Ancillary or Supplementary Use of Digital Television Capacity by Noncommercial Licensees

FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 73

[MM Docket No. 98-203; FCC 98-304]

Ancillary or Supplementary Use of Digital Television Capacity by

Noncommercial Licensees

AGENCY: Federal Communications Commission.

ACTION: Proposed rule.

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SUMMARY: The Commission initiates this Notice of Proposed Rule Making

to seek comment on whether we should impose limits on activities

undertaken by noncommercial educational (``NCE'') television licensees

on their DTV capacity. The request for clarification made by AAPTS/PBS

raises significant issues regarding the service and funding

opportunities made available to NCE stations as a result of the

transition to digital transmission. We recognize the importance of this

issue to the future of public television as it enters the digital age.

Therefore, we believe it is appropriate to seek further comment on the

AAPTS/PBS petition in order to establish a more complete record on the

issues it raises.

EFFECTIVE DATES: Comments are due on or before January 28, 1999; reply

comments are due on or before March 1, 1999.

ADDRESSES: Federal Communications Commission, 445 12th Street, Room TW-

A306, SW, Washington, DC 20554. 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 C-1804, 445 12th Street, SW,

Washington, DC 20554, or via the Internet to [email protected] and to

Timothy Fain, OMB Desk Officer, 10236 NEOB, 725--17th Street, NW,

Washington, DC 20503 or via the Internet to [email protected].

Comments may also be filed by using the Commission's Electronic Comment

Filing System (ECFS), via the Internet to http://www.fcc.gov.e-file/

ecfs.html.

FOR FURTHER INFORMATION CONTACT: Jane Gross or Robert Somers, Policy

and Rules Division, Mass Media Bureau (202) 418-2130.

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

Notice of Proposed Rule Making, MM Docket No. 98-203, adopted November

19, 1998 and released November 23, 1998. The full text of this

Commission decision is available for inspection and copying during

normal business hours in the FCC Reference Center (Room 239), 1919 M

Street, NW, Washington, DC. The complete text of this decision may also

be purchased from the Commission's copy contractor, International

Transcription Services, Inc., 1231 20th Street, NW, Washington, DC,

20036, (202) 857-3800.

Synopsis of Notice of Proposed Rulemaking

I. Introduction

1. In our Fifth Report and Order, 62 FR 26966 (May 16, 1997), in

the digital television (``DTV'') proceeding, we adopted rules

implementing a transition to digital technology for all existing

television broadcasters. Among other things, we established standards

for license eligibility, a transition and construction schedule and a

requirement that broadcasters continue to provide one free over-the-air

television service in accordance with section 336 of the

Telecommunications

[[Page 68723]]

Act of 1996 (``1996 Act''). We also adopted rules permitting DTV

licensees, without distinguishing between commercial and noncommercial

licensees, to use their DTV capacity to provide ancillary or

supplementary services provided these services do not derogate the free

digital television service.

2. In their Petition for Reconsideration of the Fifth Report and

Order, the Association of America's Public Television Stations and the

Public Broadcasting Service (AAPTS/PBS) requested clarification on the

ability of public television stations to use excess capacity on DTV

channels for commercial purposes. In opposing this request in part,

Media Access Project and other public interest parties (``MAP''),

jointly argued that, while public television stations should be able to

provide some revenue-generating ancillary and supplementary services,

these services must be consistent with the noncommercial nature of

public television as set forth in section 399B of the Communications

Act, the provision restricting advertising by these stations.

3. We initiate this Notice of Proposed Rule Making to seek comment

on whether we should impose limits on remunerative activities

undertaken by noncommercial educational (``NCE'') television licensees

on their DTV capacity. The request for clarification made by AAPTS/PBS

raises significant issues regarding the service and funding

opportunities made available to NCE stations as a result of the

transition to digital transmission. We recognize the importance of this

issue to the future of public television as it enters the digital age.

Therefore, we believe it is appropriate to seek further comment on the

AAPTS/PBS petition in order to establish a more complete record on the

issues it raises.

