Carriage of the Transmissions of Digital Television Broadcast Stations

FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 76

[CS Docket No. 98-120; FCC 98-153]

Carriage of the Transmissions of Digital Television Broadcast

Stations

AGENCY: Federal Communications Commission.

ACTION: Proposed rule.

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SUMMARY: The Notice of Proposed Rulemaking (``NPRM'') addresses the

carriage of digital broadcast television signals by cable operators. It

seeks comment of the issues surrounding the interoperability of the

digital television broadcast system, the cable system, and the digital

receiver. It seeks comment on whether to amend the cable television

broadcast signal carriage rules to accommodate the carriage of digital

broadcast television signals. It also seeks comment on changes in other

parts of the cable television rules that may be required because of the

carriage of digital television signals.

DATES: Comments on the NPRM are due on or before September 17, 1998.

Reply comments on the NPRM are due on or before October 30, 1998.

Written comments by the public on the proposed information collection

requirements contained should be submitted on or before September 17,

1998. If you anticipate that you will be submitting comments on the

proposed information collection requirements, but find it difficult to

do so within the period of time allowed by this NPRM, you should advise

the contact listed below as soon as possible.

ADDRESSES: A copy of any comments on the proposed information

collection requirements contained herein should be submitted to Judy

Boley, Federal Communications, Room 234, 1919 M St., N.W., Washington,

DC 20554 or via internet to [email protected] and to Timothy Fain, Office

of Management and Budget, Room 10236 NEOB, Washington, DC 20503, (202)

395-3561 or via internet at [email protected].

FOR FURTHER INFORMATION CONTACT: For additional information concerning

the NPRM contact Ben Golant at (202) 418-7111 or via internet at

[email protected]. For additional information concerning the proposed

information collection requirements contained in this NPRM contact Judy

Boley at 202-418-0214 or via internet at [email protected].

PAPERWORK REDUCTION ACT: The requirements proposed in this NPRM have

been analyzed with respect to the Paperwork Reduction Act of 1995 (the

``1995 Act'') and would impose new information collection requirements

on the public. The Commission, as part of its continuing effort to

reduce paperwork burdens, invites the general public to take this

opportunity to comment on the proposed information collection

requirements contained in this NPRM, as required by the 1995 Act.

Public comments are due on October 6,

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1998. Written comments must be submitted by the OMB on the proposed

information collection requirements on or before October 6, 1998.

Comments should address: (a) whether the proposed collection of

information is 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 collection of

information on the respondents, including the use of automated

collection techniques or other forms of information technology.

OMB Approval Number: 3060-XXXX (new collection).

Title: Carriage of the Transmissions of Digital Television

Broadcast Stations.

Type of Review: New collection.

Respondents: Businesses or other for-profit entities.

Number of Respondents: 12,600.

Estimated Time Per Response: 30 minutes to 40 hours, dependent upon

the specific information collection requirement addressed in this

collection.

Frequency of Response: On occasion.

Total Annual Burden to Respondents: 92,349 hours.

Total Annual Cost to Respondents: $2,355,122.

Needs and Uses: The proposed information collection requirements

contained in this proceeding, if adopted, will be used by a variety of

respondents to serve the following purposes. The purpose of the

tentative digital must-carry/retransmission consent election process,

market modification process, and digital must-carry complaint process

is to enable broadcast licensees to exercise their possible must-carry/

retransmission consent rights in an effective manner. The purpose of

the various broadcast licensee notification obligations contained in

the Commission's program exclusivity rules is to protect the exclusive

distribution rights afforded to such broadcast licensees. The purpose

of the subscriber notification requirements placed upon cable operators

is to protect subscribers' consumer rights by ensuring that cable

operators notify them when new digital channels have been added to

their channel line-ups and ensuring that cable operators notify them

when cable systems carry channels that cannot be viewed via cable

without a converter box.

Synopsis

I. Introduction

1. The statutory provision triggering this rulemaking is found in

Section 614(b)(4)(B) of the Act. This section requires that: ``At such

time as the Commission prescribes modifications of the standards for

television broadcast signals, the Commission shall initiate a

proceeding to establish any changes in the signal carriage requirements

of cable television systems necessary to ensure cable carriage of such

broadcast signals of local commercial television stations which have

been changed to conform with such modified standards.'' In our Fourth

Further Notice of Proposed Rule Making in MM Docket 87-268, 60 FR 42130

(August 15, 1995), we sought and received comments addressing digital

broadcast television carriage issues. The Commission, however,

indicated its intention to update the record and seek further comment

on these issues. We issue this NPRM to seek additional comments to

reflect our recent prescription of the modification of the standards

for television broadcast signals in a digital broadcast format; to

recognize the Commission's adoption of additional digital broadcast

television policies and rules; to address advances in digital

television technology in the last two years; to take into consideration

recent legislative developments regarding the digital broadcast

television buildout schedule as well as Congress' pronouncement that

ancillary and supplementary digital television services do not have

must carry status; and to recognize the Supreme Court's decision

upholding the constitutionality of the existing analog must carry

provisions. In addition, we are broadening this proceeding to consider

technical compatibility issues and other changes in the Commission's

rules, such as those concerning retransmission consent, program

exclusivity and rate regulation, that may also be required to recognize

the conversion of the existing broadcasting system to the new digital

format and to a new table of allotments.

II. Legal Context

2. Section 614(b)(4)(B) was adopted as part of a larger must carry/

retransmission consent scheme set forth in the Cable Television

Consumer Protection and Competition Act of 1992. This statute amended

the Act to provide television stations with certain carriage rights on

local market cable television systems. Sections 614 and 615 of the Act

contain the cable television ``must carry'' requirements. Section 325

contains revised ``retransmission consent'' requirements pursuant to

which cable operators may be obligated to obtain the consent of

broadcasters before retransmitting their signals. Within local market

areas, presently defined as Arbitron's Area of Dominant Influence

(``ADI''), commercial television stations may elect cable carriage

under either the retransmission consent or mandatory carriage

requirements. Noncommercial television stations may only elect must

carry under the Act. In addition, pursuant to Sections 653(c)(1)(B) and

(c)(2) of the Act, adopted as part of the Telecommunications Act of

1996, open video system operators are also subject to broadcast signal

carriage requirements.

3. With regard to the mandatory cable carriage provisions, Congress

believed that laws were required to ensure: (1) the continued

availability of free over-the-air television broadcast service; (2) the

benefits derived from the local origination of programming from

television stations; and (3) as it relates to noncommercial television

stations, the continued distribution of unique, noncommercial,

educational programming services. Congress reasoned that without

mandatory carriage provisions in place, the economic viability of local

broadcast television and its ability to originate quality local

programming would be jeopardized. Congress also believed that because

cable systems and broadcast stations compete for local advertising

revenue and because cable operators have an interest in favoring their

affiliated programmers, cable operators have an incentive to delete,

reposition, or refuse to carry local television broadcast stations.

These conclusions, and the carriage provisions themselves, were

premised on findings made by Congress at the beginning of this decade

that most subscribers to cable television systems do not or cannot

maintain antennas to receive broadcast television services, do not have

input selector switches to convert from a cable to an antenna reception

system, or cannot otherwise receive broadcast television services. The

retransmission consent provision was predicated on the finding that

cable systems obtain ``great benefits from local broadcast signals,''

in the form of subscribership and increased audience for cable

programming services, which they have previously been able to obtain

without the consent of the broadcaster or any copyright liability.

4. Under the mandatory carriage provisions, cable operators,

subject to certain capacity based limitations, are generally required

to carry local television stations on their cable

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systems. The Act states that systems with more than 12 usable activated

channels must carry local commercial television stations, ``up to one-

third of the aggregate number of usable activated channels of such

system[s].'' Beyond this requirement, the carriage of additional

broadcast television stations is at the discretion of the cable

operator. In addition, cable systems are obliged to carry local

noncommercial educational television stations according to a different

formula and based upon a cable system's number of usable activated

channels. Low power television stations may request carriage if they

meet six statutory criteria. A cable operator, however, cannot carry a

low power station in lieu of a full power station.

5. Cable operators are required to carry local television stations

on a tier of service provided to every subscriber and on certain

channel positions designated in the Act. Cable operators are prohibited

from degrading the television station's signal but are not required to

carry duplicative signals or video that is not considered primary.

Television stations may file complaints with the Commission against

cable operators for non-compliance with section 614 and section 615. In

addition, both cable operators and television stations may file

petitions with the Commission to either expand or contract a commercial

television stations' market for broadcast signal carriage purposes.

These statutory requirements were implemented by the Commission in

1993, and are reflected in Secs. 76.56-64 of the Commission's rules.

6. Section 336 of the Act, added as part of the Telecommunications

Act of 1996, provides that if the Commission determines to issue

additional licenses for advanced television services, the Commission

should ``allow the holders of such licenses to offer such ancillary or

supplementary services . . . as may be consistent with the public

interest, convenience, and necessity.'' It then further provides that

``no ancillary or supplementary service shall have any right to

carriage under section 614 or 615.'' In the legislative history of this

provision, Congress stated that it did not intend to ``confer must

carry status on advanced television or other video services offered on

designated frequencies'' adding that the ``issue is to be the subject

of a Commission proceeding under section 614(b)(4)(B) of the

Communications Act.''

7. The Commission recently adopted rules establishing a

transitional process for the conversion from an analog to a digital

form of transmission. In broad outline, the rules and policies adopted

make each existing analog television licensee or permittee eligible to

apply to construct or operate a new digital station with a roughly

comparable service area using 6 MHz of spectrum. The new digital

station will transmit a signal consistent with the standards adopted in

the Fourth Report and Order in MM Docket No. 87-268, 62 FR 14006 (March

25, 1997), giving stations the flexibility to broadcast in a high

definition mode, in a multiple program standard definition mode, or a

mixture of both. During a transitional period, both the analog and

digital television signals will be broadcast. At the end of the

transition, the licensee will cease broadcasting an analog signal and

will return to the government 6 MHz of spectrum. There are no federal

digital cable transition requirements. Cable operators are

transitioning to digital on a voluntary basis and in some instances,

cable franchising agreements may require operators to upgrade their

physical plant and offer digital services. Thus, as the transition to

digital occurs, a significant level of complexity will arise due to the

different time schedules followed by the nearly 1,600 television

licensees and the approximately 11,000 U.S. cable systems with respect

to the implementation of digital transmissions.

8. The rules governing the transition from analog to digital

broadcasting are found in the Fifth Report and Order in MM Docket No.

87-268, 62 FR 26966 (May 16, 1997). This Order set forth a staggered

implementation schedule for the introduction of digital broadcast

television. Construction requirements vary depending on the size of the

television market and other factors. In the first category, all

stations in the top ten television markets that are affiliated with

NBC, CBS, Fox, or ABC will have until May 1, 1999, to construct their

digital facilities. In the second category, all stations in the top 30

television markets not included above that are affiliated with NBC,

CBS, Fox, or ABC will have until November 1, 1999, to construct their

digital facilities. In the third category, all other commercial

stations will have until May 1, 2002, to construct their digital

broadcast television facilities. All noncommercial stations will have

until May 1, 2003, to construct their digital broadcast television

facilities. We note that 24 television station licensees have expressed

to the Commission their intention to voluntarily expedite their

schedules and complete construction and begin broadcasting by November,

1998.

9. Commencing April 1, 2003, digital broadcast television licensees

and permittees must simulcast at least 50% of the video programming

transmitted on their analog channel; commencing April 1, 2004, there

will be a 75% simulcasting requirement; commencing April 1, 2005, there

will be a 100% simulcasting requirement until the analog channel is

terminated and returned to the Commission.

