Implementation of the Satellite Home Viewer Improvement Act of 1999: Retransmission Consent Issues.

FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 76

[CS Docket No. 99-363; FCC 99-406]

Implementation of the Satellite Home Viewer Improvement Act of

1999: Retransmission Consent Issues.

AGENCY: Federal Communications Commission.

ACTION: Proposed rule.

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SUMMARY: This document proposes to implement certain aspects of the

[[Page 72986]]

Satellite Home Viewer Improvement Act of 1999, which was enacted on

November 29, 1999. Among other things, the new legislation requires

broadcasters, until the year 2006, to negotiate in good faith with

satellite carriers and other multichannel video programming

distributors (``MVPDs'') with respect to their retransmission of the

broadcasters'' signals, and prohibits broadcasters from entering into

exclusive retransmission agreements. We seek comment on these issues.

This document also seeks comment on the adoption of implementing

regulations relating to the exercise by television broadcast stations

of the right to grant retransmission consent to satellite carriers and

other MVPDs.

DATES: Comments by the public on the Exclusivity and Good Faith

Negotiation Sections are due January 12, 2000; reply comments are due

January 19, 2000. Comments on Retransmission Consent Election Process

and Administrative Matters are due February 1, 2000; reply comments are

due February 20, 2000. Written comments by the public on the proposed

information collections relating to the entire Notice are due February

1, 2000. Written comments must be submitted by the Office of Management

and Budget (OMB) on the proposed information collection(s) on or before

February 28, 2000.

ADDRESSES: Federal Communications Commission, 445 12th Street, 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, 445 12th Street, SW, Washington, DC 20554,

or via the Internet to [email protected], and to Virginia Huth, OMB Desk

Officer, 10236 NEOB, 725--17th Street, N.W., Washington, DC 20503 or

via the Internet to [email protected].

FOR FURTHER INFORMATION CONTACT: Steve Broeckaert at (202) 418-7200 or

via internet at [email protected]. For additional information concerning

the information collection(s) contained in this document, contact Judy

Boley at 202-418-0214, or via the Internet at [email protected].

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Notice

of Proposed Rulemaking (``NPRM''), FCC 99-406, adopted December 21,

1999; released December 22, 1999. The full text of the Commission's

NPRM is available for inspection and copying during normal business

hours in the FCC Reference Center (Room CY-A257) at its headquarters,

445 12th Street, SW Washington, D.C. 20554, or may be purchased from

the Commission's copy contractor, International Transcription Service,

Inc., (202) 857-3800, 1231 20th Street, NW, Washington, D.C. 20036, or

may be reviewed via internet at http://www.fcc.gov/csb/

Synopsis of the Notice of Proposed Rulemaking

I. Introduction

1. In this Notice of Proposed Rulemaking (``Notice''), we seek

comment on our implementation of certain aspects of the Satellite Home

Viewer Improvement Act of 1999 (``1999 SHVIA''), which was enacted on

November 29, 1999. This act authorizes satellite carriers to add more

local and national broadcast programming to their offerings, and to

make that programming available to subscribers who previously have been

prohibited from receiving broadcast fare via satellite under compulsory

licensing provisions of the copyright law. The legislation generally

seeks to place satellite carriers on an equal footing with local cable

operators when it comes to the availability of broadcast programming,

and thus give consumers more and better choices in selecting a

multichannel video program distributor (``MVPD''). We intend to

implement the 1999 SHVIA aggressively to ensure that the pro-

competitive goals underlying this important legislation are realized.

2. Among other things, the new legislation requires broadcasters,

until 2006, to negotiate in good faith with satellite carriers and

other MVPDs with respect to their retransmission of the broadcasters'

signals, and prohibits broadcasters from entering into exclusive

retransmission agreements. We are initiating, and plan to conclude,

this rulemaking well ahead of our statutory deadlines for doing so

because of the vital importance of these provisions of the 1999 SHVIA.

Strict adherence by broadcasters to the good faith requirement is

crucial if the statutory objectives are to be fulfilled. This Notice

also seeks comment on the adoption of implementing regulations relating

to the exercise by television broadcast stations of the right to grant

retransmission consent. Retransmission consent is the process whereby

television broadcasters negotiate and consent to carriage of their

signals by MVPDs such as cable television operators and satellite

carriers.

