Leased Commercial Access, 10732-10738 [08-871]

Agencies

• FEDERAL COMMUNICATIONS COMMISSION

[Federal Register Volume 73, Number 40 (Thursday, February 28, 2008)]
[Proposed Rules]
[Pages 10732-10738]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 08-871]


=======================================================================
-----------------------------------------------------------------------

FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 76

[MB Docket No. 07-42; FCC 07-208]


Leased Commercial Access

AGENCY: Federal Communications Commission.

ACTION: Proposed rule.

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

SUMMARY: In this document, the Commission seeks comment on the 
application of the Commission's revised leased access rate methodology 
and maximum allowable leased access rate to programmers that 
predominantly transmit sales presentations or program length 
commercials.

DATES: Comments for this proceeding are due on or before March 31, 
2008; reply comments are due on or before April 14, 2008.

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 Steven Broeckaert, Steven.Broeckaert@fcc.gov; or 
Katie Costello, Katie.Costello@fcc.gov; of the Media Bureau, Policy 
Division, 202-418-2120.

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Notice 
of Proposed Rulemaking (NPRM), contained in MB Docket No. 07-42, FCC 
07-208, adopted on November 27, 2007, and released on February 1, 2008. 
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. This document 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 has been analyzed with respect to the Paperwork 
Reduction Act of 1995 (``PRA''), Public Law No. 104-13, 109 Stat 163 
(1995) (codified in Chapter 35 of title 44 U.S.C.), and contains no 
proposed new or modified information collection requirements. In 
addition, therefore, it does not contain any new or modified 
``information collection burden for small business concerns with fewer 
than 25 employees,'' pursuant to the Small Business Paperwork Relief 
Act of 2002 (``SBPRA''), Public Law No. 107-198, 116 Stat 729 (2002) 
(codified in Chapter 35 of title 44 U.S.C.); see 44 U.S.C. 3506(c)(4).

Summary of Notice of Proposed Rulemaking

I. Application of Leased Access Rules to Certain Programmers

    1. The commercial leased access requirements are set forth in 
Section 612 of the Communications Act of 1934, as amended. The statute 
and corresponding leased access rules require a cable operator to set 
aside channel capacity for commercial use by unaffiliated video 
programmers. The purposes of Section 612 are ``to promote competition 
in the delivery of diverse

[[Page 10733]]

sources of video programming and to assure that the widest possible 
diversity of information sources are made available to the public from 
cable systems in a manner consistent with growth and development of 
cable systems.'' In Report and Order, FCC 07-208, the Commission 
modified the leased access rate methodology but did not apply the 
changes to rates charged to programmers that predominantly transmit 
sales presentations or program length commercials. These direct sales 
programmers often ``pay'' for carriage--either directly or through some 
form of revenue sharing with the cable operator. In this Notice of 
Proposed Rulemaking (NPRM), the Commission seeks comment on whether the 
new methodology should be applied to the rates charged to programmers 
that predominantly transmit sales presentations or program length 
commercials.
    2. In the Report and Order, the Commission modified the method for 
determining the leased access rate for full-time carriage on a tier and 
harmonized the rate methodology for carriage on tiers with more than 
50% subscriber penetration and carriage on tiers with lower levels of 
penetration by calculating the leased access rate based upon the 
characteristics of the tier on which the leased access programming will 
be placed. Cable operators will calculate a leased access rate for each 
cable system on a tier-by-tier basis which will adequately compensate 
the operator for the net revenue that is lost when a leased access 
programmer displaces an existing program channel on the cable system. 
The Report and Order adopted a methodology to determine the ``marginal 
implicit fee'' rather than the ``average implicit fee'' in calculating 
leased access rates. The ``average implicit fee'' is calculated based 
on the average value of all of the channels in a tier instead of the 
value of the channels most likely to be replaced. The revised 
methodology eliminates this excess recovery. In addition, the Report 
and Order set a maximum allowable leased access rate of $0.10 per 
subscriber per month to ensure that leased access remains a viable 
outlet for programmers.
    3. The Commission concluded not to apply the new rate methodology 
to programmers that predominantly transmit sales presentations or 
program length commercials. These programmers often ``pay'' for 
carriage--either directly or through some form of revenue sharing with 
the cable operator. Previously to the Report and Order, the Commission 
set the leased access rate for a la carte programmers at the ``highest 
implicit fee'' partly out of a concern that lower rates would simply 
lead these programmers to migrate to leased access if it were less 
expensive than what they are currently ``paying'' for carriage. Such a 
migration would not add to the diversity of voices and would 
potentially financially harm the cable system. The a la carte rate 
remains unchanged. Similarly, the Commission does not wish to set the 
leased access rates at a point at which programmers that predominantly 
transmit sales presentations or program length commercials simply 
migrate to leased access because it is less expensive than their 
current commercial arrangements. The Commission seeks on whether leased 
access is affordable at current rates to programmers that predominantly 
transmit sales presentations or program length commercials and whether 
reduced rates would simply cause migration of existing services to 
leased access.
    4. The Commission is concerned about setting the leased access 
rates at a point at which programmers that predominantly transmit sales 
presentations or program length commercials simply migrate to leased 
access because it is less expensive than their current commercial 
arrangements. Accordingly, the Commission seeks comment regarding the 
use of leased access by programmers that predominantly transmit sales 
presentations and program length commercials. Specifically, is leased 
access affordable to these programmers at current rates? Will applying 
the modified rate formula discussed previously in this Report and Order 
cause migration of existing services to leased access? What would be 
the effect of such a migration? Is a separate category for direct sales 
programmers appropriate?