10. Congress, in the Balanced Budget Act of 1997 (``BBA''),

codified certain exceptions to the return of spectrum by the 2006

target date established by the Commission. That statute established

conditions under which the return may be extended beyond December 31,

2006, upon the request of a television station. To retain its analog

channel beyond that date, a television station will have to demonstrate

that: ``(i) one or more of the stations in the relevant television

market that are licensed to, or affiliated with, one of the four

largest national television networks, is not broadcasting a digital

television service signal, and the Commission finds that such station

has exercised due diligence and satisfies the conditions for an

extension of the Commission's applicable construction deadlines for

digital television service in that market; (ii) digital-to-analog

converter technology is not generally available in such market; or

(iii) in any market in which an extension is not available under clause

(i) or (ii), 15 percent or more of the television households in such

market--(I) do not subscribe to a multichannel video programming

distributor (as defined in section 602) that carries one of the digital

television service programming channels of each of the television

stations broadcasting such a channel in such market; and (II) do not

have either--(a) at least one television receiver capable of receiving

the digital television service signals of the television stations

licensed in such market; or (b) at least one television receiver of

analog television service signals equipped with digital-to-analog

converter technology capable of receiving the digital television

service signals of the television stations licensed in such market.''

As the statutory language indicates, the return of the analog spectrum

is in part dependent on the carriage of digital television stations by

cable operators and other multichannel video programming distributors

(``MVPDs''). In the BBA's legislative history, Congress stated that it

was ``not attempting to define the scope of any MVPD's `must carry'

obligation for digital television signals'' and that the digital

broadcast television must carry

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decision is ``for the Commission to make at some point in the future.''

11. We read Section 614(b)(4)(B) of the 1992 Cable Act and Section

309(j) of the Balanced Budget Act, along with their respective

legislative histories, to give us broad authority to define the scope

of a cable operator's signal carriage requirements during the period of

change from analog to digital broadcasting. Given this intent, and

noting the significant changes that are taking place in the broadcast

and cable television industries, as well as in the development of

television reception devices, we tentatively conclude that the

Commission should have, and does have, the ability to develop rules to

facilitate the transition process and to take into account the

technical changes involved. We seek comment on this tentative

conclusion.

12. While we believe Congress has given the Commission discretion

in exploring and deciding the complex issues involved in this

proceeding, we take as our starting point the general framework

governing the carriage of television stations currently found in

Section 614, 615, and 325 of the Act. Section 614(b)(4)(B), and its

legislative history, appears to support this approach as Congress

intended that the Commission establish technical standards for the

carriage of digital television signals. Based on the legislative

history and the existing carriage provisions, we believe that the

participation by the cable industry during the transition period is

likely to be essential to the successful introduction of digital

broadcast television and the rapid return of the analog spectrum to the

Commission.

13. We also realize, given the history of the must carry provisions

and the litigation relating to them, that any rules adopted by the

Commission must be carefully crafted to permit them to be sustained in

the face of a constitutional challenge. Such rules must be consistent

with the judicial decisions regarding the constitutional limitations

applicable in this area and in particular with the Supreme Court's

holding in Turner Broadcasting System v. FCC, 117 S.Ct. 1174 (1997)

(``Turner II''). As the Supreme Court has noted in a previous decision

reviewing the must carry provisions, ``[w]hen the Government defends a

regulation on speech as a means to redress past harms or prevent

anticipated harms, it must do more than simply `posit the existence of

the disease sought to be cured.' . . . The government must demonstrate

that the recited harms are real, not merely conjectural, and that the

regulation will in fact alleviate these harms in a direct and material

way.'' Turner Broadcasting System v. FCC, 512 U.S. at 664 (1995)

(``Turner I''). In Turner II, the Supreme Court found the must carry

provisions of the 1992 Cable Act to be content neutral regulations

subject to intermediate First Amendment scrutiny. The Court emphasized

that preserving the benefits of free, over-the-air broadcast

television, promoting the widespread dissemination of information from

a multiplicity of sources, and promoting fair competition in the market

for television programming, were important governmental interests. The

court noted that there was substantial evidence before Congress

supporting the predictive judgment that local broadcasters denied

carriage ``would suffer financial harm and possible ruin'' in the

absence of carriage rules and the Government's assertion that ``the

economic health of local broadcasting is in genuine jeopardy and in

need of the protections afforded by must-carry'' was found to be

reasonable and supported by the evidence. In addressing the question of

whether the requirements ``burden substantially more speech that is

necessary'' to further the governmental interest involved, the Court

indicated that ``the actual effects are modest'' and that

``[s]ignificant evidence indicates the vast majority of cable operators

have not been affected in a significant manner by must-carry.'' The

Court concluded that the requirements were not invalid based on a

challenge that they are ``substantially broader than necessary to

achieve the government's interest. Noting that Turner II did not

address the mandatory carriage of the broadcaster's digital television

signal, we ask how the Court's reasoning and conclusions would apply in

the context of this proceeding.

14. Given this background, we find it essential to build a record

relating to the interests to be served by any digital broadcast signal

carriage rules, the factual predicate on which they would be based, the

harms to be prevented, and the burdens they would impose. Having an

updated record is particularly important because of the many legal and

technical developments that have taken place since the analog must

carry provisions were enacted in 1992, and to take into account the

differences brought about by the conversion to digital broadcasting and

the parallel conversion to digital cable operations. For example,

television reception via antennas has been made easier and more

convenient than was the case earlier this decade. Legal barriers to

over-the-air reception of broadcast signals, caused by restrictions on

antenna placement, have been reduced because of the over the air

reception device preemption provisions of the Telecommunications Act of

1996. Input selector (``A/B'') switches, which allow the subscriber to

switch between cable and an antenna, may now be built into television

receivers and can be easily controlled from a TV remote control device.

Some of the reception problems that made it difficult for certain

consumers to receive over-the-air broadcast signals may be eliminated

by the conversion to digital. Broadcasting may not be the only source

of local programming as cable operators have developed local news

channels and public, educational, and governmental access channels,

which provide highly localized content, have multiplied in the past six

years. We seek to develop through this proceeding, the facts and data

necessary for a complete record and ask for the assistance of all

parties in developing that record.

III. Digital Compatibility

15. In this section, we address the compatibility issues

recognizing that the introduction of DTV, and any carriage rules we may

implement, will be most successful if all the components of the

transmission path work together. Furthermore, an understanding how the

different technical elements fit together is essential to a discussion

of the core digital broadcast signal carriage issues. Here, we explain

how digital transmission systems function and the means of transporting

the DTV signal through the cable system to the subscriber. This

discussion is particularly important in understanding the cable system

channel capacity, channel position, and technical standards issues that

are addressed at length throughout the document. Possible technical

impediments preventing the reception of the DTV signal are raised,

including matters that are integral to the discussion of material

degradation in Section IV of the text.

16. Cable carriage of television broadcast signals in the existing

analog environment involves the need to coordinate multiple technical

systems--a television broadcast station transmission, a cable

television distribution system, and a television receiver. All three

are standardized by regulation or custom to transmit, distribute, and

display analog NTSC television pictures. Although issues sometimes

arise as to how these parts fit together from a technical perspective,

the basic elements are relatively standard and well known. In the new

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digital environment, however, neither law nor regulation standardizes

every element. How the multiple technical systems will function in a

digital environment remains to be seen. We note that the various

technical elements involved in digital broadcast signal carriage are

constantly in flux as technology advances. We set forth our basic

current understanding of the applicable technical context and seek

comment and updated information relating to this review.

17. The digital television transmission system and related

standards were established by the Advanced Television Systems Committee

(``ATSC''). The components, or comprising layers, are the video/audio

layer, compression layer, transport layer, and the transmission layer.

At the top of the ATSC hierarchy is the uncompressed digital signal in

one of the various video/audio formats. Under the ATSC's highly

flexible standard, it is possible to transmit high definition pictures

and high quality sound, multiple standard definition pictures, and

other ancillary related or unrelated communications, with the mix of

services changing dynamically from second to second. The video content

may be transmitted in the progressive scan or in the interlaced

transmission format. Pictures may be transmitted in a standard

definition format, such as 480 progressive, or in a high definition

format, such as 720 progressive or 1080 interlaced. The bitstream that

corresponds with the video/audio layer is known as the elementary

stream.

18. At the next level down in the hierarchy is the compression

layer. The purpose of this layer is to take the elementary stream from

the layer above and compress it into a bitstream with a lower data

rate. In the ATSC standard, MPEG-2 compression is used for the video

and the Dolby AC-3 compression is used for the audio. The amount of

compression depends upon the compression format chosen. Additional

compression lowers the data rate, but at the possible loss of some

video/audio quality.

19. The compressed bitstream, in turn, may be packetized and

multiplexed with other bitstreams into a higher data rate digital

bitstream. This is done in what is referred to as the transport layer.

This multiplexed bitstream may include multiple programs and/or

multiple data signals. The ATSC standard uses the MPEG-2 transport

protocol for this purpose.

20. The lowest layer in the hierarchy is referred to as the

transmission layer. Here, the multiplexed bitstream from the transport

layer is modulated onto a radio frequency (``RF'') carrier. The ATSC

set forth standards for two modulation modes using vestigial sideband

modulation (``VSB''): a terrestrial broadcast mode (8 VSB) and a high

data rate mode (16 VSB), which is said to be capable of reliably

delivering approximately twice the data throughput in a 6 MHz cable

television channel as the 8 VSB mode (38 Mbps as compared to 19 Mbps).

The 8 VSB standard has been optimized for terrestrial broadcast

television delivery where transmission errors and data loss are likely.

The Commission has adopted VSB as part of the digital broadcast

standard. The Commission, however, has not adopted a digital cable

standard nor has the industry embraced the use of 16 VSB. Instead,

cable operators plan to transmit digital communications, from the

headend to the subscriber, using quadrature amplitude modulation

(``QAM''), either 64 QAM or 256 QAM (which is closer to 16 VSB in terms

of its data rate). Both 64 and 256 QAM likely will provide cable

operators with a greater degree of operating efficiency than does 8

VSB, and permits the carriage of a higher data rate, with less bits

devoted to error correction, when compared with the digital broadcast

system.

21. The above description of the four layer hierarchy is based upon

a sequence of events at the transmitting end of a digital television

system. That is, it started with the elementary digital stream which is

compressed in the compression layer, multiplexed in the transport layer

and modulated onto an RF carrier in the transmission layer. The signal

progresses from layer-to-layer down the protocol stack. At the

receiving end, the process is reversed.

22. While the conversion of television stations to a digital

transmission mode is generally associated with greatly improved sound

and picture quality in the high definition mode and with better and

more flexible reception in the standard definition mode, the practical

definition of ``digital'' in the cable context may vary from system to

system. The fact that a portion of a cable system capacity is digital

may mean only that more channels are offered with no fundamental

enhancements in sound and picture quality. For example, a cable system

making use of TCI's Headend in the Sky or ``HITS,'' would be

distributing various packages of digitally compressed satellite-based

programming to subscribers with an associated set top box. Current HITS

technology allows for at least twelve digitally compressed channels to

fit onto one analog cable channel. The programming content is

compressed and bundled into discrete groups of programming services at

TCI's satellite uplink so that it can be passed through by the system

operator essentially without additional processing. However, there are

cable operators that will be offering digital cable using QAM on an

upgraded cable system. For example, in the case of a 750 MHz system,

the 54 MHz to 550 MHz region of the cable system may be reserved for

analog signals, while the 550 to 750 MHz area will carry dozens of

digital signals. A critical distinction between the two is that systems

subscribing to HITS may not necessarily have excess capacity to carry

digital television stations while a 750 MHz QAM system may, in fact,

have such capacity.

23. A critical aspect of the digital television transmission path

involves the digital cable set top boxes. Significant issues arise as

to how set top boxes will interact with the distribution of both

digital cable and digital broadcast signals. Digital cable set top

boxes perform digital signal processing, decompression, and

demultiplexing functions. The receiving device demodulates the carrier,

i.e., it extracts the multiplexed bitstream from the carrier, in the

transmission layer. The multiplexed bitstream is passed up to the

transport layer where it is demultiplexed into its component

bitstreams. The individual streams are, in turn, passed up to the

compression layer where they are decompressed and passed up into the

video/audio layer for decoding and display. The set top box also

controls access to prevent theft of the service and makes compressed

digital cable services available for reception on analog NTSC

television receivers. In an entirely digital environment, the set top

box and the digital receiver may work in tandem by trading off the

digital processing function. For example, a set top box that lacks

sufficient processing power and memory to uncompress a high definition

signal could nevertheless deliver the compressed data stream to the

receiver where it would be uncompressed. A variety of concerns have

been raised regarding the set top box's ability to ``pass through'' the

signals of digital broadcast stations, including in particular, high

definition signals. The concern stems from three separate, but related,

developments: (1) the possibility of shared functions between set top

boxes and receivers; (2) the possible lack of processing power and

memory in some set top boxes; and (3) the possibility of broadcast

signals being passed directly through to

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receivers without any processing by the set top box.