4. In their Petition for Reconsideration AAPTS/PBS also requested

that the Commission exempt public television licensees from any fee

assessed in connection with use of digital spectrum for ancillary or

supplementary services to the extent revenues from those services are

used to support the licensee's mission-related activities. Section

336(e) of the 1996 Act requires DTV licensees receiving fees or certain

other compensation for ancillary or supplementary services provided on

the DTV spectrum to return a portion of that revenue to the public. The

Commission was charged with establishing a means of assessing and

collecting fees for those ancillary or supplementary services specified

in the statute. In the Notice of Proposed Rule Making, 63 FR 460

(January 6, 1998), In the Matter of Fees for Ancillary or Supplementary

Use of Digital Television Spectrum (``Fees Proceeding''), we sought

comment on AAPTS/PBS's request. In the Fees Proceeding we determined

that the request for such an exemption should be considered in this

proceeding. We therefore seek additional comment on this issue in light

of the comments received on this issue in the Fees Proceeding and the

tentative proposals outlined below.

II. Background

5. Ancillary or Supplementary Services on DTV Capacity. The DTV

standard we adopted will allow for the simultaneous transmission of

multiple streams of programming, information, and other non-broadcast

services. To enable licensees to take full advantage of the

opportunities provided by digital technology, the 1996 Act provided

that DTV licensees may use a portion of their new DTV capacity for

ancillary or supplementary services.

6. Specifically, section 336 of the Communications Act authorizes

the Commission to permit DTV licensees to offer ancillary or

supplementary services on their DTV capacity as long as the provision

of these services does not derogate any advanced television services

the Commission may require and is ``consistent with the public

interest, convenience, and necessity.'' The statute does not

distinguish between commercial and noncommercial DTV licensees, nor

does the legislative history of section 336 draw any such distinction.

7. In the Fifth Report and Order in our DTV proceeding we adopted

rules to allow broadcasters the flexibility to respond to the demands

of their audience by providing ancillary or supplementary services,

provided that these services do not derogate the mandated free, over-

the-air program service. We found that this approach would serve the

public interest by fostering the provision of innovative services to

the public and by permitting the realization of the full possibilities

of DTV. We recognized the benefit of permitting broadcasters the

opportunity to develop additional revenue streams from innovative

digital services. We also found that allowing such services contributes

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

existing spectrum. At the same time, we noted our expectation that the

fundamental use of the DTV licenses will be for the provision of free

over-the-air television.

8. We clarified that ``we will consider as ancillary or

supplementary any service provided on the digital channel other than

free, over-the-air video services.'' We noted that this approach is

consistent with Commission precedent that has treated

telecommunications services provided by an NTSC station other than the

regular television program service as ancillary. We also did not impose

a requirement that the ancillary or supplementary services provided by

the broadcaster must be broadcast-related. We explained that such

ancillary or supplementary services could include, but are not limited

to, subscription television programming, computer software

distribution, data transmissions, teletext, interactive services, and

audio signals.

9. Section 336(e)(1) of the 1996 Act also requires that a fee be

assessed upon any ancillary or supplementary services on DTV spectrum

``for which the payment of a subscription fee is required in order to

receive such services'' or ``for which the licensee directly or

indirectly receives compensation from a third party in return for

transmitting materials furnished by such third party.'' The Act

specifically exempts from the fee any service which relies only upon

``commercial advertisements used to support broadcasting for which a

subscription fee is not required.'' In our Fees Proceeding we have

adopted rules to implement this provision with respect to commercial

DTV licensees.

10. Noncommercial Educational Television. Throughout the DTV

proceeding, the Commission has acknowledged that noncommercial

licensees will face unique problems in the transition to DTV. In the

Fifth Report and Order, we recognized the high quality programming

service noncommercial stations have provided to American viewers over

the years and reaffirmed our commitment to noncommercial educational

television service. We also observed that public broadcasters have been

pioneers in experimenting with the capabilities of digital technology.

We further noted our awareness of the unique financial difficulties

faced by noncommercial stations and reiterated our view that these

stations will need and warrant special relief to assist them in the

transition to DTV. In this regard, for example, we applied a six-year

construction period timetable to noncommercial stations, the longest

permitted to any category of DTV applicant. We also found, however,

that at that time it was premature to attempt to resolve the issue of

what additional special treatment, if any, should be afforded to

noncommercial broadcasters. We stated that we would

[[Page 68724]]

consider these issues in our periodic reviews examining the progress of

the DTV transition.

11. AAPTS/PBS's Request for Clarification--Use of DTV Capacity. In

its Petition for Reconsideration of the Fifth Report and Order, AAPTS/

PBS requested clarification on the ability of public television

stations to use capacity on DTV channels for commercial purposes. As

neither section 336 nor the Commission's DTV rules distinguishes

between commercial and noncommercial stations, AAPTS/PBS argued that

both are intended to allow public stations to offer ancillary or

supplementary services for revenue-generating purposes.

