[Federal Register: February 1, 2008 (Volume 73, Number 22)]
[Rules and Regulations]
[Page 6043-6054]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr01fe08-14]
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FEDERAL COMMUNICATIONS COMMISSION
47 CFR Part 76
[CS Docket No. 98-120; FCC 07-170]
Carriage of Digital Television Broadcast Signals
AGENCY: Federal Communications Commission.
ACTION: Final rule.
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SUMMARY: This Third Report and Order finalizes the material degradation
requirements adopted by the Commission in 2001, and establishes two
alternative approaches that cable operators may use to meet their
responsibility to ensure that cable subscribers with analog television
sets can continue to view all must-carry stations after the end of the
DTV transition. The Commission adopts rules to ensure that cable
subscribers will continue to be able to view broadcast stations after
the transition, and that they will be able to view those broadcast
signals at the same level of quality in which they are delivered to the
cable system. The Commission announces these rules now to ensure that
cable operators and broadcasters have sufficient time to prepare to
comply with them.
DATES: Effective March 3, 2008.
ADDRESSES: Federal Communications Commission, 445 12th Street, SW.,
Washington, DC 20554. In addition to filing comments with the Office of
the Secretary, a copy of any comments on the Paperwork Reduction Act
information collection requirements contained herein should be
submitted to Cathy Williams, Federal Communications Commission, 445
12th Street, SW., Washington, DC 20554, or via the Internet to
PRA@fcc.gov.
FOR FURTHER INFORMATION CONTACT: For additional information on this
proceeding, please contact Lyle Elder, Lyle.Elder@fcc.gov, or Eloise
Gore, Eloise.Gore@fcc.gov, of the Media Bureau, Policy Division, (202)
418-2120. For additional information concerning the Paperwork Reduction
Act information collection requirements contained in this document,
contact Cathy Williams on (202) 418-2918, or via the Internet at
PRA@fcc.gov.
SUPPLEMENTARY INFORMATION: This is a summary of the Federal
Communications Commission's Third Report and Order in CS Docket No. 98-
120, FCC 07-170, adopted September 11, 2007, and released November 30,
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
(http://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).
Paperwork Reduction Act of 1995 Analysis:
This document contains modified information collection
requirements. The Commission, as part of its continuing effort to
reduce paperwork burdens, will invite the general public to comment on
the information collection requirements contained in this R&O as
required by the Paperwork Reduction Act of 1995, Public Law 104-13. The
Commission will publish a separate Federal Register Notice at a later
date seeking these PRA comments from the public. In addition, the
Commission notes that pursuant to the Small Business Paperwork Relief
Act of 2002, Public Law 107-198, see 44 U.S.C. 3506(c)(4), we
previously sought specific comment on how the Commission might
``further reduce the information collection burden for small business
concerns with fewer than 25 employees.''
Summary of the Third Report and Order
1. As discussed below, the Act requires that cable systems carry
broadcast signals without material degradation and ensure that all
subscribers can receive and view mandatory-carriage signals. This Third
Report and Order finalizes the material degradation requirements
adopted by the Commission in 2001, and establishes two alternative
approaches that cable operators may use to meet their responsibility to
ensure that cable subscribers with analog television sets can continue
to view all must-carry stations after the end of the DTV transition.
Cable operators may either carry such signals in analog, or, for all-
digital systems, carry the signal in digital only.
A. Material Degradation--Sections 614(b)(4)(A) and 615(g)(2)
2. In this section, we adopt rules requiring that cable operators
not discriminate in their carriage between broadcast and non-broadcast
signals, and that they not materially degrade broadcast signals. As
explained below, we reaffirm the approach adopted by the Commission in
2001 to determining whether material degradation has occurred, as well
as the requirement that HD signals be carried in HD.
3. The Act requires that cable operators carry local broadcast
signals ``without material degradation,'' and instructs the Commission
to ``adopt carriage standards to ensure that, to the extent technically
feasible, the quality of signal processing and carriage provided by a
cable system for the carriage of local commercial television stations
will be no less than that provided by the system for carriage of any
other type of signal.'' As noted above, section 614(b)(4)(B) of the Act
directs the Commission ``to establish any changes in the signal
carriage requirements of cable television systems necessary to ensure
cable carriage of such broadcast signals of local commercial television
stations which have been changed'' as a result of the DTV transition.
4. In the Second Further Notice of Proposed Rulemaking (Second
FNPRM) 72 FR 312444, December 31, 2007, we sought comment on proposals
for ensuring that broadcast signals would not be materially degraded
after the digital transition. We proposed that the measurement by which
we determine whether an operator is degrading the broadcast signal
change from a subjective to an objective standard or, in the
alternative, to maintain the comparative standard established in the
First Report and Order 66 FR 16523, March 26, 2001. We asked whether we
should require cable operators to pass through all primary video and
program-related bits (``content bits''). In addition, we proposed a
rule that would create a framework for negotiations between cable
operators who wanted to carry fewer than all content bits and the
broadcasters whose signals were at issue. Such a rule would require any
operator that wished to carry fewer than all content bits to
demonstrate to the broadcaster that it could meet the picture-quality-
nondegradation standard without carriage of all content bits. Finally,
in the Second FNPRM, we reminded commenters of the existing requirement
to carry high definition signals in HD to those subscribers who have
signed up for an HD package, and
[[Page 6044]]
reiterated that this requirement will continue after the transition.
5. We retain the requirement that HD signals be carried in HD, as
well as the comparative approach to determining whether material
degradation has occurred. In 2001, the First Report and Order
established two requirements to avoid material degradation. First, ``a
cable operator may not provide a digital broadcast signal in a lesser
format or lower resolution than that afforded to any'' other signal on
the system. Second, a cable operator must carry broadcast stations such
that, when compared to the broadcast signal, ``the difference is not
really perceptible to the viewer.'' Thus, ``a broadcast signal
delivered in HDTV must be carried in HDTV.'' Because we decline to rely
on measurement of bits to determine whether degradation has occurred,
we do not require carriage of all content bits. Additionally, for the
reasons described below, we decline to adopt the proposed negotiation
framework.
6. The Act requires that broadcast signals not be ``materially
degraded.'' It also requires the Commission to ``adopt carriage
standards to ensure that, to the extent technically feasible, the
quality of signal processing and carriage provided by a cable system
for the carriage of local commercial television stations will be no
less than that provided by the system for carriage of any other type of
signal.'' The Commission stated in 2001 that ``[f]rom our perspective,
the issue of material degradation is about the picture quality the
consumer receives and is capable of perceiving.'' Cable commenters
argued that this should remain the focus of the Commission's decision
making, and we agree.
7. We considered the ``all content bits'' proposal, the main
benefit of which was a clear means of measurement and consequently ease
of enforcement. Ultimately, we conclude, however, that the all content
bits approach is likely to stifle innovation and the very efficiency
that digital technology offers, and may be more exacting a standard
than necessary to ensure that a given signal will be carried without
material degradation. We also conclude that it is unnecessary at this
time to impose such a requirement in light of the paucity of material
degradation complaints over the 15 years since enactment of the Must
Carry statute.
8. A number of commenters support the existing standard, and most
argue that a comparative approach remains the best method of measuring
material degradation. As these commenters point out, there is little
evidence to indicate otherwise. We note Comcast's observations that
there appear to have been no more than two material degradation
complaints since the 1992 adoption of the prohibition, and that both of
those were dismissed. Even if there has been limited opportunity to
``test'' these rules in a digital context, there is every reason to
believe that they will prove just as robust in an environment of
greater attention to picture quality.
9. Furthermore, there are technological benefits to the current
comparative standard. Time Warner argues that the content bits standard
proposed in the Second FNPRM would require devoting additional
bandwidth to carriage even when it would not improve the quality of the
transmitted image, hurting consumers by limiting other uses of the
bandwidth. AT&T further argues that an ``all content bits'' standard
could ``dampen[ ] incentives to invest in video compression and other
technologies * * * that would allow even greater transmission
efficiencies and higher quality pictures.'' We recognize these
concerns, and do not intend to impede improvements in technology. Some
cable operators may, currently or in the future, rely on advanced
compression technologies such as MPEG 4 to provide service to
subscribers with greater efficiency. We particularly recognize the
value of compression technologies that take the broadcast signal back
to uncompressed baseband and then re-encode it in a more efficient
manner without materially degrading the picture. Such advanced
compression utilizes a minimum bit rate that does not reduce the
quality of the resolution. We agree with commenters that a comparative
standard is currently the best way to encourage and reward
technological innovations, like MPEG4 compression, that allow for more
efficient use of bandwidth without diminishing viewer experience.
10. We decline to adopt the proposal of Agape Church Inc., that we
require carriage of secondary channels. Our rules here focus only on
the broadcaster's primary video and program related content. The
prohibition on material degradation adds no additional requirement to
carry non-program-related content.