24. ``Pass through,'' in one scenario, means that the signals in

the VSB format would be passed through the set top box, without being

processed, and sent directly into the receiver for display. If the

signal was sent through the system in the proper format and the

receiver was capable of displaying that signal, the set top box would

create no obstacle since it was bypassed in the distribution chain.

Under another scenario, the set top box would play a partial processing

function by detecting, demodulating and demultiplexing the signal, but

leave it compressed. The signal would then be passed to the receiver

which would uncompress it. The reasons a box might be designed to

function in this fashion is that extra memory and processing power are

required to uncompress certain of the high definition formats and thus

a less expensive box could be designed if the circuitry in the

television receiver could be shared and used to address the compression

issue.

25. Another scenario is where the set top box converts the digital

signal for display on NTSC television receivers. Conversion will allow

cable subscribers to view digital television on their current analog

television receivers. However, to process high definition video

programs, the set top box would need sufficient memory and computing

power, which would add to the cost of the equipment. Regardless of

which techniques are used, electronic program guides and other

interactive set top features may not work with signals that are not

processed by the set top box. We seek comment updating and informing us

on the current state of set top box technology as it relates to the

carriage, pass through, and/or conversion of digital broadcast signals.

26. It has been suggested that some of the digital broadcast-set

top box processing issues could be addressed through the use of a

digital bus, exemplified by a standard interface known as IEEE-1394.

This interface could allow a digital set-top box to share some of the

resources of other devices in terms of the processing of digital

signals, such as the MPEG decoder in a digital television receiver.

Thus, high definition signals can be processed and displayed on the

digital television receiver through the bus even though the digital set

top box could not perform the processing function. This interface is

also important in the context of digital broadcast signal carriage

because it may be needed to ensure that on-screen graphics and program

guide capabilities are enabled for the digital broadcast signals that

are being carried. We seek comment on whether a bus standard could in

fact address some of the set top box interface issues raised above. We

are aware that the relevant industries are developing an interface

standard and we fully expect that they will move quickly to adopt this

standard. Given this, we thus far have concluded that the goal of an

effective interface can be met without regulatory action. Nonetheless,

because of the importance of this issue and because of recent reports

that the development of a standard may not be proceeding as

expeditiously as previously thought, we ask if the Commission should

consider rules, or other appropriate action, e.g., establishment of a

deadline, to ensure that both the set top box and the digital receiver

are 1394-compatible. If not, are there other devices or attachments on

the market or being developed that would provide a simplified or more

desirable interconnection between the set top and the digital receiver?

27. It is difficult as this point in time to determine the

technical abilities of the different digital set top boxes already

distributed and in production, and how different cable operators will

engage set top boxes in their business plans. At least one major system

operator, TCI, has indicated that the set top boxes it will employ will

ultimately be capable of passing through digital broadcast

transmissions to the cable subscriber. This may involve simply

providing a direct connection through the digital set top box to the

digital television receiver. Although we do not want to impose

unnecessary requirements, we seek comment on whether a mandate that set

top boxes be designed to process all types of digital broadcast

television formats is needed, and if so, what additional cost (to cable

operators and at retail to consumers) would be involved. What effect

would such a requirement have on the commercial availability of set top

boxes? Would the remote control units used with the digital set top box

also work with all digital receivers?

28. Digital cable set top boxes may also perform certain other

operations that may need to be considered, such as functions that are

intended to assist program suppliers providing ``copy protection'' to

their programming. The copy protection concern is that parties having

access to the basic content of digital programming can make copies that

are virtually as good as the original thus creating commercial

incentives to withhold or delay the distribution of certain programming

product. In February, 1998, five members of the ad hoc Copy Protection

Technical Working Group presented a proposal aimed at protecting

digital video and audio content riding on and between personal

computers, digital receivers, set-tops, digital video cassette

recorders and digital video disk players. Work is continuing on this

effort. In this instance, we ask whether copy protection is a matter

that the Commission should explore in further detail in this

proceeding, in terms of the general issue of equipment compatibility.

29. Receiver manufacturers are in the process of designing digital

television sets. Their features are not standardized and the Commission

has, to date, specifically declined to adopt digital television

receiver standards. Moreover, the ATSC DTV standard does not specify

requirements for a compliant receiver. In essence, DTV receiver designs

are to be based on the specifications of the signal contained in the

other portions of the standard. It appears, however, that all digital

television receivers will be built to receive VSB transmissions and to

process all 18 ATSC formats. Whether they will be capable of receiving

QAM transmissions, and be built with a standard interface such as IEEE

1394, is less certain. Regardless of how the digital television set is

configured, it appears likely that there will be a considerable market

for digital converter boxes that mediate between analog television

receivers and digital transmission systems to lower the cost of digital

reception. In this area, we seek comment on whether television

receivers will be digital cable (QAM)-ready, or 1394 ready, and when

such sets would be available to the public. Should the Commission take

action to encourage the production of cable-ready receivers to

facilitate the introduction of digital broadcast television? We also

seek comment on whether the matters at issue in this proceeding suggest

the need for an industry receiver standard. Is this the right

proceeding to address these matters?

IV. Carriage and Retransmission Consent Issues

30. Section 325 contains the Act's retransmission consent

provisions. The law governing retransmission consent generally

prohibits cable operators and other multichannel video programming

distributors from retransmitting the signal of a commercial television

station, radio station or low power station without the prior consent

of the station whose signal is being transmitted, unless the

broadcaster has chosen must carry. Every three years, commercial

television stations must elect between pursuing their mandatory

[[Page 42336]]

carriage rights or their retransmission consent rights. Noncommercial

television stations do not have retransmission consent rights.

31. It has been estimated that approximately 80 percent of

commercial television broadcasters elected retransmission consent on

some cable systems, rather than must carry, during the 1993-1996

election cycle. Thus, assuming this information is accurate, the

question arises as to whether the general pattern will be repeated with

respect to digital broadcast television stations during the transition

period. There are reasons to believe it might not be because few cable

subscribers will have digital receivers, at least initially. If it is

repeated, however, it is possible that many of the transitional issues

involved in this proceeding will be resolved through retransmission

consent negotiations. Also, if the general retransmission consent

pattern is repeated, the digital television stations scheduled to begin

broadcasting in November 1998, May 1999, and November 1999, are most

likely to exercise retransmission consent for the third election cycle

currently scheduled to commence on January 1, 2000, even if there were

digital must carry requirements in place. Television stations not

affiliated with the four major networks and commercial television

stations in smaller markets are those broadcasters most likely to

exercise the must carry option, but a number of these stations will not

commence digital operations until the year 2002, when they are required

to do so under the Commission's rules. We seek comment on these general

estimates and what effect these market factors would have on the need

to implement must carry rules immediately. Moreover, what effect would

not setting rules have on television stations, not affiliated with the

top four networks, that want to build out earlier than 2002? We also

seek comment on how retransmission consent, rather than must carry,

will speed the transition to digital television. For example, a cable

operator could agree to carry a broadcaster's ancillary and

supplementary digital services, that are not subject to a must carry

requirement, and the carriage of such services could spur consumers to

purchase digital receivers.

32. The advent of digital broadcast television raises certain

potential retransmission consent procedural issues that need to be

addressed. The Broadcasters had previously commented that the

retransmission consent process should apply separately to the analog

and digital broadcast signal. They argue that separate must carry/

retransmission consent elections should be allowed for each

transmission mode. In this context, we first seek comment on whether

analog and digital broadcasts constitute separate ``broadcasting

stations'' for purposes of retransmission consent and digital broadcast

signal carriage. Would the Broadcaster's approach be desirable because

it permits the separation of two possibly unrelated issues? Conversely,

we ask whether the Broadcasters' proposal would unbalance the

negotiation process by divorcing decisions made by a single licensee

during the transition to digital television.

33. We further inquire as to whether a common retransmission/must

carry election is required for the broadcaster's entire transmission or

may the broadcaster select which of its channels or programming streams

is deemed a must carry program stream and which is a retransmission

consent program stream. We note that the Commission has stated in the

analog context that ``any broadcast station that is eligible for must-

carry status, although it may be carried pursuant to a retransmission

consent agreement must . . . be carried in the entirety, unless

carriage of specific programming is prohibited . . . pursuant to our

rules.'' Nonetheless, it may be desirable to allow partial carriage

pursuant to the retransmission consent process if that is what the

parties agree to. We seek comment on what countervailing policy would

suggest a requirement for all of a station's digital broadcast output

and whether changes in the policy described above are warranted.

34. As stated previously, the Act requires local commercial

television stations to elect either must carry or retransmission

consent on a triennial basis. The first election cycle ended on

December 31, 1996, and the second election cycle ends on December 31,

1999. Assuming that there was some form of mandatory digital broadcast

signal carriage rules in place during the transition period, we ask

whether the current must carry/retransmission consent cycle should be

shortened or otherwise changed to further accommodate the introduction

of digital broadcast television? Are changes in the election cycle

permitted under the Act? We note that new television stations can make

their initial election anytime between 60 days prior to commencing

broadcast and 30 days after commencing broadcast with the initial

election taking effect 90 days after they are made. Instead of revising

the election cycle, should we instead apply the current ``new station''

rule to digital broadcast television signals when they sign on-the-air?

Alternatively, if there were no mandatory digital broadcast signal

carriage rules in place, we seek comment on the procedural mechanisms

necessary for digital television stations to enforce their

retransmission consent rights against cable operators.

35. Section 325(b)(2)(D) exempts cable operators from the

obligation to obtain retransmission consent from superstations whose

signals were available by a satellite or common carrier on May 1, 1991.

The legislative history behind this provision states that an exemption

from retransmission consent was necessary ``to avoid sudden disruption

to established relationships'' between superstations and satellite

carriers. United Video, in comments filed in response to the Fourth

Further Notice in MM Docket No. 87-268, 60 FR 42130 (August 15, 1995),

explains that the exemption permits it to continue to uplink

superstations signals and transmit them to cable operators and other

facilities-based multichannel video providers. We seek comment on

whether the digital replacement stations for these analog superstations

should be treated as new stations for purposes of the retransmission

consent provisions or whether they should have the same status as the

ones they replace.

36. In the Must Carry Report and Order, MM Docket No. 92-259, 58 FR

17350 (April 2, 1993), we specifically prohibited exclusive

retransmission consent agreements between television broadcast stations

and cable operators. This policy forbids a television station from

making an agreement with one MVPD for carriage exclusive of other

MVPDs. The Commission, however, indicated that while this restriction

was desirable at least initially, it would reconsider the need for such

a prohibition. We now seek comment on the continuing desirability of

this prohibition. We ask what impact the introduction of digital

television has on this policy and how the Commission's decision in this

regard would hasten or slow down the transition period.

37. We recognize that the most difficult issues arise during the

transition because there will exist, for a temporary period,

approximately twice as many stations as are now in operation or will be

in operation after the transition and the return of the analog station

licenses. Toward the end of the period, there will be an increasing

redundancy of basic content between the analog and digital stations as

the Commission's simulcasting requirements become applicable. These two

developments have broad

[[Page 42337]]

implications for the cable industry. To the extent that the Commission

imposes a digital must carry requirement, cable operators could be

required to carry double the amount of television stations, that will

eventually carry identical content, while having to drop various and

varied cable programming services where channel capacity is limited.

The central question addressed in this section is how must carry should

be initiated during the transition to digital television.