II. Retransmission Consent

3. The Commission, in Implementation of the Cable Television

Consumer Protection and Competition Act of 1992, Broadcast Signal

Carriage Issues (``Broadcast Signal Carriage Order'') (58 FR 17350),

implemented the retransmission consent provisions of the Cable

Television Consumer Protection and Competition Act of 1992 (``1992

Cable Act''). The 1992 Cable Act amended section 325 of the

Communications Act of 1934 by adding provisions governing

retransmission of broadcast signals by cable systems and other MVPDs.

Section 325 of the 1992 Cable Act provided that television broadcast

stations were required to make an election every three years whether to

proceed under the mandatory cable signal carriage rules or to govern

their relationship with cable operators or other MVPDs by electing

retransmission consent. Congress indicated that the retransmission

consent and must-carry rule election provisions adopted pursuant to the

1992 Cable Act provide a model for implementation of the retransmission

consent election provisions of the 1999 SHVIA.

Retransmission Consent and the Election Process

4. Section 1009 of the 1999 SHVIA amends section 325(b)(1) and

provides that no cable system or other MVPD shall transmit the signal

of a broadcasting station, or any part thereof, except: (A) with the

express authority of the originating station; (B) pursuant to section

614, in the case of a station electing to assert the right to carriage

by a cable operator; or (C) pursuant to section 338, in the case of a

station electing to assert the right to carriage by a satellite

carrier. Thereafter, the 1999 SHVIA provides that every three years

television stations covered by 325(b) are required to elect

retransmission consent pursuant to section 325 or must-carry pursuant

to sections 614 or 338.

5. Amended section 325(b)(2) provides five exceptions to the

retransmission consent requirement of section 325(b)(1). The amendment

provides that the retransmission consent requirement does not apply to:

(1) noncommercial television broadcast stations; (2) retransmission, in

certain circumstances, of the signal of a superstation outside the

station's local market by a satellite carrier; (3) until December 31,

2004, retransmission of signals of network stations directly to a home

satellite antenna, if the subscriber receiving the signal is located in

an area outside the local market of such station and resides in an

unserved household; (4) retransmission, in certain circumstances, by a

cable operator or other MVPD other than a satellite carrier of the

signal of a superstation outside the station's local market; and (5)

during

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the six month period following the date of enactment of the 1999 SHVIA,

the retransmission of the signal of a television broadcast station

within the station's local market by a satellite carrier directly to

its subscribers. In other words, subject to the limitations set forth

therein, MVPDs, including satellite carriers, may freely transmit the

signals of any of the broadcasters satisfying the criteria set forth in

section 325(b)(2) without obtaining retransmission consent from such

broadcasters.

6. Section 325(b)(3)(C) directs the Commission, within 45 days

after the date of enactment of the 1999 SHVIA, to commence a rulemaking

to administer the limitations contained in section 325(b)(2). At the

outset, we note that this Notice relates to retransmission consent

only. The exercise of must carry rights by broadcasters with regard to

satellite carriers does not commence until January 1, 2002 and will be

addressed in a subsequent Notice and Rulemaking proceeding. As part of

that proceeding, we will seek comment on any necessary or prudent

revisions to our retransmission consent rules as a result of the

initiation of satellite must carry.

7. The Commission was directed by Congress to undertake a

rulemaking to implement a substantially similar provision of the 1992

Cable Act. In the Broadcast Signal Carriage Order, the Commission

adopted such regulations. The rules implementing this provision are

codified at 47 CFR 76.64. We seek comment on the appropriate manner to

implement the provisions of amended section 325(b)(2). In particular,

we seek comment on whether the amended provisions should be

incorporated into existing 47 CFR 76.64, or whether some other

regulatory framework or procedures would more appropriately implement

amended section 325(b)(2). We also seek comment on any other issues

relevant to the implementation of section 325(b)(2). In addition, we

note that, although the statute is entitled the Satellite Home Viewer

Improvement Act, some of the amendments Congress enacted to section 325

appear to have general impact upon the retransmission consent

provisions as applied to all MVPDs. We tentatively conclude that such

was Congress' intent and seek comment on this tentative conclusion.

8. Congress also amended section 325(b) by adding new paragraph

(3)(C)(i), which requires the Commission to adopt regulations which

shall ``establish election time periods that correspond with those

regulations adopted under subparagraph (B) of this paragraph. * * *''

Commission adopted the required regulations in the Broadcast Signal

Carriage Order. The regulations are codified in 47 CFR 76.64.