11. Commenters requested clarification that downconversion to
analog does not constitute material degradation. We accordingly clarify
that it is not material degradation to downconvert that signal to
comply with the ``viewability'' requirement discussed below.
12. As noted above, we do not adopt the negotiation framework
proposed in the Second FNPRM, and direct parties to continue to follow
the rules as established in section 76.61. Both broadcasters and cable
operators, the parties who would be involved in these negotiations,
raised serious objections to the proposal. The National Association of
Broadcasters (``NAB'') and The Association for Maximum Service
Television (``MSTV'') are highly critical of any required negotiations,
particularly ones which would begin and end upon the request of
operators. They state that the 30 day window for carriage complaints is
too short, and that the proposal as a whole places the burden of
ensuring compliance on the broadcasters, rather than on the operators
who have the duty by statute. Finally, they argue that the requirements
and penalties for noncompliance are insufficiently detailed or strict.
Cable commenters object to the requirement that operators make a
showing of non material-degradation to the satisfaction of the
broadcaster. They express concern about what they anticipate would be:
(1) A major shift in power to must-carry broadcasters, who do not have
an incentive to bargain; and (2) an addition of significant transaction
costs for operators, who currently do not negotiate with must carry
stations at all. They argue that this would add an unnecessary
complication to mandatory carriage. As NAB and MSTV note, the goal of
these rules is to provide cable subscribers with the full benefits of
the digital transition. Given the broad based objections to the
proposal, we decline to establish a formal procedure by which
broadcasters would waive the material degradation requirements. We note
that enforcement of the material degradation requirements is initiated
by a broadcaster's carriage complaint, and that the rules provide for
the broadcaster to complain first to the cable operator before filing
such a complaint. This gives the parties an opportunity to informally
address material degradation disputes, and if the station is satisfied
with the resultant carriage, no complaint will be filed. No additional
formal process is necessary. 47 CFR 76.61.
B. Availability of Signals--Sections 614(b)(7) and 615(h)
13. In this section, we adopt rules requiring cable systems that
are not ``all-digital'' to provide must-carry signals in analog, while
``all-digital'' systems may provide them in digital form only. We also
require that the cost of any downconversion be borne by operators, but
that downconverted signals may count toward the cap on commercial
[[Page 6045]]
broadcast carriage. Pursuant to sections 614 and 615 of the Act, cable
operators must ensure that all cable subscribers have the ability to
view all local broadcast stations carried pursuant to mandatory
carriage. Specifically, section 614(b)(7) (for commercial stations)
states that broadcast signals that are subject to mandatory carriage
must be ``viewable via cable on all television receivers of a
subscriber which are connected to a cable system by a cable operator or
for which a cable operator provides a connection.'' Similarly, section
615(h) for noncommercial stations states that ``[s]ignals carried in
fulfillment of the carriage obligations of a cable operator under this
section shall be available to every subscriber as part of the cable
system's lowest priced tier that includes the retransmission of local
commercial television broadcast signals.'' These statutory requirements
plainly apply to cable carriage of digital broadcast signals, and, as a
consequence, cable operators must ensure that all cable subscribers--
including those with analog television sets--continue to be able to
view all commercial and non-commercial must-carry broadcast stations
after February 17, 2009.
14. These rules shall be in force for three years from the date of
the digital transition, subject to review by the Commission during the
last year of this period (i.e., between February 2011 and February
2012). In light of the numerous issues associated with the transition,
it is important to retain flexibility as we deal with emerging
concerns. A three-year sunset ensures that both analog and digital
cable subscribers will continue to be able to view the signals of must-
carry stations, and provides the Commission with the opportunity after
the transition to review these rules in light of the potential cost and
service disruption to consumers, and the state of technology and the
marketplace. To assist the Commission in this review, we will include
questions in our annual Cable Price Survey to assess, for example,
digital cable penetration, cable deployment of digital set-top boxes
with various levels of processing capabilities, and cable system
capacity constraints.
15. In the Second FNPRM, we sought comment on proposals that would
ensure the viewability, for all subscribers, of signals carried
pursuant to mandatory carriage. To that end, we proposed that
cable operators must either: (1) Carry the signals of commercial and
non-commercial must-carry stations in analog format to all analog
cable subscribers, or (2) for all-digital systems, carry those
signals only in digital format, provided that all subscribers with
analog television sets have the necessary equipment to view the
broadcast content.
We also proposed that the cost of any down conversion rendered
necessary by these rules be borne by the cable operators.
16. We adopt these proposals, and note that they apply to all
operators, regardless of their rate-regulated status. In sum, cable
operators must comply with the statutory mandate that must-carry
broadcast signals ``shall be viewable via cable on all television
receivers of a subscriber which are connected to a cable system by a
cable operator or for which a cable operator provides a connection,''
and they have two options of doing so. First, to the extent that such
subscribers do not have the capability of viewing digital signals,
cable systems must carry the signals of commercial and non-commercial
must-carry stations in analog format to those subscribers, after
downconverting the signals from their original digital format at the
headend. This proposal is in line with the approach already voluntarily
planned by many cable operators, as described in testimony by Time
Warner CEO Glenn Britt before the House Subcommittee on
Telecommunications and the Internet. In the alternative, operators may
choose to operate ``all-digital systems.'' ``All-digital'' systems are
systems that do not carry analog signals or provide analog service.
Under this option, operators will not be required to downconvert the
signal to analog, and may provide these stations only in a digital
format. In any event, any downconversion costs will be borne by the
operator.
17. To fulfill its must-carry obligations in cases where a cable
operator uses digital-to-analog converter boxes that do not have analog
tuners, the operator can deliver a standard definition digital version
of a must-carry broadcaster's high definition digital signal, in
addition to the analog and high definition signal, or use boxes that
convert high definition signals for viewing on an analog television
set, or use other technical solutions so long as cable subscribers have
the ability to view the signals.
18. As NCTA notes, the congressionally mandated end of the Digital
Television transition does not apply directly to cable operators. We
thus recognize that there may be two different kinds of cable systems
for some period of time after the DTV transition is complete. Some
operators may choose to deliver programming in both digital and analog
format. NAB and MSTV describe these systems as those in which they
``keep an analog tier and continue to provide local television signals
(and perhaps many cable channels as well) to analog receivers in a
format that does not require additional equipment.'' Other operators
may choose, as many already have, to operate or transition to ``all-
digital systems,'' and as NAB and MSTV further note, ``virtually all
cable operators ultimately will do so.'' Game Show Network, LLC
(``GSN'') questions why there should be any rules protecting owners of
analog sets, since that is ``a format the government itself has
determined is no longer worthy of any spectrum.'' Congress did decide
to end analog broadcasting, but declined to turn its backs on the
millions of Americans with analog sets. Thus, they established the NTIA
converter box program to protect the continued availability of over-
the-air signals to all Americans; they accepted the claims of the cable
industry that subscribers with analog sets would continue to be served;
and we now establish these rules to ensure that those subscribers do
continue to be served.
19. NAB proposes that cable operators carry all broadcasters on
their systems in the same manner; i.e., if one must carry station is
carried in analog, all broadcasters, whether carried pursuant to
retransmission consent or must carry, would be carried in analog. Cable
operators object to this proposal, and we decline to adopt it. Although
a system that is not ``all-digital'' will be required to carry analog
versions of all must-carry signals to ensure their viewability,
retransmission consent stations may be carried in any manner that
comports with the private agreements of the parties.
20. The ``viewability'' requirement that we adopt today is based on
a straightforward reading of the relevant statutory text. While some
cable commenters dispute our interpretation of section 614(b)(7), their
arguments are at odds with both the plain meaning of the statutory text
as well as the structure of the provision. These commenters principally
argue that the viewability mandate is satisfied whenever cable
operators transmit broadcast signals and `` `offer to sell or lease * *
* a converter box' to their customers'' that will allow those signals
to be viewed on their receivers. To the extent that such subscribers do
not have the necessary equipment, however, the broadcast signals in
question are not ``viewable'' on their receivers. In addition, it is
important to note that the relevant question under the statute is not
whether subscribers can view over-the-air broadcast signals using their
receivers. Rather, it is whether
[[Page 6046]]
subscribers can view the signals of broadcast stations that are carried
through their cable system. See 47 U.S.C. 534(b)(7). To be sure, ``[i]f
a cable operator authorizes subscribers to install additional receiver
connections, but does not provide the subscriber with such connections,
or with the equipment and materials for such connections, the operator
[is only required to] notify such subscribers of all broadcast stations
carried on the cable system which cannot be viewed without a converter
box and * * * offer to sell or lease such a converter box to such
subscribers at rates in accordance with section 623(b)(3).'' But these
commenters confuse the separate mandates set forth in the second and
third sentences of section 614(b)(7), a distinction we clarified as
early as 1993. As NAB and MSTV observe, ``there is no evidence that the
third sentence of section 614(b)(7) was intended to narrow the scope of
the viewability requirement for sets connected by cable operators.''