II. Procedural Matters

A. Ex Parte Rules
    5. Permit-But-Disclose. The NPRM in this proceeding will be treated 
as ``permit-but-disclose'' subject to the ``permit-but-disclose'' 
requirements under Sec.  1.1206(b) of the Commission's rules. 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. Additional rules pertaining to oral 
and written presentations are set forth in Sec.  1.1206(b).
B. Filing Requirements
    6. Information. For additional information on this proceeding, 
contact Katie Costello, Katie.Costello@fcc.gov of the Media Bureau, 
Policy Division, (202) 418-2120.
    7. Comment Information. Pursuant to Sec. Sec.  1.415 and 1.419 of 
the Commission's rules, 47 CFR 1.415, 1.419, interested parties may 
file comments and reply comments on or before the dates indicated on 
the first page of this document. 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, 
May 1, 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 website 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

[[Page 10734]]

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 must 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).
    8. Availability of Documents. Comments, reply comments, and ex 
parte submissions will be available for public inspection during 
regular business hours in the FCC Reference Center, Federal 
Communications Commission, 445 12th Street, SW., CY-A257, Washington, 
DC 20554. Persons with disabilities who need assistance in the FCC 
Reference Center may contact Bill Cline at (202) 418-0267 (voice), 
(202) 418-7365 (TTY), or bill.cline@fcc.gov. These documents also will 
be available from the Commission's Electronic Comment Filing System. 
Documents are available electronically in ASCII, Word 97, and Adobe 
Acrobat. Copies of filings in this proceeding may be obtained from Best 
Copy and Printing, Inc., Portals II, 445 12th Street, SW., Room CY-
B402, Washington, DC 20554; they can also be reached by telephone, at 
(202) 488-5300 or (800) 378-3160; by e-mail at fcc@bcpiweb.com; or via 
their Web site at https://www.bcpiweb.com. 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 and Governmental Affairs Bureau at (202) 418-0531 
(voice), (202) 418-7365 (TTY).
C. Initial Paperwork Reduction Act of 1995 Analysis
    9. The FNPRM has been analyzed with respect to the Paperwork 
Reduction Act of 1995 (``PRA''), Public Law No. 104-13, 109 Stat 163 
(1995) (codified in Chapter 35 of title 44 U.S.C.) and contains no 
proposed new or modified information collection requirements. In 
addition, therefore, it does not contain any new or modified 
``information collection burden for small business concerns with fewer 
than 25 employees,'' pursuant to the Small Business Paperwork Relief 
Act of 2002 (``SBPRA''), Public Law No. 107-198, 116 Stat 729 (2002) 
(codified in Chapter 35 of title 44 U.S.C.); see 44 U.S.C. 3506(c)(4).