9. We seek comment on the appropriate manner to implement section

325(b)(3)(C)(i). In particular we seek comment on whether, following an

initial election period applicable only to satellite carriers, the

Commission should merely incorporate the satellite carrier must carry-

retransmission consent election cycle into the Commission's

regulations, employing the same rules and procedures the Commission

adopted in response to the 1992 Cable Act. In the alternative, we seek

comment on whether a different election cycle with different procedures

is required to appropriately implement section 325(b)(3)(C)(i) and what

the effect would be of having different procedures in the cable and

satellite contexts. In this regard, we seek comment on any statutory,

regulatory or technical differences between satellite carriers and

other MVPDs that would justify a different election scheme. 47 CFR

76.64(g) requires that broadcasters make consistent must carry-

retransmission consent elections where the franchise areas of cable

systems overlap. We seek comment on the consistent election requirement

and how it would be implemented, if at all, in the context of any

election cycle in which satellite carriers participate. We also seek

comment on any other issues relevant to the implementation of section

325(b)(3)(C)(i).

III. Exclusivity and Good Faith Negotiation

A. Good Faith Negotiation Requirement

10. Congress further amended section 325(b) of the Communications

Act, requiring the Commission to adopt regulations that shall:

* * * until January 1, 2006, prohibit a television broadcast

station that provides retransmission consent from * * * failing to

negotiate in good faith, and it shall not be a failure to negotiate

in good faith if the television broadcast station enters into

retransmission consent agreements containing different terms and

conditions, including price terms, with different multichannel video

programming distributors if such different terms and conditions are

based on competitive marketplace considerations.

The Joint Explanatory Statement of the Committee of Conference

(``Conference Report'') does not explain or clarify the statutory

language and merely states that:

The regulations would, until January 1, 2006, prohibit a

television broadcast station from * * * refusing to negotiate in

good faith regarding retransmission consent agreements. A television

station may generally offer different retransmission consent terms

or conditions, including price terms, to different distributors. The

[Commission] may determine that such different terms represent a

failure to negotiate in good faith only if they are not based on

competitive marketplace considerations.

Accordingly, we seek comment on the good faith negotiation

requirement of section 325(b)(3)(C).

11. Congress did not expressly define the term ``good faith'' in

the statutory language or the legislative history other than to

instruct that retransmission consent agreements containing different

terms and conditions, including price terms, with different video

programming distributors do not reflect a failure to negotiate in good

faith on behalf of the television broadcast station if such different

terms and conditions are based on competitive marketplace conditions.

While Congress did not expressly define what constitutes good faith

under section 325(b)(3)(C), Congress has signaled its intention to

impose some heightened duty of negotiation on broadcasters in the

retransmission consent process. We seek to fulfill Congress' intent by

adopting substantive and procedural rules that are clear and subject to

swift and effective enforcement. We therefore seek comment on the

criteria that should be employed to define ``good faith.'' We also seek

comment on whether the duty of good faith negotiation applies equally

to the MVPD negotiating a retransmission consent agreement. We seek

comment on whether we need to explicitly define what constitutes good

faith under section 325(b)(3)(C). The Uniform Commercial Code (``UCC'')

defines the term ``good faith'' as ``honesty in fact in the conduct of

the transaction concerned.'' In addition, Black's Law Dictionary

defines good faith as ``an intangible and abstract quality with no

technical meaning or statutory definition, and it encompasses, among

other things, an honest belief, the absence of malice, and the absence

of design to defraud or to seek an unconscionable advantage * * *'' We

seek comment on whether to adopt either of these definitions, or some

other explicit definition of the term good faith.

12. We note that, in other contexts within both the Communications

Act and other Federal laws, Congress has imposed a good faith

negotiation requirement upon parties subject to a federal statutory

scheme. For example, section 8(d) of the Taft-Hartley Act details the

collective bargaining duty of

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both employers and employees, providing that:

To bargain collectively is the performance of the mutual

obligation of the employer and the representative of the employees

to meet at reasonable times and confer in good faith with respect to

wages, hours, and other terms and conditions of employment * * * but

such obligation does not compel either party to agree to a proposal

or require the making of a concession.

