Implementation of Section 612 of the Cable Communications Policy Act of 1984 as Amended by the Cable Television Consumer Protection and Competition Act of 1992 and Section 616 of the Cable Television Consumer Protection and Competition Act of 1992, 39370-39377 [E7-13827]

Agencies

• FEDERAL COMMUNICATIONS COMMISSION

[Federal Register Volume 72, Number 137 (Wednesday, July 18, 2007)]
[Proposed Rules]
[Pages 39370-39377]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-13827]


-----------------------------------------------------------------------

FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 76

[MB Docket No. 07-42; FCC 07-18]


Implementation of Section 612 of the Cable Communications Policy 
Act of 1984 as Amended by the Cable Television Consumer Protection and 
Competition Act of 1992 and Section 616 of the Cable Television 
Consumer Protection and Competition Act of 1992

AGENCY: Federal Communications Commission.

ACTION: Proposed rule.

-----------------------------------------------------------------------

SUMMARY: In this document, the Commission seeks comment on proposed 
rules and guidance to

[[Page 39371]]

implement sections 612 and 616 of the Communications Act. In the 
context of its review of recent merger transactions and comments filed 
in its Annual Assessment of the Status of Competition in the Market for 
the Delivery of Video Programming, the Commission determined to review 
the program carriage complaint processes and initiate a notice of 
proposed rulemaking regarding leased access rules.

DATES: Comments for this proceeding are due on or before September 4, 
2007; reply comments are due on or before September 21, 2007.

ADDRESSES: You may submit comments, identified by MB Docket No. 07-42, 
by any of the following methods:
     Federal eRulemaking Portal: https://www.regulations.gov. 
Follow the instructions for submitting comments.
     Federal Communications Commission's Web Site: https://
www.fcc.gov/cgb/ecfs/. Follow the instructions for submitting comments.
     People with Disabilities: Contact the FCC to request 
reasonable accommodations (accessible format documents, sign language 
interpreters, CART, etc.) by e-mail: FCC504@fcc.gov or phone: 202-418-
0530 or TTY: 202-418-0432.
    For detailed instructions for submitting comments and additional 
information on the rulemaking process, see the SUPPLEMENTARY 
INFORMATION section of this document.

FOR FURTHER INFORMATION CONTACT: For additional information on this 
proceeding, contact Katie Costello, Katie.Costello@fcc.gov of the Media 
Bureau, Policy Division, (202) 418-2233.

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Notice 
of Proposed Rulemaking (NPRM), FCC 07-18, adopted on March 2, 2007, and 
released on June 15, 2007. The full text of this document is available 
for public inspection and copying during regular business hours in the 
FCC Reference Center, Federal Communications Commission, 445 12th 
Street, SW., CY-A257, Washington, DC 20554. These documents will also 
be available via ECFS (https://www.fcc.gov/cgb/ecfs/). (Documents will 
be available electronically in ASCII, Word 97, and/or Adobe Acrobat.) 
The complete text may be purchased from the Commission's copy 
contractor, 445 12th Street, SW., Room CY-B402, Washington, DC 20554. 
To request this document in accessible formats (computer diskettes, 
large print, audio recording, and Braille), send an e-mail to 
fcc504@fcc.gov or call the Commission's Consumer and Governmental 
Affairs Bureau at (202) 418-0530 (voice), (202) 418-0432 (TTY).

Initial Paperwork Reduction Act of 1995 Analysis

    This document seeks comment on potential revised and new 
information collection requirements. The Commission will invite the 
general public and the Office of Management and Budget (OMB) to comment 
at a later date on any rules developed as a result of this proceeding 
that require the collection of information, as required by the 
Paperwork Reduction Act of 1995, Public Law 104-13. The Commission will 
publish a separate notice seeking public and agency comments, which 
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. In 
addition, pursuant to the Small Business Paperwork Relief Act of 2002, 
Public Law 107-198, see 44 U.S.C. 3506(c)(4), we will seek specific 
comment on how we might ``further reduce the information collection 
burden for small business concerns with fewer than 25 employees.''

Summary of the Notice of Proposed Rulemaking

I. Introduction

    1. In this Notice of Proposed Rulemaking (``NPRM''), in light of 
issues raised in recent merger transactions and comments filed in the 
Annual Assessment of the Status of Competition in the Market for the 
Delivery of Video Programming, 71 FR 66946-02, we review the 
Commission's leased access, 47 CFR sections 76.970 through 76.977, and 
program carriage, 47 CFR sections 76.1300 through 76.1302, complaint 
processes. We initiate this review in order to provide guidance and 
further implement Section 612 of the Communications Act of 1934, as 
amended (the Communications Act), 47 U.S.C. 532, which requires a cable 
operator to set aside channel capacity for commercial use by video 
programmers unaffiliated with the operator, and Section 616 of the 
Communications Act, 47 U.S.C. 536, which prohibits a cable operator or 
other multichannel video programming distributor (``MVPD'') from 
requiring a financial interest in any program service as a condition 
for carriage of such service, from coercing a programmer to grant 
exclusive carriage rights, or from engaging in conduct that 
unreasonably restrains the ability of an unaffiliated programming 
vendor to compete fairly by discriminating against such vendor on the 
basis of affiliation or nonaffiliation.