For every receiver ``connected to a cable system by a cable operator or
for which a cable operator provides a connection,'' that operator must
ensure that the broadcast signals in question are actually viewable on
their subscribers' receivers.
21. As we explained in the Second FNPRM, the operators of either
all-digital or mixed digital-analog systems will be responsible under
the statute for ensuring that mandatory carriage stations are actually
viewable by all subscribers, ``including those with analog television
sets.'' Two commenters argued that our proposed rules were overbroad,
because analog-only televisions will not ``qualify as `television
receivers' after the transition for purposes of the viewability
requirement.'' These arguments fail to recognize, however, that the
hard deadline set by Congress does not apply to Low Power television
stations, including translators and Class A stations. Thus, Low Power
broadcasters, operating hundreds of channels, will still be lawfully
transmitting analog signals on February 18, 2009, and for some period
of time afterwards. Those consumers who rely on Low Power stations and
turn on their over-the-air analog sets that morning to watch a local
newscast will be using a device ``engaged or able to engage in `the
process of * * * radio transmission.' '' More broadly, as NAB and MSTV
point out, the Commission's authority over these sets is not predicated
merely on their ability to receive over the air signals. Rather, we
believe that a device that allows subscribers to view signals sent by
their cable operator is a television receiver for purposes of section
614(b)(7) of the Act.
22. NCTA also argues that the situation in the early 1990s that
spurred the creation of these viewability requirements was different
from the situation that will be faced by consumers post-transition.
Therefore, they posit, it is inappropriate to rely on sections
614(b)(7) and 615(h) to address viewability on analog receivers. To
begin with, it is our primary task to implement the text of the
statutory provision. While the enactment of a statute may be
principally aimed at a particular set of circumstances present at the
time, it is often written in general language so that it applies to
similar sets of circumstances in the future. As the United States
Supreme Court has instructed, ``statutory prohibitions often go beyond
the principal evil to cover reasonably comparable evils, and it is
ultimately the provisions of our laws rather than the principal
concerns of our legislators by which we are governed.'' In any event,
the cable commenters' own descriptions of the driving force behind the
statutory provision demonstrate that the situation at hand is directly
analogous. NCTA explains that ``[a]t the time [of the provision's
enactment], certain television sets were not `cable-ready' and could
not receive [some] channels at all,'' and observes that the Commission
therefore required converter boxes provided by cable operators to
contain ``the necessary channel capacity to permit a subscriber to
access a UHF must-carry signal through the converter.'' Replace
``cable-ready'' with ``digital cable-ready,'' and ``UHF'' with
``digital,'' and NCTA has described the problem at hand, and one of the
options the Commission has again offered to resolve it. The
Commission's charge is to implement the statutory language enacted by
Congress, and this language reflects Congress's unambiguous
determination that broadcast signals must be viewable by all cable
subscribers. Indeed, as NAB and MSTV note, ``the authority that
Congress gave the Commission under section 614(b)(4)(B) to make rules
regarding advanced television reflects Congress' understanding that
broadcast technology certainly would change over time, and that the
Commission was expected to modify the carriage rules as needed.'' While
the circumstances today differ from those present at the time of the
provision's enactment, the basic issue, ensuring the viewability of
broadcast signals, is the same.
23. Time Warner argues that we do not have the authority to read
section 614(b)(7) as a ``manner of carriage'' requirement, even to
offer analog carriage as one option for complying with the statute.
They see the Commission's early interpretation of the viewability
provision as a statement that operators must provide converter boxes
``in a specific and limited context,'' and that the section cannot
serve as the basis for a carriage requirement. On the contrary, the
Commission has frequently allowed cable operators to meet their
614(b)(7) obligations by placing must carry signals on a channel
viewable to all subscribers instead of by providing boxes. The rules we
adopt today are firmly grounded in longstanding Commission practice,
and echo previous solutions to similar problems.
24. Some cable programmer commenters, such as the Weather Channel,
argue that the proposal ``unquestionably would consume vast amounts of
cable system bandwidth'' with duplicative programming. In actuality, as
Time Warner admits, these rules will not have an impact on the carriage
of most stations; the ``vast majority of broadcasters opt for
retransmission consent.'' Thus, as NAB notes in its reply, any
incremental increase of bandwidth devoted to must-carry stations will
be ``negligible.'' Gospel Music Channel, LLC (Gospel) articulates a
concern that flows from Weather Channel's: That these rules could
reduce their chances of carriage on any given system. While we
recognize Gospel's concerns, Congress already acknowledged them when it
mandated that systems with more than 12 usable activated channels need
carry local commercial television stations only ``up to one-third of
the aggregate number of usable activated channels of such system[s].''
Furthermore, Gospel fails to recognize that to the extent operators
choose the second option and become ``all-digital,'' these rules could
contribute to a very positive impact on independent programmers'
ability to make carriage deals due to the concomitant effective
increase in channel capacity. The Africa Channel, et al. (``TAC'') also
argue that the potential loss of independent cable programmers serving
focused audiences ``are digital transition issues as important as a
consideration of what constitutes viewability or material degradation
for broadcasters who are the least likely television market
participants to be left behind with or without burdensome new must-
carry rules.'' In essence, TAC argues that independent cable
programmers deserve protections on par with must-carry broadcasters.
Congress, however, disagrees, and the Supreme Court has
[[Page 6047]]
upheld the must-carry regime to ensure the viewability and prevent the
material degradation of the signals of those broadcasters.
25. Some commenters have incorrectly characterized our rule as
``dual carriage.'' Comcast attempts to frame this requirement as ``a
requirement to carry broadcast signals in [analog] * * * in
perpetuity.'' Not only is this not the Commission's rule, Comcast's
proposal for avoiding ``dual carriage'' would read ``viewability''
itself out of the Act. Dual carriage, as considered and rejected by the
Commission, would have required cable operators ``to carry both the
digital and analog signals of a station during the transition when
television stations are still broadcasting analog signals''; that is,
the mandatory simultaneous carriage of two different channels broadcast
by the same station. The Commission ultimately rejected this concept.
The rule we establish in this Third Report and Order is quite distinct.
It requires carriage only of a single broadcast signal, and gives
operators the freedom to choose how to ensure that signal is viewable
by all subscribers. It does not require carriage of more than one
broadcast signal from a given must-carry broadcaster, and it does not
require carriage of an analog version of a signal unless an operator
chooses not to operate an all-digital system.
26. NCTA notes that the Act allows a cable operator to decline to
carry signals from stations whose programming substantially duplicates
that of a station it already carries. The commenter argues from this
that the statute can not be read to require carriage of additional
versions of a signal under any circumstances. The connection, however,
is tenuous at best. Section 614(b)(5) speaks specifically to the issue
of the carriage of different stations providing substantially identical
programming, and does not address a requirement to carry multiple
versions of a single station's signals. In the former case, subscribers
would be receiving multiple channels all showing the same programs at
virtually the same time. In this case, however, some subscribers will
not be able to see any of a station's programming unless a
downconverted version is carried. From the perspective of these
subscribers, the actual people sections 614 and 615 were designed to
reach, there need not be more than one viewable version of a
broadcaster's signal--but there must be at least one.
27. Comcast argues that enforcement of the viewability provisions
of the Act will force the Commission into conflict with other sections
of the Act, particularly the effective competition provisions of
section 623(b). Comcast misstates the case, however, when it says that
a deregulated system may provide must carry stations ``in any format
that it wishes.'' Indeed, as the Commission made clear in the 2001
Order, signals broadcast in HD must be carried by cable operators in
HD, regardless of whether or not the system is rate-regulated. While
some requirements are lifted when an operator is deregulated,
deregulation is not an exemption from the carriage requirements of the
statute. Stations electing mandatory carriage must be carried, they
must not be materially degraded, and they must be made viewable.
28. If an operator chooses not to operate an ``all-digital system''
and therefore ensures viewability by providing a digital broadcast
signal and a downconverted version of the signal for analog
subscribers, it will in some cases use more than the 6 MHz of bandwidth
occupied by an analog must-carry signal alone. Comcast argues that this
improperly forecloses the use of the bandwidth for other purposes.
Congress recognized the importance of preserving cable bandwidth for
non-broadcast programmers when it mandated that systems with more than
12 usable activated channels need carry local commercial television
stations only ``up to one-third of the aggregate number of usable
activated channels of such system[s].'' This limit has been upheld by
the courts and will continue to ensure that operators have sufficient
bandwidth for carriage of non-broadcast programming and other services.