38. In previous comments, the cable industry, as well as cable

equipment manufacturers, have argued that operators should not be

required to carry both the analog television station and digital

television station during the transition period. They assert that

system and equipment requirements to meet an all channel carriage

obligation would be prohibitively expensive. On the other hand, groups

such as the Broadcasters and Electronics Industry Association (``EIA'')

argue that a cable operator's must carry obligations extend to both the

digital broadcast television transmission and the analog signal during

the transition period. EIA argues that simultaneous retransmission will

allow consumers to experience the qualitative difference between the

two formats and promote digital broadcast television deployment. Some

parties argued that mandatory carriage of additional digital television

broadcast stations would also be contrary to the public interest

because it may harm other video programmers. Viacom asserts that

digital broadcast television must carry requirements should not operate

in such a way as to preempt the carriage of some broadcast station

transmissions in favor of one broadcast station's multiplexed program

services. It refers to those situations where a cable operator's one-

third channel capacity signal carriage requirement may be met through

the carriage of certain analog and digital stations, while another

broadcaster in the market, with a right of carriage, does not get

carried. The Alliance for Community Media argues that public,

educational, and governmental access channels, as well as noncommercial

television stations, be given preference over additional channels

incumbent broadcasters may want carried, in order to maintain a diverse

range of noncommercial voices on cable television. Below, we seek

comment on several carriage options that address the needs of the

broadcasters and the concerns of the cable operators as well as the

timing of mandatory digital broadcast signal carriage rules. For each

of these options, we seek comment on how they comport with the existing

language in the statute. We also ask whether there are any other

options that would serve the public interest and also be consistent

with the statute.

39. The Immediate Carriage Proposal. This first option would

require all cable systems, regardless of channel capacity constraints,

to carry, in addition to the existing analog television stations, all

digital commercial television stations up to the one-third capacity

limit and any additional digital noncommercial stations within the

limits currently found in the statute. This approach would provide

regulatory certainty to the television industry and provide assurance

that investment in digital technology and programming will be fully

realized. Moreover, digital broadcasters would be assured of reaching

the audience they are licensed to serve. This option may also

accelerate the transition period and thus, speed the recapture of the

analog spectrum for auction by the Commission. At the same time,

however, significant cable channel line-up disruptions may occur as

cable operators, whose systems are channel-locked, would have to drop

existing cable programming services to accommodate the carriage of

digital television signals. This option may also result in cable rate

increases, as explained more fully below, for digital broadcast

services that the majority of subscribers will be unable to view, at

least initially, because they did not make the significant investment

in digital television sets necessary to receive such signals. We seek

comment on this first proposal. Are there additional arguments for or

against this option? For example, will broadcaster reliance on

mandatory cable carriage discourage the development of antenna

technology? Furthermore, would program diversity be adversely affected?

How will this proposal, if implemented, alter retransmission consent

negotiations? Would this approach discourage operators from investing

in system upgrades? What effect would such a proposal have on

television stations that have yet to build out their digital

facilities? We also ask whether there should be exceptions to this

proposal, perhaps for operators in large television markets where a

high number of new digital television stations will commence operations

at the same time.

40. If this option is adopted, we ask when the digital broadcast

television must carry requirement should take effect. There are several

possible triggering events that are based on either the digital

broadcast television buildout schedule, by rule, or through the

enforcement process: (1) when the first digital television station is

broadcasting in a given television market; (2) when the majority of

stations in a given television market are broadcasting in a digital

mode; (3) in tandem with the buildout schedule as set forth in the 5th

Report and Order in MM Docket No. 87-268, 62 FR 26966 (May 16, 1997);

(4) at the inception of the third must carry/retransmission consent

election cycle on January 1, 2000; or (5) upon the Commission grant of

a must carry complaint filed by the digital television broadcast

station. We seek comment on which of these scenarios, or any other

option, best reconciles the governmental interest in the rapid

availability of digital broadcast television to cable subscribers with

the other interests involved in this proceeding.

41. In addition, we seek comment on whether this proposal, as well

as others that include a mandatory carriage requirement, is consistent

with Congressional intent. As previously noted, the continued

availability of free over-the-air television broadcast service was one

of the primary reasons Congress required mandatory cable carriage.

Similarly, one Congressional goal cited in the discussion of the

transition to digital broadcasting was the future competitiveness of

free over-the-air broadcasting. If the mandatory carriage provisions

and the transition to digital television share a common purpose--the

continued availability of free over-the-air television broadcast

service--should some form of must carry be required during the

transition to digital television in order to satisfy the common purpose

of the mandatory carriage and digital television provisions?

42. The System Upgrade Proposal. An alternative proposal would

require only higher channel capacity cable systems to add new digital

television stations as they commence operations and initiate their

digital over-the-air service during the transition period. As systems

reach 750 MHz (approximately 120 analog six MHz channels), considerable

flexibility will exist to add new television stations. For cable

systems that are in the process of increasing their channel capacity

through transmission plant upgrades, we would propose that new digital

broadcast television stations must be carried by cable operators as

they come on the air. We seek comment on this option in line with the

questions delineated in the immediate carriage proposal, above. We are

specifically interested in the impact this proposal would have on a

cable operator's incentive to upgrade facilities and on facilities

already upgraded. We seek

[[Page 42338]]

comment on the extent to which upgraded cable systems have no

additional capacity to add new services.

43. To provide a concise response to the above proposal, we seek

comment on whether 750 MHz is the proper cutoff for defining an

upgraded system or should a lower number, such as 450 MHz (54

channels), be used instead. We note that approximately 19 percent of

the current analog cable systems in the nation have 54 or more channels

while the majority of cable systems, about 64 percent, have between 30-

53 channels. According to one report, some two-thirds of cable systems

are currently channel-locked, meaning that they cannot add additional

services without deleting another service or through technical system

enhancements. However, this situation may change in the future as cable

systems upgrade their physical plant and add new channel capacity.

Thus, we also ask commenters to provide information on the expected

growth rate for cable channel capacity between now and 2003, when all

digital television stations are required to commence operation. In

addition, we seek comment about cable programmer plans to convert to

digital and what additional carriage needs these programmers would have

in the future.

44. The Phase-In Proposal. For cable systems that are not adding

channel capacity or have only a limited ability to add channels and

have no unoccupied channel capacity, a requirement to immediately

commence carriage of all digital broadcast television stations when

they come on-the-air would possibly be highly disruptive to cable

subscribers, especially in those markets where a substantial number of

stations are mandated to complete station construction by the same

date. For example, stations affiliated with the top four networks in

the top 30 markets are scheduled to have construction complete by

November 1, 1999. The ten largest market have an average of 17 stations

each with two markets having 22 stations. There are 43 markets that

have ten or more stations. Under this option, we would require that all

cable systems commence some carriage of digital broadcast stations as

they come on-the-air, but that some limit on the number that must be

added be included in the transitional rules to avoid substantial

channel line-up disruptions. If this option is adopted, we would

propose that three to five channels be added each year until all

digital television stations are carried. These could be either must

carry or retransmission consent stations. We seek comment on this

schedule and its effects on the transition. We seek comment on whether

there is another phase-in approach, such as adding three to five

channels every six months, that would also further the rapid

introduction of digital broadcast television while reducing, to the

extent feasible, possible disruptions to the cable system's channel

line-up. We also ask how we would determine which digital television

stations have carriage priority on the cable system in cases where the

quota has been satisfied.

45. The Either-Or Proposal. Another proposal would be to require

broadcasters to choose mandatory carriage for either the analog signal

or the digital transmission, but not both, during the early years of

the transition period. In the year 2005, when the 100 percent simulcast

rule goes into effect, the mandatory carriage option will default to

the digital transmission. This option would avoid causing channel line-

up disruptions but may have an adverse effect on the speed of the

transition process. We seek comment on this approach and ask whether

this proposal may be combined with any other transition option

discussed. We also ask what effect this proposal would have on the

economic viability of digital broadcasters, investment in digital

broadcast technology, and on the sale of digital television receivers.

46. The Equipment Penetration Proposal. Under this option, we ask

whether a carriage obligation should be triggered before any

significant number of consumers have receivers or digital-to-analog

converter boxes that give them the ability to access digital

transmissions. For example, should carriage obligations commence when

some percentage of the public, e.g., 5 percent or 10 percent, have

invested in receiving equipment? Such a requirement would recognize

that in the cable context, the addition of new digital broadcast

television transmissions will likely result in the deletion or absence

of carriage of other services. The possibility of such a substitution

is inherent in the whole mandatory carriage policy, but the general

assumption under the existing analog rules is that at least all

subscribers will have access to the new transmission in question and

not just those who have invested in additional equipment.

47. The Deferral Proposal. The sixth option is to defer the

implementation of mandatory digital broadcast signal carriage rules for

a certain period of time. One possible deferral date would be May 1,

2002. This would coincide with the date that stations not affiliated

with ABC, CBS, NBC, and Fox as well as digital commercial television

stations in markets 31-212, are required to initiate service. Waiting

to issue regulations until this time has certain advantages. For

example, it would allow cable operators and broadcasters to find a

successful business model for digital television. A deferral would also

allow time for voluntary negotiations on cable carriage issues between

the broadcasting and cable industries to settle some of the matters

involved. It would allow time for technology to progress and for

digital television receivers to come down in price. We seek comment on

this proposal and its advantages and disadvantages as well as its

impact on the transition period.

48. The No Must Carry Proposal. The last option is that must carry

does not apply at all for digital television stations during the

transition period. Section 614(b)(4)(B) states that ``the Commission

shall initiate a proceeding to establish any changes in the signal

carriage requirements of cable television systems necessary to ensure

cable carriage of such broadcast signals of local commercial television

stations which have been changed to conform with such modified

standards'' (emphasis added). NCTA argues that the phrase ``have been

changed'' means that the television station's analog signal has ceased

broadcasting and the station's digital signal has replaced it as the

over the air service. Under this reading, digital broadcasters would

not have must carry rights until the transition period is over. If this

were the case, we would propose the following. For commercial

television stations, retransmission consent would still apply. With

regard to those commercial television stations that do not enforce

their retransmission consent rights, or noncommercial television

stations that lack retransmission consent rights, they are free to

enter into voluntary carriage negotiations with cable operators. These

broadcasters would be similarly situated with competing cable

programming services in that they could pay to be placed on the cable

system or negotiate other mutual beneficial arrangements with cable

operators. We seek comment on this approach. We ask how this proposal

would affect the economic viability of digital television stations as

well as the rapid transition to DTV. Moreover, should we recommend to

Congress that noncommercial television stations be vested with

retransmission consent and program exclusivity rights in order to

provide such entities with greater bargaining power vis-a-vis cable

operators?

[[Page 42339]]

49. With regard to those options where a must carry requirement is

suggested, we note that the one-third capacity limit set forth in

Section 614(b)(1)(B), is still applicable. When the one-third capacity

limit has been reached, Section 614(b)(2) provides that ``the cable

operator shall have discretion in selecting which such stations shall

be carried on its cable system.'' We believe that this statutory

directive would continue to apply in the digital context, if we

conclude that mandatory digital signal carriage is necessary. We seek

comment on this interpretation. In the alternative, we ask whether it

would be desirable to adopt carriage priority rules. Would it be useful

to accord priority to stations based on when they commence digital

television broadcasting as a way of encouraging stations to speed up

the transition process? Should carriage priority be given to stations

geographically closer to the operator's principal headend to support

the principal of localism? Alternatively, should priority be given to

television stations that are not affiliated with the top four networks

as these were the stations most likely to have chosen the must carry

option in the analog context and also have less bargaining power

relative to cable operators?