12. AAPTS/PBS states that public television stations are exploring

various revenue generating options such as: leasing capacity to other

digital operators; joint ventures with commercial entities; and

subscription channels for popular PBS programming. It emphasizes the

importance of the revenue potential of these services in order to

continue public television's commitment to providing a high quality

noncommercial, educational broadcast service. AAPTS/PBS has noted that

the multiple programming streams offered by the extra capacity of

digital transmission will enable public broadcasters to extend the

reach of their educational services. New expanded ``multicast''

programming channels planned by public television as a result of

multicasting capabilities include: PBS's Ready-to-Learn service for

children; K-12 instructional programming; college credit telecourses;

workforce training; and local public affairs programming. AAPTS/PBS

notes that many public stations are relying on the revenue from

ancillary or supplementary services to help fund the construction of

DTV facilities and the operation of both DTV and NTSC facilities. Such

flexibility is crucial, it maintains, as federal and corporate funding

have become increasingly difficult to obtain.

13. Specifically, AAPTS/PBS requests that the Commission clarify

that Sec. 73.621 of its rules, which requires public stations to

provide a noncommercial service, is not applicable to ancillary or

supplementary services provided on DTV capacity. It proposes that the

Commission make clear that, as long as a public station provides one

noncommercial broadcast service pursuant to Sec. 73.621, it can use its

additional DTV capacity as a source of revenue, subject only to the

requirement of non-derogation in Sec. 73.624.

14. AAPTS/PBS notes that its proposal to use its additional DTV

capacity as a source of revenue is consistent with existing

Secs. 73.621(f) and (g), and 73.646(b) and (d) of the Commission's

rules, which allow public television stations to use the vertical

blanking interval (``VBI''), and auxiliary broadcast services for

revenue generating activities. It argues that use of their DTV capacity

as a source of revenue follows rationally from these provisions.

Similarly, public television licensees seek the opportunity to use that

portion of their DTV spectrum that is not necessary for their primary

public television mission as a means of financing their DTV broadcast

operations.

15. In opposing AAPTS/PBS's request in part, MAP requests that the

Commission make clear that any leased or joint-venture programming

undertaken by public television licensees that is advertiser-supported

would violate the advertising ban of section 399B of the Act. MAP

argues that AAPTS/PBS's request is unclear as to what specific

programming would be offered or whether it would comport with the

requirements of section 399B. For example, MAP specifies programming

that it believes would violate the advertising ban as ``programming

that is predominantly utilized for the transmission of sales

presentations or program length commercials, such as home shopping or

infomercials, or that otherwise encourages or solicits the purchase of

goods and services from commercial entities.'' MAP also argues that

because section 336 of the Act does not explicitly permit noncommercial

stations to broadcast advertisements on any ancillary or supplementary

services, AAPTS/PBS's argument that section 336 extends to both

commercial and noncommercial entities is possible only if the

inconsistent requirements of section 399B were repealed. MAP notes

that, while public television stations should be able to provide some

revenue-generating ancillary services, these services must be

consistent with the nature of noncommercial public television as set

forth in that section.

16. In reply, AAPTS/PBS acknowledges that the advertisement ban of

section 399B will apply to the primary noncommercial broadcast service,

but argues that it should not extend to the provision of ancillary and

supplementary services on DTV spectrum. AAPTS/PBS points out that

section 399B was enacted by Congress in 1981 in an effort to reduce

public television's dependence on federal appropriations. Although

Congress was also concerned that public broadcasting's primary

broadcasting service remain noncommercial, AAPTS/PBS notes that the

balance Congress struck in section 399B was to allow such remunerative

activities, provided that the public broadcast service remained

noncommercial.

17. AAPTS/PBS also notes that previous Commission decisions have

allowed noncommercial licensees to provide subsidiary communications

services without regard to whether they include advertisements. AAPTS/

PBS maintains that even if the section 399B advertising restrictions

are found to apply to these services, the Commission has discretion

under section 336(a)(2) to allow public TV licensees to include

advertiser-supported services if it finds these services to be in the

public interest. AAPTS/PBS urges an interpretation in which the

advertising ban in section 399B would continue to apply to the primary

noncommercial broadcast service, while any ancillary and supplementary

use of DTV channels would be free from the restrictions of this

section.