Moreover, to the extent that a cable operator wishes to free bandwidth
for other purposes, it may choose to operate an ``all-digital'' system.
29. We are bound by statute to ensure that commercial and non-
commercial mandatory carriage stations are actually viewable by all
cable subscribers. The Commission also believes, however, that it is
important to provide cable operators flexibility in meeting the
requirements of sections 614(b)(7) and 615(h). Therefore, we have
declined to require a specific approach, instead allowing operators to
choose whether or not to operate ``all-digital systems,'' and therefore
whether or not to provide mandatory carriage stations in an analog
format. This is in accord with the Commission's decision, in the First
Report and Order, not to require operators to provide set-top boxes.
30. Time Warner argues that the requirement of section 629, that
navigation devices be available at retail, supersedes the requirements
of section 614(b)(7), which was enacted four years earlier. We
disagree. Section 629(f) provides that ``[n]othing in this section
shall be construed as expanding or limiting any authority that the
Commission may have under [the] law'' prior to the 1996
Telecommunications Act. This includes the viewability provisions of
section 614(b)(7). Furthermore, Time Warner's argument is premised on
an interpretation of section 614(b)(7) that we decline to adopt, namely
that it requires cable operators to provide set top boxes. Indeed, the
retail availability of set-top boxes should facilitate subscriber
purchase of digital equipment and lessen the burden on all-digital
cable operators to provide such boxes. However, we adopt the analog
downconversion option to address these very concerns, and provide an
option which does not even potentially implicate set-top boxes. An
operator may choose not to go ``all-digital,'' and instead satisfy its
section 614(b)(7) obligations by downconverting must carry stations to
analog, until the operator concludes that the local market is ready for
an all-digital cable system.
31. We note that Americans for Tax Reform, Ovation, LLC, and other
commenters appear to misapprehend the functionality of the ``converter
boxes'' that will be available through the NTIA coupon program. These
boxes will, by design, be limited to use in converting over-the-air
digital signals into analog signals that can be interpreted by an
analog television. Because of differences in the modulation used by
digital broadcasters and digital cable systems, these boxes will not be
usable by digital cable subscribers to connect their analog receivers.
Such converters will be available, but it is important to ensure that
the public understands that there are different functionalities
provided by different boxes.
32. Discovery observes that, during the transition period, a
digital-only broadcaster has had the right to request carriage in
digital only, rendering it non-viewable to analog subscribers. As the
Commission explained in the First Report and Order, however, this is an
interim policy, assisting both broadcasters and cable operators to
adjust to digital broadcasting over a limited period of time. Discovery
argues that the post-transition period will ``similarly be limited,''
and indeed, eventually analog-only sets will be as rare as VHF tuner-
only sets are today. There are still important differences, however. In
the post-transition period, every channel subject to mandatory carriage
will be broadcast solely in digital, while the use of analog receivers
[[Page 6048]]
will continue for an indefinite time. Furthermore, making stations
actually viewable to cable subscribers is the most fundamental interest
expressed in the must carry rules that have been upheld by the Supreme
Court. If we declined to enforce the viewability requirement it would
render the regime almost meaningless, contrary to the clearly expressed
will of the Congress as upheld by the Supreme Court.
33. Because the interim policy governing downconversion makes it an
option exercised by broadcasters, they are responsible for any
associated costs. Cequel argues that post-transition analog
downconversion would only be necessary because the broadcaster itself
is no longer providing an analog signal, and that any costs should
therefore be borne by the broadcaster. Agape Church Inc. and other
broadcast commenters agree with our proposal that, because the decision
will shift to cable operators after the transition, so should the
costs. NAB and MSTV further argue that these downconversion costs would
be modest. ACA says that one of its members paid as much as $4,390.25
per channel to downconvert from HD to analog, and argues in an ex parte
that these costs could approach $16,500 per channel. We find this
estimate surprisingly high and note that $12,000 of this total appears
to be dedicated to format conversion, rather than digital to analog
conversion. It is also unclear whether or not the prices or equipment
quoted are industry standards, or whether some of the equipment costs
presented cumulatively are actually redundant or usable for more than
just analog downconversion of one broadcast signal. Nevertheless, we
are taking up the issue of flexibility for small cable operators in the
Third FNPRM, infra. Entravision Holdings, LLC (Entravision) notes that,
while it supports our proposal, it would not object to a requirement
that broadcasters pay the cost of downconversion if it became necessary
in order to ensure the continued viewability of must-carry stations for
analog subscribers. However, since the post-transition downconversion
will be undertaken by operators at their discretion, in order to comply
with the Act, we adopt the proposal that any expense necessary for an
operator's compliance with the requirements of sections 614(b)(7) and
615(h) shall be borne by the operator, and not the broadcaster.
Specifically, operators of systems that provide analog service are
responsible for the cost of downconverting a digital must-carry signal
to analog at the headend. To the extent that a standard definition
digital subscriber is unable to view a high definition signal via their
equipment, operators have a similar responsibility to ensure that the
signal is viewable.
34. Such downconverted signals will, however, count toward the one-
third carriage cap. Section 614(b)(1)(B) of the Act requires that cable
systems with more than ``12 usable activated channels'' devote ``up to
one-third of the aggregate number of usable activated channels of such
system[s]'' to the carriage of local commercial television stations.
Beyond this requirement, the carriage of additional commercial
television stations is at the discretion of the cable operator. The
Commission determined in the First Report and Order that with respect
to carriage of digital broadcast signals, the channel capacity
calculation will be made by taking the total usable activated channel
capacity of the system in megahertz and dividing it by three to find
the limit on the amount of system spectrum that a cable operator must
make available for commercial broadcast signal carriage purposes. After
the transition, when calculating whether an operator has reached or
exceeded the one-third cap, we will count the system spectrum occupied
by all versions of a commercial broadcast signal (both digital and
analog).
35. We also find that operators of systems with an activated
channel capacity of 552 MHz or less that do not have the capacity to
carry the additional digital must-carry stations may seek a waiver from
the Commission. Such systems must, however, commit to continue carrying
an analog version such that their subscribers are assured of being able
to view all must-carry stations carried on the system.
36. We observe that a number of cable comments imply or state that
it is not possible to transition from a system that provides analog
service to an all-digital system without the agreement of all current
subscribers. While each operator will choose to transition or not based
on local market conditions and other business considerations, it is
clear that this choice is fully within their discretion. Both of these
options are available to all operators at any time, a fact unaffected
by this rule. We do note, that as with any change in programming
service, particularly one which will have an impact on the
compatibility of subscriber equipment, cable operators must comply with
certain notice requirements. We remind operators who transition their
systems to all-digital that they must provide written notice to
subscribers about the switch, containing any information they need or
actions they will have to take to continue receiving service.
37. Entravision, licensee of a number of commercial broadcast
stations, argues that analog downconversion is the best way to ensure
continued viewability, but does not object to the use of other methods
by cable operators so long as the result is the same. As an alternative
to the option we proposed for systems that continue to carry analog
programming, Entravision proposes that must-carry stations be provided
in analog, but only until such time as 85% of subscribers in each zip
code served by a given operator have the means to view those signals if
provided in digital. As Entravision acknowledges, however, the statute
requires that must carry broadcast stations be made available to all
cable subscribers with analog television sets. As we have noted before,
we do not believe we have the authority to exempt any class of
subscribers from this requirement, no matter how few the analog
subscribers. Therefore, we decline to adopt the proposal offered by
Entravision.
38. The Consumer Electronics Association (CEA) asks that the
Commission rely on technical solutions shaped by earlier rules and
developed by the market to resolve concerns about viewability. CEA
suggests that the agency can rely on the retail availability of sets
with digital tuners to ensure continued viewability of high quality
programming. It argues that this can be assured by requiring the
carriage of must carry signals to conform to three requirements: (1)
Unencrypted, unscrambled, and in QAM (i.e., ``in the clear''); (2)
modulated using MPEG-2, a widely used and accepted codec; and (3) not
in switched digital. CEA expresses concern that the requirement to
carry must-carry stations ``in the clear'' is not sufficiently
articulated outside the context of rate-regulated systems. Although we
decline to reach the question of requiring MPEG-2 and prohibiting
switched digital, as they are beyond the scope of this proceeding, we
do address CEA's essential concern, which is at the heart of our
viewability proceeding. Like CEA's proposals, our rules are designed to
ensure that all subscribers to a cable system have ``in the clear''
access to all must carry stations.