In determining good faith under section 8(d), the National Labor

Relations Board (``NLRB'') and the courts apply two independent

tests to see whether a party has acted in good faith during

collective bargaining. In one test, the NLRB applies an objective

set of criteria to determine whether a party has violated one or

more enumerated per se violations of the duty to negotiate in good

faith. In the second test, the NLRB subjectively examines the

``totality of the circumstances'' evidencing a party's behavior

during negotiations to determine whether the duty to negotiate in

good faith has been violated. The objective test allows the NLRB to

single out specific recurring or particularly damaging behavior. On

the other hand, the subjective test allows the NLRB to punish

behavior that would not by itself constitute a per se violation, but

when examined along with other suspect behavior constitutes a

violation of the duty to negotiate in good faith.

13. Congress imposed a good faith negotiation requirement upon

common carriers as part of the Telecommunications Act of 1996 (``1996

Act''). Section 251(c)(1) of the Communications Act imposes on

incumbent local exchange carriers (``ILECs''):

The duty to negotiate in good faith in accordance with section

252 the particular terms and conditions of agreements to fulfill the

duties described in paragraphs (1) through (5) of subsection (b) and

this subsection. The requesting telecommunications carrier also has

the duty to negotiate in good faith the terms and conditions of such

agreements.

In implementing section 251(c)(1), the Commission adopted a two-

part test to determine good faith similar to that used by the NLRB.

Reasoning that it would be futile to try to determine in advance every

possible action that might be inconsistent with the duty to negotiate

in good faith, the Commission found that it was appropriate to identify

factors or practices that may be evidence of failure to negotiate in

good faith, but that need to be considered in light of all relevant

circumstances. The Commission adopted a list of eight specific actions

or practices that, among other unenumerated actions or practices to be

determined on a case-by-case basis, violate the section 251(c)(1) duty

to negotiate in good faith.

14. We seek comment on whether to adopt a two-part objective-

subjective test for good faith similar to that embraced by the NLRB and

by the Commission pursuant to section 251 of the Communications Act. In

this regard, we seek comment on specific actions or practices which

would constitute a per se violation of the duty to negotiate in good

faith in accordance with section 325(b)(3)(C). Establishing a specific

list of per se requirements or prohibitions would lend clarity to, and

thus expedite, the negotiation process and would do likewise with

respect to our enforcement mechanism, where enforcement became

necessary. In addition to any other actions or practices, we ask

commenters to address whether it would be appropriate to include in any

such list provisions similar to the per se violations set forth in 47

CFR 51.301. Although the 47 CFR 51.301 process provides a basis for

comment in this proceeding, we emphasize that the good faith standard

of SHVIA is different in significant respects. We also seek comment on

any other specific legal precedent upon which we should rely and any

other regulatory approach that might appropriately implement the good

faith negotiation requirement of section 325(b)(3)(C) of the

Communications Act.

15. Section 325(b)(3)(C) permits television broadcast stations to

negotiate in good faith retransmission consent agreements with

different MVPDs with different terms and conditions, including price

terms, provided that such different terms and conditions are based upon

``competitive marketplace considerations.'' We seek comment on what

constitutes a competitive marketplace consideration. We seek to define

the term as specifically as possible in this rulemaking, rather than to

adopt a general standard to be fleshed out in subsequent adjudication.

While we will resolve each case on its own merits, adding specification

to our rules should add certainty to the negotiation process and reduce

the number of cases presented to the Commission for adjudication. We

note that the Commission has adopted non-discrimination standards in

both the program access and open video system contexts. We seek comment

on the relevance, if any, of these standards to what constitutes a

``competitive marketplace consideration.'' We seek comment on the scope

of the relevant marketplace to which Congress refers. In addition, we

seek comment on any other factors or approaches to determining what

constitutes competitive marketplace considerations under section

325(b)(3)(C). In this regard, we note that the Commission has recently

relaxed the television broadcast ownership rules, in certain

circumstances, permitting companies to own two television broadcast

stations within a given market. We seek comment on this development and

its impact upon a broadcaster's duty to negotiate in good faith. For

example, can companies with two broadcast stations within the same

market negotiate a joint retransmission consent agreement or should

they be required to negotiate separate arms-length retransmission

consent agreements on behalf of each station?

16. The Commission is aware that direct broadcast satellite

providers have entered into retransmission consent agreements with

television broadcast stations that predate enactment of section

325(b)(3)(C). In addition, we note that we are also aware of agreements

that have been executed since the enactment of the 1999 SHVIA. We seek

comment on the impact on these agreements of the duty to negotiate in

good faith.