50. We seek comment on whether digital broadcast television

carriage requirements, during the transition and afterward, will impose

unique burdens on small cable systems or small cable operators that

warrant special consideration in the development of new digital

broadcast signal carriage rules. The Broadcasters recognize that small

cable systems may find it difficult to accommodate digital broadcast

television signals. Therefore, they suggest that the Commission may

consider adopting phase-in rules or policies for cable carriage of

digital broadcast television signals but that such rules or policies

should recognize cable's role in working with broadcasters to avail the

public of the benefits of digital technology. Although small cable

operators may be able to pass through a digital broadcast signal to

subscribers, there still may be significant equipment costs and channel

capacity loss involved in order for a cable operator to deliver digital

broadcast television. Small cable operators may not be able to upgrade

their systems, or invest in digital compression technology, due to

financial constraints and thus, may delay their transition to digital.

As such, these entities, that have been accorded special regulatory

status by Congress and the Commission in other areas, such as rate

regulation, may be the subjects of special treatment when it comes to

the carriage of digital broadcast television transmissions.

51. We seek comment on how to define small systems and small cable

operators in the context of digital must carry. We see alternative

definitions to choose from: those found in the must carry provisions of

the Act and those found in the rate regulation context. We seek comment

on which definition furthers the transition to digital broadcast

television while, at the same time, recognizes the unique circumstances

of the small cable operator. Are there other definitions that we have

not considered? As for relief, we ask, for example, whether the

Commission should decide that as long as the small system or small

operator carries all of the local analog television signals, it need

not carry the digital television transmissions as well. Alternatively,

we ask whether the Commission should allow small cable operators to

file petitions for special relief requesting a waiver of any digital

broadcast television carriage rule if financial hardship is

demonstrated. With regard to retransmission consent and its effect on

small cable operators, we seek comment on whether the Commission should

prohibit tying arrangements where an operator must carry the

broadcaster's digital signal as a precondition for carriage of the

analog signal. We seek comment on the scope of our statutory authority

to redefine small cable operators and small systems and provide them

with special relief.

52. Section 653(c)(1) of the Act provides that any provision that

applies to cable operators under Sections 614, 615 and 325, shall apply

to open video system operators certified by the Commission. Section

653(c)(2)(A) provides that, in applying these provisions to open video

system operators, the Commission ``shall, to the extent possible,

impose obligations that are no greater or lesser'' than the obligations

imposed on cable operators. The Commission, in implementing the

statutory language, held that there are no public policy reasons to

justify treating an open video system operator differently from a cable

operator in the same local market for purposes of broadcast signal

carriage. Thus, OVS operators generally have the same requirements for

the carriage of local television stations as do cable operators except

that these entities are under no obligation to place television

stations on a basic service tier. OVS operators are also obligated to

abide by Section 325 and the Commission's rules implementing

retransmission consent. We seek comment on the impact digital must

carry and retransmission consent will have on OVS operators and whether

and how rules for these entities should be different than the rules for

cable operators.

53. Sections 614 (a) and (h), and 615 (a) and (l) establish the

qualifications for cable carriage eligibility as it pertains to full

power commercial television stations (market based eligibility

standards), low power commercial television stations (six statutory

qualifications), and noncommercial television stations (mileage and

technical based standards). At this time, we see no need to deviate

from the existing eligibility requirements for these three categories

of stations. We seek comment on this tentative conclusion.

54. The issue of over-the-air signal reception quality at the

headend of the cable system is also involved in this discussion as it

defines which digital television stations, from a technical

perspective, are eligible for carriage. Section 614(h)(1)(B)(iii)

states that a television station that does not deliver a good quality

signal to the cable operator's headend, and does not agree to pay for

the equipment necessary to improve the signal, is not qualified to

assert its must carry rights. Under the current regime, television

broadcast stations must deliver either a signal level of -45dBm for UHF

signals or -49dBm for VHF signals at the input terminals of the signal

processing equipment, to be considered eligible for carriage. We seek

comment on how the Act's signal quality exception test applies to

digital transmissions. We have previously stated that, in order to ease

the transition, and to be considered to have complied with the

construction schedule, a broadcaster only initially needs to emit a

digital transmission strong enough to encompass its community of

license. We ask how this policy may affect the carriage of the digital

television transmission. We seek comment on whether the Commission's

analog signal strength standards are relevant to digital broadcast

television or new good quality signal parameters, which include normal

system processing degradations and account for bit rate error, are

necessary.

55. The language of Section 614(b)(4)(B) states that the Commission

should initiate a proceeding to establish any changes in the signal

carriage requirements of cable television systems are necessary ``to

ensure cable carriage of such broadcast signals of local commercial

television stations. . . .'' (emphasis added). The question here is

[[Page 42340]]

the nature and existence of carriage rights for noncommercial digital

television stations, since they are not explicitly discussed in this

section. We note that Section 615(a) of the Act states that ``each

cable operator shall carry on the cable system of that cable operator,

any qualified local noncommercial educational television station

requesting carriage.'' APTS argues that this provision is broad enough

to require cable operators to carry both the analog and digital signals

of public television stations. We seek comment on the statutory

language and on APTS' interpretation.

56. Section 614(b)(1)(B) provides that a cable operator, with more

than 12 usable activated channels, shall not have to devote more than

``one-third of the aggregate number of usable activated channels'' to

local commercial broadcast signal carriage purposes. Determining a

cable operator's capacity when digital content is involved and

therefore how many commercial television station signals must be

carried, is thus an issue in this proceeding. The cable industry has

commented that operators lack capacity to accommodate both the analog

signal and digital transmission. Broadcasters, on the other hand, have

asserted that cable operators are technically capable of fulfilling any

digital broadcast television must carry requirement and that lack of

capacity is a misleading argument. They state that one 6 MHz digital

cable channel could carry at least 8 digitally compressed analog NTSC

signals or two HDTV channels, or a compressed NTSC channel and 4

multicast SDTV channels. Thus, while the Act provides that a cable

operator should not have to devote more than ``one-third of aggregate

number of usable activated channels'' to local broadcast signal

carriage purposes, there is some dispute as to how capacity should be

defined in a digital environment.

57. Accordingly, we solicit comments on the definition of ``usable

activated channels'' in the context of digital broadcast television

carriage. Many cable operators now have, or soon will have, the

technical ability to fit several analog programming services onto one 6

MHz channel. Thus, in answering this question, we ask how advances in

signal compression technology affect the definition of capacity. We

also ask whether the one-third channel capacity requirement for digital

broadcast television carriage purposes means one-third of a cable

operator's digital channel capacity or one-third of all 6 MHz blocks,

including both the analog and digital channels.

58. We see three possible options in determining capacity: (1) each

programming service counts as one channel; (2) each 6 MHz block of

spectrum counts as one channel; or (3) the digital capacity should be

by data throughput, i.e. bits per second of digital data. We seek

comment on the benefits and drawbacks on each of these options. We also

ask whether the Act permits the Commission to redefine the meaning of

capacity in this context. We note, as discussed above, that the ability

of cable operators to carry more than a single digital broadcast

television signal in a 6 MHz channel is dependent on whether the

transmission is carried in its original format or whether changes in

format may be permitted, and ask commenters to address this distinction

in discussing the capacity issue.

59. We seek quantified estimates and forecasts of usable channel

capacity. Are there differences in channel capacity that are based on

franchise requirements, patterns of ownership, geographic location, or

other factors? What is the average number of channels dedicated to

various categories of programming, such as pay-per-view, leased access,

local and non-local broadcast channels, and others that would assist us

in understanding the degree to which capacity is, and will be,

available over the next two, five, eight years, or beyond? What methods

are appropriate to forecast the comparison between usable channel

capacity and potential broadcast needs, nationally, during the

transition (or other appropriate timeframe)?

60. Section 614(b)(4)(A) of the Act, discussing the cable system's

treatment and processing of analog broadcast station signals, provides

that: ``The signals of local commercial television stations that a

cable operator carries shall be carried without material degradation.

The Commission shall adopt carriage standards to ensure that, to the

extent technically feasible, the quality of the signal processing and

carriage provided by a cable system for the carriage of local

commercial television stations will be no less than that provided by

the system for carriage of any other type of signal.''

61. In the context of digital broadcast signal carriage, this

raises two quite distinct questions. First, to what extent should this

preclude cable operators from altering the digital format of digital

broadcast television signal when the transmission is processed at the

system headend or in customer premises equipment, such as the set top

box, that is part of the cable system or is attached to it? And second,

regardless of the transmission format, what standards and measurement

tools are available to address disputes relating to the quality of the

digital broadcast television signal?

62. The first issue essentially has to do with tradeoffs between

different modulation methods and transport specifications that may be

optimized for different media and the savings involved in having a

common receiver for signals or bitstreams received from different

transmission paths. As described above, broadcasters are using 8 VSB

while the cable industry has favored 64 or 256 QAM. The cable

operators' selection of a transmission methodology other than 8 VSB

reflect their ability to carry a higher data rate, and make more use of

their capacity, than they would if they used the broadcast system.

63. In comments in the previous phase of this proceeding, the

broadcasters argue that the material degradation mandate should be

strictly applied so that each cable system must carry the digital

broadcast television signal in its original over-the-air format so that

the public can receive the full extent of the station's capabilities,

including the station's full high definition capabilities.

64. The cable industry's concern in this area is that operators

should be allowed to demodulate and repack the digital broadcast

television signal into a higher bit-rate package because it would

result in a more efficient use of cable network capacity than any

broadcaster proposed engineering plan to merely pass-through the

bitstream on an equivalent basis, i.e., a 6 MHz broadcast signal on a 6

MHz cable channel.

65. We recognize one important action that may constitute material

degradation. It involves the cable operator's conversion of the

broadcaster's digital transmission into another digital format, perhaps

one with lower picture resolution. We seek comment on this possibility

and whether such a conversion should be prohibited. Are there other

degradation possibilities that we have not considered? Additionally,

does the term ``material'' in the statute suggest that some ``de

minimis'' amount of degradation is permissible?

66. Aside from the matters discussed above, questions arise as to

what standards and measurement techniques the Commission should employ

where specific disputes as to digital broadcast signal quality develop.

Picture and sound quality issues in a digital environment implicate

standards and measurement techniques that are quite different than

those that arise in the analog environment. In the analog

[[Page 42341]]

situation, issues involving signal strength, signal to noise ratios,

and ghosting are the focus of concern. In the digital situation,

picture resolution is still a concern but bit error rates and data

throughput are also relevant. Moreover, the technical standards that

are employed to evaluate cable analog picture quality were adopted and

refined over the course of many decades. We tentatively conclude that

it would be premature to attempt to replicate parallel digital

standards before digital broadcasting has even commenced. In this

regard, we seek suggestions for any standards that may be used in

addressing signal degradation issues. How, and where, should

degradation be measured? For example, should it be measured before the

signal is processed by the set top box, if such a device is involved,

or should it be measured at the input of the digital receiver? We

recognize that, under the Act, the signal quality of a local commercial

television station carried by a cable system will be no less than that

provided by the system for carriage of any other type of signal. Does

this mean that if an operator carried a cable programming service, such

as HBO, in the 1080i HDTV format, then it must carry, without material

degradation, all local commercial television stations that also provide

1080i HDTV signals? Would such a channel comparison test be a viable

degradation measurement technique, at least for HDTV picture quality?

Alternatively, we ask whether degradation should be gauged through the

use of bit error rate and signal-to-noise ratio measurements. In other

words, it may be that as long as the bit error rate is minimal, then

any conversion process cannot be said to materially degrade the signal.

67. Section 614(b)(5) of the Communications Act provides that ``a

cable operator shall not be required to carry the signal of any local

commercial television station that substantially duplicates the signal

of another local television station which is carried on the cable

system * * *.'' Parallel provisions also apply to the carriage of

noncommercial stations. Congress stated that these provisions were

intended to preserve the cable operator's editorial discretion while

ensuring that the public has access to diverse local signals. Because

it is likely, and indeed mandated, that at some point in the transition

process there be a duplication of program content between analog and

digital broadcast transmissions, an integral part of the overall

carriage question is the issue of how to treat duplicative programming.