C. Constitutional Issues
1. The Viewability Requirements Are Consistent With the First Amendment
39. A number of commenters assert that the rules we adopt herein
constitute ``mandatory dual carriage'' and are unconstitutional. We
disagree. The
[[Page 6049]]
statutory must-carry provisions upheld by the Supreme Court in Turner
II include the requirement that must-carry signals ``shall be
viewable'' on all television receivers of a subscriber which are
connected to a cable system by a cable operator or for which a cable
operator provides a connection. The rules we adopt in this order do
nothing more than ensure the continued fulfillment of this statutory
mandate at the conclusion of the digital television (``DTV'')
transition in February 2009. The must-carry obligation is meaningful
only if all cable subscribers are able to view local broadcasters'
signals, even if they have analog televisions. If we fail to act,
however, analog cable subscribers will be unable to view must-carry
stations after the DTV transition. Rather than mandating downconversion
to prevent this loss of signals after the transition, however, we offer
cable operators a choice: those operators that choose not to operate an
``all-digital system'' must down-convert the broadcasters' digital
signal for their analog subscribers. Cable operators that elect to
operate ``all-digital'' systems, on the other hand, do not have to
down-convert these signals and may provide them solely in a digital
format. The choice rests with the individual cable operator. In this
way, cable operators decide for themselves, taking into account their
particular circumstances, how best to operate following the digital
transition.
40. We reject the argument of cable commenters that the ``second
option is effectively no option at all,'' or that we have presented
cable operators with a ``Hobson's Choice.'' Rather, we believe that the
second option represents a viable choice for complying with the
viewability mandate. Cable operators complain about the burden of
transitioning to ``all-digital systems.'' In particular, they object to
requiring subscribers with analog television sets who do not yet have
digital-set top boxes to use such boxes because, they argue, it is not
``feasible'' to require those customers to install set-top boxes,
because customers do not want set-top boxes, or because of the expense
associated with providing the boxes. After the DTV transition, however,
some sort of set-top or converter box will be the rule rather than the
exception for those Americans with analog television sets. Whether
consumers currently obtain video programming through over-the-air
broadcasts, cable, or DBS, they generally will need either set-top
boxes or digital televisions to receive programming once the transition
is complete. Thus, cable operators' fear that they will lose customers
to other providers of video programming if they pursue this option
seems misplaced. As to cable operators' concerns about the expense of
providing set-top boxes, nothing in this order precludes them from
recovering the costs of those boxes from subscribers, and cable
operators offer no evidence to support their claim that they will lose
a meaningful number of customers because of such charges. Indeed, such
claims are rather ironic in light of the cable industry's recent
practice of raising its prices at a rate significantly in excess of
inflation.
41. Cable operators' complaints about the second option are also
belied by these same parties' assurances that they have both the
incentive and the means to ``mak[e] the digital transition as seamless
as possible for their customers.'' NCTA asserts, for example, that
cable operators have committed to ``ensure that cable viewers do not
experience disruption after February 17, 2009,'' and that they
``already have the means to ensure continuing service to analog
television sets with no government intervention or subsidy required.''
Cequel Communications notes that it has every incentive to continue
providing must-carry stations to all subscribers after the transition,
if only because it welcomes free programming. Comcast similarly assures
us that ``cable operators have powerful incentives to meet their
customers' demands'' and that ``no cable operator will allow its
subscribers to become `disenfranchised' since to do so would be
economically irrational.'' If cable operators, in fact, ``have every
incentive to move customers to digital'' and ``equipment will be
available to enable cable customers to view digital broadcast
signals,'' then we do not understand the cable companies' complaint
that the all-digital option is so burdensome that it is merely a
``fantasy.'' Indeed, numerous cable operators have indicated to the
Commission their intent to convert to all-digital operations prior to
February 2009. The record in this proceeding also demonstrates that
cable operators are already reducing analog programming and moving it
to digital tiers. For all of these reasons, we conclude that the second
option set forth in this item offers cable operators a meaningful
choice about how to fulfill their must-carry obligations.
42. Turning to the First Amendment challenge, we do not believe
that the ``all-digital'' option for complying with the statute's
viewability mandate implicates any First Amendment interest beyond that
inherent in the must-carry mandate for digital signals already adopted
by the Commission. We note, moreover, that this mandate is
significantly less burdensome than the analog must-carry mandate upheld
by the Supreme Court in Turner II because digital signals occupy much
less bandwidth on a cable system than do analog signals. The ``all-
digital'' option does not require cable operators to carry any
additional signals over its system or to displace any additional
programming beyond that required by the Commission's previously adopted
digital must-carry mandate. Rather, it simply requires cable operators
to take steps to ensure that all subscribers are able to view signals
that will already be carried on their systems, and we do not believe
that such a mandate can reasonably be described as an independent
``infringement'' of cable operators' free speech rights.
43. While cable commenters argue that the second option triggers
additional First Amendment scrutiny, we do not find their claims to be
persuasive. We do not agree that the second option coerces operators
into downconverting broadcaster's digital signals or impermissibly
penalizes them for failing to downconvert. The purpose and effect of
the second option are neither to coerce operators into downconverting
nor to penalize them for failing to do so. Rather, they are to provide
cable operators with an alternative means of fulfilling the statutory
requirement that the signals of must-carry stations must be viewable by
all subscribers.
44. However, even if we were to find that the second option
implicates a First Amendment interest beyond that inherent in the must-
carry mandate for digital signals already adopted by the Commission or,
for that matter, that the second option did not represent a realistic
choice for cable operators, we would still conclude that our approach
here is constitutional because we believe that both options for
complying with the viewability mandate are fully and independently
consistent with the First Amendment.
45. Content-Neutral Regulation. As articulated by the Supreme Court
in Turner II, ``[a] content-neutral regulation will be sustained under
the First Amendment if it advances important governmental interests
unrelated to the suppression of free speech and does not burden
substantially more speech than necessary to further those interests.''
There can be little argument that must-carry obligations are content-
neutral regulations. The Supreme Court held in Turner I that must-carry
does not ``distinguish favored speech from disfavored speech on the
basis of the
[[Page 6050]]
ideas or views expressed'' but is instead a content-neutral regulation
subject to intermediate-level scrutiny under the First Amendment.
Similarly, with respect to the first option provided to cable operators
today, requiring downconversion of digital signals does not distinguish
speech on the basis of content; it merely requires cable operators to
carry whatever message the must-carry stations choose to transmit. We
thus reject the notion that ensuring that cable subscribers with analog
television sets are able to view must-carry stations reflects an
``effort to exercise content control'' that triggers strict scrutiny.
With respect to the ``all-digital'' option, we do not think that
permitting cable operators to fulfill their must-carry obligations by
providing digital must-carry signals that are viewable by all of their
subscribers changes the analysis. This option does not distinguish
speech on the basis of content; instead, it simply requires that
subscribers can view broadcasters' digital signals--regardless of the
content those signals contain.
46. We also reject the argument that, in light of ``enormous
technological and market changes,'' a First Amendment challenge to
must-carry regulations today would be subject to strict scrutiny. This
argument is premised on the mistaken notion that the Supreme Court
applied intermediate scrutiny to must-carry regulation due to the
existence of cable market power. The Court made clear, however, that
the applicable level of scrutiny was tied to the content-neutral
character of must-carry regulation. Like the regulations upheld in the
Turner decisions, requiring cable operators to down-convert digital
must-carry signals or make such signals viewable by all subscribers is
a content-neutral regulation that guarantees the carriage of broadcast
programming regardless of content and is not designed to promote speech
of a particular content.
47. Moreover, to the extent cable operators' arguments about market
power are meant to suggest that they no longer represent the threat to
free, over-the-air broadcasting that drove the Turner decisions, the
evidence convinces us otherwise. Although it faces competition by DBS
operators and others, the cable industry by far remains the dominant
player in the MVPD market, commanding approximately 69 percent of all
MVPD households. By contrast, the percentage of households that rely on
over-the-air broadcast signals has declined significantly since the
Turner decisions. In 1992, 40 percent of American households continued
to rely on over-the-air signals for television programming. Today,
however, that figure has shrunk to 14 percent. The shift in the
competitive balance between broadcast and cable can also be seen in
viewership trends. Between 1995 and 2006, ad-supported cable channels'
total day share of the market increased from 28 to 49.5 percent,
whereas the total day share of ABC, CBS, and NBC affiliates shrunk
precipitously from 44 percent to 23.5 percent. As cable capacity and
the number of cable programming networks have grown, the fragmentation
of the market for video programming has accelerated, further weakening
broadcast stations.
48. In addition, cable operators continue to ``exercise `control
over most (if not all) of the television programming that is channeled
into the subscriber's home [and] can thus silence the voice of
competing speakers with a mere flick of the switch.''' As in 1992, few
consumers have the choice of more than one cable operator. Cable
systems also are more clustered than they were in 1992. While
clustering may have beneficial effects, the Supreme Court has
recognized that it also may increase cable's threat to local
broadcasters and the risk of anticompetitive carriage denials.