B. Prohibition of Exclusive Retransmission Consent

17. Section 325(b) of the Communications Act also directs the

Commission to commence a rulemaking proceeding that shall:

until January 1, 2006, prohibit a television broadcast station that

provides retransmission consent from engaging in exclusive contracts

* * *

The accompanying Conference Report contains no language to clarify

or explain the prohibition, stating only:

The regulations would, until January 1, 2006, prohibit a

television broadcast station from entering into an exclusive

retransmission consent agreement with a multichannel video

programming distributor * * *

18. The Commission established a similar prohibition in rulemakings

following passage of the 1992 Cable Act. The 1992 Cable Act called upon

the Commission to ``establish regulations to govern the exercise by

television broadcast stations of the right to grant retransmission

consent * * *'' In the Broadcast Signal Carriage Order, the Commission

recognized that ``exclusivity can be an efficient form of distribution,

but, in view of the concerns that led Congress to regulate program

access and signal carriage arrangements, we believe that it is

appropriate to extend the same nonexclusivity safeguards to non-cable

multichannel distributors with respect to television broadcast signals,

at least initially.'' The Commission established

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the following prohibition on exclusive retransmission contracts:

Exclusive retransmission consent agreements are prohibited. No

television broadcast station shall make an agreement with one

multichannel distributor for carriage, to the exclusion of other

multichannel distributors.

19. Section 325(b)(3)(C)(ii) requires us to ``until January 1,

2006, prohibit a television broadcast station that provides

retransmission consent from engaging in exclusive contracts.'' We seek

comment on what activities would constitute ``engaging in'' exclusive

retransmission agreements. We note that section 325(b)(3)(C)(ii)

prohibits a broadcaster from ``engaging in'' exclusive retransmission

consent agreements, while the Conference Report describes the

prohibition of ``entering into'' exclusive retransmission consent

agreements. While the phrase ``engaging in'' could be interpreted to

suggest a currently effective exclusive relationship, it would appear

to allow television broadcast stations to negotiate future exclusive

contracts that would take effect on or after January 1, 2006. We seek

comment on whether the statute allows negotiation and execution of such

agreements before January 1, 2006. We also note the distinction between

the phrases ``engaging in'' and ``entering into.'' While the statutory

phrase ``engaging in'' seems to indicate not only the act of entering

into a contract, but also the acts necessary to performance of a

contract, the phrase ``entering into'' seems to indicate only the

process of negotiating and formalizing a contract. We seek comment on

the significance, if any, of the Conference Report's use of the phrase

``entering into.''

20. The Conference Report states that the prohibition applies to

``an exclusive retransmission consent agreement with a multichannel

video programming distributor'' until January 1, 2006. On its face,

this provision would seem to sunset any prohibition on exclusive

retransmission consent contracts for all multichannel video program

distributors. Under this reading of the statute, the Commission's rule

prohibiting exclusive retransmission consent agreements for cable

operators would be deemed abrogated as of January 1, 2006. We seek

comment on whether this was Congress' intent in enacting section

325(b)(3)(C)(ii). In addition, we seek comment regarding what public

interest concerns are involved in such a sunset. Section

325(b)(3)(C)(ii) appears to have immediate effect. We seek comment on

the existence of exclusive satellite carrier retransmission consent

agreements that either predate the enactment of the 1999 SHVIA or under

the Commission's rules implementing section 325(b)(3)(C)(ii). Assuming

any such agreements exist, we seek comment on what, if anything, the

Commission should do about them.

21. We seek comment on what evidence should be required to

demonstrate the existence of an exclusive contract in violation of

section 325(b)(3)(C)(ii). Presumably, if companies are engaged in an

exclusive contractual relationship, they are in violation of the

statute's prohibitions. However, there is no mechanism for determining

whether such exclusive contracts exist. As such, it may be difficult

for a MVPD not party to an exclusive retransmission consent agreement

to determine whether one exists. We seek comment on approaches to

establishing the existence of an exclusive retransmission consent

agreement.

C. Procedural Issues

22. In directing the Commission to adopt regulations which, until

January 1, 2006, prohibit exclusive carriage agreements and require

good faith negotiation of retransmission consent agreements, Congress

did not indicate what procedures the Commission should employ to

enforce these provisions. We seek comment on what procedures the

Commission should employ to enforce the provisions adopted pursuant to

section 325(b)(3)(C). Our goal is swift and certain enforcement of the

rules that Congress has directed us to adopt to further the pro-

competitive goals of the 1999 SHVIA. Commenters should state whether

the same set of enforcement procedures should apply to both the

exclusivity prohibition and the good faith negotiation requirement, or

whether the Commission should adopt different procedures tailored to

each prohibition. We seek comment regarding whether special relief

procedures of the type found in 47 CFR 76.7 which provides an

appropriate framework for addressing issues arising under section

325(b)(3)(C). We seek comment on whether expedited procedures are

necessary to the appropriate resolution of either exclusivity or good

faith proceedings. We seek comment on whether there are circumstances

in which the use of alternative dispute resolution services would

assist in determining whether a television broadcast station negotiated

in good faith as defined by section 325(b)(3)(C)(ii) and the

Commission's rules adopted thereunder.