68. We see alternative approaches to defining ``duplication'' in

the digital age. The first option would be modeled after the current

approach for analog signal duplication and focus on the stations'

program content so that the nonduplication provision would apply even

though the signals were transmitted in different formats. In the analog

signal context, the Commission has determined that two commercial

television stations will be considered to substantially duplicate each

other ``if they simultaneously broadcast identical programming for more

than 50 percent of the broadcast week.'' Thus, if a broadcaster aired

substantially the same material over its digital station, as it does

over its analog station, the operator would not be obligated to carry

both. Second, because they each use different transmission formats, the

analog signal and digital bitstream could be considered not duplicative

even if they contain identical program content. This would be most

clearly the case where one of the broadcasts was in a high definition

format and the other was not. Third, the substantial duplication

requirement may not apply in the digital world because Congress may

have intended that the provision be used where there were two different

television stations involved, not the same licensee transmitting

programming in both an analog and digital format. We seek comment on

each of these possibilities. In answering this inquiry, we seek comment

on the meaning of the term ``duplicative'' when applied to digital

broadcast television signals. For example, should a multiplexed

broadcast signal that includes cable programming that is already

carried by the operator, be considered duplicative? Moreover, how

should the term ``station'' be defined in this context? Does the term

``another'' in the statute suggest that the signals in question must

come from two different stations, not the same one? We also seek

comment on whether a definition that requires carriage of identical

analog and digital signals would result in other commercial broadcast

programming not being carried because the one-third channel capacity

has been reached.

69. Section 614(b)(3)(A) of the Act requires cable operators to

carry the ``primary video'' of each of the local commercial television

stations carried on the cable system. A parallel provision exists for

noncommercial educational television stations. The general question

here is how to define ``primary video'' during the transition period

when both an analog and digital signal will be broadcast. Could the

analog signal be considered primary but not the digital signal since

the former can be received by all cable subscribers with analog

television sets? Moreover, broadcasters, under the digital television

rules, have flexibility in choosing to broadcast either high definition

or multiple standard definition television transmissions, or a mixture

of both, over the course of a broadcast day. Thus, how should ``primary

video'' be defined in the context of a digital service that broadcasts

multiple streams of video programming. If the primary video includes

less than all of the streams of programming broadcast, we seek comment

on which video programming services provided by a licensee should be

considered primary and should be entitled to carriage. Should the

definition be flexible, allowing the broadcaster to alternate which of

its transmissions would be considered primary over time? How do the

answers to these questions reflect on the development of both digital

broadcasting and on the services provided and rates charged by cable

operators?

70. Section 336 of the Act provides that ``no ancillary or

supplementary service shall have any right to carriage under section

614 or 615.'' Section 614(b)(3) of the Act requires cable operators to

carry ``to the extent technically feasible, program-related material

carried in the vertical blanking interval or on subcarriers'' but

states that ``[r]etransmission of other material in the vertical

blanking interval or other nonprogram-related material (including

teletext and other subscription and advertiser-supported information

services) shall be at the discretion of the cable operator.'' Our task

here is to define what ``ancillary or supplementary'' mean in the

context of digital broadcast television carriage. We seek comment on

possible definitions that are consistent with the language of Section

614(b)(3).

71. We note that Section 336 of the 1996 Act also states that ``no

ancillary or supplementary service shall * * * be deemed a multichannel

video programming distributor for purposes of section 628.'' Section

628 contains the program access requirements pursuant to which

multichannel video programming distributors have rights to demand

access to certain satellite delivered cable programming in which a

cable operator has an attributable interest. We seek comment on whether

the Act's language provides any insight as to the ancillary or

supplementary service definition.

[[Page 42342]]

72. Section 615(d) and 614(c)(2) of the Act provides that a cable

operator required to add the signals of qualified local noncommercial

educational stations and qualified low power television stations,

respectively, may do so by placing such additional stations on unused

public, educational or governmental (``PEG'') channels not in use for

their designated purposes, subject to the approval of franchising

authorities. Pursuant to Section 611 of the Act, the franchising

authority determines how much of a cable operator's channel capacity,

if any, will be set aside for PEG use. The Commission, when

implementing the analog must carry rules, declined to adopt stringent

requirements regarding the use of PEG channels for must carry purposes

because we believed that these matters are more appropriately resolved

by individual franchising authorities. We seek comment on whether the

DTV signals of NCE stations and LPTV stations should be allowed on PEG

channels under the same framework accorded analog television signals.

73. Section 614(b)(7) provides that all commercial must-carry

signals shall be provided to every subscriber of a cable system and

shall be viewable on all television receivers of subscribers that are

connected by the cable operator or for which the cable operator

provides a connection. Section 615(h) provides that noncommercial

educational stations, that are entitled to carriage, shall be

``available to every subscriber as part of the cable system's lowest

price service tier that includes the retransmission of local commercial

television broadcast signals.'' We seek comment on whether the operator

must place the broadcaster's digital transmissions on the same basic

tier where the analog channels are found or whether a separate digital

basic service tier could be established that would be available only to

subscribers with the capacity to view the contents of the digital

broadcast signals.

74. During the transition period, there may be situations where the

carriage of digital broadcast signals could properly be associated with

the carriage of digital cable channels because of their similar digital

picture or interactive characteristics, or may otherwise be provided

only to subscribers capable of using digital video. By associating the

digital broadcast and cable channels in terms of tier placement,

subscribers that are equipped to receive digital signals will be

assured of receiving digital broadcast signals and subscribers not so

equipped would not be obliged to subscribe to services that they are

not equipped to receive. We seek comment on this general concept or on

other means whereby subscribers' reception capabilities could be

matched with the tier package they are required by regulation to

receive. Do we have the authority to implement such a proposal?

Moreover, should there be parallel tier placement rules, one for analog

cable systems that do not offer digital services, and one for cable

systems that do offer digital services? We also seek comment on the

legal issues that might be associated with having more than a single

basic tier in order to accommodate the carriage of digital broadcast

signals. Once the transition period ends, our tentative view is that

the basic service tier would be required to include, at a minimum,

digital broadcast signals and public, educational, and governmental

access channels. This will satisfy the statute's directive of assuring

that all cable subscribers are able to view broadcast material on the

lowest priced tier available.

75. Also pursuant to Section 614(b)(7), if a cable operator

authorizes subscribers to install additional receiver connections, but

does not provide the subscriber with such connections, the operator

shall notify such subscribers of all broadcast stations carried on the

cable system which cannot be viewed via cable without a converter box.

In such cases, the cable operator shall offer to sell or lease a

converter box to such subscribers at rates in accordance with the

standards established by the Commission pursuant to Section 623(b)(3).

We seek comment on the application of this provision to the carriage of

digital broadcast television stations. We specifically ask whether this

provision would require cable operators to offer converter boxes to

every subscriber if digital broadcast television stations cannot be

received without some set-top device facilitating reception of the

stations' transmissions.

76. In addition to tier position requirements, we also need to

determine the specific channel rights digital broadcast television

stations should have. Section 614(b)(6) provides for four channel

positioning options for commercial television stations: (1) The channel

number on which the station broadcasts over-the-air; (2) the channel on

which the station was carried on July 19, 1985; (3) the channel on

which it was carried on January 1, 1992; and (4) any other channel

number as is mutually agreed upon by the station and the cable

operator. Noncommercial television stations have three channel

positioning options under Section 615(g)(5): (1) the channel number on

which the station is broadcast over-the-air; (2) the channel on which

the station was carried on July 19, 1985; and (3) any other channel

number as is mutually agreed upon by the station and the cable

operator. We seek comment on which of the statutory options remain

applicable in a digital environment. Commenters should also focus their

attention on the carriage of multiple SDTV programming streams and

describe how channel positioning should vest in this situation.

77. In earlier comments, the Broadcasters maintain that television

stations should have the option of electing the channel on which the

digital broadcast television signal is carried, so that each station

would be able to retain its channel identity from cable system to cable

system, and so that the analog and digital channels be found together

on the cable system. They also maintain that the Congressional intent

behind the Act's channel positioning mandate, i.e., to prevent the

anticompetitive conduct of the cable operator placing the television

station on an undesirable, higher cable channel, remains valid. We seek

comment on this proposal.

78. The new digital broadcast television table of allotments

typically does not correspond to a television station's analog channel

number but the advent of advanced programming retrieval systems and

other channel selection devices may alleviate the need for specific

channel positioning requirements as subscribers will be able to locate

a television station with little degree of difficulty. Additionally,

channel mapping protocols (``PSIP'') have been developed that will

technically link the digital channel number with that assigned to the

analog channel. Given these developments, we ask whether the Commission

should refrain from promulgating new channel positioning requirements

and allow technology, as discussed above, to resolve the matter. We

seek comment on the extent to which PSIP is the subject of voluntary

standards setting processes in the cable, broadcast, and consumer

electronics industries and what the timing and outcome of such

voluntary processes are likely to be. Moreover, recognizing that

channel positioning is important to ensure the successful introduction

of an individual digital television station on a cable system with

dozens of other channels, we ask whether deference to technology to

resolve the positioning issues here will be the appropriate solution.

We also seek comment on whether this option would be consistent with

the statutory channel positioning requirements.

[[Page 42343]]

79. Another alternative would be to allow the operator to place the

digital television transmission on any cable channel of its choice,

subject to certain conditions, such as: (1) That the digital channel

identification or PSIP information be clearly available for use by the

subscriber's receiver; (2) that all analog and digital channel

placement decisions must comply with tier placement requirements; and

(3) once a station has been assigned a channel position, the cable

operator may not move it from that position for at least three years

except where a move is authorized by the broadcaster. These general

requirements would give the operator greater leeway in configuring its

channel line-up. We seek comment on this particular proposal and ask

commenters to focus on the legal, technical, and economic issues

involved.

80. We also seek comment on whether advanced programming retrieval

systems and other channel selection devices provided by cable operators

which, in effect, filter and prioritize programming, present another

series of challenges similar to those that gave rise to Congress'

channel positioning requirements. If so, we ask whether any rules are

necessary to ensure fair competition between electronic programming

guides controlled by cable operators and those that are controlled by

broadcasters.

81. Television stations have carriage rights throughout the market

to which they are assigned. Pursuant to Section 614(h)(1)(C), at the

request of either a broadcaster or a cable operator, the Commission

may, with respect to a particular television broadcast station, include

additional communities within its television market or exclude

communities from such station's television market to better effectuate

the purposes of the Act's must carry provisions. The Commission's

inclusion of additional communities within a station's ADI imposes new

must carry requirements on cable operators subject to the modification

request while the grant to exclude communities from a station's ADI

removes a cable operator's obligation to carry a certain station's

signal. In considering market modification requests, the Act provides

that the Commission shall afford particular attention ``to the value of

localism'' by taking into account such factors as--(1) Whether the

station, or other stations located in the same area, have been

historically carried on the cable system or systems within such

community; (2) whether the television station provides coverage or

other local service to such community; (3) whether any other television

station that is eligible to be carried by a cable system in such

community in fulfillment of the requirements of this section provides

news coverage of issues of concern to such community or provides

carriage or coverage of sporting and other events of interest to the

community; and (4) evidence of viewing patterns in cable and noncable

households within the areas served by the cable system or systems in

such community. We seek comment on whether any change to the market

modification process is warranted to accommodate the difference between

analog and digital broadcasting and the fact that the signals in

question have neither a history of carriage nor measured audience. We

also seek comment on whether there are alternative means to resolve

market structure issues for new digital broadcast television stations.

82. We also inquire as to whether changes in signal strength and

Grade B contour coverage, because of new digital television station

channel assignments and power limits, will result in different carriage

obligations for cable operators. We focus on those instances where the

Commission has redefined an analog station's television market based,

in part, on Grade B contour coverage and has either granted or denied a

must carry complaint based on a analog station's signal strength

measurements. Should the digital television station's technical

characteristics have any bearing on the analog television station's

market area, or vice versa?