Furthermore, the share of subscribers served by the 10 largest multiple
system operators (``MSOs'') has continued to accelerate since Congress
recognized a trend toward horizontal concentration of the cable
industry, ``giving MSOs increasing market power.'' The figure was
nearly 54 percent in 1989 and over 60 percent in 1994. The figure
remains over 60 percent in 2005. And there remains a significant amount
of vertical integration in the cable industry. In 2005, approximately
22 percent of the 531 nonbroadcast video programming networks were
vertically integrated with at least one cable operator. ``Congress
concluded that vertical integration gives cable operators the incentive
and ability to favor their affiliated programming services.''
49. The incentives that the Turner II Court recognized for cable
operators to drop local broadcasters in favor of other programmers less
likely to compete with them for audience and advertisers also have
steadily increased. The Court explained that:
Independent local broadcasters tend to be the closest
substitutes for cable programs, because their programming tends to
be similar, and because both primarily target the same type of
advertiser: those interested in cheaper (and more frequent) ad spots
than are typically available on network affiliates. The ability of
broadcast stations to compete for advertising is greatly increased
by cable carriage, which increases viewership substantially. With
expanded viewership, broadcast presents a more competitive medium
for television advertising. Empirical studies indicate that cable-
carried broadcasters so enhance competition for advertising that
even modest increases in the numbers of broadcast stations carried
on cable are correlated with significant decreases in advertising
revenue for cable systems. Empirical evidence also indicates that
demand for premium cable services (such as pay-per-view) is reduced
when a cable system carries more independent broadcasters. Thus,
operators stand to benefit by dropping broadcast stations.
In addition, the Court observed that ``[t]he incentive to subscribe to
cable is lower in markets with many over-the-air viewing options.''
50. Consistent with the Turner II Court's analysis, the evidence
confirms that local advertising revenue has become an increasingly
important source of revenue for the cable industry, ``providing a
steady, increasing incentive to deny carriage to local broadcasters in
an effort to capture their advertising revenue.'' For example, between
1992 and 2003, cable revenue from local advertising rose dramatically,
increasing by approximately 525 percent. Thus, cable operators have
even greater incentives today to withhold carriage of broadcast
stations.
51. We also cannot conclude that the option of switching between
cable and broadcast input significantly weakens cable operators'
ability to harm broadcasters. With respect to the A/B switch, the
Supreme Court found, inter alia, that many households lack adequate
antennas to receive broadcast signals and that installation and use of
such switches with other video equipment could be cumbersome or
impossible. Notwithstanding technical improvements since then,
moreover, there is no evidence of consumer acceptance of the switch, or
that more households have adequate antennas to receive broadcast
signals. And since the percentage of television viewers relying solely
on broadcast signals has dropped from approximately 40 percent to 14
percent in the years since Turner II, the number of households with
adequate antennas to receive broadcast signals through an A/B switch
has almost certainly dropped. Thus, while A/B switches have largely
moved from mechanical to electronic in the decade since the Turner
decisions, switching signal sources still remains cumbersome or
impossible for television viewers and does not represent an adequate
alternative to must-carry regulation. In sum, we cannot conclude that
technological and market changes dictate that must-carry obligations
[[Page 6051]]
would now be subject to strict constitutional scrutiny.
52. Important Governmental Interests. The Supreme Court has already
recognized that must-carry regulations serve important governmental
interests. In particular, it held that there was substantial evidence
to support a finding that must-carry requirements serve the important,
and interrelated, governmental interests of (1) preserving the benefits
of free, over-the-air local broadcast television; and (2) promoting the
widespread dissemination of information from a multiplicity of sources.
Congress found, and the Court agreed, that both these interests were
threatened by cable operators' refusals to carry local broadcast
stations. Broadcasters denied carriage on cable systems lose a
substantial portion of their audience, which, in turn, translates into
lost advertising revenues. As a result, the stations have less money to
invest in equipment and programming, leading to further reductions in
audience size. This cycle of audience loss followed by revenue loss
repeats to the point that the stations ``deteriorate to a substantial
degree or fail altogether.'' Thus, the viability of local broadcast
stations and, consequently, the availability of over-the-air broadcasts
for non-cable households depend to a material extent on cable carriage.
Furthermore, we note that the must-carry mandate found by the Court in
Turner II to advance these governmental interests required that the
signals of must-carry stations be viewable by all cable subscribers; it
did not merely require cable operators to carry such signals and make
them viewable to a limited class of their customers.
53. The steps we take here to ensure that cable operators comply
with the statutory viewability requirement after the DTV transition
serve these same interests. Cable operators are free to choose whether
or not to operate as all-digital systems. We require cable operators
that choose not to operate ``all-digital systems'' to down-convert the
digital broadcast signals; otherwise, their analog subscribers will
lose access to must-carry stations altogether on February 17, 2009.
This fact distinguishes the present circumstances from those the
Commission addressed in 2005 when it decided not to require cable
operators to carry both the digital and analog signals of broadcast
stations during the DTV transition, while television stations continue
to broadcast analog signals. At that time, the Commission concluded
that a dual carriage requirement was not needed to preserve over-the-
air broadcasting for viewers who lack cable because local analog
broadcasts were already carried on virtually every cable system.
Therefore, the lack of a dual carriage requirement would not have any
meaningful effect on a station's viewership, and there was thus no
evidence that the absence of dual carriage would diminish the
availability of broadcast signals to non-cable subscribers. In
contrast, this order addresses the impact of the end of the DTV
transition, where the signals of must-carry stations will be completely
unavailable to analog cable subscribers, absent the actions we take
here. This obviously poses a much more serious challenge for must-carry
stations. For this reason, we do not agree that this order is at odds
with the Commission's 2005 constitutional analysis. If cable operators
did not downconvert the digital signals, broadcasters would stand to
lose an audience of millions of households that are analog cable
subscribers and the concomitant advertising revenues, thus jeopardizing
their continued health and viability. Should these stations deteriorate
or cease to exist, the impact of these lost programming options would
fall most heavily on those that most need them: the roughly fifteen
percent of Americans who rely solely on over-the-air television, which
disproportionately consist of low-income and minority households. This
is precisely the harm that Congress sought to prevent when it enacted
the must-carry provisions upheld by the Supreme Court in Turner II, and
no party has suggested a plausible argument that preserving free, over-
the-air broadcast television no longer qualifies as an important
governmental interest. The Court also recognized that ``preserving a
multiplicity of broadcasters'' serves the related governmental interest
of ``promoting the widespread dissemination of information from a
multiplicity of sources.'' All cable programming other than that
carried in fulfillment of must-carry obligations is under the control
of cable operators. Unless we act, analog cable subscribers and
households that rely solely on over-the-air broadcast television may
well face ``a reduction in the number of media voices'' and the loss of
``the widest possible dissemination of information from diverse and
antagonistic sources.'' Thus, this Order clearly advances the important
governmental interests identified by Congress and upheld by the Supreme
Court. Alternatively, cable operators may fulfill their must-carry and
viewability obligations by providing digital signals that are viewable
by all of their subscribers, thus serving the same governmental
interests upheld in the Turner cases.
54. In addition, the actions we take here advance a separate, but
also important, governmental interest of minimizing adverse consumer
impacts associated with the DTV transition. The DTV transition results
in the return of analog spectrum that can be allocated for other
important, indeed critical, purposes, but Congress also recognized the
need to protect consumers by ensuring that their television sets
continue to work at the end of the transition just as they do today. To
that end, Congress created a program to make available coupons that
consumers can use to buy digital-to-analog converter boxes for the
analog television sets in their homes. Just as Congress sought to
minimize the burden of the DTV transition on consumers who rely on
over-the-air broadcasting, we act here to minimize the impact of the
DTV transition on cable subscribers. Analog downconversion minimizes
the impact of the DTV transition on cable subscribers who do not own
digital television sets. By ensuring that these consumers continue to
receive local broadcast signals, we ensure that they experience little
or no disruption in service due to the DTV transition. We do not agree
that requiring cable systems offering analog programming to down-
convert digital signals undermines, rather than promotes, the digital
conversion by encouraging continued dependence on analog televisions.
Just as Congress's set-top box program does not undermine but merely
smoothes the transition for certain vulnerable consumers, we act here
to promote widespread consumer acceptance of the DTV transition by
addressing a major source of potential consumer confusion and
frustration. Similarly, subscribers to cable systems that convert to
all-digital operations will continue to receive local broadcast signals
without interruption and thus will experience minimal disruption due to
the DTV transition.
55. For all of these reasons, we conclude that both options
available to cable operators--downconversion of digital signals and the
operation of all-digital systems--advance numerous important
governmental interests.