18. AAPTS/PBS's Request for Exemption From Fees under section

336(e). In its Petition for Reconsideration of the Fifth Report and

Order, AAPTS/PBS requested that the Commission exempt public television

licensees from any fee assessed in connection with revenue-generating

use of the ancillary or supplementary services on their DTV spectrum

``to the extent that revenues from those services are used to support

the licensee's mission-related activities.'' We sought comment in the

Fees Proceeding on whether noncommercial television licensees should be

exempt from such fees or subject to a nominal fee where they offer

ancillary and supplementary services as a source of funding for public

television.

19. In its comments in the Fees Proceeding, AAPTS/PBS argues that

public television stations should be exempt from such fees because the

statutory purposes of section 336(e)(2) do not apply to services

provided by public television licensees. AAPTS/PBS notes that if these

revenues would be used to support noncommercial activities, there would

be no need to ``recover'' a portion of the value of the spectrum for

the public and that an exemption would not result in any ``unjust

enrichment''. AAPTS/PBS also argues that, as public television stations

are not auctioned, there is no equivalent amount that would have been

received at auction. Further, AAPTS/PBS contends that such an exemption

would be consistent with other Congressional

[[Page 68725]]

and regulatory policies, and that the Commission has concluded in other

proceedings that the imposition of a fee on public broadcasting would

dilute the financial support paid to public broadcasting by Congress.

20. MAP generally supports allowing public broadcasters to be

exempt from such fees, but only if they do not provide advertiser-

supported ancillary and supplementary services. MAP asserts that the

statute makes no distinction between noncommercial and commercial

licensees, either in their ability to provide advertiser-supported

ancillary and supplementary services, or in their obligation to pay

fees on such services. We have determined that AAPTS/PBS's request for

such exemption should be considered in this proceeding. Accordingly, we

seek additional comment on this issue in light of the comments received

in the Fees Proceeding and the tentative proposals set forth in this

Notice.

III. Request for Comments

21. Noncommercial Educational Television. Public broadcasting's

mission has long been to provide quality educational and cultural

programming to a wide and diverse audience. Noncommercial educational

television stations have also been at the forefront of exploring

innovative services and new technologies to accomplish this mission.

These stations also appear poised to take full advantage of the

opportunities made available by digital technology. We fully recognize

the public interest benefits inherent in the services that may be

offered by NCE licensees on the digital spectrum.

22. As we stated in the Fifth Report and Order, granting

broadcasters the flexibility to offer the ancillary or supplementary

services they choose will help them attract consumers to the service,

which will, in turn, speed the transition to digital television. We

stated that such flexibility will encourage entrepreneurship and

innovation, will contribute to efficient spectrum use, and will expand

and enhance use of existing spectrum. We seek comment on whether these

same considerations apply to the NCE context.

23. Throughout the development of the public broadcasting system,

both Congress and the Commission have continually balanced the desire

to maintain the integrity of its noncommercial status with the fact

that public television must have access to adequate funding in order to

survive. Congress enacted the Public Broadcasting Act of 1967 in

response to increasing public demand for the government to sponsor

independent sources of broadcast programming as an alternative to

commercial broadcasting. This legislation sought to promote the

development of noncommercial, educational broadcasting stations and

established the framework for today's public broadcasting system.

24. Public television has since flourished and developed from an

experimental educational service into the valuable and unique

programming service that exists today. The Commission has supported the

goals of the public broadcasting system and promulgated rules to

implement the public broadcasting provisions of the Communications Act.

For example, in 1952, recognizing the important and unique role to be

served by public television, the Commission reserved spectrum

exclusively for the noncommercial broadcasting service.

25. We are consequently sympathetic to the relief requested in the

AAPTS/PBS petition. The petition describes a range of revenue-

generating ancillary or supplementary services that could help NCE

stations flourish in a digital age. We seek comment on these new

services and specifically on NCE stations' plans for using excess

digital capacity. We note that the costs of converting to digital

service will be considerable, and that many NCE stations rely on public

funds to provide the build-out to DTV service. At the same time we are

sensitive to the concerns raised by MAP that in permitting NCE stations

flexibility in providing such services we must be consistent with

section 399B and also not undermine their fundamental mission of

providing a noncommercial educational broadcast service. To help us

determine the limits, if any, on the remunerative activities of NCE

licensees on their DTV capacity, we seek comment below on a number of

issues.

26. Noncommercial Educational Television: Funding Issues. Many NCE

stations have traditionally received most of their funding from

federal, state and local government sources in addition to corporate

and viewer contributions. In its request for clarification, AAPTS/PBS

notes the uncertainty of continued federal financial support and the

tightening of support from the corporate sector. We seek comment on

such funding trends and on NCE licensees' specific funding needs to

convert to digital and maintain a robust NCE television service. We

also seek comment on the appropriate role of the Commission in ensuring

that such funding needs are met.