23. We also seek comment on how the burden of proof should be

allocated. In this regard, we seek comment on whether the burden should

rest with the complaining party until it has made a prima facie showing

and then shift to the defending party. Under this approach, we seek

comment on what would constitute a prima facie showing sufficient to

shift the burden to the defending party.

24. Section 325(b)(3)(C) directs that the regulations adopted by

the Commission prohibit exclusive carriage agreements and require good

faith negotiation of retransmission consent agreements ``until January

1, 2006.'' We seek comment on whether the Commission's rules regarding

exclusive carriage agreements and good faith negotiation should

automatically sunset on this date. We seek comment on whether any

sunset of regulations should apply to television broadcast stations

negotiations with all MVPDs or solely to negotiations with satellite

programming distributors. We also seek comment on what, if anything, is

the Commission's role with regard to these issues after January 1,

2006.

IV. Administrative Matters

A. Initial Regulatory Flexibility Act Statement

25. The initial regulatory flexibility analysis is attached to this

order as Appendix A.

B. Ex Parte Rules

26. This proceeding will be treated as a ``permit-but-disclose''

proceeding subject to the ``permit-but-disclose'' requirements under 47

CFR 1.1206(b) of the rules. 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 47 CFR 1.1206(b).

C. Filing of Comments and Reply Comments

27. Comments may be filed using the Commission's Electronic Comment

Filing System (``ECFS'') or by filing

[[Page 72990]]

paper copies. Comments filed through the ECFS can be sent as an

electronic file via the Internet to http://www.fcc/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 an e-mail to [email protected], and

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

form[email protected] and to

Virginia Huth, OMB Desk Officer, 10236 NEOB, 725 17th Street, N.W.,

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

29. Parties who choose to file by paper must file an original and

four copies of each filing. If participants want each Commissioner to

receive a personal copy of their comments, an original plus nine copies

must be filed. If more than one docket or rulemaking number appears in

the caption of this proceeding commenters must submit two additional

copies for each additional docket or rulemaking number. All filings

must be sent to the Commission's Secretary, Magalie Roman Salas, Office

of the Secretary, Federal Communications Commission, 445 12th Street,

S.W., Washington, D.C. 20554. The Cable Services Bureau contact for

this proceeding is Steven Broeckaert at (202) 418-7200, TTY (202) 418-

7172, or at [email protected].

30. Parties who choose to file by paper should also submit their

comments on diskette. Parties should submit diskettes to Steven

Broeckaert, Cable Services Bureau, 445 12th Street N.W., Room 4-A802,

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

Microsoft Word, or compatible software. The diskette should be

accompanied by a cover letter and should be submitted in ``read only''

mode. The diskette should be clearly labeled with the party's name,

proceeding (including the lead docket number in this case [CS Docket

No. 99-363]), type of pleading (comments or reply comments), date of

submission, and the name of the electronic file on the diskette. The

label should also include the following phrase ``Disk Copy--Not an

Original.'' Each diskette should contain only one party's pleadings,

referable in a single electronic file. In addition, commenters must

send diskette copies to the Commission's copy contractor, International

Transcription Service, 1231 20th Street, N.W., Washington, D.C. 20036.

Paperwork Reduction Act

This NPRM contains a proposed information collection. The

Commission, as part of its continuing effort to reduce paperwork

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

Budget (OMB) to comment on the information collection(s) contained in

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

Law 104-13. OMB notification of action is due 60 days from date of

publication of this NPRM in the Federal Register. Comments should

address: (a) whether the proposed 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 Control Number: 3060-xxxx.

Title: Implementation of the Satellite Home Viewer Improvement Act

of 1999: Retransmission Consent Issues.

Type of Review: New collection or revision of existing collection.

Respondents: Business or other for-profit entities.

Number of Respondents: Television broadcast licensees and MVPDs--

11,588.