56. Burden on Speech. The thrust of the cable operators' objections
to downconversion is the ``severe burden'' they allege it imposes on
protected speech. They contend that a downconversion obligation imposes
a greater burden than the must-carry rules upheld in Turner II because
cable
[[Page 6052]]
companies will now be required to transmit the must-carry stations'
digital signal and down-convert it to analog, thus displacing
additional speech. Even assuming that analog downconversion, together
with digital must-carry, requires greater bandwidth than existing must-
carry requirements, we do not agree that it burdens ``substantially
more speech than necessary'' to further the government's important
interests.
57. The relative burden that must-carry regulation places on cable
operators must be measured in context. At the time of the Turner cases,
cable capacity was significantly more constrained than it is today. In
the early 1990s, most cable systems were all-analog and offered far
fewer than 100 channels. In 1995, for example, the Commission defined a
``high capacity'' cable system as a system with 54 or more channels. By
contrast, analog carriage today accounts for only a small percentage of
the total number of cable channels and spectrum capacity. By 2004,
cable operators were providing, on average, 70 analog video channels
and approximately 150 digital video channels, with enough additional
bandwidth to provide high-definition television, video-on-demand,
Internet access services, and both circuit-switched and IP-based voice
services. As a result, the relative burden of the first option set
forth above on cable operators today would be far less of a burden than
was the analog mandate upheld by the Supreme Court in Turner II.
58. The Supreme Court foresaw in 1994 that ``rapid advances in
fiber optics and digital compression technology'' might one day result
in ``no practical limitation on the numbers of speakers that may use
the cable medium.'' And today, we have every reason to expect that
cable capacity will continue to expand in future years, thus further
decreasing the relative burden on cable operators. Cable operators
continue to develop ways to use their available capacity more
efficiently. For example, cable operators, in order to keep pace with
their competitors, are beginning to deploy ``switched digital''
capability in their networks. In a switched digital environment, a
channel is transmitted via coaxial cable to a subscriber's premises
only when the subscriber tunes to that channel. Time Warner already has
deployed switched digital in three cities. Time Warner has said that
switched digital gives cable operators the means of adding channels and
never running out of capacity. Moreover, because digital cable systems
offer so much more capacity, the proportion of overall bandwidth
devoted to must-carry signals is that much smaller than was the case at
the time of the Turner decisions. For example, NAB and MSTV explain
that 18 basic analog channels, which includes all must-carry stations,
represent about 4.2 percent of the total number of channels and about
6.8 percent of the total downstream spectrum of a typical cable system
today. In 1993, by contrast, the same number of channels represented 33
percent of the capacity of a ``high capacity'' cable system. We believe
that the typical cable operator electing to down-convert digital
signals will devote significantly less than one-third of its channel
capacity to local broadcasters, the cap that was upheld in Turner II.
59. We also conclude that the relative burden on speech of
downconversion is outweighed by the benefits. Unless we act,
subscribers of cable systems that choose not to operate ``all-digital
systems'' will suffer both the loss of local broadcasts and confusion
over that loss, and non-MVPD consumers risk deterioration, if not loss,
of over-the-air broadcasting options. Preserving local television
broadcasting will help these consumers more than a downconversion
obligation will hurt cable operators, particularly given that
downconversion is necessary only until cable operators complete the
transition to all-digital systems. We also reject Time Warner's
contention that a downconversion requirement burdens more speech than
is necessary because the governmental interests at issue can be
promoted in a less burdensome manner--namely by providing digital set-
top boxes to subscribers. Time Warner's objection proves too much, of
course, for we have provided cable operators with precisely that
choice: they may avoid analog downconversion by converting to all-
digital systems, including by providing their subscribers with set-top
boxes. Also, to the extent that cable operators do not take the
necessary steps to ensure that the digital signals of must-carry
stations can be viewed by all subscribers, the carriage of analog
signals is necessary to advance the governmental interests identified
above. Although we conclude that downconversion is in fact necessary to
advance important governmental interests, we note that a regulation is
not invalid under the intermediate scrutiny analysis even if the
government's interest might be adequately served by some less-
restrictive alternative. Finally, we note that the cable operators'
arguments about the burdens of downconversion are undercut by their
admission that they might down-convert on a purely voluntary basis. For
all these reasons, we find that analog-down conversion does not burden
``substantially more speech'' than is necessary and, therefore, this
option does not violate the First Amendment.
60. We also conclude that the ``all-digital'' option does not
burden ``substantially more speech than necessary'' to further the
important governmental interests discussed above. Indeed, this option
imposes less of a burden on speech than the must-carry regulations
upheld in Turner II. The transmission of digital signals requires far
less bandwidth than that required for analog signals, so cable
companies transmitting signals, including must-carry signals, in
digital rather than analog will gain bandwidth. In addition, while
cable operators complain that transitioning to ``all-digital systems''
will impose an onerous burden on them and therefore does not represent
a meaningful choice, we reject those arguments for the reasons
discussed above.
61. We conclude, therefore, that both analog downconversion and the
``digital-only'' options are consistent with the First Amendment on a
stand-alone basis. By offering cable operators the flexibility to
choose, based on their particular circumstances, either option to
fulfill their must-carry obligations, moreover, we have minimized the
burden imposed on any particular cable operator.
2. The Viewability Requirements Are Consistent With the Fifth Amendment
62. In addition to the First Amendment issue, some parties contend
that requiring downconversion of digital must-carry signals constitutes
a taking of property without just compensation in violation of the
Fifth Amendment. To begin with, as discussed above, we provide cable
operators here with two options for complying with the statutory
viewability requirement and do not mandate the downconversion of
digital signals. But in any event, for the reasons stated below, we
also conclude that requiring cable operators to down-convert the
digital must-carry signals so that they are viewable by their
subscribers with analog televisions would present no problems under the
Fifth Amendment.
63. The ``takings'' clause of the Fifth Amendment provides: ``[N]or
shall private property be taken for public use, without just
compensation.'' In general, there are two types of Fifth Amendment
takings: ``per se'' takings and ``regulatory'' takings. Government
authorization of a permanent physical occupation of property
constitutes a per
[[Page 6053]]
se taking. A permanent physical occupation of property is a taking
without regard to the public interest that it may serve, the size of
the occupation, or the economic impact on the property owner. NAB has
argued elsewhere that must carry regulation cannot constitute a per se
taking because no physical property is involved; rather the
``property'' taken consists of electronic bits. Moreover, we agree that
the downconversion obligation does not affect the takings analysis. As
NAB states:
If requiring cable operators to carry channels of broadcast signals
indeed takes `private property for public use' without compensation,
then the requirement is unconstitutional regardless of whether the
cable companies must accommodate one, five, or one hundred channels.
64. Applying the above framework to the issue here, we believe that
a court would find that a per se takings analysis would not apply. The
Supreme Court has advised that a per se taking is ``relatively rare and
easily identified,'' and this is not one of those rare and easily
identifiable instances. Mandatory carriage regulation effectuates no
permanent physical occupation of a cable operator's property, such as
the installation of physical equipment that was at issue in Loretto v.
Teleprompter Manhattan CATV Corp. Rather, multiple programming streams
are simply transmitted in bits of data over cable bandwidth through
electrons or photons at the speed of light while the cable operator
retains complete control over its physical property (i.e., headend
equipment). Courts have consistently rejected attempts to apply the
concept of permanent physical occupation to the technological realm,
and we believe these decisions to be consistent with the Supreme
Court's admonition that a permanent physical occupation of property is
easily identified and, where found, ``presents relatively few problems
of proof.''
65. We therefore turn to whether requiring downconversion of
digital must-carry signals would constitute a regulatory taking. An
allegation that a regulation is so onerous as to constitute a
regulatory taking is analyzed under the multi-factor inquiry set forth
by the Supreme Court in Penn Central Transportation Co. v. City of New
York. A court will examine the following factors identified in Penn
Central to determine whether a regulatory taking has occurred: (1) The
character of the governmental action; (2) its economic impact; and (3)
its interference with reasonable investment-backed expectations.
Applying this test here, we easily conclude that requiring
downconversion of digital signals does not effectuate a regulatory
taking.
66. First, looking at the character of the governmental action at
issue here, we believe it to be a quite modest attempt to ``adjust the
benefits and burdens of economic life to promote the common good.'' As
explained above, requiring downconversion of digital must-carry signals
will likely impose only a modest burden on a cable operator's system as
a whole and will materially advance the government's important
interests in preserving over-the-air broadcasting, promoting the
widespread dissemination of information from a multiplicity of sources,
and minimizing any adverse consumer impacts associated with the DTV
transition. Moreover, it is critical to recognize that the government
action here involves what traditionally has been and remains a heavily
regulated industry.