27. Ancillary or Supplementary Services. In the Fifth Report and

Order, we adopted rules implementing section 336 to allow broadcasters

the flexibility to respond to the demands of their audience by

providing ancillary or supplementary services, including subscription

television, providing that these services do not derogate the mandated

free, over-the-air program service. As an initial matter, we generally

invite comment on AAPTS/PBS's request that we clarify that Sec. 73.621

of our rules, which requires public stations to provide a noncommercial

service, is not applicable to ancillary or supplementary services

provided on DTV capacity. We also seek comment on whether such a

clarification is consistent with the provisions of section 399B.

28. The Communications Act defines a ``noncommercial educational

broadcast station'' and ``public broadcast station,'' as ``a

noncommercial educational radio or television broadcast station which

is owned and operated by a public agency or nonprofit private

foundation, cooperation, or association'' or ``is owned and operated by

a municipality and which transmits only noncommercial programs for

educational purposes.'' In 1981, Congress amended the Communications

Act to give public broadcasters more flexibility to generate funds for

their operations. As amended, section 399B of the Act permits public

stations to provide facilities and services in exchange for

remuneration as long as those uses do not interfere with the stations'

provision of public telecommunications services. In addition, under

Sec. 73.621 of the Commission's rules, public television stations are

required to furnish primarily an educational as well as a nonprofit and

noncommercial broadcast service.

29. We have previously been called on to determine the extent to

which public television stations can transmit subscription television

(``STV'') or other revenue-generating services on their analog channels

consistent with the statutory and regulatory requirements we have just

described. In particular, in 1984, the Commission considered amending

its rules to permit public television stations to engage in

subscription television operations. The Commission stated that it

``clearly has the authority [under section 399B of the Act] in

particular instances and under certain circumstances to permit STV

operation by public television.'' But the Commission expressed sympathy

with concerns expressed by some parties in that proceeding that such a

rule change could result in public television service, then operating

with analog technology, being ``dominated'' by STV. It therefore

[[Page 68726]]

concluded at the time that it should not generally authorize such

operation through a rule change.

30. The Commission nonetheless recognized that STV operations can

benefit public stations as a supplementary funding source. It

consequently stated that it would permit individual public television

stations to engage in STV operations on a waiver basis. The Commission

has also given public television stations flexibility in their use of

the analog channels in other ways. In particular, the Commission has

ruled that noncommercial spectrum, like commercial spectrum, can be

used for remunerative ancillary services such as data delivery or

teletext provided by NTSC licensees on the vertical blanking interval

(VBI) and the video portion of the analog signal in accordance with

section 399B of the Act.

31. The AAPTS/PBS petition raises many of the same legal and policy

questions raised by our previous consideration of requests to provide

STV and other revenue-generating ancillary services on analog NCE

channels. Unlike the previous requests, however, the AAPTS/PBS petition

concerns digital television, which offers significant new challenges

and opportunities to NCE stations. We are inclined to permit NCE

stations to take advantage of these opportunities and offer innovative

ancillary and supplementary services that are remunerative and

consistent with their educational mission. We therefore seek comment on

whether, and under what conditions, NCE licensees should be permitted

to use their DTV capacity to offer ancillary or supplementary services,

including STV, on a remunerative basis.

32. In particular, we seek comment on whether and how we should

amend Sec. 73.621 of our Rules, which requires NCE stations to provide

a noncommercial service that ``primarily'' serves the educational needs

of the community. For example, should we extend this requirement to

ancillary or supplementary services provided by noncommercial licensees

on their DTV capacity? Should we clarify that an NCE licensee's

obligation to provide a primarily educational service applies to its

entire DTV bitstream? Under this proposal, NCE stations would be

permitted to provide ancillary or supplementary services, but still

would be required to ensure that their overall digital bitstream was

primarily devoted to serving the educational needs of the community.

Should we clarify that the requirement to provide a primarily

educational service applies only to the single, free-over-the-air

broadcast service it is required to provide? We seek comment on these

and any other options for amending Sec. 73.621 in this regard.

33. We also seek comment on whether and how we can permit NCE

stations to provide remunerative ancillary or supplementary services in

a manner that does ``not interfere with the provision of public

telecommunications services'' by such stations as required by section

399B of the Act. In particular, we seek comment on whether NCE DTV

stations will have the capacity to provide ancillary or supplementary

services without interfering with their ability to provide a primarily

educational NCE service. We also seek comment on whether such ancillary

or supplementary services can provide an important funding source that

could facilitate the transition to DTV for NCE stations, and, more

generally, enhance their primary mission of providing a robust

noncommercial, educational broadcasting service.

34. We ask commenters specifically to address how the provision of

ancillary or supplementary services would affect our noncommercial

channel reservation policies, regulatory treatment of noncommercial

licensees, and other government support for noncommercial stations.

While we are inclined to give NCE stations some flexibility in offering

remunerative ancillary or supplementary services, we will continue to

expect these stations to adhere to their fundamental mission of

providing a noncommercial, educational broadcast service, as required

by Sec. 73.621(a) of the Commission's rules. We therefore seek comment

on whether parties believe our proposed amendment to Sec. 73.621 should

incorporate any particular safeguards regarding a public television

station's use of its DTV capacity to provide remunerative services to

ensure that its DTV license is primarily being used for a noncommercial

educational broadcast service, and that the proceeds of such services

are used to support its NCE programming. We also ask commenters to

address whether the accounting procedures and funding restrictions

outlined in section 399B should apply to the provision of ancillary or

supplementary services by NCE licensees on DTV capacity.

35. We note that in addition to those restrictions imposed by

provisions in the Communications Act and the Commission's rules, the

commercial activities of NCE stations are also restricted by their

status as nonprofit corporations, as well as by state and local

government oversight. We seek comment on the scope of these existing

limits and oversight and on the extent to which they help ensure that

public television stations offering remunerative ancillary or

supplementary services continue to serve their mission of providing a

noncommercial educational broadcasting service?

36. Advertising. We also seek comment on how the advertising ban

set forth in section 399B of the Communications Act implicates the

provision of remunerative services by public DTV stations. Section 399B

prohibits a public station from ``making its facilities available to

any person for the broadcasting of any advertisement.'' By its plain

language, this section would appear to prohibit advertisements on any

service that would constitute ``broadcasting,'' while permitting a

public DTV station to air advertisements on any ``nonbroadcast''

service. The term ``broadcasting'' is defined in the Communications Act

as ``the dissemination of radio communications intended to be received

by the public, directly or by the intermediary of relay stations.'' The

Commission further clarified the definition of ``broadcasting'' in its

1986 Subscription Video proceeding. In that decision the Commission

determined that the term ``broadcasting'' as defined by the

Communications Act ``refers only to those signals which the sender

intends to be received by the indeterminate public.'' We therefore

found that ``a necessary condition for the classification of a service

as broadcasting is that the licensee's programming is available to all

members of the public, without any special arrangements or equipment.''

Based on these criteria, the Commission ruled that subscription

television does not constitute broadcasting.

37. Applying these factors to the issue before us, we tentatively

conclude that while section 399B continues to apply to all video

broadcast programming streams provided by public DTV stations, it does

not apply to any subscription services they provide on their DTV

channels since such services do not constitute ``broadcasting.'' We

seek comment on this view. We also seek comment on the extent to which

section 399B applies to advertising carried on any other non-

subscription ancillary or supplementary services carried by a public TV

station. Finally, we ask parties to address AAPTS/PBS's argument that

even if section 399B's advertising restrictions apply to some ancillary

or supplementary services, the Commission has discretion under section

336(a)(2) of the Act to allow public TV licensees to include

advertiser-supported services if it finds

[[Page 68727]]

these services to be in the public interest.

38. Fees Under section 336. In the Fees Proceeding we determined

that the issue of whether ancillary or supplementary services offered

by noncommercial licensees are subject to fees should be considered in

this proceeding. We take this opportunity to seek additional comment in

light of the comments received in the Fees Proceeding and the tentative

proposals outlined above. In the event that we clarify that Sec. 73.621

does not apply to ancillary or supplementary services provided by

noncommercial licensees on their DTV capacity, we seek comment on

whether noncommercial licensees should be exempt from DTV fees when

they offer ancillary or supplementary services as a source of funding

for their mission related activities.

39. AAPTS/PBS submitted comments in the Fees Proceeding arguing

that there is no need to ``recover'' a portion of the value of the DTV

spectrum for the public if the revenue is used to support noncommercial

services that Congress has declared to be in the public interest.

AAPTS/PBS also argues that exemption would not result in any ``unjust

enrichment'' because these revenues would be used to support

noncommercial activities, and that as public television stations are

not auctioned, there is no equivalent amount that would have been

received at auction. An exemption from fees would allow public

television stations to dedicate greater resources to their mission.