83. We previously held that television markets for must carry

eligibility purposes are to be determined by Arbitron's ADIs through

December 31, 1999, the end of the second must carry/retransmission

consent election cycle, and by Nielsen's DMAs for all election cycles

thereafter. Television markets for digital allocation purposes,

however, are currently defined by DMAs rather than ADIs. Noting that

digital broadcast television service in certain markets is to be

introduced months earlier than the switch to DMAs, the situation now

exists where carriage obligations commence under one set of standards

(ADIs) and shortly thereafter shift to a new set of market definitions

(DMAs). This two-step carriage process is likely to cause channel line-

up disruptions and subscriber confusion. We seek comment on this

situation and the steps the Commission should take to lessen the

possibility of channel line-up disruptions.

84. Under current Commission rules, whenever a television station

believes that a cable operator has failed to meet its must carry

obligations, the station may file a complaint with the Commission.

Section 614(d)(3) requires the Commission to adjudicate a must carry

complaint within 120 days from the date it is filed. The Commission may

grant the complaint and order the cable operator to carry the station

or it may dismiss the complaint if it is determined that the cable

operator has fully met its must carry obligations with regard to that

station. We seek comment on whether the complaint process now set forth

in part 76 is appropriate in the context of digital broadcasting

stations. We specifically ask whether the Commission's rules need to be

modified to recognize the broadcaster's transmission of programming

streams rather than entire channels. We welcome any suggestions for

streamlining the complaint process that would expedite the Commission's

adjudication of the requested action.

85. Various means of providing cable subscribers access to over-

the-air broadcast signals have been explored in years past. One

recognized option was to require cable operators to provide subscribers

with an input selector switch (commonly referred to as an A/B switch)

that switches television receiver inputs from cable to an over-the-air

antenna and to require cable system operators to educate subscribers as

to the use of this device. Congress, however, subsequently abolished

the Commission's A/B switch requirements when it passed the Cable Act

of 1992, stating affirmatively that no cable operator should be

required to provide or make available such a switch. It stated that an

A/B switch is not an enduring or feasible method for the reception of

television signals. In light of Section 614(b)(4)(B), and Congressional

statements about the Commission's broad role in examining the digital

broadcast television carriage issue, we ask whether we have the

authority to address A/B switch issues, notwithstanding the existing

prohibition.

86. The availability of an input selector switch, in conjunction

with television antennas, could be a means of increasing cable

subscriber access to DTV signals, including ancillary and supplementary

services that are not entitled to cable carriage. That does not

necessarily mean that a regulatory requirement mandating the inclusion

of such a device is needed. The basic hardware involved is readily

available from retail outlets. Moreover, a switch mechanism is now

incorporated into many television receivers (as well as into videotape

recorders and DBS receivers) and new digital television receivers may

have multiple input

[[Page 42344]]

possibilities fully selectable from remote control devices. We seek

comment on these views and specifically ask whether A/B switches have

evolved, from a technical perspective, in the last six years. Are they

easier to use than they were when Congress made its findings for the

1992 Cable Act? For example, has widespread use of remote control

technology rather than manual operation made the use of A/B switches

more effective? Are there widely accepted industry practices with

regard to the manufacturing and inclusion of A/B switches? What plans,

if any, do manufacturers have to incorporate electronic or diode-based

A/B switches into television receivers and other devices? We also ask

whether there are any actions that the Commission needs to take to make

sure that subscribers have access to digital television signals that

are not carried. Are there situations where regulatory intervention

would be useful either to facilitate access as a technical matter or to

overcome any residual ``gatekeeper'' control that cable system

operators may retain with respect to such devices? Is the restriction

in Section 614(b)(4)(B) on requirements applicable to cable operators

equally applicable to requirements imposed on receiver manufacturers?

Could the Commission, for example, require that all digital television

equipment, not supplied by the cable operator, be manufactured with an

A/B switch? We also seek comment on whether improvements in A/B switch

technology and its availability undercut the need for mandatory digital

broadcast signal carriage, if the justification for such a rule is to

preserve free over the air broadcast television.

87. As the above discussion indicates, the use and usefulness of

antennas, both roof-top and indoor, is central to this proceeding. It

appears likely that antennas will play a significant role in the

reception of DTV. In this context, many questions arise about the

efficacy of antennas for over-the-air reception of DTV and their use by

cable and non-cable homes, alike. For example, do indoor antennas work

better with digital television receivers than with analog receivers?

How do weather conditions affect DTV television reception when an

antenna is used? Are roof top antennas an economically efficient

alternative to cable for the reception of DTV signals? Should the

Commission encourage antenna technology in order to enhance the use of

the valuable spectrum broadcasters use? How does the availability of

better antennas affect the necessity of mandatory digital broadcast

signal carriage rules?

V. Impact on Other Rules

88. Digital broadcast signal carriage also has potential

consequences for the cable television rate regulation process. Both

jurisdictional and substantive rate level issues are involved. One of

the issues addressed in this proceeding has to do with where, in terms

of tier location, digital broadcast television signals would be placed

on the cable systems involved. The answer to this question has

jurisdictional consequences for the rate regulation process and

substantive consequences in terms of the rate levels permitted by the

Commission's rules. With respect to the jurisdictional question, rates

for the basic service tier (``BST'') are subject to local franchise

authority regulation and upper tier or cable programming service tiers

(``CPST'') are subject to Commission regulation on a complaint basis.

89. With respect to the substance of rate regulation, under the

benchmark rate rules, once initial rates are established, cable

operators are permitted to adjust their rates for changes in the number

of regulated channels. Cable operators seeking to adjust regulated

rates to reflect these changes had to be prepared to justify rate

increases using the applicable forms. In justifying rate adjustments,

operators use a channel adjustment methodology provided for under the

rules. The rules also provide an adjustment process when channels are

dropped and when channels are moved between tiers. An alternative

``cost of service'' rate regulation process also is available to cable

system operators that believe the benchmark process fails to adequately

account for their costs. There are also cost pass-through mechanisms

for defined categories of ``external'' costs, including franchise fees;

certain local franchise costs; programming; retransmission consent; and

copyright fees. Costs associated with compliance with mandatory

broadcast signal carriage rules are not now included as external costs.

Customer equipment that is used to receive the basic service tier, and

any other service received with the same equipment, is subject to

franchise authority jurisdiction under a separate set of rules.

Additionally, subject to a number of conditions, cable operators may

establish a category of cable programming service tiers, referred to as

a ``new product tiers,'' that may be offered at prices they elect. New

product tiers consist of programming not previously carried by the

operator that is optional to subscribers and that is available without

subscribing to any other cable programming service tier. It appears

that most cable system operators that are adding separate tiers of

digital cable programming may be doing so under the ``new product

tier'' provisions of the rules.

90. In our effort to establish a complete record in this area, and

make an informed policy decision with regard to rate regulation, we

seek comment on what, if any, changes in these rules may be necessary

or desirable. We specifically seek comment on the processes and costs

of delivering digital broadcast television to cable subscribers. This

part of the inquiry is important because some operators, such as

Intermedia, have said that mandating carriage of all digital broadcast

television transmissions ``will financially devastate many cable

operators.'' Broadcasters acknowledge that the transition to digital

will be expensive for all parties involved. We note that the

broadcaster is currently required to pay for the costs of delivering

its analog signal to the cable operator's headend. Cable subscribers

also have an interest given that rates may change if digital broadcast

television stations must be carried by cable systems, and the

Commission has a statutory responsibility to ensure reasonable rates to

these subscribers. We also seek comment on whether existing rate levels

already allow operators to recover the costs involved in any upgrading

of their systems necessary for digital broadcast signal carriage.

91. The ``costs of carriage'' issue has been generally addressed in

prior comments. The broadcasters, for example, assert that they should

not have to pay for cable upgrades in return for mandatory carriage.

They state that cable operators will know what technical compatibility

issues lie ahead and thus, any expenses incurred to ensure

compatibility should be borne by those systems. The cable operators, on

the other hand, argue that if they are required to carry any digital

broadcast services before a cable system has become digital-capable,

the cost to transmit such services should be borne by the broadcast

station. We ask that commenters refresh the record on the specific

technical modifications needed to enable cable systems to deliver

digital broadcast television to subscribers. We ask what the costs will

be for such modifications, particularly for new headend equipment and

the delivery and installation of new digital set top boxes, if they are

needed to comply with any carriage requirement. We also ask about the

costs related to cable tower modifications as it may be necessary to

[[Page 42345]]

add additional digital broadcast television receiving antennas at the

headend. To what extent should these additional costs be the

responsibility of the broadcaster seeking carriage? We also seek

comment on whether digital cable programming services are paying, or

plan to pay, cable operator digital equipment costs as one way of

obtaining carriage on the cable system. We ask if the advent of digital

compression technology has, or will, lessen the cable operator's costs

in bringing digital broadcast television signals into the home.

92. Cable operators are required to notify subscribers of any

changes in rates, programming services or channel positions. When the

change involves the addition or deletion of channels, each channel

added or deleted must be separately identified. We seek comment on how

any new digital broadcast television carriage requirements will affect

the notification provisions described above. For example, if an

existing broadcaster switches to an HDTV format, would the cable

operator be required to notify subscribers of the change? Moreover, if

a television broadcasts multiple streams of programming, must the cable

operator explain the broadcaster's offerings on each of these streams?

We tentatively conclude that a cable operator would be required to

notify subscribers whenever a new digital television transmission is

added to the operator's channel line-up because these digital broadcast

television substitutions could be considered new services affecting

subscribers equipment and subscription choices. We also tentatively

conclude that while the operator should state that multiple programming

streams are available, it would be under no obligation to explain to

subscribers the material found in each and every SDTV programming

stream, if such material is carried, as such detail is not required by

either the Act or our rules.

93. The Commission's program exclusivity rules, as implemented in

Secs. 76.92 and 76.151, protect exclusive distribution rights afforded

to network programming and syndicated programming. Television broadcast

station licensees are entitled to protect those kinds of programs for

which they have contracted in a particular market by exercising

blackout rights against distant television broadcast stations carried

on cable systems that serve more than 1000 subscribers. Stations may

assert their rights regardless of whether their signals are carried on

the cable system in question.

94. We seek comment on how the transition to digital television may

affect these rules. We specifically ask how SDTV multiplexing impacts

these rules and whether the cable operator will be able to accommodate

such black-out requests on various programming streams. Finally, we ask

whether these rules are applicable in the digital age, with or without

must carry, and whether it would be possible to repeal these rules and

instead rely on the retransmission consent provisions of Section 325 of

the Act to protect the rights in question. Section 325 generally

provides that distant stations may not be carried without the

permission of the station involved. To the extent digital broadcast

television stations will need to make new arrangements for programming,

it may be possible for the rights now protected by the rules to be

protected through private contractual relationships. A broadcaster, for

example, could require a cable operator to blackout certain programming

and monetary penalties could arise if the operator does not comply with

the terms of the contract. This may be a more effective method of

enforcing blackout rights than relying on the Commission's current

complaint process. The rules in question, we note, were adopted prior

to the changes in Section 325 that include the retransmission consent

requirement.

95. The Commission's cable television broadcast signals carriage

rules and the copyright laws, through reference to the Commission's

rules, contain a number of distinctions in their application based on

whether a broadcast signal is ``local'' to the cable community. One

measure of whether a station's signal is ``local'' involves using

actual over-the-air viewership in the community as the standard. This

``significantly viewed'' concept is defined in Sec. 76.5(i) of the

rules and is applied in the contexts of syndicated exclusivity, sports

broadcast, network nonduplication, and, through incorporation by

reference, to the compulsory copyright licensing process. The

significant viewing standard supplements the other ``local'' station

definitions by permitting stations to be considered local both within

their Grade B contours and outside of their Grade B contours and

outside of their ADI or DMA-defined economic market areas based on

viewing surveys that directly demonstrate that over-the-air viewers

have access to the signals in question.

96. Because digital broadcast television stations will not, in the

early stages of their deployment, have significant over-the-air

audience, we seek comment on methods to address the kinds of issues

that the significant viewing standard addresses in the analog

environment. Should, for example, a new measure be developed that

measures viewing in places that are equipped with digital receivers? Or

should the ``significant viewing'' status of analog stations be

transferred to their digital replacements. It is our initial view that

such transfer of rights may be the most efficient and equitable way to

proceed based on the costs and problems associated with taking new

measurements.