67. Second, there is no evidence in the record that the economic
impact on cable operators of requiring downconversion will cause
significant harm. As we explain above, mandatory carriage of analog
signals accounts for only a small percentage of the total number of
cable channels and total spectrum capacity. As cable operators continue
to convert to digital programming, must-carry signals will impose a
decreasing relative capacity burden. Given that the cable channels
devoted to the mandatory carriage of commercial broadcast signals is
capped at one-third of the cable system's usable capacity and in
practice is likely to be significantly less than one-third, we find the
economic burden on cable operators to be modest.
68. Third, there is no evidence in the record that requiring
downconversion will interfere with reasonable investment-backed
expectations. Based upon the statutory cap for commercial stations and
the numerical limit for non-commercial stations, cable operators should
reasonably expect to devote up to one-third of their capacity to
carriage of local broadcast stations. Requiring downconversion of
digital must-carry signals does not change this limit. Finally, cable
operators should have reasonably expected that they would be required
to comply with the statutory viewability mandate after the digital
transition. For all of these reasons, we conclude that requiring
downconversion does not interfere with reasonable investment-backed
expectations.
69. We do not find evidence or persuasive argument in the record
that requiring downconversion transforms must-carry regulation into a
per se taking or a regulatory taking.
D. Other Issues
70. In its comments, United Communications Corporation made an
argument for a revision of the Must Carry rules generally, to increase
the carriage rights of low power stations, particularly Class A
stations that serve as local network affiliates. Ensuring the continued
viability of low power broadcasters is a major concern of the
Commission; these proposals, however, are beyond the scope of the
current proceeding. We will consider whether there is some alternative
or future proceeding in which they could be more fully addressed.
71. Given the statutory directive to treat OVS operators like cable
operators with regard to broadcast signal carriage, we find that OVS
operators must carry digital-only television stations pursuant to
section 76.1506 of the Commission's Rules. Thus, OVS operators must
comply with all requirements set forth in this Third Report and Order.
Section 653(c)(1) of the Act provides that any provision that applies
to cable operators under sections 614, 615, and 325 shall apply to open
video system operators certified by the Commission. Section
653(c)(2)(A) provides that, in applying these provisions to open video
system operators, the Commission ``shall, to the extent possible,
impose obligations that are no greater or lesser'' than the obligations
imposed on cable operators. The Commission, in implementing the
statutory language, held that there are no public policy reasons to
justify treating an open video system operator differently from a cable
operator in the same local market for purposes of broadcast signal
carriage. Thus, OVS operators generally have the same requirements for
the carriage of local television stations as do cable operators except
that these entities are under no obligation to place television
stations on a basic service tier. OVS operators are also obligated to
abide by section 325 and the Commission's Rules implementing
retransmission consent. We note that section 76.1506(e) specifically
emphasizes the mandate to make must-carry signals viewable, and
reiterates that the requirements established in this Third Report and
Order apply equally to cable operators and OVS operators.
E. Conclusion
For the reasons discussed above, we adopt these rules with respect
to material degradation and viewability. A number of detailed issues
must be addressed now that the broad
[[Page 6054]]
framework of rules has been established. We believe it is appropriate
to provide stakeholders and the public with an opportunity to weigh in
on these matters; therefore the Third Further Notice seeks comment on
some specific applications of these general rules.
II. Procedural Matters
A. Third Report and Order
1. Final Regulatory Flexibility Analysis
72. As required by the Regulatory Flexibility Act of 1980
(``RFA''), the Commission has prepared a Final Regulatory Flexibility
Analysis (``FRFA'') relating to this Third Report and Order. The FRFA
is set forth in Appendix A of the order.
2. Final Paperwork Reduction Act Analysis
73. This Third Report and Order contains modified information
collection requirements subject to the Paperwork Reduction Act of 1995
(``PRA''), Public Law 104-13. The modified information collection
requirements relate solely to Office of Management and Budget (``OMB'')
Control No. 3060-0647, the Commission's Annual Cable Price Survey. They
will be submitted to OMB for review under section 3507(d) of the PRA.
OMB, the general public, and other Federal agencies will be invited to
comment on the modified information collection requirements contained
in this proceeding. The Commission will publish a separate Federal
Register Notice at a later date seeking these PRA comments from the
public. In addition, we note that pursuant to the Small Business
Paperwork Relief Act of 2002, Public Law 107-198, see 44 U.S.C.
3506(c)(4), we have considered how the Commission might ``further
reduce the information collection burden for small business concerns
with fewer than 25 employees.'' We find that the modified requirements
must apply fully to small entities (as well as to others) to protect
consumers and further other goals, as described in the Order.
3. Congressional Review Act
74. The Commission will send a copy of this Third Report and Order
in a report to be sent to Congress and the Government Accountability
Office, pursuant to the Congressional Review Act.
III. Ordering Clauses
75. It is ordered that, pursuant to the authority contained in
sections 4, 303, 614, and 615 of the Communications Act of 1934, as
amended, 47 U.S.C. 154, 303, 534, and 535, this Third Report and Order
and Third Further Notice of Proposed Rule Making is adopted and the
Commission's Rules are hereby amended as set forth in Appendix C of the
order.
76. It is further ordered that this Third Report and Order and the
rules in Appendix C are adopted and shall be effective March 3, 2008.
The modified information collection requirements concerning the Annual
Cable Price Survey will become effective upon approval by the Office of
Management and Budget and our publication in the Federal Register of a
notice announcing the effective date of the modified requirements.
77. It is further ordered that the Commission's Consumer and
Governmental Affairs Bureau, Reference Information Center, shall send a
copy of this Third Report and Order and Third Further Notice of
Proposed Rule Making, including the Initial and Final Regulatory
Flexibility Analyses, to the Chief Counsel for Advocacy of the Small
Business Administration.
78. It is further ordered that the Commission shall send a copy of
this Third Report and Order and Third Further Notice of Proposed Rule
Making in a report to be sent to Congress and the Government
Accountability Office pursuant to the Congressional Review Act, see
5U.S.C. 801(a)(1)(A).
List of Subjects in 47 CFR Part 76
Cable television.
Federal Communications Commission.
Marlene H. Dortch,
Secretary.
Final Rules
0
For the reasons discussed in the preamble, the Federal Communications
Commission amends 47 CFR part 76 as follows:
PART 76--MULTICHANNEL VIDEO AND CABLE TELEVISION SERVICE
0
1. The authority citation for part 76 continues to read as follows:
Authority: 47 U.S.C. 151, 152, 153, 154, 301, 302, 303, 303a,
307, 308, 309, 312, 315, 317, 325, 336, 338, 339, 503, 521, 522,
531, 532, 533, 534, 535, 536, 537, 543, 544, 544a, 545, 548, 549,
552, 554, 556, 558, 560, 561, 571, 572, 573.
0
2. Section 76.56 is amended by adding paragraphs (d)(3), (d)(4), (d)(5)
and paragraph (f) to read as follows:
Sec. 76.56 Signal carriage obligations.
* * * * *
(d) * * *
(3) The viewability and availability requirements of this section
require that, after the broadcast television transition from analog to
digital service for full power television stations cable operators must
either:
(i) Carry the signals of commercial and non-commercial must-carry
stations in analog format to all analog cable subscribers, or
(ii) For all-digital systems, carry those signals in digital
format, provided that all subscribers, including those with analog
television sets, that are connected to a cable system by a cable
operator or for which the cable operator provides a connection have the
necessary equipment to view the broadcast content.
(4) Any costs incurred by a cable operator in downconverting or
carrying alternative-format versions of signals under Sec.
76.56(d)(3)(i) or (ii) shall be the responsibility of the cable
operator.
(5) The requirements set forth in paragraph (d)(3) of this section
shall cease to be effective three years from the date on which all
full-power television stations cease broadcasting analog signals,
unless the Commission extends the requirements in a proceeding to be
conducted during the year preceding such date.
* * * * *
(f) Calculation of Broadcast Signals Carried. When calculating the
portion of a cable system devoted to carriage of local commercial
television stations under paragraph (b) of this section, a cable
operator may count the primary video and program-related signals of all
such stations, and any alternative-format versions of those signals,
that they carry.
0
3. Section 76.62 is amended by revising paragraph (b) and adding
paragraph (h) to read as follows:
Sec. 76.62 Manner of carriage.
* * * * *
(b) Each digital television broadcast signal carried shall be
carried without material degradation. Each analog television broadcast
signal carried shall be carried without material degradation and in
compliance with technical standards set forth in subpart K of this
part.
* * * * *
(h) If a digital television broadcast signal is carried in
accordance with Sec. 76.62(b) and either (c) or (d), the carriage of
that signal in additional formats does not constitute material
degradation.
[FR Doc. E8-1915 Filed 1-31-08; 8:45 am]
BILLING CODE 6712-01-P