III. Initial Regulatory Flexibility Analysis

    10. The Regulatory Flexibility Act of 1980, as amended (``RFA''), 
requires that a regulatory flexibility analysis be prepared for notice 
and comment rule making proceedings, unless the agency certifies that 
``the rule will not, if promulgated, have a significant economic impact 
on a substantial number of small entities.'' 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). As required by the RFA, 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 the FNPRM Initial Regulatory 
Flexibility Analysis.
    11. 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 on small entities by the policies and rules proposed in 
the Further Notice of Proposed Rulemaking (``FNPRM''). 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 
provided on the first page of the document. The Commission will send a 
copy of the FNPRM, including this IRFA, to the Chief Counsel for 
Advocacy of the Small Business Administration (``SBA''). In addition, 
the FNPRM and IRFA (or summaries thereof) will be published in the 
Federal Register.
A. Need for, and Objectives of, the Proposed Rules
    12. Overview. The commercial leased access requirements set forth 
in Section 612 of the Communications Act of 1934 require a cable 
operator to set aside channel capacity for commercial use by video 
programmers unaffiliated with the cable operator. The purposes of 
Section 612 are ``to promote competition in the delivery of diverse 
sources of video programming and to assure that the widest possible 
diversity of information sources are made available to the public from 
cable systems in a manner consistent with growth and development of 
cable systems.''
    13. In the Report and Order in MB Docket No. 07-42, the Commission 
modified its formula used to calculate commercial leased access rates, 
which will result in making leased access channels a more viable outlet 
for leased access programming. The Order also provides that the maximum 
leased access rate will not exceed $0.10 per subscriber per month for 
any cable system. The Order, however, did not apply the modified rate 
formula or the maximum allowable leased access rate to programmers that 
predominantly transmit sales presentations or program length 
commercials. These direct sales programmers often ``pay'' for 
carriage--either directly or through some form of revenue sharing with 
the cable operator.
    14. In the FNPRM, the Commission notes its concern about setting 
the leased access rates at a point at which programmers that 
predominantly transmit sales presentations or program length 
commercials simply migrate to leased access because it is less 
expensive than their current commercial arrangements. Accordingly, the 
FNPRM considers whether leased access at current rates is affordable to 
programmers that predominantly transmit sales presentations and program 
length commercials. The FNPRM considers whether applying the modified 
leased access rate formula to programmers that predominantly transmit 
sales presentations or program length commercials will cause migration 
of these services to leased access. If these services do migrate to 
leased access, the FNPRM considers the effect of such a migration. The 
FNPRM also considers whether a separate category for direct sales 
programmers is appropriate.
    15. In the FNPRM, the Commission seeks comment on the foregoing 
issues. In particular, the FNPRM invites comment on issues that may 
impact small entities, including cable operators and leased access 
programmers.

[[Page 10735]]

