265

stations with fewer than five full-time employees are exempted from certain EEO reporting and recordkeeping requirements." We estimate that the total number of commercial television stations with 4 or fewer employees is 132 and that the total number of noncommercial educational television stations with 4 or fewer employees is 136.266

IV. Projected Compliance Requirements of the Rule:

The Fifth Report and Order adopts a number of rules, procedures, and policies, most of which are not expected to involve the imposition of new compliance requirements upon licensees or other entities. These include the rules: (1) providing 6 MHz channels for each DTV channel; (2) limiting the initial eligibility for DTV channels to existing full-power broadcasters; (3) requiring licensees to provide at least one free digital video programming service that is at least comparable in resolution to today's service and aired during the same time periods that their analog channel is broadcasting; (4) allowing broadcasters full flexibility to respond to the demands of their audience by providing ancillary and supplementary services that do not derogate the mandated free, over-the-air program service; (5) giving broadcasters the discretion as to how much, if any, high definition television programming they will transmit; (6) refraining from imposing a simulcasting requirement upon broadcasters until the final years of the transition; (7) licensing NTSC and DTV television facilities under a single, paired license; (8) stating the Commission's intent to give special relief to noncommercial broadcasters to assist their transition to DTV, including providing them six years within which to construct DTV facilities; (9) allowing equipment manufacturers at this time maximum latitude to determine which video formats DTV equipment will receive, since broadcasters will have the latitude to decide which video formats they will transmit based on market and consumer demand; (10) postponing a decision whether to impose labeling requirements on receiver manufacturers; and (11) declining to limit the sale of NTSC-only display devices in the future.

Enhancement Act of 1992, Pub. L. No. 102-366, § 222(b)(1), 106 Stat. 999 (1992), as further amended by the Small Business Administration Reauthorization and Amendments Act of 1994, Pub. L. No. 103-403, § 301, 108 Stat. 4187 (1994). However, this definition was adopted after public notice and an opportunity for comment. See Report and Order in Docket No. 18244, 23 FCC 2d 430 (1970).

265 See, e.g., 47 C.F.R. § 73.3612 (Requirement to file annual employment reports on Form 395-B applies to licensees with five or more full-time employees); First Report and Order in Docket No. 21474 (In the Matter of Amendment of Broadcast Equal Employment Opportunity Rules and FCC Form 395), 70 FCC 2d 1466 (1979). The Commission is currently considering how to decrease the administrative burdens imposed by the EEO rule on small stations while maintaining the effectiveness of our broadcast EEO enforcement. Order and Notice of Proposed Rule Making in MM Docket No. 96-16 (In the Matter of Streamlining Broadcast EEO Rule and Policies, Vacating the EEO Forfeiture Policy Statement and Amending Section 1.80 of the Commission's Rules to Include EEO Forfeiture Guidelines), 11 FCC Rcd 5154 (1996). One option under consideration is whether to define a small station for purposes of affording such relief as one with ten or fewer full-time employees. Id. at ¶ 21.

266

We base this estimate on a compilation of 1995 Broadcast Station Annual Employment Reports (FCC Form 395-B), performed by staff of the Equal Opportunity Employment Branch, Mass Media Bureau, FCC.

We do expect that three of the rules we adopt today may constitute significant compliance requirements on small entities, as well as on others. First, pursuant to the rule setting a timetable for applying for and constructing DTV facilities, all licensees will have 90 days after the release date of the DTV Table of Allotments to inform the Commission if they do not want a DTV channel. After that, there will be three categories of construction requirements for commercial television stations. In the first category, all network-affiliated stations in the top ten television markets2 267 will have until May 1, 1999, to construct their digital facilities. In the second category, all network-affiliated stations in the top 30 television markets not included above will have until November 1, 1999, to construct their digital facilities. In the third category, all other commercial stations will have until May 1, 2002, to construct their DTV facilities. All noncommercial stations will have until May 1, 2003, to construct their DTV facilities. We will ask that those stations that have represented to the Commission that they will complete construction of the DTV facility by November 1, 1998, file reports at six-month intervals, beginning on November 1, 1997, stating that their plans to meet these deadlines are on schedule or specifying any difficulties encountered in attempting to meet these deadlines. We will grant an extension of time where a broadcaster has been unable to complete construction due to circumstances that are either unforeseeable or beyond the licensee's control where the licensee has taken all possible steps to resolve the problem expeditiously.

reasons.

