Cable Television Relay Service

AGENCY:

Federal Communications Commission.

ACTION:

Final rule.

SUMMARY:

The Commission amends its rules to expand eligibility for licenses in the Cable Television Relay Service (CARS) to all Multichannel Video Programming Distributors (“MVPDs”). This action will enhance opportunities for additional competition to incumbent cable operators. It will increase the number of frequencies available to more MVPDs and treat all MVPDs equally for access to microwave frequencies. Thus, all MVPDs will have the opportunity to use CARS frequencies to support their delivery of video services in a balanced competitive environment.

DATES:

Effective July 29, 2002, except for § 78.13(f), which contains information collection requirements that have not been approved by OMB. The Federal Communications Commission will publish a document in the Federal Register announcing the effective date.

FOR FURTHER INFORMATION CONTACT:

Wayne T. McKee, 202-418-2355, or John P. Wong, 202-418-7012. For additional information concerning the information collection(s) contained in this document, contact Judith B. Herman at 202-418-0214, or via the Internet at jboley@fcc.gov.

SUPPLEMENTARY INFORMATION:

This is a summary of the Commission's Report and Order (R&O) in CS Docket No. 99-250; FCC 02-149, adopted May 21, 2002, and released May 21, 2002. The complete text of this R&O is available for inspection and copying during normal business hours in the FCC Reference Information Center, Courtyard Level, 445 12th Street, SW., Washington, DC, and also may be purchased from the Commission's copy contractor, Qualex International, Portals II, 445 12th Street, SW., Room CY-B402, Washington, DC 20554, telephone 202-863-2893, facsimile 202-863-2898, or via e-mail at qualexint@aol.com. Alternative formats (computer diskette, large print, audio cassettes, and Braille) are available to persons with disabilities by contacting Brian Millin at 202-418-7426, TTY 202-418-7365, or at bmillin @fcc.gov. In addition to filing comments with the Office of the Secretary, a copy of any comments on the information collection(s) contained herein should be submitted to Judith B. Herman, Federal Communications Commission, Room 1-C804, 445 12th Street, SW, Washington, DC 20554, or via the Internet to jboley@fcc.gov.

The Notice of Proposed Rule Making (NPRM) in this proceeding may be found at 64 FR 41899, August 2, 1999.

Synopsis of the Report and Order

All Multichannel Video Programming Distributors (MVPDs) will now be eligible for licenses to operate microwave facilities in the Cable Television Relay Service (CARS). Currently, franchised cable systems and wireless cable systems are eligible for CARS licenses, but private cable operators (PCOs), Direct Broadcast Satellite (DBS), Open Video Systems (OVS) and others are not. This action enhances opportunities for additional competition to incumbent cable operators by making MVPDs eligible to use all CARS frequencies, including frequencies in the 12 GHz CARS band (12.70 to 13.20 GHz). It also increases the number of frequencies available to PCOs and other MVPDs for video programming distribution in the 18 GHz band (17.70 to 18.58 GHz), in addition to those on which they may currently operate under part 101 of the Commission's rules. Thus, all MVPDs will have the opportunity to use CARS frequencies to provide video services in a balanced competitive environment in which all MVPDs share microwave spectrum.

CARS licensees may now use the frequency band segment from 13.20 to 13.25 GHz for delivery of video programming on a secondary basis. CARS license applicants need no longer apply for waivers for minor variations in the frequency of channels. They may apply for the usual channel changes as an alternate channel regime. A frequency coordinator suggested that CARS should use the same frequency coordination procedures as other services that share these frequencies; this suggestion is adopted.

Paperwork Reduction Act

This Report and Order contains a modified information collection. The Commission, as part of its continuing effort to reduce paperwork burdens, invites the general public to comment on the information collection(s) contained in this Report and Order as required by the Paperwork Reduction Act of 1995, Public Law 104-13. Public and agency comments are due August 26, 2002.

Final Regulatory Flexibility Analysis

As required by the Regulatory Flexibility Act (“RFA”), an Initial Regulatory Flexibility Analysis (“IRFA”) was incorporated in the Notice of Proposed Rulemaking (“NPRM”) in CS Docket No. 99-250, FCC 99-166. The Commission sought written public comment on the proposals in the NPRM, including comment on the IRFA. This Final Regulatory Flexibility Analysis (“FRFA”) conforms to the RFA.