Estimated Time Per Response: 11.196 hours.

Total Annual Burden: 1,297,492.

Cost to Respondents: $13,000.

Needs and Uses: Congress directed the Commission to adopt

regulations related to retransmission consent pursuant to the changes

outlined in the Satellite Home Viewer Improvement Act of 1999.

Retransmission consent is the process whereby television broadcasters

negotiate and consent to carriage of their signals by MVPDs. Television

broadcasters will be required to make an election and make status

information available for public review. The availability of such

information will serve the purpose of informing the public of the

method of broadcast signal carriage.

Federal Communications Commission.

William F. Caton,

Deputy Secretary.

Appendix A

Initial Regulatory Flexibility Act Analysis

1. 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 possible policies and rules that would result from

this Notice of Proposed Rulemaking (``Notice''). 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 Notice provided above in paragraph 31. The

Commission will send a copy of the Notice, including this IRFA, to

the Chief Counsel for Advocacy of the Small Business Administration.

In addition, the Notice and IRFA (or summaries thereof) will be

published in the Federal Register.

2. Need for, and Objectives of, the Proposed Rules. Section

325(b)(3)(C), of the Communications Act of 1934, as amended

(``Act''), 47 U.S.C. Sec. 325, directed the Commission, within 45

days of enactment of the Satellite Home Viewer Improvement Act of

1999, ``to commence a rulemaking proceeding to revise the

regulations governing the exercise by television broadcast stations

of the right to grant retransmission consent.'' These provisions

concern retransmission consent in connection with transmission of

television broadcast station signals by multichannel video

programming distributors (``MVPDs'').

3. Legal Basis. The authority for the action proposed in this

rulemaking is contained in sections 1, 4(i) and (j), 325, 338, and

614 of the Communications Act of 1934, as amended, 47 U.S.C.

Secs. 151, 154(i) and (j), 325, 338, and 534.

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

Which the Proposed Rules Will Apply. 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.

[[Page 72991]]

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 may adopt as a result of the Notice will affect television

station licensees, cable operators, and other MVPDs.

5. Television Stations. The proposed rules and policies will

apply to television broadcasting licensees. 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.

6. 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.

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

entity that 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.

8. 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, 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 services individually

to provide a more precise estimate of small entities.

9. 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 emanating out of the

Notice.

10. 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. It should be further noted that recent

industry estimates project that there will be a total 64,000,000

subscribers and we have based our fee revenue estimates on that

figure.

11. Open Video System (``OVS''): The Commission has certified

eleven OVS operators. Of these eleven, only two are providing

service. Affiliates of Residential Communications Network, Inc.

(``RCN'') received approval to operate OVS systems in New York City,

Boston, Washington, D.C. and other areas. RCN has 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.

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.

12. Multichannel Multipoint Distribution Service (``MMDS''): The

Commission refined the definition of ``small entity'' for the

auction of MMDS as an entity that together with its affiliates has

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

the proceeding three calendar years. This definition of a small

entity in the context of the Commission's Report and Order

concerning MMDS auctions that has been approved by the SBA.

13. The Commission completed its MMDS auction in March, 1996 for

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

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

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

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

with approximately 1,573 previously authorized and proposed MMDS

facilities. Information available to us indicates that no MDS

facility generates revenue in excess of $11 million annually. We

tentatively conclude that for purposes of this IRFA, there are

approximately 1,634 small MMDS providers as defined by the SBA and

the Commission's auction rules.

14. DBS: There are four licenses of DBS services under Part 100

of the Commission's Rules. Three of those licensees are currently

operational. Two of the licensees which are operational have annual

revenues which may be in excess of the threshold for a small

business. The Commission, however, does not collect annual revenue

data for DBS and, therefore, is unable to ascertain the number of

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

DBS service requires a great investment of capital for operation,

and we acknowledge that there are entrants in this field that may

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

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

operated.

15. HSD: The market for HSD service is difficult to quantify.

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

HSD owners have access to more than 265 channels of programming

placed on C-band satellites by programmers for receipt and

distribution by MVPDs, of which 115 channels are scrambled and

approximately 150 are unscrambled. HSD owners can watch unscrambled

channels without paying a subscription fee. To receive scrambled

channels, however, an HSD owner must purchase an integrated

receiver-decoder from an equipment dealer and pay a subscription fee

to an HSD programming package. Thus, HSD users include: (1) Viewers

who subscribe to a packaged programming service, which affords them

access to most of the same programming provided to subscribers of

other MVPDs; (2) viewers who receive only non-subscription

programming; and (3) viewers who receive satellite programming

services illegally without subscribing. Because scrambled packages

of programming are most specifically intended for retail consumers,

these are the services most relevant to this discussion.