We believe that an aggressive construction schedule will not burden small entities for several First, most stations in the largest television markets can be expected to lead the transition to DTV, since these stations are better situated to invest the capital necessary to establish the first DTV stations. Second, smaller stations will find it easier to begin DTV service after learning from the experience gained by the top market stations. Third, our staggered construction schedule will help keep costs lower for smaller market stations, as equipment costs decrease as the market matures. Finally, our tiered approach allows us to ensure that DTV quickly reaches a large percentage of U.S. television households while placing requirements on a relatively small number of stations.

The second rule with compliance requirements, that setting a deadline of 2006 for broadcasters to complete their transition to DTV by surrendering their NTSC spectrum, also affects small entities, as well as others. However, because stations will have constructed their DTV facilities by that time, pursuant to the timetable mentioned above, the compliance requirement is simply to cease transmitting NTSC signals.

The third rule with compliance requirements, that setting a graduated simulcast requirement for the last three years of the transition, also affects small entities, as well as others. However, because of the gradual nature of the requirement, as well as the multichannel capabilities of DTV,

267

For the purposes of the construction schedule, a network-affiliated station is one that operates as an affiliate of CBS, NBC, ABC, or Fox, as of April 3, 1997, the adoption date of this Report and Order. "Television markets" are defined as the Designated Market Areas, or DMA, as defined by Nielsen Media Research. In those DMAs in which a network has more than one network affiliate, only the affiliate with the largest audience share will be considered as "network-affiliated" for the purposes of the digital television construction schedule.

small entities are not expected to find it difficult to comply.

V. Significant Alternatives Considered Minimizing the Economic Impact on Small Entities and Consistent with the Stated Objectives:

i

The Fifth Report and Order adopts rule providing 6 MHz channels for each DTV channel. This represents the optimum balance of broadcast needs and spectrum efficiency, and it is consistent with the DTV Standard adopted in the Fourth Report and Order. To specify a different channel size at this late date would not promote the goals we sought to achieve in adopting the DTV Standard and would prolong the conversion to DTV, thereby putting broadcasters at a competitive disadvantage to other digital video program providers.

The Fifth Report and Order also adopts a rule limiting the initial eligibility for DTV channels to existing full-power broadcasters, consistent with the statutory directive to do so contained in the Telecommunications Act of 1996. This minimizes the chances that small entities that already have full-service NTSC licenses or construction permits will be forced to surrender them. However, low power television broadcasters, many of which are small entities, would not automatically be eligible for DTV channels. While LPTV commenters urge the inclusion of LPTV stations in the conversion to digital television, some urge us not to afford them a second 6 MHz channel, as this would be costly and disruptive to them. In proposing a DTV Table of Allotments in the Sixth Further Notice in this proceeding, we stated that in order to provide DTV allotments for existing full service stations, it will be necessary to displace LPTV stations and TV translator stations to some degree, especially in major markets. In the Sixth Further Notice, we also issued a number of proposals to mitigate the impact on LPTV stations. In the Sixth Report and Order establishing a DTV Table of Allotments, which is a companion document adopted concurrently with the present Fifth Report and Order, we adopt a number of measures intended to minimize the impact of DTV implementation on LPTV service.

The Fifth Report and Order also adopts a rule requiring licensees to provide at least one free digital video programming service that is at least comparable in resolution to today's service and aired during the same time periods that their analog channel is broadcasting. We believe that this requirement will not be onerous for small broadcast entities because of the relative ease with which they will be able to digitize their analog signal in order to meet the requirement. Accordingly, the provision of this minimum service should impose no economic impact beyond that already imposed by the general requirement that stations construct and operate digital television facilities. At the same time, it ensures that viewers will continue to have access to over-the-air broadcast programming. Finally, it does not impede broadcasters' opportunities to generate revenue through additional advertiser-supported programming or subscription, if they choose.

The Fifth Report and Order also adopts a rule stating that broadcasters shall have full flexibility to respond to the demands of their audience by providing ancillary and supplementary services that do not derogate the mandated free, over-the-air program service. Such services could include, but are not limited to, subscription television programming, computer software

distribution, data transmissions, teletext, interactive services, audio signals, and any other services that do not interfere with the required free service. Revenue-based services can help digital broadcasters achieve more rapid penetration of digital television, can help broadcasters compete with other video providers, and can help support the free television service. Because these ancillary and supplemental services are voluntary, they will impose no economic burden on broadcast television licensees.

The Fifth Report and Order declines to impose a requirement that broadcasters provide a minimum amount of high definition television programming over the DTV spectrum, and instead leaves this decision to the discretion of broadcasters. Such a minimum requirement might be particularly burdensome on small broadcasters, including many independent and foreign-language stations.