Indeed, this reasoning has prompted Congress and the Commission to

exempt public television stations from other regulatory and filing

fees. We seek comment generally on AAPTS/PBS's arguments to exempt

noncommercial licensees from fees for remunerative ancillary or

supplementary services offered on their excess digital capacity.

40. We particularly seek comment on whether such an exemption is

consistent with section 336. Specifically, section 336(e)(1) draws no

distinction between commercial and noncommercial stations in stating

that the Commission ``shall establish a program to assess and collect *

* * an annual fee'' from DTV licensees offering subscription-based

ancillary or supplementary services. Can this provision, or the

criteria for establishing the fee set forth in section 336(e)(2) be

interpreted to permit an exemption from such fees for noncommercial

licensees? If an exemption is inconsistent with the statute, would a

nominal or reduced fee be consistent with the statute? We also ask

parties to address MAP's argument that if we allow noncommercial

licensees to include advertising in any ancillary or supplementary

services, these licensees should pay a fee comparable to that imposed

on commercial broadcasters.

IV. Administrative matters

41. To file paper copies formally in this proceeding, you must file

an original plus four copies of all comments, reply comments, and

supporting comments. If you want each Commissioner to receive a copy of

your comments, you must file an original plus nine copies. You should

send comments and reply comments to Office of the Secretary, Federal

Communications Commission, 445 Twelfth Street, S.W.; TW-A306;

Washington, D.C. 20554. Comments and reply comments will be available

for public inspection during regular business hours in the FCC

Reference Center (Room 239), 1919 M Street, N.W., Washington, D.C.

20554.

42. Comments filed through the ECFS can be sent as an electronic

file via the Internet to http://www.fcc.gov.e-file/ecfs.html>.

Generally, only one copy of an electronic submission must be filed. If

multiple docket or rulemaking numbers appear in the caption of this

proceeding, however, commenters must transmit one electronic copy of

the comments to each docket or rulemaking number referenced in the

caption. In completing the transmittal screen, commenters should

include their full name, Postal Service mailing address, and the

applicable docket or rulemaking number. Parties may also submit an

electronic comment by Internet e-mail. To get filing instructions for

e-mail comments, commenters should send am e-mail to [email protected], and

should include the following words in the body of the message, ``get

form jboley@fcc.gov and to Timothy

Fain, OMB Desk Officer, 10236 NEOB, 725-17th Street, NW, Washington, DC

20503 or via the Internet to fain__t@al.eop.gov.

44. Ex Parte Rules. This proceeding will be treated as a ``permit-

but-disclose'' proceeding. 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 Sec. 1.1206(b).

45. Initial Regulatory Flexibility Analysis. As required by the

Regulatory Flexibility Act, see 5 U.S.C. 603, the Commission has

prepared an Initial Regulatory Flexibility Analysis (IRFA) of the

possible impact on small entities of the proposals suggested in this

document. The IRFA is set forth as Attachment A. Written public

comments are requested with respect to the IRFA. These comments must be

filed in accordance with the same filing deadlines for comments on the

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

[[Page 68728]]

designating the comments as responses to the IRFA. The Office of Public

Affairs, Reference Operations Division, will send a copy of this NPRM,

including the IRFA, to the Chief Counsel for Advocacy of the Small

Business Administration, in accordance with the Regulatory Flexibility

Act.

46. Accordingly, it is ordered that pursuant to authority contained

in section 4(i), 303, and 336 of the Communications Act of 1934, as

amended, 47 U.S.C. 154(i), 303, 307 and 336, this Notice of Proposed

Rulemaking is adopted.

47. It is further ordered that the Commission's Office of Public

Affairs, Reference Operations Division, SHALL SEND a copy of this

Notice, including the Initial Regulatory Flexibility Analysis, to the

Chief Counsel for Advocacy of the Small Business Administration.

48. Additional Information. For additional information on this

proceeding, please contact Jane Gross or Robert Somers, Policy and

Rules Division, Mass Media Bureau (202) 418-2130.

Initial Regulatory Flexibility Analysis

49. As required by the Regulatory Flexibility Act (RFA), the

Commission has prepared this Initial Regulatory Flexibility Analysis

(IRFA) of the possible significant economic impact on small entities by

the policies and rules proposed in the present Notice of Proposed

Rulemaking. 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 IRFA provided above in paragraph

46. The Commission will send a copy of the NPRM, including this IRFA,

to the Chief Counsel for Advocacy of the Small Business Administration.