A. Need for, and Objectives of, this Report and Order

The Commission undertook this proceeding in response to a petition for rulemaking filed by OpTel, Inc. The NPRM sought comment on OpTel's request that we expand the definition of entities eligible to use the 12 GHz Cable Television Relay Service (“CARS”) frequency band to include private cable operators (“PCOs”). CARS is a microwave radio service used predominantly by cable systems to provide video links between portions of their systems. PCOs provide a video service similar to cable systems, for example, to apartment buildings, but PCOs do not use public rights-of-way. By its own motion, the Commission expanded the NPRM to include other multichannel video programming distributors (“MVPDs”). MVPDs are anyone who provides multiple channels of video programming to subscribers. This Report and Order adopts rules which will increase competition to incumbent, franchised cable operators, particularly with regard to video programming service to multi-dwelling units, by expanding eligibility to use the CARS band to PCOs and other MVPDs, such as direct broadcast satellite (“DBS”) and open video systems (“OVS”). This Report and Order promotes competition in multichannel video programming distribution by allowing new services to compete with existing services by giving those new services access to the same technologies as existing services while balancing the interests of incumbent distributors by not hampering their use of those technologies.

B. Summary of Significant Issues Raised by Public Comments in Response to IRFA

We received one comment in direct response to the IRFA. The Society of Broadcast Engineers (“SBE”) states that the Commission analysis in the IRFA of the impact on small entities did not include the needs for production spectrum of television broadcasters and Local Television Transmission Service (“LTTS”). Although the IRFA did not specifically mention broadcasters or LTTS providers, the Commission did request comment concerning the impact on small businesses, small organizations, and small business concerns. In addition, the NPRM requested comment on “the compatibility of shared use of the spectrum between fixed PCOs and mobile [broadcast auxiliary stations]” and on “any existing or future impact this sharing may have with BAS, especially as it relates to the required digital transition for broadcasters.” SBE and others discussed this specific issue in their comments. Briefly, SBE opposes use of the spectrum from 13.20 GHz to 13.25 GHz by PCOs as proposed by the PCOs. The Order addresses and pays all due deference to the concerns and issues raised. The PCOs are allocated the spectrum only as secondary users of the spectrum from 13.20 GHz to 13.25 GHz, which means they cannot cause interference to television broadcasters or LTTS providers.

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

The RFA directs the Commission to provide a description of and, where feasible, an estimate of the number of small entities that will be affected by the rules adopted herein. The RFA defines the term “small entity” as having the same meaning as the terms “small business,” “small organization,” and “small governmental jurisdiction” under section 3 of the Small Business Act. 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”). A small organization is generally “any not-for-profit enterprise which is independently owned and operated and is not dominant in its field.” Nationwide, as of 1992, there were approximately 275,801 small organizations. “Small government jurisdiction” generally means “governments of cities, counties, towns, townships, villages, school districts, or special districts, with a population of less than 50,000.” As of 1992, there were approximately 85,006 governmental entities in the United States. This number includes 38,978 counties, cities, and towns: of these, 37,566, or 96%, have populations of fewer than 50,000. The Census Bureau estimates that this ratio is approximately accurate for all governmental entities. Thus, of the 85,006 governmental entities, we estimate that 81,600 (96%) are small entities. Below, we further describe and estimate the number of small entity licensees and regulatees that may be affected by these rules.

The rules we adopt as a result of the Report and Order will add PCOs and other MVPDs to those entities eligible to use the 12 GHz CARS frequency band. The 12 GHz CARS frequency band, 12.70 GHz-13.25 GHz, is currently used by franchised cable, licensees and conditional licensees of channels in the Multipoint Distribution Service (“MDS”), Multichannel, Multipoint Distribution Service (“MMDS”), and Instructional Television Fixed Services (“ITFS”). The 12 GHz CARS spectrum, 12 GHz-12.35 GHz, is also used by television broadcasters for both fixed and short-range mobile transmissions by Broadcast Auxiliary Stations (“BAS”).