The Fifth Report and Order also refrains from imposing a simulcasting requirement on broadcasters until the closing years of the transition. However, broadcasters at all times retain the option to simulcast, should they so choose. This discretion assures small entities, as well as others, the flexibility to compete more efficiently in the video marketplace. We believe that during the early stages of the transition, marketplace forces will ensure that the best NTSC programming will be simulcast on DTV.

However, in order to help reclaim spectrum at the end of the transition period, the Fifth Report and Order requires that by the sixth year after its adoption, programming that is aired on a broadcaster's analog channel must be available on its digital channel. This will prevent disenfranchisement of the remaining NTSC viewers when the NTSC spectrum is reclaimed. Thus, commencing April 1, 2003, DTV licensees and permittees must simulcast at least 50% of the video programming transmitted on their analog channel; commencing April 1, 2004, there will be a 75% simulcasting requirement; commencing April 1, 2005, there will be a 100% simulcasting requirement until the analog channel is terminated and returned. Because of the gradual nature of the requirement and the multichannel capabilities of digital television, the simulcasting requirement should impose little, if any, burden on small entities.

The Fifth Report and Order also determines that NTSC and DTV television facilities should be licensed under a single, paired license. This will help small broadcasters, as well as others, minimize their administrative burdens and the financial costs associated with them.

The Fifth Report and Order also sets a timetable by which stations must apply for and construct DTV facilities. It is important to foster an expeditious and orderly transition to digital technology that will allow the public to receive the benefits of digital television, so it is important that viewers in television markets have access to DTV programming and other digital services as quickly as possible. First, pursuant to the rule setting a timetable for applying for and constructing DTV facilities, all licensees will have 90 days after the release date of the DTV Table of Allotments to inform the Commission if they do not want a DTV channel. After that, there will be three categories of construction requirements for commercial television stations. In

the first category, all network-affiliated stations in the top ten television markets268 will have until May 1, 1999, to construct their digital facilities. In the second category, all network-affiliated stations in the top 30 television markets not included above will have until November 1, 1999, to construct their digital facilities. In the third category, all other commercial stations will have until May 1, 2002, to construct their DTV facilities. All noncommercial stations will have until May 1, 2003, to construct their DTV facilities. We will require that those stations that have represented to the Commission that they will complete construction of the DTV facility by November 1, 1998, file reports at six-month intervals, beginning on November 1, 1997, stating that their plans to meet these deadlines are on schedule or specifying any difficulties encountered in attempting to meet these deadlines. We will grant an extension of time where a broadcaster has been unable to complete construction due to circumstances that are either unforeseeable or beyond the licensee's control where the licensee has taken all possible steps to resolve the problem expeditiously.

An aggressive construction schedule is necessary for us to meet our main objectives in this proceeding. First, digital broadcast television stands a risk of failing unless it is rolled out quickly. Other media such as DBS, cable, and wireless cable have or soon will offer digital programming services. Unless digital television broadcasting is available quickly, other digital services may achieve levels of penetration that could preclude the success of over-the-air, digital television. Second, a rapid construction period is critical to DTV's competitive strength internationally, as well as domestically. Third, an aggressive construction schedule helps to offset possible disincentives that any individual broadcaster may have to begin digital transmissions quickly, as well as the absence of many market forces that might themselves ensure rapid construction. Fourth, a rapid build-out works to ensure that recovery of broadcast spectrum and its reallocation to other beneficial uses occurs as quickly as possible.

This construction schedule takes the needs and interests of small entities into account. The most aggressive requirements apply to stations that we believe will be in the best position to make the transition quickly: network-affiliated stations in the top 10 television markets. These markets include approximately 30 percent of U.S. television households. Network-affiliated stations consistently have higher ratings, with higher audience numbers, and we assume with greater financial and other resources, so that the above construction requirement will both serve the public and be reasonably nonburdensome to broadcasters. In recognition of the fact that some networks may have in some of the larger markets a second affiliate that is not as strong as the other affiliate, we have minimized the burden on that weaker affiliate by imposing a longer construction deadline. Moreover, we are not requiring licensees initially to construct fullreplication facilities. Instead, we are requiring them at the outset only to emit a DTV signal strong enough to encompass the community of license.

268 For the purposes of the construction schedule, a network-affiliated station is one that operates as an affiliate of CBS, NBC, ABC, or Fox, as of April 3, 1997, the adoption date of this Report and Order. "Television markets" are defined as the Designated Market Areas, or DMA, as defined by Nielsen Media Research. In those DMAs in which a network has more than one network affiliate, only the affiliate with the largest audience share will be considered as "network-affiliated" for the purposes of the digital television construction schedule.