See 5 U.S.C. 603(a). In addition, the NPRM and IRFA (or summaries

thereof) will be published in the Federal Register. See id.

Need For and Objectives of the Proposed Rule Change

50. In the Fifth Report and Order the Commission adopted rules

permitting broadcasters to offer feeable ancillary or supplementary use

of digital television (DTV) capacity. In their Petition for

Reconsideration, the Association of America's Public Television

Stations and the Public Broadcasting Service (AAPTS/PBS) requested

clarification on the ability of public television stations to use

excess capacity on DTV channels for commercial purposes. Media Access

Project and other public interest parties jointly opposed this request,

arguing that while public television stations should be able to provide

some revenue-generating ancillary and supplementary services, these

services must be consistent with the noncommercial nature of public

television as set forth in section 399B of the Communications Act, the

provision restricting advertising by these stations. AAPTS/PBS also

requested that the Commission exempt, to the extent feasible, public

television licensees from any obligation to pay fees when they offer

ancillary services on their DTV capacity as a source of funding for

their public television operation.

51. The petition describes a range of revenue-generating ancillary

or supplementary services that could help noncommercial educational

(``NCE'') stations flourish in a digital age. The Notice in this

proceeding notes that the costs of converting to digital service will

be considerable, and that many NCE stations rely on public funds to

provide the build-out to DTV service. This Notice seeks comment on

these new services and on whether, and under what conditions, NCE

licensees should be permitted to use their DTV capacity to offer

ancillary or supplementary services, including subscription television,

on a remunerative basis. This Notice also seeks comment on whether and

in what circumstances NCE stations should be subject to fees for these

ancillary or supplementary services.

52. Legal Basis: Authority for the actions proposed in this Notice

may be found in section 4(i), 303 and 336 of the Commissions Act of

1934, as amended, 47 U.S.C. 154(i), 303, 307 and 336.

53. Description and Estimate of the Number of Small Entities to

Which the Rules Would Apply: The RFA directs agencies to provide a

description of and, where feasible, an estimate of the number of small

entities that may be affected by the proposed rules, if adopted. The

RFA generally defines the term ``small entity `` as having the same

meaning as the terms ``small business,'' ``small organization,'' and

``small governmental jurisdiction.'' The RFA generally defines the term

``small organization'' to mean ``any not-for-profit enterprise which is

independently owned and operated and is not dominant in its field.'' A

small organization is generally ``any not-for-profit enterprise which

is independently owned and operated and is not dominant in its field.''

Nationwide, as of 1992, there were approximately 275,801 small

organizations. Below, we further describe and estimate the number of

small entity licensees and regulatees that may be affected by the

proposed rules, if adopted.

54. The proposed rules and policies will apply to television

broadcasting licensees, particularly those television stations licensed

to operate on channels reserved as ``noncommercial educational.''

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

in 1992, of which 362 were noncommercial educational stations. That

number has remained fairly constant as indicated by the approximately

1,583 operating television broadcasting stations in the nation as of

August 31, 1998, of which 368 were noncommercial educational stations.

55. In addition to owners of operating television stations, any

entity who seeks or desires to obtain a television broadcast license,

particularly for a noncommercial educational station, may be affected

by the proposals contained in this item. The number of entities that

may seek to obtain a noncommercial educational television broadcast

license is unknown.

56. We seek comment on these estimates and data regarding the

number of small entities affected by the proposals in this Notice.

Reporting, Recordkeeping, and Other Compliance Requirements

57. The Commission is not proposing any new or modified reporting,

recordkeeping, information collection, or compliance requirements in

this proceeding.

Any Significant Alternatives Minimizing the Impact on Small Entities

and Consistent with the Stated Objectives

58. This Notice solicits comment on a variety of alternatives

discussed herein. Any significant alternatives presented in the

comments will be considered. This proposal may ultimately benefit all

noncommercial educational television stations. We seek comment on the

alternatives proposed in this Notice and on whether there is a

significant economic impact on any class of small licensees or

permittees as a result of any of our proposed approaches.

[[Page 68729]]

Federal Rules that Overlap, Duplicate, or Conflict with the Proposed

Rules

59. The initiatives and proposed rules raised in this proceeding do

not overlap, duplicate or conflict with any other rules.

List of Subjects in 47 CFR Part 73

Radio broadcasting.

Federal Communications Commission.

Magalie Roman Salas,

Secretary.

[FR Doc. 98-33007 Filed 12-11-98; 8:45 am]

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