II. Commercial Leased Access Rules

    2. The commercial leased access (leased access) requirements are 
set forth in Section 612 of the Communications Act. The leased access 
rules require a cable operator to set aside channel capacity for 
commercial use by video programmers unaffiliated with the operator. The 
statutory framework for commercial leased access was first established 
by the Cable Communications Policy Act of 1984. Congress established 
leased access set-aside requirements in proportion to a system's total 
activated channel capacity.
    3. In the Cable Television Consumer Protection and Competition Act 
of 1992 (1992 Cable Act), Congress broadened Section 612's explicit 
statutory purpose to include the promotion of competition in the 
delivery of diverse sources of video programming, and required the 
Commission: (a) To determine the maximum reasonable rates that a cable 
operator may establish for commercial use of designated channel 
capacity; (b) to establish reasonable terms and conditions for such 
use; and (c) to establish procedures for the expedited resolution of 
disputes concerning rates or carriage. Congress also required that the 
Commission's rules not adversely affect the operation, financial 
condition, or market development of the cable system.
    4. The Commission adopted a maximum rate formula for full-time 
carriage on programming tiers based on the average implicit fee that 
other programmers are implicitly charged for carriage to permit the 
operator to recover its costs and earn a profit. The Commission also 
adopted a maximum rate for a la carte services based on the highest 
implicit fee that other a la carte services implicitly pay, and a 
prorated rate for part-time programming.
    5. The Commission seeks comment on the current status of leased 
access programming and on the following issues: Do programmers actually 
use leased access channels? To what extent are they able to use the 
set-aside channels? How many leased access channels do cable operators 
provide?

[[Page 39372]]

Which programmers are using those channels? Are programmers using the 
channels on a full-time or part-time basis? For what purposes are 
leased access channels used? Do cable operators turn down requests for 
leased access? If so, why? To what extent and for what purposes do the 
cable operators use the channels for themselves? Does the cable 
operators' option to use the channels contribute to programmers' lack 
of use of the set-aside channels? Are the terms in leased access 
agreements the same or similar to those that the cable operator has 
with its programmers? Do cable operators impose different requirements 
regarding, for example, insurance or termination provisions? If so, 
why? The Commission also seeks comment on the effectiveness of leased 
access enforcement, specifically on the costs associated with the 
complaint or other dispute resolution processes and whether there 
should be a defined time period for cable operators to respond to 
leased access requests or other aspects of the enforcement process. 
Regarding the Commission's rules that allow programmers to file 
complaints to challenge a cable operator's rates before the Commission, 
the Commission seeks comment on these issues: To what extent do 
programmers make use of the Commission's process to challenge rates 
that they believe violate the Commission's regulations? Is the process 
too burdensome? Is it effective? Should there be changes to the 
complaint process, such as an expedited complaint process before the 
Commission? The Commission's rules require a cable operator to respond 
to a programmer's request for rate information within 15 calendar days. 
The Commission seeks comment on whether cable operators are responsive 
to programmer's requests and whether they include all required 
information.
    6. The Commission also seeks comment on its rate formula for leased 
access, such as specific methodologies that the Commission should 
consider and how such methodologies would better serve Congress' 
statutory objectives in a legally sustainable way.
    7. The Commission's leased access rules involve calculations based 
on activated channels and location. Because of the development of 
digital signal processing and signal compression technologies, the 
number of video services carried on a cable system may no longer be a 
simple calculation and may change dynamically over time depending, for 
instance, on the degree of compression and whether the programming is 
carried in a standard or high definition digital format. The Commission 
seeks comment on whether and how the digital transition affects channel 
capacity and channel count for purposes of the calculation of carriage 
obligations and average rates; whether, consistent with changes in 
technology, cable operators have updated their terms of access to 
facilities, such as allowing programmers to submit video to the 
operator via the Internet.
    8. The Commission requests comment on whether leased access 
programmers should have the ability to request carriage on a specific 
tier and whether there is evidence that cable operators seek to place 
leased access programming on digital tiers or other less popular tiers, 
when leased access programmers would prefer the basic tier, whether 
cable operators have acted reasonably in regard to placing leased 
access channels at specific channel locations what specific reform 
measures should the Commission consider? The Commission seeks comment 
on which service tier leased access programs appear, and on which 
channel within the tier do cable operators place the programming and 
whether leased access rules apply to video-on-demand (VOD) or other 
technologies that do not fit a traditional ``tier''.
    9. The Commission seeks comment on other ways that advances in 
technology or marketplace developments should affect the leased access 
rules, in particular, whether and how the deployment of advanced 
digital services (e.g., interactive electronic programming guides, 
addressable digital set-top boxes, VOD), should inform its review. The 
Commission seeks comment on any other issues that would properly inform 
its leased access inquiry.