B. Legal Basis
    16. The authority for the action proposed in the rulemaking is 
contained in Section 4(i), 303, and 612 of the Communications Act of 
1934, as amended, 47 U.S.C. 154(i), 303, and 532.
C. Description and Estimate of the Number of Small Entities to Which 
the Proposed Rules Will Apply
    17. 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'').
    18. Wired Telecommunications Carriers. The 2007 North American 
Industry Classification System (``NAICS'') defines ``Wired 
Telecommunications Carriers'' (2007 NAISC code 517110) to include the 
following three classifications which were listed separately in the 
2002 NAICS: Wired Telecommunications Carriers (2002 NAICS code 517110), 
Cable and Other Program Distribution (2002 NAISC code 517510), and 
Internet Service Providers (2002 NAISC code 518111). The 2007 NAISC 
defines this category as follows: ``This industry comprises 
establishments primarily engaged in operating and/or providing access 
to transmission facilities and infrastructure that they own and/or 
lease for the transmission of voice, data, text, sound, and video using 
wired telecommunications networks. Transmission facilities may be based 
on a single technology or a combination of technologies. Establishments 
in this industry use the wired telecommunications network facilities 
that they operate to provide a variety of services, such as wired 
telephony services, including VoIP services; wired (cable) audio and 
video programming distribution; and wired broadband Internet services. 
By exception, establishments providing satellite television 
distribution services using facilities and infrastructure that they 
operate are included in this industry.'' The SBA has developed a small 
business size standard for Wired Telecommunications Carriers, which is 
all firms having 1,500 employees or less. According to Census Bureau 
data for 2002, there were a total of 27,148 firms in the Wired 
Telecommunications Carriers category (2002 NAISC code 517110) that 
operated for the entire year; 6,021 firms in the Cable and Other 
Program Distribution category (2002 NAISC code 517510) that operated 
for the entire year; and 3,408 firms in the Internet Service Providers 
category (2002 NAISC code 518111) that operated for the entire year. Of 
these totals, 25,374 of 27,148 firms in the Wired Telecommunications 
Carriers category (2002 NAISC code 517110) had less than 100 employees; 
5,496 of 6,021 firms in the Cable and Other Program Distribution 
category (2002 NAISC code 517510) had less than 100 employees; and 
3,303 of the 3,408 firms in the Internet Service Providers category 
(2002 NAISC code 518111) had less than 100 employees. Thus, under this 
size standard, the majority of firms can be considered small.
    19. Cable and Other Program Distribution. The 2002 NAICS defines 
this category as follows: ``This industry comprises establishments 
primarily engaged as third-party distribution systems for broadcast 
programming. The establishments of this industry deliver visual, aural, 
or textual programming received from cable networks, local television 
stations, or radio networks to consumers via cable or direct-to-home 
satellite systems on a subscription or fee basis. These establishments 
do not generally originate programming material.'' This category 
includes, among others, cable operators, direct broadcast satellite 
(``DBS'') services, home satellite dish (``HSD'') services, satellite 
master antenna television (``SMATV'') systems, and open video systems 
(``OVS''). The SBA has developed a small business size standard for 
Cable and Other Program Distribution, which is all such firms having 
$13.5 million or less in annual receipts. According to Census Bureau 
data for 2002, there were a total of 1,191 firms in this category that 
operated for the entire year. Of this total, 1,087 firms had annual 
receipts of under $10 million, and 43 firms had receipts of $10 million 
or more but less than $25 million. Thus, under this size standard, the 
majority of firms can be considered small.
    20. Cable System Operators (Rate Regulation Standard). The 
Commission has also developed its own small business size standards for 
the purpose of cable rate regulation. Under the Commission's rules, a 
``small cable company'' is one serving 400,000 or fewer subscribers 
nationwide. As of 2006, 7,916 cable operators qualify as small cable 
companies under this standard. In addition, under the Commission's 
rules, a ``small system'' is a cable system serving 15,000 or fewer 
subscribers. Industry data indicate that 6,139 systems have under 
10,000 subscribers, and an additional 379 systems have 10,000-19,999 
subscribers. Thus, under this standard, most cable systems are small.
    21. 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.'' There are approximately 65.4 million 
cable subscribers in the United States today. Accordingly, an operator 
serving fewer than 654,000 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, we find that the number of cable 
operators serving 654,000 subscribers or less totals approximately 
7,916. We note that the Commission neither requests nor collects 
information on whether cable system operators are affiliated with 
entities whose gross annual revenues exceed $250 million. 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.
    22. 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 $13.5 million or less in annual receipts. Currently, 
three operators provide DBS service, which requires a great investment 
of capital for operation: DIRECTV, EchoStar (marketed as the DISH 
Network), and Dominion Video Satellite, Inc. (``Dominion'') (marketed

[[Page 10736]]