Small MVPDs. SBA has developed a definition of small entities for cable and other pay television services, which includes such companies generating $11 million or less in annual receipts. This definition includes cable system operators, closed circuit television services, direct broadcast satellite services, multipoint distribution systems, satellite master antenna systems, and subscription television services. According to the Census Bureau, there were 1,423 such cable and other pay television services generating less than $11 million in revenue. We address below services individually to provide a more precise estimate of small entities.

The Commission has developed, with SBA's approval, its own definition of a small cable system operator for the purposes of rate regulation. Under the Commission's rules, a “small cable company” is one serving fewer than 400,000 subscribers nationwide. Based on our most recent information, we estimate that there were 1439 cable operators that qualified as small cable companies at the end of 1995. Since then, some of those companies may have grown to serve over 400,000 subscribers, and others may have been involved in transactions that caused them to be combined with other cable operators. The Commission's rules define a “small system,” for the purposes of rate regulation, as a cable system with 15,000 or fewer subscribers. The Commission does not request nor does the Commission collect information concerning cable systems serving 15,000 or fewer subscribers and thus is unable to estimate, at this time, the number of small cable systems nationwide.

The Communications Act also contains a definition of a small cable system operator, which is “a cable operator that, directly of through an affiliate, serves in the aggregate fewer than 1% of all subscribers in the United States and is not affiliated with any entity or entities whose gross annual revenues in the aggregate exceed $250,000,000.” The Commission has determined that there are 61,700,000 subscribers in the United States. Therefore, a cable operator serving fewer than 617,000 subscribers shall be deemed a small operator, if its annual revenues, when combined with the total annual revenues of all of its affiliates, do not exceed $250 million in the aggregate. Based on available data, we find that the number of cable operators serving 617,000 subscribers or less totals approximately 1450. Although it seems certain that some of these cable system operators are affiliated with entities whose gross annual revenues exceed $250,000,000, we are unable at this time to estimate with greater precision the number of cable system operators that would qualify as small cable operators under definition in the Communications Act. It should be further noted that recent industry estimates project that there will be a total of 64,000,000 subscribers and we have based our fee revenue estimates on that figure.

Private Cable Operators/Satellite Master Antenna Systems. Based on our most recent information, we estimate that there are 3400 private cable operators serving multiple dwelling units that qualify as small cable companies. Some of those companies may have grown to serve from 800,000 to 1.6 million subscribers, and others may have been involved in transactions that caused them to be combined with other cable operators. Consequently, we estimate that there are fewer than 3,400 small entity private cable system operators that may be affected by the decisions and rules we are adopting.

Open Video System (“OVS”). The Commission has certified eleven OVS operators. Of these eleven, only two are providing service. Affiliates of residential Communications Network, Inc. (“RCN”) received approval to operate OVS systems in New York City, Boston, Washington, D.C., and other areas. RCN has sufficient revenues to assure us that they do not qualify as small business entities. Little financial information is available for the other entities authorized to provide OVS service that are not yet operational. Given that other entities have been authorized to provide OVS service but have not yet begun to generate revenues, we conclude that at least some of the OVS operators qualify as small entities.

Multichannel, Multipoint Distribution Service (“MMDS”). The Commission refined the definition of “small entity” for the auction of MMDS as an entity that, together with its affiliates, has average gross revenues that are not more than $40 million for the proceeding three calendar years. This definition of a small entity, in the context of the Commission's decision concerning MMDS auctions, has been approved by the SBA. The Commission completed its MMDS auction in March 1996 for authorization in 493 basic trading areas (“BTAs”). Of the 67 winning bidders, 61 qualified as small entities. Five winners indicated that they were minority-owned and four winners indicated that they were women-owned businesses. MMDS is an especially competitive service, with approximately 1573 previously authorized and proposed MMDS facilities. Information available to us indicates that no MMDS facility generates revenue in excess of $11 million annually. We conclude that there are approximately 1634 small MMDS providers as defined by the SBA and the Commission's auction rules.

D. Description of Projected Reporting, Record Keeping And other Compliance Requirements

This Report and Order makes an additional class that will be eligible for CARS licenses. As such, they will be subject to the reporting, record keeping, and other compliance requirements of CARS. These newly eligible entities will be required to file an application, FCC Form 327, to obtain a license and to modify or renew that license. They will also be required to maintain certain station records related to maintenance of the technical parameters of the station, as specified in § 78.69 of the Commission's rules.