97. We recognize that cable operators are frequently dependent on

cable television relay service (``CARS'') stations to relay broadcast

television signals. CARS stations distribute signals to microwave hubs

where it may be physically impossible or too expensive to run actual

cable wire. CARS stations are not used to distribute programming

directly to subscribers. We seek comment on whether the introduction of

digital broadcast television impacts CARS, and, if so, how.

VI. Procedural Matters

98. Ex Parte Rules. This proceeding will be treated as a ``permit-

but-disclose'' proceeding subject to the ``permit-but-disclose''

requirements under 47 CFR 1.1206(b), as revised. Ex parte presentations

are permissible if disclosed in accordance with Commission rules,

except during the Sunshine Agenda period when presentations, ex parte

or otherwise, are generally prohibited. Persons making oral ex parte

presentations are reminded that a memorandum summarizing a presentation

must contain a summary of the substance of the presentation and not

merely a listing of the subjects discussed. More than a one or two

sentence description of the views and arguments presented is generally

required. See 47 CFR 1.1206(b)(2), as revised. Additional rules

pertaining to oral and written presentations are set forth in

1.1206(b).

99. Filing of Comments and Reply Comments. Pursuant to applicable

procedures set forth in 47 CFR 1.415 and 1.419, interested parties may

file comments on or before September 17, 1998 and reply comments on or

before October 30, 1998. To file formally in this proceeding, you must

file an original plus four copies of all comments and reply comments.

If you want each Commissioner to receive a personal copy of your

comments and reply comments, you must file an original plus nine

copies. You should send comments and reply comments to Office of the

Secretary, Federal Communications Commission, 1919 M Street, N.W.,

Washington, D.C. 20554. Comments and reply comments will be available

for public inspection during regular business hours in the FCC

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

Street N.W., Washington D.C. 20554. The Cable Services Bureau contact

for this proceeding is Ben Golant at 202-418-7111 or [email protected].

100. Written comments must be submitted by the Office of Management

and Budget (``OMB'') on the proposed information collections on or

before September 17, 1998. In addition to filing comments with the

Secretary, a copy of any comments on the information collections

contained herein should be submitted to Judy Boley, Federal

Communications Commission, Room 234, 1919 M Street, N.W., Washington,

DC 20554, or via the Internet to [email protected] and to Timothy Fain,

OMB Desk Officer, 10236 NEOB, 725--17th Street, N.W., Washington, DC

20503 or via the Internet to [email protected].

101. Parties are also asked to submit comments and reply comments

on diskette, where possible. Such diskette submissions would be in

addition to, and not a substitute for, the formal filing requirements

addressed above. Parties submitting diskettes should submit them to Ben

Golant of the Cable Services Bureau, 2033 M Street N.W., Room 703B,

Washington, D.C. 20554. Such a submission should be on a 3.5 inch

diskette formatted in an IBM compatible form using MS DOS 5.0 and

WordPerfect 5.1 software. The diskette should be submitted in ``read

only'' mode. The diskette should be clearly labelled with the party's

name, proceeding, type of pleading (comments or reply comments), and

date of submission. The diskette should be accompanied by a cover

letter.

102. Initial Regulatory Flexibility Act Analysis. As required by

the Regulatory Flexibility Act (``RFA''), the Commission has prepared

this present Initial Regulatory Flexibility Analysis (``IRFA'') of the

possible significant economic impact on small entities by the policies

and rules proposed in this NPRM. Written public comments are requested

on this IRFA. Comments must be identified as responses to the IRFA and

must be filed by the deadlines for comments on the NPRM provided above.

The Commission will send a copy of the NPRM, including this IRFA, to

the Chief Counsel for Advocacy of the Small Business Administration.

103. Need for, and Objectives of, the Proposed Rule Changes. This

NPRM seeks comment on several issues relating to the carriage of

digital television broadcast stations. The objective of the NPRM is to

propose broadcast signal carriage policy alternatives during the

transition period, examine the changes in the Commission's current

broadcast signal carriage rules that may be necessary in the digital

age, and to ensure compatibility between digital broadcast television,

cable systems, and related equipment.

104. Legal Basis. The authority for the action proposed in this

rulemaking is contained in Sections 1, 4(i) and (j), 325, 336, 614, and

615 of the Communications Act of 1934, as amended, 47 U.S.C. 151,

154(i) and (j), 325, 336, 534, and 535.

105. Description and Estimate of the Number of Small Entities

Impacted. The IRFA directs the Commission to provide a description of

and, where feasible, an estimate of the number of small entities that

will be affected by the proposed rules. The IRFA 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. Under the Small Business

Act, a small business concern is one which: (1) is independently owned

and operated; (2) is not dominant in its field of operation; and (3)

satisfies any additional criteria established by the Small Business

Administration (``SBA''). The rules we propose in this NPRM will affect

cable operators, OVS operators, cable programmers, and television

station licensees.

106. Small MVPDs. SBA has developed a definition of small entities

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

companies generating $11 million or less in annual receipts. This

definition includes cable system operators, closed circuit television

services, direct broadcast satellite services, multipoint distribution

systems, satellite master antenna systems and subscription television

services. According to the Census Bureau data from 1992, there were

1,758 total cable and other pay television services and 1,423 had less

than $11 million in revenue. We address below each service individually

to provide a more precise estimate of small entities.

107. Cable Systems. The Commission has developed, with SBA's

approval, our own definition of a small cable system operator for the

purposes of rate regulation. Under the Commission's rules, a ``small

cable company'' is one serving fewer than 400,000 subscribers

nationwide. Based on our most recent information, we estimate that

there were 1439 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 1439

small entity cable system operators that may be affected by the

decisions and rules proposed in this NPRM.

108. 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.'' The Commission has determined that there are 61,700,000

subscribers in the United States. Therefore, 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. Based on

available data, we find that the number of cable operators serving

617,000 subscribers or less totals approximately 1450. 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.

109. Open Video System (``OVS''). The Commission has certified

eleven OVS operators. Of these eleven, only two are providing service.

Bell Atlantic received approval for its certification to convert its

Dover, New Jersey Video Dialtone (``VDT'') system to OVS. Affiliates of

Residential Communications Network, Inc. (``RCN'') received approval to

operate OVS systems in New York City and the Boston area. Bell Atlantic

and RCN have sufficient revenues to assure us that they do not qualify

as small business entities. Little financial information is available

for the other entities authorized to provide OVS that are not yet

operational. We believe that one OVS licensee may qualify as a small

business concern. Given that other entities have been authorized to

provide OVS service but have not yet begun to generate revenues, we

conclude that at least some of the OVS operators qualify as small

entities.

110. Program Producers and Distributors. The Commission has not

developed a definition of small entities applicable to producers or

distributors of cable television programs. Therefore, we will use the

SBA classifications of

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Motion Picture and Video Tape Production (SIC 7812), Motion Picture and

Video Tape Distribution (SIC 7822), and Theatrical Producers (Except

Motion Pictures) and Miscellaneous Theatrical Services (SIC 7922).

These SBA definitions provide that a small entity in the cable

television programming industry is an entity with $21.5 million or less

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

annual receipts for SIC 7922. Census Bureau data indicate the

following: (a) there were 7,265 firms in the United States classified

as Motion Picture and Video Production (SIC 7812), and that 6,987 of

these firms had $16.999 million or less in annual receipts and 7,002 of

these firms had $24.999 million or less in annual receipts; (b) there

were 1,139 firms classified as Motion Picture and Video Tape

Distribution (SIC 7822), and 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 (c) there were 5,671 firms in the United

States classified as Theatrical Producers and Services (SIC 7922), and

5627 of these firms had $4.999 million or less in annual receipts.

111. Each of these SIC categories is very broad and includes firms

that may be engaged in various industries, including cable programming.

Specific figures are not available regarding how many of these firms

exclusively produce and/or distribute programming for cable television

or how many are independently owned and operated. Thus, we estimate

that our rules may affect approximately 6,987 small entities primarily

engaged in the production and distribution of taped cable television

programs and 5,627 small producers of live programs that may be

affected by the rules adopted in this proceeding.

112. Television Stations. The proposed rules and policies will

apply to television broadcasting licensees, and potential licensees of

television service. The Small Business Administration defines a

television broadcasting station that has no more than $10.5 million in

annual receipts as a small business. Television broadcasting stations

consist of establishments primarily engaged in broadcasting visual

programs by television to the public, except cable and other pay

television services. Included in this industry are commercial,

religious, educational, and other television stations. Also included

are establishments primarily engaged in television broadcasting and

which produce taped television program materials. Separate

establishments primarily engaged in producing taped television program

materials are classified under another SIC number. There were 1,509

television stations operating in the nation in 1992. That number has

remained fairly constant as indicated by the approximately 1,579

operating full power television broadcasting stations in the nation as

of May 31, 1998. In addition, as of October 31, 1997 , there were 1,880

LPTV stations that may also be affected by our rules. For 1992 the

number of television stations that produced less than $10.0 million in

revenue was 1,155 establishments.

113. Thus, the proposed rules will affect many of the approximately

1,579 television stations; approximately 1,200 of those stations are

considered small businesses. 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.

114. In addition to owners of operating television stations, any

entity who seeks or desires to obtain a television broadcast license

may be affected by the proposals contained in this item. The number of

entities that may seek to obtain a television broadcast license is

unknown. We invite comment as to such number.

115. Small Manufacturers. The SBA has developed definitions of

small entity for manufacturers of household audio and video equipment

(SIC 3651) and for radio and television broadcasting and communications

equipment (SIC 3663). In each case, the definition includes all such

companies employing 750 or fewer employees. 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.

116. Electronic Equipment Manufacturers. The Commission has not

developed a definition of small entities applicable to manufacturers of

electronic equipment. Therefore, we will use the SBA definition of

manufacturers of Radio and Television Broadcasting and Communications

Equipment. 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. 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 manufacturers of radio and television

equipment.

117. Electronic Household/Consumer Equipment. The Commission has

not developed a definition of small entities applicable to

manufacturers of electronic equipment used by consumers, as compared to

industrial use by television licensees and related businesses.

Therefore, we will use 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. 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. 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.

118. Computer Manufacturers. The Commission has not developed a

definition of small entities applicable to computer manufacturers.

Therefore, we will utilize the SBA definition of Electronic Computers.

According to SBA regulations, a computer manufacturer must have 1,000

or fewer employees in order to qualify as a small entity. 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. 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.

119. Compliance Requirements. There may be compliance requirements

for cable operators and OVS operators, in the form of mandatory digital

broadcast television carriage requirements, if any of the options set

forth in this NPRM are

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ultimately adopted by the Commission. An attempt has been made to

streamline compliance requirements. For example, we have sought comment

on streamlining the must carry complaint process for digital television

station carriage.

120. Federal Rules Which Duplicate, Overlap, or Conflict with the

Commission's Proposals. None.

121. Report to Congress. The Commission will send a copy of the

NPRM, including this IRFA, in a report to be sent to Congress pursuant

to the Small Business Regulatory Enforcement Fairness Act of 1996. In

addition, the Commission will send a copy of the NPRM, including IRFA,

to the Chief Counsel for Advocacy of the Small Business Administration.

122. It is ordered that, pursuant to Sections 1, 4 (i) and (j),

325, 336, 614, and 615 of the Communications Act of 1934, as amended,

47 U.S.C. 151, 154 (i) and (j), 325, 336, 534, and 535, notice is

hereby given of proposed amendments to part 76, in accordance with the

proposals, discussions and statements of issues in this NPRM, and that

comment is sought regarding such proposals, discussions and statements

of issues.

123. It is further ordered that the Commission's Office of Public

Affairs, Reference Operations Division, shall send a copy of this NPRM,

including the Initial Regulatory Flexibility Analysis, to the Chief

Counsel for Advocacy of the Small Business Administration.

List of Subjects in 47 CFR Part 76

Cable television.

Federal Communications Commission.

Magalie Roman Salas,

Secretary.

[FR Doc. 98-21085 Filed 8-6-98; 8:45 am]

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