as Sky Angel). All three currently offer subscription services. Two of 
these three DBS operators, DIRECTV and EchoStar Communications 
Corporation (``EchoStar''), report annual revenues that are in excess 
of the threshold for a small business. The third DBS operator, 
Dominion's Sky Angel service, serves fewer than one million subscribers 
and provides 20 family and religion-oriented channels. Dominion does 
not report its annual revenues. 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 recognize the possibility that there are 
entrants in this field that may not yet have generated $13.5 million in 
annual receipts, and therefore may be categorized as a small business, 
if independently owned and operated.
    23. 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 $13.5 million or 
less in annual receipts. Currently, there are approximately 150 members 
in the Independent Multi-Family Communications Council (IMCC), the 
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 one 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 may 
qualify as small entities.
    24. 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 $13.5 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 2004 and June 2005, HSD subscribership fell from 335,766 
subscribers to 206,358 subscribers, a decline of more than 38 percent. 
The Commission has no information regarding the annual revenue of the 
four C-Band distributors.
    25. Broadband Radio Service and Educational Broadband Service. 
Broadband Radio Service comprises Multichannel Multipoint Distribution 
Service (MMDS) systems and Multipoint Distribution Service (MDS). MMDS 
systems, often referred to as ``wireless cable,'' transmit video 
programming to subscribers using the microwave frequencies of MDS and 
Educational Broadband Service (EBS) (formerly known as Instructional 
Television Fixed Service (ITFS)). We estimate that the number of 
wireless cable subscribers is approximately 100,000, as of March 2005. 
The SBA definition of small entities for Cable and Other Program 
Distribution, which includes such companies generating $13.5 million in 
annual receipts, appears applicable to MDS and ITFS.
    26. The Commission has also defined small MDS (now BRS) entities in 
the context of Commission license auctions. For purposes of 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 receive their licenses as a result of the 
MDS auction fall under the SBA small business size standard for Cable 
and Other Program Distribution, which includes all such entities that 
do not generate revenue in excess of $13.5 million annually. 
Information available to us indicates that there are approximately 850 
of these licensees and operators that do not generate revenue in excess 
of $13.5 million annually. Therefore, we estimate that there are 
approximately 850 small entity MDS (or BRS) providers, as defined by 
the SBA and the Commission's auction rules.
    27. Educational institutions are included in this analysis as small 
entities; however, the Commission has not created a specific small 
business size standard for ITFS (now EBS). We estimate that there are 
currently 2,032 ITFS (or EBS) licensees, and all but 100 of the 
licenses are held by educational institutions. Thus, we estimate that 
at least 1,932 ITFS licensees are small entities.
    28. Local Multipoint Distribution Service. Local Multipoint 
Distribution Service (LMDS) is a fixed broadband point-to-multipoint 
microwave service that provides for two-way video telecommunications. 
The SBA definition of small entities for Cable and Other Program 
Distribution, which includes such companies generating $13.5 million in 
annual receipts, appears applicable to LMDS. The Commission has also 
defined small LMDS entities in the context of Commission license 
auctions. 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

[[Page 10737]]

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.
    29. 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 $ 13.5 million or less in annual receipts. The Commission 
has approved approximately 120 OVS certifications with some OVS 
operators 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 2005, 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. As of June 2005, RCN Corporation is the largest BSP and 14th 
largest MVPD, serving approximately 371,000 subscribers. RCN received 
approval to operate OVS systems in New York City, Boston, Washington, 
D.C. 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.
    30. Cable and Other Subscription Programming. The Census Bureau 
defines this category as follows: ``This industry comprises 
establishments primarily engaged in operating studios and facilities 
for the broadcasting of programs on a subscription or fee basis * *. 
These establishments produce programming in their own facilities or 
acquire programming from external sources. The programming material is 
usually delivered to a third party, such as cable systems or direct-to-
home satellite systems, for transmission to viewers.'' The SBA has 
developed a small business size standard for firms within this 
category, which is all firms with $13.5 million or less in annual 
receipts. According to Census Bureau data for 2002, there were 270 
firms in this category that operated for the entire year. Of this 
total, 217 firms had annual receipts of under $10 million and 13 firms 
had annual receipts of $10 million to $24,999,999. Thus, under this 
category and associated small business size standard, the majority of 
firms can be considered small.
    31. Motion Picture and Video Production. The Census Bureau defines 
this category as follows: ``This industry comprises establishments 
primarily engaged in producing, or producing and distributing motion 
pictures, videos, television programs, or television commercials.'' The 
SBA has developed a small business size standard for firms within this 
category, which is all firms with $27 million or less in annual 
receipts. According to Census Bureau data for 2002, there were 7,772 
firms in this category that operated for the entire year. Of this 
total, 7,685 firms had annual receipts of under $24,999,999 and 45 
firms had annual receipts of between $25,000,000 and $49,999,999. Thus, 
under this category and associated small business size standard, the 
majority of firms can be considered small. 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.
    32. Motion Picture and Video Distribution. The Census Bureau 
defines this category as follows: ``This industry comprises 
establishments primarily engaged in acquiring distribution rights and 
distributing film and video productions to motion picture theaters, 
television networks and stations, and exhibitors.'' The SBA has 
developed a small business size standard for firms within this 
category, which is all firms with $27 million or less in annual 
receipts. According to Census Bureau data for 2002, there were 377 
firms in this category that operated for the entire year. Of this 
total, 365 firms had annual receipts of under $24,999,999 and 7 firms 
had annual receipts of between $25,000,000 and $49,999,999. Thus, under 
this category and associated small business size standard, the majority 
of firms can be considered small. 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.
    33. Small Incumbent Local Exchange Carriers. We have included small 
incumbent local exchange carriers in this present RFA analysis. 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. We have therefore included 
small incumbent local exchange carriers in this RFA, although we 
emphasize that this RFA action has no effect on Commission analyses and 
determinations in other, non-RFA contexts.
    34. 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, 1,307 carriers have reported that they are engaged in the 
provision of incumbent local exchange services. Of these 1,307 
carriers, an estimated 1,019 have 1,500 or fewer employees and 288 have 
more than 1,500 employees. Consequently, the Commission estimates that 
most providers of incumbent local exchange service are small 
businesses.
    35. 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, 859 carriers have reported that they are engaged in the provision 
of either competitive access provider services or competitive local 
exchange carrier services. Of these 859 carriers, an estimated 741 have 
1,500 or