III. Program Carriage Rules

    10. Section 616 of the Communications Act directs the Commission to 
establish regulations governing program carriage agreements and related 
practices between cable operators or other MVPDs and video programming 
vendors. The Commission's program carriage rules prohibit a cable 
operator or other MVPD from requiring a financial interest in any 
program service as a condition for carriage of such service, from 
coercing a programmer to grant exclusive carriage rights, or from 
engaging in conduct that unreasonably restrains the ability of an 
unaffiliated programming vendor to compete fairly by discriminating 
against such vendor on the basis of affiliation or nonaffiliation.
    11. In addition to establishing rules governing program carriage, 
the Commission has established procedures for the review of program 
carriage complaints and has established appropriate penalties and 
remedies. These procedures generally provide for resolution of a 
complaint on the basis of a complaint, answer, and reply. However, the 
Commission has recognized that the staff may be unable in some cases to 
resolve carriage agreement complaints on the sole basis of a written 
record. In such cases, if the staff determines that the complainant has 
established a prima facie case but that disposition of the complaint 
would require the resolution of factual disputes or other extensive 
discovery, the staff is to notify the parties that they have the option 
of choosing Alternative Dispute Resolution (ADR) or an adjudicatory 
hearing before an Administrative Law Judge (ALJ). In terms of 
appropriate relief for violations of the program carriage rules, the 
Commission has stated that the appropriate relief will be determined on 
a case-by-case basis, and that appropriate remedies and sanctions may 
include forfeitures, mandatory carriage, or carriage on terms revised 
or specified by the Commission.
    12. The Commission seeks comment on whether and how its processes 
for resolving carriage disputes should be modified. Currently, the 
Commission's rules provide that any complainant alleging a violation of 
Section 616(a)(3)'s prohibition on discrimination must demonstrate that 
the alleged discrimination is on the basis of affiliation or 
nonaffiliation of a vendor, and that the effect of the conduct that 
prompts the complaint is to unreasonably restrain the ability of the 
complainant to compete fairly. If, after reviewing the pleadings and 
supporting documentation filed by the parties, the Commission staff 
finds that the complainant has established a prima facie case under 
Section 76.1301(c), the staff may direct an ALJ to hold a hearing, 
issue a recommended decision on the facts underlying the discrimination 
claim and a recommended remedy, if necessary, and then return the 
matter to the Commission. The Commission seeks comment on these 
procedures, and, in particular, whether the elements of a prima facie 
case should be clarified.
    13. The Commission has established timelines for the resolution of 
individual program carriage complaints. The Commission seeks comment on 
the effectiveness of this mechanism and whether similar changes or 
additional time limits would improve the existing process. For 
instance, whether specific time limits on the Commission, cable 
operators, or others would promote a

[[Page 39373]]

speedy and just resolution of these disputes.
    14. The Commission seeks comment on whether it should adopt rules 
to address the complaint process; whether the Commission should adopt 
additional rules to protect programmers from potential retaliation if 
they file a complaint or whether the existing penalties for frivolous 
program carriage complaints are appropriate or should be modified.
    15. Independent programmers assert that many cable operators 
require them to negotiate for carriage on a system-by-system basis, 
even while they negotiate national carriage agreements with other 
programmers. The Commission seeks comment on whether it should adopt 
rules that expressly allow independent programmers to seek nationwide 
access directly from multiple system cable operators and, if so, how 
such a process would operate.
    16. The Commission seeks comment on any other issues that would 
properly inform its program carriage inquiry.

IV. Arbitration

    17. The Commission seeks comment on the application of arbitration 
procedures to resolve leased access and program carriage disputes. 
Should the Commission establish arbitration procedures specifically for 
these types of complaints? If so, what procedures should be 
established? Should such procedures be elective or mandatory, and who 
should bear the costs of arbitration? What standard of review should 
the Commission employ in reviewing an arbitration decision if 
arbitration is required or otherwise used?

V. Procedural Matters

    18. Ex Parte Rules. This is a permit-but-disclose notice and 
comment rulemaking proceeding. Ex Parte presentations are permitted, 
except during the Sunshine Agenda period, provided that they are 
disclosed as provided in the Commission's rules. See generally 47 CFR 
1.1202, 1.1203, and 1.1206(a).
    19. Comment Information. Pursuant to sections 1.415 and 1.419 of 
the Commission's rules, 47 CFR 1.415, 1.419, interested parties may 
file comments on or before 45 days after this Notice of Proposed 
Rulemaking is published in the Federal Register, and reply comments on 
or before 65 days of publication. Comments may be filed using: (1) The 
Commission's Electronic Comment Filing System (ECFS), (2) the Federal 
Government's eRulemaking Portal, or (3) by filing paper copies. See 
Electronic Filing of Documents in Rulemaking Proceedings, 63 FR 24121 
(1998).
    Electronic Filers: Comments may be filed electronically using the 
Internet by accessing the ECFS: https://www.fcc.gov/cgb/ecfs/ or the 
Federal eRulemaking Portal: https://www.regulations.gov. Filers should 
follow the instructions provided on the Web site for submitting 
comments. For ECFS filers, if multiple docket or rulemaking numbers 
appear in the caption of this proceeding, filers must transmit one 
electronic copy of the comments for each docket or rulemaking number 
referenced in the caption. In completing the transmittal screen, filers 
should include their full name, U.S. 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, 
filers should send an e-mail to ecfs@fcc.gov, and include the following 
words in the body of the message, ``get form.'' A sample form and 
directions will be sent in response.
    Paper Filers: Parties who choose to file by paper must file an 
original and four copies of each filing. If more than one docket or 
rulemaking number appears in the caption of this proceeding, filers 
must submit two additional copies for each additional docket or 
rulemaking number. Filings can be sent by hand or messenger delivery, 
by commercial overnight courier, or by first-class or overnight U.S. 
Postal Service mail (although we continue to experience delays in 
receiving U.S. Postal Service mail). All filings must be addressed to 
the Commission's Secretary, Office of the Secretary, Federal 
Communications Commission. The Commission's contractor will receive 
hand-delivered or messenger-delivered paper filings for the 
Commission's Secretary at 236 Massachusetts Avenue, NE., Suite 110, 
Washington, DC 20002. The filing hours at this location are 8 a.m. to 7 
p.m. All hand deliveries must be held together with rubber bands or 
fasteners. Any envelopes must be disposed of before entering the 
building. Commercial overnight mail (other than U.S. Postal Service 
Express Mail and Priority Mail) must be sent to 9300 East Hampton 
Drive, Capitol Heights, MD 20743. U.S. Postal Service first-class, 
Express, and Priority mail should be addressed to 445 12th Street, SW., 
Washington, DC 20554. People with Disabilities: To request materials in 
accessible formats for people with disabilities (braille, large print, 
electronic files, audio format), send an e-mail to fcc504@fcc.gov or 
call the Consumer & Governmental Affairs Bureau at 202-418-0530 
(voice), 202-418-0432 (tty).
    20. Initial Regulatory Flexibility Analysis. As required by the 
Regulatory Flexibility Act, the Commission has prepared an Initial 
Regulatory Flexibility Analysis (IRFA) of the possible significant 
economic impact on a substantial number of small entities of the 
proposals addressed in this NPRM. The IRFA is set forth below. Written 
public comments are requested on the IRFA. These comments must be filed 
in accordance with the same filing deadlines for comments on the NPRM, 
and they should have a separate and distinct heading designating them 
as responses to the IRFA.

VI. Ordering Clauses

    21. It is ordered that, pursuant to the authority contained in 
Sections 4(i), 303, 612 and 616 of the Communications Act of 1934, as 
amended, 47 U.S.C. 154(i), 303, 532 and 536, notice is hereby given of 
the proposals described in this Notice of Proposed Rulemaking.
    22. It is further ordered that the Commission's Consumer and 
Governmental Affairs Bureau, Reference Information Center, will send a 
copy of this Notice of Proposed Rulemaking, including the IRFA, to the 
Chief Counsel for Advocacy of the Small Business Administration, in 
accordance with the Regulatory Flexibility Act.

Initial Regulatory Flexibility Analysis

    23. As required by the Regulatory Flexibility Act of 1980, as 
amended (the RFA), the Commission has prepared this Initial Regulatory 
Flexibility Analysis (IRFA) of the possible significant economic impact 
of the policies and rules proposed in this Notice of Proposed 
rulemaking (Notice) on a substantial number of small entities. 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 indicated on the first page of this document. 
The Commission will send a copy of the Notice, including this IRFA, to 
the Chief Counsel for Advocacy of the Small Business Administration 
(SBA). In addition, the Notice and IRFA (or summaries thereof) will be 
published in the Federal Register.

Need for, and Objectives of, the Proposed Regulatory Approaches

    24. The focus of the leased access and program carriage provisions 
contained in Sections 612 and 616 of the Communications Act of 1934, as 
amended, adopted as part of the Cable

[[Page 39374]]

Television Consumer Protection and Competition Act of 1992, was to 
promote competition and diversity in the video programming marketplace 
and prevent cable systems, other MVPDs and affiliated programmers from 
preventing fair competition in video programming distribution through 
various practices. This proceeding requests comments on proposed 
changes to the Commission's rules to further enhance the Congressional 
objectives and respond to complaints that the rules are ineffective. 
Ultimately, these policies and rules are geared to the benefit of 
independent programmers, many of which may be small entities.

Legal Basis

    25. The authority for the action proposed in the rulemaking is 
contained in Section 4(i), 303, 612 and 616 of the Communications Act 
of 1934, as amended, 47 U.S.C. 154(i), 303, 532 and 536.

Description and Estimate of the Number of Small Entities to Which the 
Proposed Rules Will Apply

    26. 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.'' In addition, the term ``small business'' has the same 
meaning as the term ``small business concern'' 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'').
    27. Cable and Other Program Distribution. The SBA has developed a 
small business size standard for cable and other program distribution 
services, which includes all such companies generating $12.5 million or 
less in revenue annually. This category includes, among others, cable 
system operators, closed circuit television services, direct broadcast 
satellite services, multipoint distribution systems, satellite master 
antenna systems, subscription television services and open video 
systems. According to Census Bureau data for 1997, there were 1,311 
firms in this category, total, that had operated for the entire year. 
Of this total, 1,180 firms had annual receipts of under $10 million and 
an additional 52 firms had receipts of $10 million or more but less 
than $25 million. Consequently, the Commission estimates that the 
majority of providers in this service category are small businesses 
that may be affected by the rules and policies adopted herein. We note, 
however, that the rules at issue in this Notice only apply at this time 
to cable operators, and not other MVPD providers.
    28. Cable System Operators (Rate Regulation Standard). The 
Commission has developed its own small business size standard for cable 
system operators, for purposes of rate regulation. Under the 
Commission's rules, a ``small cable company'' is one serving fewer than 
400,000 subscribers nationwide. The most recent estimates indicate that 
there were 1,439 cable operators who qualified as small cable system 
operators 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, the Commission estimates that there are 
now fewer than 1,439 small entity cable system operators that may be 
affected by the rules and policies adopted herein.
    29. Cable System Operators (Telecom Act Standard). The 
Communications Act of 1934, as amended, also contains a size standard 
for small cable system operators, which is ``a cable operator that, 
directly or through an affiliate, serves in the aggregate fewer than 1 
percent 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 67,700,000 subscribers in the United States. Therefore, an 
operator serving fewer than 677,000 subscribers shall be deemed a small 
operator, if its annual revenues, when combined with the total annual 
revenues of all its affiliates, do not exceed $250 million in the 
aggregate. Based on available data, the Commission estimates that the 
number of cable operators serving 677,000 subscribers or fewer, totals 
1,450. The Commission neither requests nor collects information on 
whether cable system operators are affiliated with entities whose gross 
annual revenues exceed $250 million, and therefore is unable, at this 
time, to estimate more accurately the number of cable system operators 
that would qualify as small cable operators under the size standard 
contained in the Communications Act of 1934.
    30. Direct Broadcast Satellite (``DBS'') Service. DBS service is a 
nationally distributed subscription service that delivers video and 
audio programming via satellite to a small parabolic ``dish'' antenna 
at the subscriber's location. Because DBS provides subscription 
services, DBS falls within the SBA-recognized definition of Cable and 
Other Program Distribution. This definition provides that a small 
entity is one with $12.5 million or less in annual receipts. Currently, 
only four operators hold licenses to provide DBS service, which 
requires a great investment of capital for operation. All four 
currently offer subscription services. Two of these four DBS operators, 
DIRECTV and EchoStar Communications Corporation (``EchoStar''), report 
annual revenues that are in excess of the threshold for a small 
business. A third operator, Rainbow DBS, is a subsidiary of 
Cablevision's Rainbow Network, which also reports annual revenues in 
excess of $12.5 million, and thus does not qualify as a small business. 
The fourth DBS operator, Dominion Video Satellite, Inc. (``Dominion''), 
offers religious (Christian) programming and does not report its annual 
receipts. The Commission does not know of any source which provides 
this information and, thus, we have no way of confirming whether 
Dominion qualifies as a small business. Because DBS service requires 
significant capital, we believe it is unlikely that a small entity as 
defined by the SBA would have the financial wherewithal to become a DBS 
licensee. Nevertheless, given the absence of specific data on this 
point, we acknowledge the possibility that there are entrants in this 
field that may not yet have generated $12.5 million in annual receipts, 
and therefore may be categorized as a small business, if independently 
owned and operated.
    31. Private Cable Operators (PCOs) also known as Satellite Master 
Antenna Television (SMATV) Systems. PCOs, also known as SMATV systems 
or private communication operators, are video distribution facilities 
that use closed transmission paths without using any public right-of-
way. PCOs acquire video programming and distribute it via terrestrial 
wiring in urban and suburban multiple dwelling units such as apartments 
and condominiums, and commercial multiple tenant units such as hotels 
and office buildings. The SBA definition of small entities for Cable 
and Other Program Distribution Services includes PCOs and, thus, small 
entities are defined as all such companies generating $12.5 million or 
less in annual receipts. Currently, there are approximately 135 members 
in the Independent Multi-Family Communications Council (IMCC), the

[[Page 39375]]

trade association that represents PCOs. Individual PCOs often serve 
approximately 3,000-4,000 subscribers, but the larger operations serve 
as many as 15,000-55,000 subscribers. In total, PCOs currently serve 
approximately 1.1 million 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 PCOs, we believe that a substantial number of PCOs qualify 
as small entities.
    32. Home Satellite Dish (``HSD'') Service. Because HSD provides 
subscription services, HSD falls within the SBA-recognized definition 
of Cable and Other Program Distribution, which includes all such 
companies generating $12.5 million or less in revenue annually. HSD or 
the large dish segment of the satellite industry is the original 
satellite-to-home service offered to consumers, and involves the home 
reception of signals transmitted by satellites operating generally in 
the C-band frequency. Unlike DBS, which uses small dishes, HSD antennas 
are between four and eight feet in diameter and can receive a wide 
range of unscrambled (free) programming and scrambled programming 
purchased from program packagers that are licensed to facilitate 
subscribers' receipt of video programming. There are approximately 30 
satellites operating in the C-band, which carry over 500 channels of 
programming combined; approximately 350 channels are available free of 
charge and 150 are scrambled and require a subscription. HSD is 
difficult to quantify in terms of annual revenue. HSD owners have 
access to program channels placed on C-band satellites by programmers 
for receipt and distribution by MVPDs. Commission data shows that, 
between June 2003 and June 2004, HSD subscribership fell from 502,191 
subscribers to 335,766 subscribers, a decline of more than 33 percent. 
The Commission has no information regarding the annual revenue of the 
four C-Band distributors.
    33. Wireless Cable Systems. Wireless cable systems use the 
Multipoint Distribution Service (``MDS'') and Instructional Television 
Fixed Service (``ITFS'') frequencies in the 2 GHz band to transmit 
video programming and provide broadband services to subscribers. Local 
Multipoint Distribution Service (``LMDS'') is a fixed broadband point-
to-multipoint microwave service that provides for two-way video 
telecommunications. As previously noted, the SBA definition of small 
entities for Cable and Other Program Distribution, which includes such 
companies generating $12.5 million in annual receipts, appears 
applicable to MDS, ITFS and LMDS. In addition, the Commission has 
defined small MDS and LMDS entities in the context of Commission 
license auctions.
    34. In the 1996 MDS auction, the Commission defined a small 
business as an entity that had annual average gross revenues of less 
than $40 million in the previous three calendar years. This definition 
of a small entity in the context of MDS auctions has been approved by 
the SBA. In the MDS auction, 67 bidders won 493 licenses. Of the 67 
auction winners, 61 claimed status as a small business. At this time, 
the Commission estimates that of the 61 small business MDS auction 
winners, 48 remain small business licensees. In addition to the 48 
small businesses that hold BTA authorizations, there are approximately 
392 incumbent MDS licensees that have gross revenues that are not more 
than $40 million and are thus considered small entities. MDS licensees 
and wireless cable operators that did not participate in the MDS 
auction must rely on the SBA definition of small entities for Cable and 
Other Program Distribution. Information available to us indicates that 
there are approximately 850 of these licensees and operators that do 
not generate revenue in excess of $12.5 million annually. Therefore, we 
estimate that there are approximately 850 small MDS providers as 
defined by the SBA and the Commission's auction rules.
    35. While SBA approval for a Commission-defined small business size 
standard applicable to ITFS is pending, educational institutions are 
included in this analysis as small entities. There are currently 2,032 
ITFS licensees, and all but 100 of these licenses are held by 
educational institutions. Thus, the Commission estimates that at least 
1,932 ITFS licensees are small businesses.
    36. In the 1998 and 1999 LMDS auctions, the Commission defined a 
small business as an entity that had annual average gross revenues of 
less than $40 million in the previous three calendar years. Moreover, 
the Commission added an additional classification for a ``very small 
business,'' which was defined as an entity that had annual average 
gross revenues of less than $15 million in the previous three calendar 
years. These definitions of ``small business'' and ``very small 
business'' in the context of the LMDS auctions have been approved by 
the SBA. In the first LMDS auction, 104 bidders won 864 licenses. Of 
the 104 auction winners, 93 claimed status as small or very small 
businesses. In the LMDS re-auction, 40 bidders won 161 licenses. Based 
on this information, we believe that the number of small LMDS licenses 
will include the 93 winning bidders in the first auction and the 40 
winning bidders in the re-auction, for a total of 133 small entity LMDS 
providers as defined by the SBA and the Commission's auction rules.
    37. Open Video Systems (``OVS''). The OVS framework provides 
opportunities for the distribution of video programming other than 
through cable systems. Because OVS operators provide subscription 
services, OVS falls within the SBA-recognized definition of Cable and 
Other Program Distribution Services, which provides that a small entity 
is one with $12.5 million or less in annual receipts. The Commission 
has certified 25 OVS operators with some now providing service. 
Broadband service providers (BSPs) are currently the only significant 
holders of OVS certifications or local OVS franchises, even though OVS 
is one of four statutorily recognized options for local exchange 
carriers (LECs) to offer video programming services. As of June 2003, 
BSPs served approximately 1.4 million subscribers, representing 1.49 
percent of all MVPD households. Among BSPs, however, those operating 
under the OVS framework are in the minority, with approximately eight 
percent operating with an OVS certification. Serving approximately 
460,000 of these subscribers, Affiliates of Residential Communications 
Network, Inc. (``RCN'') is currently the largest BSP and 11th largest 
MVPD. RCN received approval to operate OVS systems in New York City, 
Boston, Washington, DC and other areas. The Commission does not have 
financial information regarding the entities authorized to provide OVS, 
some of which may not yet be operational. We thus believe that at least 
some of the OVS operators may qualify as small entities.
    38. Program Producers and Distributors. The Commission has not 
developed a definition of small entities applicable to producers or 
distributors of cable television programs. Therefore, we will use the 
SBA classifications of Motion Picture and Video Tape Production (NAICS 
Code 51211), Motion Picture and Video Tape Distribution (NAICS Code 
42199), and Theatrical Producers (Except Motion Pictures) and 
Miscellaneous Theatrical Services (NAICS Codes 56131, 71111, 71141, 
561599, 71151, 71112, 71132, 51229, 53249). These SBA definitions 
provide that a small entity in the cable