16. According to the most recently available information, there

are approximately 30 program packages nationwide offering packages

of scrambled programming to retail consumers. These program packages

provide subscriptions to approximately 2,314,900 subscribers

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

program package. This is substantially smaller than the 400,000

subscribers used in the commission's definition of a small MSO.

Furthermore, because this is an average, it is likely that some

program packages may be substantially smaller.

17. SMATVs: Industry sources estimate that approximately 5,200

SMATV operators were providing service as of December, 1995. Other

estimates indicate that SMATV operators serve approximately 1.05

million

[[Page 72992]]

residential subscribers as of September, 1996. The ten largest SMATV

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

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

operators serve approximately 40% of the total number of SMATV

subscribers. Because these operators are not rate regulated, they

are not required to file financial data with the Commission.

Furthermore, we are not aware of any privately published financial

information regarding these operators. Based on the estimated number

of operators and the estimated number of units served by the largest

ten SMATVs, we tentatively conclude that a substantial number of

SMATV operators qualify as small entities.

18. Description of Projected Reporting, Recordkeeping and other

Compliance Requirements. In order to implement the Satellite Home

Viewer Improvement Act of 1999, the Commission has proposed to add

new rules and modify others. We have yet to determine whether to

amend existing provisions of the Commission's rules, or to adopt

some other regulatory framework or procedures concerning

retransmission consent. There are certain compliance requirements

involving the retransmission consent agreement process. Foremost is

that entities most likely will have to participate in a negotiation

process. There may be costs relating to the time and effort involved

in discussions, in crafting, and possibly in achieving an agreement.

In certain circumstances, there may be costs associated with hiring

accounting or engineering personnel, as there may be instances where

entities may have to provide detailed information relating to such

aspects of their particular operations. Conversely, research may

have to be conducted and information may have to be obtained on

other entities' operations. All such data may be key to a

negotiation and a retransmission consent agreement.

19. In terms of recordkeeping, entities most likely will have to

keep a record of their election status and entities may be required

to maintain such information within their business environment and

may also have to file such information with the Commission. As

discussed in the Notice, however, it is unclear what records or

recordkeeping would be required of entities relating to the good

faith negotiation and exclusive carriage aspects of a retransmission

consent agreement. At this time, small businesses might not be

impacted differently, but we seek comment on these and the above

matters.

20. Steps Taken To Minimize Significant Impact on Small

Entities, and Significant Alternatives Considered. The RFA requires

an agency to describe any significant alternatives that it has

considered in reaching its proposed approach, which may include the

following four alternatives: (1) The establishment of differing

compliance or reporting requirements or timetables that take into

account the resources available to small entities; (2) the

clarification, consolidation, or simplification of compliance or

reporting requirements under the rule for small entities; (3) the

use of performance, rather than design, standards; and (4) an

exemption from coverage of the rule, or any part thereof, for small

entities.

21. As indicated above, the Notice proposes to implement certain

aspects of the Satellite Home Viewer Improvement Act of 1999. Among

other things, the new legislation requires television broadcasters,

until 2006, to negotiate in good faith with satellite carriers and

other multichannel video programming distributors (``MVPDs'') with

respect to their retransmission of the broadcasters' signals, and

prohibits broadcasters from entering into exclusive retransmission

agreements. This document also discusses implementing regulations

relating to the exercise by television broadcast stations of the

right to grant retransmission consent to satellite carriers and

other MVPDs.

22. This legislation applies to small entities and large

entities equally. However, in terms of the election process, in the

Notice we specifically ask whether there are any statutory,

regulatory, or technical differences between any of the MVPDs that

would justify different election schemes. The Commission

acknowledges that consideration should be given to possible

differences in services. There may be established a different

election process timetable or compliance requirement, and also

possibly a different filing requirement, among the different MVPDs.

In the Notice, however, the possible distinction in treatment was

not related to the size of the entity. At this time, small entities

are not treated differently and might not be impacted differently,

but we seek comment.

23. Federal Rules Which Duplicate, Overlap, or Conflict with the

Commission's Proposals. None.

[FR Doc. 99-33764 Filed 12-28-99; 8:45 am]

BILLING CODE 6712-01-P