[[Page 10738]]

fewer employees and 118 have more than 1,500 employees. In addition, 16 
carriers have reported that they are ``Shared-Tenant Service 
Providers,'' and all 16 are estimated to have 1,500 or fewer employees. 
In addition, 44 carriers have reported that they are ``Other Local 
Service Providers.'' Of the 44, an estimated 43 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.
    36. 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.
D. Description of Proposed Reporting, Recordkeeping and Other 
Compliance Requirements
    37. The rules ultimately adopted as a result of this FNPRM may 
contain new or modified information collections. We anticipate that 
none of the changes would result in an increase to the reporting and 
recordkeeping requirements of small entities. We invite small entities 
to comment in response to the FNPRM.
E. Steps Taken To Minimize Significant Impact on Small Entities and 
Significant Alternatives Considered
    38. 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 (among others): (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.
    39. In response to the FNPRM, the Commission may choose to continue 
to apply its current leased access rates to programmers that 
predominantly transmit sales presentations or program length 
commercials; it may choose to apply the modified rate formula and the 
maximum allowable leased access rate of $0.10 per subscriber per month 
to these programmers; or it may adopt an alternative approach. We 
invite comment on the options the Commission is considering, or 
alternatives thereto as referenced above, and on any other alternatives 
commenters may wish to propose for the purpose of minimizing any 
significant economic impact on smaller entities.
F. Federal Rules Which Duplicate, Overlap, or Conflict With the 
Commission's Proposals
    40. None.

IV. Additional Information

    41. For additional information on this proceeding, contact Steven 
Broeckaert, Steven.Broeckaert@fcc.gov; or Katie Costello, 
Katie.Costello@fcc.gov; of the Media Bureau, Policy Division, (202) 
418-2120.

V. Ordering Clauses

    42. Accordingly, it is ordered, pursuant to the authority found in 
sections 4(i), 303(r), and 628 of the Communications Act of 1934, as 
amended, 47 U.S.C. 154(i), 303(r), and 532, this Notice of Proposed 
Rulemaking Is Adopted.
    43. It is further ordered that the Commission's Consumer and 
Governmental Affairs Bureau, Reference Information Center, shall send a 
copy of this Notice of Proposed Rulemaking, including the Initial 
Regulatory Flexibility Analysis, to the Chief Counsel for Advocacy of 
the Small Business Administration.

Federal Communications Commission.
Marlene H. Dortch,
 Secretary.
[FR Doc. 08-871 Filed 2-27-08; 8:45 am]
BILLING CODE 6712-01-P