[[Page 39376]]

television programming industry is an entity with $21.5 million or less 
in annual receipts for NAICS Codes 56131, 51211, 42199, and 51212, and 
$5 million or less in annual receipts for NAICS Codes 56131, 71111, 
71141, 561599, 71151, 71112, 71131, 71132, 51229, and 53249. Census 
Bureau data indicate the following: (a) There were 7,265 firms in the 
United States classified as Motion Picture and Video Production (NAICS 
Code 51211), and that 6,987 of these firms had $16.999 million or less 
in annual receipts and 7,002 of these firms had $24.999 million or less 
in annual receipts; (b) there were 1,139 firms classified as Motion 
Picture and Video Tape Distribution (NAICS Codes 42199 and 51212), and 
1007 of these firms had $16.999 million or less in annual receipts and 
1013 of these firms had $24.999 million or less in annual receipts; and 
(c) there were 5,671 firms in the United States classified as 
Theatrical Producers and Services (NAICS Codes 56131, 71111, 71141, 
561599, 71151, 51229, and 53249), and 5627 of these firms had $4.999 
million or less in annual receipts.
    39. Each of these NAICS categories is very broad and includes firms 
that may be engaged in various industries, including cable programming. 
Specific figures are not available regarding how many of these firms 
exclusively produce and/or distribute programming for cable television 
or how many are independently owned and operated. Thus, we estimate 
that our rules may affect approximately 6,987 small entities primarily 
engaged in the production and distribution of taped cable television 
programs and 5,627 small producers of live programs that may be 
affected by the rules adopted in this proceeding.
    40. A ``small business'' under the RFA is one that, inter alia, 
meets the pertinent small business size standard (e.g., a telephone 
communications business having 1,500 or fewer employees), and ``is not 
dominant in its field of operation.'' The SBA's Office of Advocacy 
contends that, for RFA purposes, small incumbent local exchange 
carriers are not dominant in their field of operation because any such 
dominance is not ``national'' in scope.
    41. Incumbent Local Exchange Carriers (``LECs''). Neither the 
Commission nor the SBA has developed a small business size standard 
specifically for incumbent local exchange services. The appropriate 
size standard under SBA rules is for the category Wired 
Telecommunications Carriers. Under that size standard, such a business 
is small if it has 1,500 or fewer employees. According to Commission 
data, 1,303 carriers have reported that they are engaged in the 
provision of incumbent local exchange services. Of these 1,303 
carriers, an estimated 1,020 have 1,500 or fewer employees and 283 have 
more than 1,500 employees. Consequently, the Commission estimates that 
most providers of incumbent local exchange service are small businesses 
that may be affected by our action. In addition, limited preliminary 
census data for 2002 indicate that the total number of wired 
communications carriers increased approximately 34 percent from 1997 to 
2002.
    42. Competitive Local Exchange Carriers, Competitive Access 
Providers (CAPs), ``Shared-Tenant Service Providers,'' and ``Other 
Local Service Providers.'' Neither the Commission nor the SBA has 
developed a small business size standard specifically for these service 
providers. The appropriate size standard under SBA rules is for the 
category Wired Telecommunications Carriers. Under that size standard, 
such a business is small if it has 1,500 or fewer employees. According 
to Commission data, 769 carriers have reported that they are engaged in 
the provision of either competitive access provider services or 
competitive local exchange carrier services. Of these 769 carriers, an 
estimated 676 have 1,500 or fewer employees and 93 have more than 1,500 
employees. In addition, 12 carriers have reported that they are 
``Shared-Tenant Service Providers,'' and all 12 are estimated to have 
1,500 or fewer employees. In addition, 39 carriers have reported that 
they are ``Other Local Service Providers.'' Of the 39, an estimated 38 
have 1,500 or fewer employees and one has more than 1,500 employees. 
Consequently, the Commission estimates that most providers of 
competitive local exchange service, competitive access providers, 
``Shared-Tenant Service Providers,'' and ``Other Local Service 
Providers'' are small entities that may be affected by our action. In 
addition, limited preliminary census data for 2002 indicate that the 
total number of wired communications carriers increased approximately 
34 percent from 1997 to 2002.
    43. Electric Power Generation, Transmission and Distribution. The 
Census Bureau defines this category as follows: ``This industry group 
comprises establishments primarily engaged in generating, transmitting, 
and/or distributing electric power. Establishments in this industry 
group may perform one or more of the following activities: (1) Operate 
generation facilities that produce electric energy; (2) operate 
transmission systems that convey the electricity from the generation 
facility to the distribution system; and (3) operate distribution 
systems that convey electric power received from the generation 
facility or the transmission system to the final consumer.'' The SBA 
has developed a small business size standard for firms in this 
category: ``A firm is small if, including its affiliates, it is 
primarily engaged in the generation, transmission, and/or distribution 
of electric energy for sale and its total electric output for the 
preceding fiscal year did not exceed 4 million megawatt hours.'' 
According to Census Bureau data for 2002, there were 1,644 firms in 
this category that operated for the entire year. Census data do not 
track electric output and we have not determined how many of these 
firms fit the SBA size standard for small, with no more than 4 million 
megawatt hours of electric output. Consequently, we estimate that 1,644 
or fewer firms may be considered small under the SBA small business 
size standard.

Description of Proposed Reporting, Recordkeeping and Other Compliance 
Requirements

    44. The NPRM seeks comment on a range of potential changes to 
existing reporting, recordkeeping or other compliance requirements. 
Regarding the Commission's rules implementing Section 612 of the 
Communications Act, the NPRM seeks comment on all aspects of the 
commercial leased access rules, as well as dispute resolution 
procedures. Similarly, regarding the Commission's rules implementing 
Section 616 of the Communications Act, the NPRM seeks comment on 
whether and how the Commission's dispute resolution and other rules 
should be modified.

Steps Taken to Minimize Significant Impact on Small Entities and 
Significant Alternatives Considered

    45. The RFA requires an agency to describe any significant 
alternatives that it has considered in proposing regulatory approaches, 
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. The NPRM seeks comment on the Commission's rules implementing 
Sections 612 and 616 of the Communications Act, as amended.

[[Page 39377]]

While most of the leased access and program carriage complaints have 
been filed against large entities or affiliates of large entities, some 
small entities may be affected by any rule changes. Therefore, this 
NPRM invites comment on issues that may impact some small entities. In 
addition, this NPRM seeks comment on whether the Commission's rules and 
their enforcement are successful in promoting competition and diversity 
in the video programming marketplace and preventing cable systems and 
other MVPDs from preventing fair competition in video programming 
distribution through various practices. Those policies and rules are 
designed to promote and protect the interests of independent 
programmers in the video distribution marketplace and many of the 
programmers will qualify as small entities. In the event that the 
Commission modifies its rules in this proceeding, it will explain the 
steps that it has taken to minimize significant impacts on small 
entities and the significant alternatives that it has considered.

Federal Rules Which Duplicate, Overlap, or Conflict With the 
Commission's Proposals

    46. None.

Federal Communications Commission.
Marlene H. Dortch,
Secretary.
 [FR Doc. E7-13827 Filed 7-17-07; 8:45 am]
BILLING CODE 6712-01-P