E. Steps Taken To Minimize the Impact on Small Entities, and Significant Alternatives Considered

The RFA requires an agency to describe any significant alternatives that it has considered in developing its approach, 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 and reporting requirements under the rule for such 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 such small entities.”

This Report and Order creates opportunities for small entities, such as PCOs and other MVPDs, to compete with incumbent providers of video programming in the 12 GHz CARS frequency band. The Commission's decision will allow new entrants, many of whom are deemed to be small entities, to have access to the 12 GHz CARS frequency band on an equal basis with franchised cable operators and other users. No significant alternatives were considered other than to examine whether the options currently available to the entities currently not eligible for CARS licenses are adequate for their needs. These options are use of 18 GHz frequencies or 23 GHz frequencies under part 101 of the Commission's rules. In the Order, the Commission has decided that because the 12 GHz CARS band provides greater range at a reduced cost, that the petitioning PCOs should be given the relief requested. On its own motion, the Commission extended the eligibility to use the 12 GHz CARS band to all MVPDs. Further, the Commission made these entities eligible to use all CARS frequencies, rather than just the 12 GHz band. This will eliminate a significant barrier to entry into the MVPD market for small entities and will lessen the cost of expansion for others. Small entities, from a regulatory standpoint, will now be on a par with wireless cable operators and, in this sense, with cable systems.

Report to Congress. We will send a copy of this Report and Order, including this FRFA, in a report to Congress pursuant to the Congressional Review Act of 1996, 5 U.S.C. 801(a)(1)(A). A copy of this report and Order and FRFA (or summary thereof) will also be published in the Federal Register, pursuant to 5 U.S.C. 604(b), and will be sent to the Chief Counsel for Advocacy of the Small Business Administration.

Ordering Clauses

Accordingly, IT IS ORDERED that, pursuant to authority found in sections 4(i)-(j) of the Communications Act of 1934, as amended, 47 U.S.C. 154(i)-(j), 303(c), (f), and (r), and 309(j), the Commission's rules ARE AMENDED as set forth in this Order.

IT IS FURTHER ORDERED that the amendments to §§ 78.18 and 78.36 of the Commission's rules WILL BECOME EFFECTIVE July 29, 2002. The action contained herein has been analyzed with respect to the Paperwork Reduction Act of 1995 and found to impose new or modified reporting or record keeping requirements or burdens on the public. Implementation of these new or modified reporting or record keeping requirements will be subject to approval by the Office of Management and Budget (OMB) as prescribed by the Paperwork Reduction Act. Consequently, amendments to § 78.13 of the Commission's rules WILL NOT BECOME EFFECTIVE until OMB approval of the modified reporting or record keeping requirements.

IT IS FURTHER ORDERED that the Consumer and Governmental Affairs Bureau, Reference Information Center, SHALL SEND a copy of this Report and Order, including the Final Regulatory Flexibility Analysis, to the Chief Counsel for Advocacy of the Small Business Administration.

List of Subjects in 47 CFR Part 78

• Cable television
• Communications equipment
• Radio
• Reporting and recordkeeping requirements

Rule Changes

For the reasons discussed in the preamble, the Federal Communications Commission amends 47 CFR part 78 as follows:

PART 78—CABLE TELEVISION RELAY SERVICE

1. The authority for part 78 continues to read as follows:

Authority: Secs. 2, 3, 4, 301, 303, 307, 308, 309, 48 Stat., as amended, 1064, 1065, 1066, 1081, 1082, 1083, 1084, 1085; 47 U.S.C. 152, 153, 154, 301, 303, 307, 308, 309.

2. In § 78.13, add paragraph (f) to read as follows:

3. In § 78.18, revise the tables in paragraph (a)(2) and add paragraph (m) to read as follows:

(m) CARS stations may be authorized use of the band from 13.20 to 13.25 GHz on a secondary basis to Television Broadcast Auxiliary Stations. Any CARS application seeking authorization for use of the 13.20 to 13.25 GHz band must demonstrate that the applicant has exhausted all spectrum available to it in the 12.70 to 13.20 GHz band. Applications for use of this band must specify whether the channels are 6 MHz, 12.5 MHz, or 25 MHz wide and give the upper and lower boundaries and the polarization for each channel.

4. Revise § 78.36 to read as follows: