Implementation of the Satellite Home Viewer Improvement Act of 1999: Application of Network Nonduplication, Syndicated Exclusivity, and Sports Blackout Rules to Satellite Retransmissions of Broadcast Signals

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receive via satellite because the station demanding protection is not carried on satellite. Viewers may be able to receive this programming, however, through use of over-the-air antennas or on cable. Substitute Programming 45. The cable syndicated exclusivity rules expressly allow a cable operator to substitute programming from another television station when programming is required to be deleted, provided carriage is consistent with all the exclusivity rules, such as sports blackout. No comparable provision is included in the network non-duplication rules, but cable operators are free to substitute any programming--broadcast or cable--to which they have the legal rights. Commenters addressing this issue generally support a provision to allow satellite carriers to offer substitute programming for the programming covered by exclusivity agreements. We agree that it is reasonable to permit substitute programming so that viewers need not be faced with a blank screen or a slide stating that contractual limitations require programming to be deleted. 46. Carriage of programming by satellite carriers is governed by a number of laws and regulations, including the Copyright Act, the Communications Act, and Commission rules, which differ from those applicable to cable programming. In reinstating the syndicated exclusivity rules in 1988, the Commission encouraged the substitution of programming in response to consumer demands that a distant program be available in place of the original programming that is deleted. At that time, we also noted that such substitution of programming was consistent with the compulsory license provisions of the Copyright Act and the syndicated exclusivity rules repealed in 1981. Unlike the cable compulsory license, however, the satellite statutory license does not include provisions for the substitution of programming. In considering permissible substitute programming under these rules, we observe that there are statutory provisions that impose a number of limits on the retransmission of signals by satellite carriers. Under these provisions, distant network station signals are limited to two per network per day and restricted to unserved households, local signals may be provided only in their own markets, and the satellite carrier must have retransmission consent for carriage of any local broadcast signal. To the extent that carriage of a program is permissible under these laws and regulations, and the satellite carrier has the authority to offer the programming, we believe that satellite carriers should be permitted to use substitute programming. In addition, commenters ask that we not limit substitute programming to broadcast programming. We see no reason to place such a limit on what is permissible and will allow non-broadcast programming to be used as a substitute, as long as its carriage is consistent with the applicable statutory and regulatory provisions, and it is clear to viewers that the substitute programming is not provided by the same broadcast station as the programming for which it is substituted. 47. We further note that the cable rules do not expressly provide for the substitution of programming when a program is deleted pursuant to network non-duplication protection. The absence of an express provision does not necessarily prevent the cable operator from substituting programming to which it has the rights. However, we recognize that if a cable operator were required to delete network programming from a station, and the network programming subject to deletion constitutes a high percentage of the station's programming, the cable operator would likely drop the entire station from carriage. When the Commission originally adopted the network non-duplication rules, there were only three commercial broadcast networks, and network programming constituted the majority of the programming distributed to viewers by each network affiliate. The superstations affected by these new rules are affiliated with emerging networks (i.e., WB, UPN). These networks distribute significantly fewer hours of programming to their affiliates each day and week than the older commercial networks. Thus, we believe that when, for satellite carriers, the non-duplication rules are applied only to nationally distributed superstations, it is likely that a smaller percentage of the programming will be subject to deletion. It is hoped that satellite carriers will continue to provide the nationally distributed superstations to their subscribers, and, thus, the question of substitution programming is relevant. To prevent the possibility of a blank screen and undesirable disruptions for consumers, we will specifically provide for substitution for non-duplication deletions with any programming that the satellite carrier is authorized to carry. Accordingly, we will adopt rules permitting the use of authorized substitute programming for any programs deleted to comply with network non-duplication or syndicated exclusivity protection, or sports blackout. We note that the copyright laws do not provide a statutory copyright license for substitute programming for satellite carriers as they do for cable operators. Therefore, unless the statutory provisions are changed, satellite carriers may only substitute programming for which they have copyright and retransmission consent, or otherwise have legal rights to carry. Transition Period 48. When the Commission reinstated the syndicated exclusivity rules, it recognized that cable systems would need several months to implement the new regulatory requirements. Satellite industry commenters in this proceeding requested a similar transition period to implement these new rules. Echostar suggests that broadcasters and other rights holders should submit their deletion requests during the transition period, but satellite carriers' compliance would be tolled for one year. We agree that satellite carriers today, like cable operators in 1988, need time to phase-in compliance with these new exclusivity rules. We reject, however, proposals for a transition period one year in duration. The transition period for cable operators was necessary, in part, to allow time to develop and implement new equipment needed to perform the deletions required by the rule. In this proceeding, apart from the concerns raised by the C-Band carriers and discussed below, the satellite carriers have not asserted that they need time to develop new equipment. In addition, we do not believe that EchoStar's one-year proposal would serve its stated purpose of enabling satellite carriers to review deletion notices and plan a year in advance before the implementing the deletions. We believe rights holders would not bother to submit deletion requests knowing that they will not be acted upon for a year. 49. We will allow satellite carriers a reasonable period of time after the new satellite network non-duplication and syndicated exclusivity rules take effect to adjust to the new requirements, to review the contract language, to ensure that they have adequate equipment and personnel to implement the deletions, and to arrange for programming that can be used to substitute for deleted programming. Normally, as set forth above, exclusivity protection begins, at the earliest, within 60 days of notification. However, as described above, broadcasters will have up to six months from the effective date of this Order to renegotiate contracts, and they

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must notify satellite carriers of deletion requests within 60 days of signing the renegotiated contract. When no renegotiation is necessary because the existing contract clearly pertains to satellite as well as cable carriage, broadcasters must notify satellite carriers of their exclusivity protection and deletion requests within 60 days of the effective date of this Order. In these instances, satellite carriers will have 120 days in which to implement deletion requests (e.g., this Order is effective on November 29, 2000, therefore a broadcaster could provide deletion notice on January 8, 2001, and the deletion would take effect on or after May 10, 2001). To provide time for satellite carriers to adjust to the new requirements, for notices provided before June 1, 2001, satellite carriers will have 120 days before they are required to implement the necessary deletions. For notices provided to satellite carriers after June 1, 2001, the normal time requirements will apply. 50. Echostar also proposes, as an alternative or complement to the transition period, a ``grandfathering'' provision that would exempt from application of the network non-duplication and syndicated exclusivity rules all of EchoStar's 700,000 current superstation subscribers. We reject this proposal because there is nothing in the statute to support it, and it is contrary to the letter and the intent of the SHVIA provision requiring the Commission to apply the exclusivity rules to satellite carriers. This proposal is also inconsistent with the goal of placing comparable requirements on cable operators and satellite carriers. Cable subscribers' viewing options are currently subject to the cable exclusivity rules, which allow for the same deletions that affect satellite subscribers. In fact, cable subscribers are generally subject to a greater impact from deletions because the cable rules apply to deletions of programming carried on network stations and other broadcast stations, not only that programming carried on the specially defined six superstations. Adopting EchoStar's proposal would perpetuate the disparity between cable and satellite that Congress clearly sought to eliminate. Moreover, when the Commission implemented the network non-duplication rules and reinstituted the syndicated exclusivity rules with respect to cable operators, it did not provide for grandfathering of existing cable customers. As the Commission explained in those proceedings, the potential impact of the rules is ultimately determined by the negotiations among the parties for exclusivity rights and the decision whether or not to assert them in a given market. Protecting parties' rights to engage in contract negotiations with the knowledge that exclusive agreements would not be abrogated by importation of distant signals was fundamental to the Commission's purpose in creating the exclusivity rules in the cable context, and is relevant today to application of these rules to satellite carriers. Small System Exception and C-Band Carriers 51. Sections 76.95(a) and 76.156(b) (amended rule Sec. 76.106(b)) provide that small cable systems serving fewer than 1,000 subscribers are exempt from the network non-duplication and syndicated exclusivity requirements, respectively. The Commission originally adopted these exceptions in the mid-1970s to balance the costs of compliance for small cable systems against the impact on broadcast stations. The Commission was concerned that the costs of equipment and manpower needed to comply with the cable exclusivity rules would have a substantial impact on such systems when viewed in relation to their gross revenues. In addition, the Commission concluded that the cumulative number of homes served by small systems nationwide constituted a very small percentage of the total number of television households and there would be no significant adverse economic impact on broadcasters. When the Commission reinstituted the syndicated exclusivity rules and modified the network non-duplication rules in 1988, it again exempted cable systems with fewer than 1,000 subscribers out of the same concern. 52. Some commenters representing the satellite industry seek similar exceptions that take into account the technical feasibility and cost of compliance for satellite carriers. While offering no specific proposal, EchoStar argues that the only way to ensure equivalent protections for satellite operators is to go back to the rationale for the exception. However, since the original rationale for the small system exception was based on the relative cost of compliance compared to such systems' gross revenues, and none of the commenters has provided cost data to justify such an exception, we are unable to conclude that a comparable situation exists in the satellite context. Satellite carriers are among the largest providers of television programming and are not comparable to the ``Mom and Pop'' cable operators for which the small system exception was designed. Each of the satellite carriers serves millions of subscribers nationally, is well-capitalized and capable of purchasing necessary equipment, is managed through centralized control centers, and already blacks out programming consistent with existing contracts and the programming packages selected by individual subscribers. We conclude that, with no specific evidence to the contrary, the costs of compliance with these rules, on a per subscriber basis and relative to total revenues, will be small given the large subscriber base of each DBS satellite carrier. 53. In contrast to DBS carriers, however, we note that C-Band satellite carriers, while still serving 1.3 million subscribers nationwide, are experiencing a steady decline in subscribers from a high in 1995 of nearly 2.4 million. C-Band commenters contend that Congress intended to exempt them from application of the exclusivity rules. However, they offer only an isolated and ambiguous colloquy between two Senators in support of this assertion. C-Band commenters describe their subscribers as primarily rural and note that many live in areas that are not served by cable systems or are beyond the reach of over-the-air broadcasters. They contend that their centralized system of program delivery and authorization would make deletion and substitution of programming economically prohibitive. As these commenters note, in 1991 the Commission considered applying the syndicated exclusivity rules to C-Band retransmission of television broadcast programming. At that time, Congress had directed the Commission to apply the cable syndicated exclusivity rules to C-Band carriers if the Commission found it would be feasible for the C-Band carriers to comply. The Commission sought comment and concluded that the equipment needed for satellite carriers to implement exclusivity protection was not available and could not be developed and implemented before the expiration in 1994 of the interim compulsory copyright license under which C-Band carriers retransmitted broadcast programming. C-Band commenters contend that nothing has changed in their capability of deleting duplicating programming. They argue that network non-duplication requirements may apply to at least 93 markets, 30 weekly programs, with different times for each program. They ask that we either exempt them from application of the cable exclusivity rules or defer application until after 2004.

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54. The circumstances today differ significantly from 1991 in that the provision in the SHVIA does not allow for consideration of feasibility. Congress could have provided an exemption for C-Band carriers from application of the exclusivity rules, but did not. Congress did provide a more generous copyright license to C-Band carriers, than to DBS carriers, to retransmit distant network stations to virtually all C-Band subscribers. As noted, the network non-duplication and syndicated exclusivity rules do not apply to satellite retransmission of network stations. Currently, C-Band carriers provide only four of the six nationally distributed superstations (C-Band carries KTLA, WPIX, KWGN, and WGN. WOR-TV (New York) and WSBK-TV (Boston) are no longer available.) One of these, WGN, provides a satellite feed from which all duplicating programming has been deleted. Thus, the burden on C-Band carriers under the new network non-duplication and syndicated exclusivity rules is to delete programming from only three nationally distributed superstations. The information provided by the satellite commenters in this record describes serious technical and economic difficulties in accomplishing deletions and substituting replacement programming. C-Band carriers contend that Geolocs cannot accomplish the numerous simultaneous deletions that the network non-duplication and syndicated exclusivity rules may require. However, it appears that these comments contemplate more widespread deletions and substitutions than the statute calls for and more than we impose here on either C-Band or DBS carriers. 55. Notwithstanding that we may not provide a blanket exemption for C-Band carriers, we have considered their proposal that we defer application of the rules until after 2004 or pending a further rulemaking proceeding. We determine to do neither. We note that the Commission deferred application of the syndicated exclusivity rules in 1991 due to the expectation of full copyright liability in 1994. Now we are urged again, for the same reasons, to defer because the statutory copyright license is set to expire in 2004. We are not willing to defer application until 2004, and then find that the copyright license is again extended and we are faced again with the same issues and arguments. We believe that C-Band carriers will be able to implement these new regulations, in the limited circumstances in which they will apply to C-Band subscribers, using existing technology modified as necessary. We also believe that this proceeding has given all sides on this issue ample opportunity to present evidence and see no need for a further rulemaking. We do note, however, that we can apply to C-Band carriers an exception comparable to the cable exceptions for small systems. C-Band has persuasively argued that the demands of network non-duplication, syndicated exclusivity, and sports blackout, cumulatively, may exceed the capacity of their existing system. In this case, the C-Band carriers would have to develop a new system or substantially modify their existing system. We believe that this can be a costly burden, and that it is appropriate to provide an exception that recognizes the relatively small size of the C-Band carriers, as compared with the DBS carriers. Therefore, insofar as any C-Band carrier has fewer than 1,000 subscribers within the zone of protection, as expressed by zip code areas within the zone, it is not required to delete programming subject to network non-duplication or syndicated exclusivity protection. (See Secs. 76.122(l), 76.123(m), and 76.127(e).) The language of these exceptions is not limited to C-Band carriers and may apply, as well, to any satellite carrier with a similarly small subscriber base, such as a new carrier in the future. We will consider, if presented to us, additional information on how best to tailor a small system exemption that would be meaningful for C- Band carriers without being significantly broader than the exemption for small cable systems. Finally, if Congress amends the SHVIA to expressly exempt C-Band carriers from application of any or all of the exclusivity rules (including sports blackout, discussed below), we can conduct a rulemaking proceeding to exempt C-Band from our rules accordingly. Exceptions Preventing One Local Station From Blacking Out Another 56. The cable rules contain a number of exceptions that prevent one local station from asserting exclusivity protection against another station that has been deemed ``local.'' Often these situations arise because the rules contain several definitions of ``local'' station. These exceptions--for significantly viewed stations, stations whose Grade B includes the community unit to be blacked out, and overlapping specified zones--were adopted to ensure that cable subscribers receive the same programming that would be available to over-the-air viewers in their communities. Consideration of these exceptions in the context of satellite carriage is made more complicated because superstations could have dual identities. In the NPRM, we sought comment on the treatment of superstations within their own markets. We noted that for must carry purposes, superstations are treated as local signals in their local markets (DMAs) and distant signals elsewhere. In its own market, a nationally-distributed superstation acts as any other local station and is treated as a local station within its local market. In the context of satellite retransmission of nationally distributed superstations, however, there is an important difference between a station carried as a superstation or carried as a local station. As described above, satellite carriers are not required to obtain retransmission consent to carry the superstations, but are required to obtain retransmission consent to carry a local station within its local market. The SHVIA, as it amended the retransmission consent provisions in the Communications Act, permits satellite carriers to retransmit the six stations that meet the definition of nationally distributed superstation without their consent provided they are transmitted outside their local markets. We believe that the presence or absence of a requirement for retransmission consent for nationally distributed superstations is key to Congress' determination to apply the cable exclusivity and sports blackout rules in this satellite context. Therefore, within their local markets, the nationally distributed superstations are not subject to deletions because they are carried as local stations. However, when a satellite carrier is retransmitting the station as a nationally distributed superstation, without its retransmission consent, it must be treated as a superstation, and the exclusivity and sports blackout rules will apply. Even in those instances in which the superstation's terrestrial over-the-air signal is significantly viewed, or the protected zone is within its Grade B contour, if the satellite retransmission is outside the station's local market, we will look to the manner of carriage to determine whether the station is treated as a superstation subject to deletions and blackouts, or as a local station that cannot be blacked out by another, overlapping local station. To the extent the exceptions for overlapping areas in the cable exclusivity rules are relevant in the satellite context, we will adopt them, as described below. 57. With respect to the ``significantly viewed signal exception,'' a broadcast television station can be declared ``significantly viewed'' outside what is usually considered its local market on the basis of its over-the-air viewing in a

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community. Significantly viewed status confers local treatment on a station under a number of rules and is intended to ensure that cable subscribers have the same local broadcast service that is available to noncable subscribers in their communities. Section 76.92(f) provides that a community unit is not required to delete the duplicating network programming of a significantly viewed signal. Similarly, under Section 76.156 (amended rule Sec. 76.106), syndicated programming covered by an exclusivity agreement need not be deleted from a significantly viewed signal. A few comments note that a superstation could be significantly viewed in areas surrounding its city of license based on over-the-air viewing. DirecTV argues that this exception could only apply in a few cases in which the superstation is functioning as a local station and since local stations are not covered by this section of SHVIA, the significantly viewed exception should not be present in the satellite context. We believe that pursuant to the SHVIA, the local-into-local copyright license can only apply within the station's DMA. Thus, once carried outside the DMA, the station cannot be considered a ``local'' station. Therefore, we believe the significantly viewed and Grade B contour exceptions will rarely, if ever, be applicable in the satellite context. Overlapping Specified Zones 58. In a related matter, under the network non-duplication rules, if a cable community is located in one or more overlapping specified zones, neither station can blackout the other station's duplicating programming because both stations have equal priorities. The NPRM stated that we did not believe that a similar situation could occur in the satellite context and sought comment on this issue. The one commenter addressing this issue contends this exception will not be triggered in the satellite context since superstations do not have specified zones outside their local markets and SHVIA only applies network non-duplication to nationally distributed superstations. As mentioned above, a nationally distributed superstation is a ``local station'' when carried by a satellite carrier within its local market. When carried as a local station, the network non-duplication and syndicated exclusivity rules do not apply to delete its programming. To the extent the overlapping zones situation could occur, it will be covered by the exception for significantly viewed or Grade B contour discussed above. NCE Must-Carry Exception 59. Under Section 76.92(g) of the rules, a cable community unit is not required to delete the duplicating network programming of any qualified noncommercial educational (``NCE'') broadcast television station that is carried pursuant to the must carry rules. Congress mandated that this provision be added to the cable network non-duplication rules as part of the must carry requirements. Congress recognized that in some situations an NCE station could be considered ``local'' under the must-carry rules, which are based on a 50-mile zone around the station's community of license, and ``distant'' for purposes of the network non-duplication rules, which are based on a 35-mile specified zone. No commenters addressed this issue and we believe that this exception is not relevant in this context. The SHVIA provision applies only to a local station asserting exclusivity rights against one of six nationally distributed superstations, none of which is an NCE licensee. Section 339(B)(1)(A) and (B): Application of Sports Blackout to Retransmission of Nationally Distributed Superstations and Network Stations 60. In addition to requiring application of the network non-duplication and syndicated exclusivity rules, section 339(b)(1)(A) also requires that we apply the sports blackout rule to retransmission of nationally distributed superstations, and section 339(b)(1)(B) requires that we apply the sports blackout rule to satellite retransmission of network stations. Unlike the other cable rules we are required to apply to satellite carriers, only the sports blackout rule applies to retransmission of both nationally distributed superstations and network stations. In the case of retransmission of network stations, we are instructed to apply the cable sports blackout rule only ``to the extent technically feasible and not economically prohibitive. 61. The Commission's sports broadcasts rule (``sports blackout rule'') is designed to allow the holder of the exclusive distribution rights to local programming, in this case sporting events, to control, through contractual agreements, the display of that event on local cable systems. The purpose of the sports blackout rule is to ensure the continued general availability of sports programming to the public. The Commission adopted this rule based on a concern that sports teams would refuse to sell the rights to their local games to television stations serving distant markets due to their fear of losing gate receipts if the local cable system imported the local sporting event carried on a distant station. The cable sports blackout rule is triggered when a subject sporting event will not be aired live by any local television station carried on a community unit cable system. Under the cable sports blackout rule, the holder of the rights to the event (e.g., a sports team or league, rather than a broadcaster) has the power to demand that the local cable system blackout the distant importation of the subject sporting event. The zone of protection afforded by the sports blackout rule is generally 35 miles surrounding the reference point of the broadcast station's community of license in which the live sporting event is taking place. The 35 mile zone of protection is measured from a television station's reference point based upon the list of reference points in 47 CFR 76.53. The same reference point applies to all stations licensed to the same community regardless of where their transmitter or studios are located. When sports facilities are located in suburban areas, the downtown reference points may be inappropriate for purposes of calculating the protected zone (e.g., the New England Patriots play mid way between Boston and Providence). Therefore, the Commission has expressed its willingness to consider waivers ``to substitute a zone of protection extending out 35 miles from the site of a sports event for the television station specified zone designated by the rule.'' As with the Commission's exclusivity rules, the sports blackout rule specifies notification procedures regarding the sports programming to be deleted. However, the time frame allowed for notification is significantly shorter in the case of the sports blackout rule than for network non-duplication and syndicated exclusivity. Notification for sports blackout can be given as little as 24 hours in advance. Notifications for regularly scheduled events subject to the sports blackout rule must be received no later than the Monday preceding the calendar week during which the deletion is to be made. Notifications for events not regularly scheduled, or when the schedule is revised, must be received within 24 hours after the time of the deleted telecast is known, but in no event less than 24 hours before the event will take place. The sports blackout rule does not apply to any community unit with fewer than 1,000 subscribers. This exemption is based on the cost of the equipment needed to delete programming.

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Technical and Economic Effects of Sports Blackout on Satellite Carriers 62. With respect to retransmission of nationally distributed superstations, the SHVIA requires us to apply the sports blackout rule from the cable context to satellite carriers. With respect to retransmission of network stations, however, the SHVIA provides that the sports blackout rules should be applied only to the extent technically feasible and not economically prohibitive. The language limits the application of the sports blackout rules in this narrow circumstance but only if the technical and economic difficulties are serious and harmful to the satellite carriers. In the NPRM we asked for specific information on the technical and economic problems that would be encountered by satellite carriers. We requested per subscriber cost data and asked whether the existing conditional access mechanisms would work for this purpose. We did not receive specific data or descriptions of how the requirement to black out sporting events on network stations would be unfeasible or economically prohibitive to the degree of posing a serious economic threat to the health of satellite carriers. 63. DirecTV argues that the Commission should invoke the technical/ economic hardship exception of section 339(b)(1)(B) and not apply any sports blackout requirements on satellite retransmission of network stations but does not explain why the methods it uses to perform the blackouts required by its contracts with sports leagues cannot be used to black out network stations. DirecTV does explain that the actual blackouts are ``manually triggered'' by a person who can watch and monitor only four events at a time. DirecTV states that additional personnel would be needed to monitor and trigger the additional events that will be covered by the sports blackout rule. It asserts there will be ``vast numbers of subscribers'' and ``thousands of blackout requests'' creating a ``monumental, expensive, and time-consuming task.'' There are no specific costs provided. The Echostar comments offer even less specific information. Echostar provides no information about particular burdens that would be imposed by the requirement to black out sport events from network stations. 64. As the Network Affiliates point out, no commenting party explains why it would be infeasible to develop the technology to black out sports programming, if such technology is not already in use, nor does any commenter offer cost figures to demonstrate that the technology would be cost prohibitive. We agree with those commenters that observe that the statutory language and expressions of legislative intent place a high burden to justify not imposing the sports blackout requirements for satellite retransmission of network stations. Such burden cannot be satisfied by the vague assertions and undocumented conclusions offered in this record. In contrast, the record provides unrefuted information that the technology to implement the network station sports blackout exists. Indeed, the satellite carriers currently black out sports programming pursuant to geographic restrictions in their contracts with regional sports networks and sports leagues. Consequently, we find that the heavy burden is not met to justify not applying the sports blackout obligations to satellite carriers with respect to network stations. Notification 65. In one aspect of the sports blackout rules, however, the timing of notification, we find that the record supports some modification from the notification periods in the cable sports blackout rules. DirecTV and Echostar urge that we lengthen the notification periods with respect to sports blackouts. In this respect, DirecTV describes a blackout system that is notably more complex than that of a cable operator. The cable operator controls the programming at a headend, which facilitates blacking out a particular area of limited geographic size. The satellite carrier, in contrast, is controlling programming on a national basis:

First the programmer must notify DirecTV and provide information about the program to be blacked out, as well as the areas (by zip code) affected. The information provided by the programmer must then be reformatted for DirecTV compatibility. Traffic department employees must then build the blackout by entering the data into the system and notify the scheduling department. The blackout is then scheduled and the data regarding the blackout is processed. The blackout is checked again for accuracy before it hits the air. Finally the actual blackout itself must be manually triggered, both in and out, by an employee who determines when the actual event begins and ends by watching an actual signal of the event.

DirecTV also notes the difficulty of re-programming the time period that has been blacked out, especially with very short advance notice. 66. While the process generally described by DirecTV does not appear to present such a serious technical or economic burden as to excuse compliance with the sports blackout rules altogether, it does suggest that the challenge of implementing multiple, simultaneous blackouts and identifying and arranging substitute programming is greater for satellite carriers than for cable operators. DirecTV correctly notes that the time frame allowed for notification for sports blackouts is significantly shorter than it is for either network non-duplication or syndicated exclusivity, and recognizes that rights holders may not always have the ability to provide more than 24 hours notice. The cable sports blackout rules require notice for regularly scheduled events to be received on the Monday preceding the calendar week during which the deletion is to be made, and, for events not regularly scheduled or revisions to previously submitted notices, within 24 hours after the time of the telecast is known and no later than 24 hours before the telecast is to occur. This timing was instituted in 1975 to address sports interests' concerns that playoffs and weather cancellations often afford little advance notice of scheduling changes. DirecTV explains that while it may be capable of deleting a sporting event on short notice, it cannot accomplish the reprogramming necessary in such a short period of time. DirecTV proposes a notification period of 60 days prior to the start of a season for sports with a specific season, 60 days prior to the event for nonseasonal but regularly scheduled events, 30 days for events not regularly scheduled, and 10 working days for revisions to previously submitted notices. 67. Commenters respond to DirecTV's proposal that, while they sometimes can provide notice as soon as a season's games are scheduled, the televising schedule may not be set until a later date. We agree that a 60 day advance notice may allow time for the games to be scheduled but not for the telecasts to be arranged. Often the televising schedule is not finally decided until a week before the beginning of the season. We find that the satellite carriers, although not providing sufficient data to warrant an exemption from the sports blackout requirements, have offered reasonable arguments in support of revising the notification periods in the satellite sports blackout rules to the extent possible without depriving the teams and leagues of their contractual rights by establishing time frames that afford no practical protection. 68. In light of the differences in the structure and operation of the satellite and cable industries, we are persuaded that some adjustment in the application of the sports blackout rules is justified and consistent with Congressional recognition of these differences. We find, however, that the lack of specific information in the record limits our ability to finely tailor the requirements

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while providing the protection the statute requires. Moreover, we take note that satellite carriers currently comply with contractually mandated blackouts, which require that they delete sporting events and provide subscribers with replacement programming. We believe it is appropriate to adjust the notification requirements for satellite carriers to ensure that the holders of rights to sporting events will provide the required notice as promptly as possible. The sports blackout rules for satellite carriers will, therefore, retain the same advance notice requirements for regularly scheduled events, including those events that have a specific season (notice must be received the Monday before the calendar week in which the deletion is to be made) but will also require that rights holders notify satellite carriers within forty-eight hours of the time the telecast is scheduled. We will not make the same requirement for events not regularly scheduled due to the last minute nature of such events. For these unscheduled events, as well as for last minute revisions to previously scheduled events, we must take into account the realities for the sports interests of last minute revisions, particularly due to weather. Therefore, we retain the 24 hour advance notice minimum to revise previously scheduled deletions. We hope that where satellite carriers have had adequate time to line up substitute programming, they will be able to shift the substitute programming into the revised time slot even with only 24 hours notice. Because this adjustment to the notification requirements reflects legitimate differences between satellite carriers and cable operators, we see no reason to limit this distinction to retransmission of network stations. For purposes of uniformity and clarity, the same notification requirements will apply to all sports blackout requirements imposed on satellite carriers, whether with respect to network stations or nationally distributed superstations. Use of Zip Codes To Determine the Location of Households Subject to Sports Blackout 69. As with the network non-duplication and syndicated exclusivity rules, most commenters agree that the sports blackout rule can best be applied to satellite carriers by reference to zip codes rather than community units. For the same reasons discussed in connection with network non-duplication and syndicated exclusivity, we agree that the zip codes that comprise the specified zones are appropriate for this purpose. As in the cable sports blackout rule, the holder of the broadcast rights, or its agent, shall be responsible for including the appropriate information identifying areas subject to deletion with its blackout notification to the satellite carrier. The notification must include a list of the appropriate zip codes. Exception for Small Community Units, as Applied to Satellite Carriers 70. DirecTV advocates excepting satellite carriers from the sports blackout requirement if the blackout would affect fewer than 5% of the television households in the relevant DMA, on a provider-by-provider basis. DirecTV asserts that this would have a de minimis impact on rights holders. The holders of rights to sporting events strongly disagree. The Commissioner of Baseball states that satellite subscribers generally constitute less than 5% of households in most DMAs and contends such an exception would eliminate sports blackouts in most cases. We agree that there should be exceptions to the blackout requirements imposed on satellite carriers that are analogous to the exceptions for cable systems. We do not agree that 5% of television households in a DMA (which would include cable subscribers as well as satellite subscribers) is analogous to the small community unit exception for cable systems. 71. The cable sports blackout rule does not apply ``to any community unit having fewer than 1,000 subscribers.'' Much has been made by some commenters of the difference between the language of this small system exception and the small system exceptions for non-duplication and syndicated exclusivity, which specifically exempt cable systems with fewer than 1,000 subscribers. However, there appears to be no basis in past Commission Orders for emphasizing this difference in the rule language. The Commission's rationale for exempting either small systems or small community units is the cost of the equipment for the cable system, and the relatively de minimis effect on the protected rights holder of exempting such a small system. Because there is no specific cost information in the record in this proceeding, it is difficult for us to draw a direct connection from the Commission's concerns for small cable systems due to the cost of their blackout equipment to the satellite carriers who, by all reports, already possess the necessary equipment to perform the sports blackouts required by statute. 72. We believe that the same type of exception we apply to the satellite network non-duplication and syndicated exclusivity rules is warranted here. Our primary concern here is for the affected subscribers, as well as the expense imposed upon satellite carriers relative to the number of subscribers who will be blacked out. The Commission has found in previous considerations of the cable sports blackout rule that the effect of excepting up to 1,000 subscribers from a blackout requirement will have a de minimis effect on the gate receipts. Insofar as we are using zip codes in lieu of community units, we believe an exception based upon the number of satellite subscribers, per carrier, in the zip codes affected by a sports blackout request is analogous to the exception in the cable sports blackout rule for community units with fewer than 1,000 subscribers. In this satellite context we find again that an exception for fewer than 1,000 subscribers per carrier, per zip code area comprising a protected zone, will not be so detrimental to the sports interests as to warrant the expense to satellite carriers and the loss of sports programming for viewers. We will reexamine this issue if, in the future, we receive information that the loss of 1,000 satellite subscribers is more costly to the sports interests than the comparable loss of 1,000 cable subscribers where the small system exception applies in the cable sports blackout rule. Other Provisions of Sports Blackout Rule for Satellite Carriers 73. Apart from the changes in the use of zip codes and in the notification requirements described above, we do not change the other provisions of the cable sports blackout rules in their application to satellite carriers. Based upon the general consensus in the comments, the same 35 mile zone of protection that applies to cable systems will apply to satellite carriers, and the same willingness to consider waivers for suburban stadiums applies to the satellite sports blackout rules as well as to the cable sports blackout rules. The rights holder will have the obligation of providing a list of the relevant zip codes to the satellite carrier with its deletion notice. If satellite carriers want to evaluate each subscriber's address and black out only those households within the 35 mile zone, the rules will not prevent them from doing so. For the same reasons cited in the network non-duplication and syndicated exclusivity rules, we will not require an electronic list of zip codes, nor will we require that satellite carriers designate a particular name or address for receipt of the notification. We do not have such a requirement for cable systems, which

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are far more numerous and varied, and we see no reason to require it from satellite carriers. As in the cable sports blackout rule, satellite carriers may substitute other programming during the time scheduled for a sporting event that must be blacked out. Satellite carriers may only use substitute programming for which they have copyrights, and, when required, retransmission consent. They may substitute a different distant network station provided they do not retransmit more than two network stations affiliated with the same network in a single day. Of course the substitute programming must also comply with the network non-duplication and syndicated exclusivity rules. 74. In addition, to afford satellite carriers an opportunity to adjust their schedules to these new regulatory requirements, we will require that sports rights holders provide 60 days advance notice for any sports blackout to occur on or before March 31, 2001. As of April 1, 2001, the regular notice requirements, including 24 hour notice for changes in previously scheduled blackouts, will apply. Because satellite carriers are currently complying with contractually required sports blackouts, we do not believe it is necessary to provide the same length of time to phase-in the implementation of the sports blackout rules as we find warranted for the network non-duplication and syndicated exclusivity. We believe that this 60 day period will be adequate for satellite carriers to adjust to the additional sports blackout requests.

Other Issues

Digital Signals 75. In the NPRM, we stated that section 339(b)(1) and the relevant part of the Joint Explanatory Statement are silent regarding application of the exclusivity and sports blackout rules to the retransmission of digital broadcast signals. We noted that in the pending proceeding considering cable mandatory carriage of digital signals, we requested comment on how these cable rules would function for cable carriage of digital signals. In the Notice, we repeated our question of whether Congress intended to apply these rules to satellite retransmission of digital broadcast signals. We noted that the SHVIA may be read to apply to both analog and digital broadcast signals. An alternative interpretation we posited was that Congress was only concerned about the carriage of analog signals given that elsewhere in the statute Congress expressly mentioned digital signals and, presumably, could have done so in this context as well. We sought comment on whether and how the exclusivity rules could apply to satellite carriage of digital broadcast signals, and whether there is a meaningful distinction between analog and digital carriage issues for satellite carriers in this context. 76. The responses we received concerning this matter are aligned by industry. Echostar argues that there is no legislative authority for the extension of the exclusivity rules to digital signals. NAB argues that the SHVIA requires exclusivity and sports blackout protection to apply to both analog and digital signals. Other broadcast groups, such as Tribune, argue that Congress did not indicate an intent that digital signals should be excluded from the new exclusivity rules and therefore that there should be no distinction between analog and digital signals under the new rules. MPAA asserts that syndicated exclusivity should apply to both digital and analog signals, pointing out that Congress made exceptions for digital signals in certain instances but did not do so for syndicated exclusivity. 77. Because digital exclusivity issues are closely related to digital carriage issues, we believe that it would be premature to resolve the matters related to this issue at this time. Exclusivity requirements cannot be fully fashioned until both cable operators and satellite carriers know what their carriage responsibilities will be for digital broadcast television. The digital exclusivity issues should be decided either when the Commission issues a Report and Order in the Digital Must Carry proceeding or in another proceeding that discusses a satellite carrier's digital broadcast signal carriage responsibilities. 78. We do address one aspect of this issue here. We are disinclined, in the early stage of the DTV transition, to allow a broadcaster to use an exclusive contract that applies only to digital programming to prevent a cable system or satellite carrier from providing that programming in analog form to its subscribers. However, to the extent contractual rights protect a broadcaster's exclusivity for both the analog and digital versions of the same program, we see no reason to limit the effectiveness of the contract to protect only analog exclusivity. Therefore, contractual language that expressly applies to analog and digital format of the same program content will be effective to require deletion of both. That is, the rule will provide that neither satellite carriers nor cable operators will be permitted to carry the digital version of a program when the analog version is required to be deleted and the contract expressly provides exclusivity for both, any, or all formats. NFL Proposal to Expand Exclusivity Rules To Apply to Unitary Program Packages 79. The NPRM sought comment on an additional issue concerning the distribution of sports programming that is related to, but not directly covered by, the SHVIA. The National Football League sells packages of programming to networks on a national basis, but different games are broadcast locally on a regional basis, often in two-game packages. To the extent that broadcasts of games are carried into local markets on distant broadcast signals via satellite, the network non-duplication and other rules involved in this proceeding appear to offer neither the stations nor the leagues involved any protection beyond the rights to the particular games that local stations are authorized to broadcast. We sought comment on the question of how the patterns of sports carriage involved are addressed by the new law, and whether they can and should be addressed in the regulations the Commission is required to adopt pursuant to it. 80. The NFL asks the Commission to ``complete the work that Congress began'' by applying the network non-duplication and syndicated exclusivity rules to network stations as well as to nationally distributed superstations. The NFL admits that damage to stations' contractual rights is limited because only unserved and grandfathered households can receive such stations but argues that the numbers of viewers involved are significant nonetheless. The NFL further contends that the Commission should also recognize the unitary nature of the NFL or any other regional television plan and allow local affiliates to exercise network non-duplication protections to black out other games played at the same time but broadcast in other regions of the country (e.g., Redskins versus Cowboys could blackout Giants versus Packers). Similarly, the National Hockey League expresses concern that a satellite carrier that offers local-into-local service could have access to the four games that the NHL plans to regionalize on ABC this year and could thereby create a multi-game hockey package to compete unfairly with the ``Center Ice'' package on ABC. We note that in the case of local-into-local carriage, retransmission consent is required, and, presumably, the stations in question could contractually prevent this from occurring.

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81. The advocates of this expanded application of network non-duplication have not described why such action would be in the public interest, although we are persuaded it could be in the Leagues' interest. The NFL and other sports interests advocating this change ask us to revise the existing cable rules to require deletion of programming that does not duplicate protected programming. As noted in the discussion of the network non-duplication rules, supra, the Commission has determined in the cable context that the use of different camera crews and announcers for a sporting event results in the distant program not being considered the same as the local program. Here, the NFL asks us to reach a contrary result and decide that a different event between different teams ``duplicates'' the protected event. The NFL and others ask us to expand the scope of the new satellite exclusivity rules beyond what Congress mandated. In light of the SHVIA's restrictions on households that are eligible to receive distant network signals, it is not clear to what extent carriage of distant signals providing different games merits remedial action. The NFL asserts that allowing satellite carriers (and, presumably, cable systems as well) to import distant signals carrying different games would undermine the NFL's regional television plan. The NFL cautions that it might ``be forced'' to alter its distribution plan in unspecified ways that would be ``less pro-consumer.'' However, we believe it would not be pro-consumer to take the action the sports interests request. There can be no doubt of the negative impact on viewers of losing access to more and more sports programming. The sports interests have not provided a compelling need for this additional protection, and other commenters have argued that it would deprive viewers unnecessarily. For the reasons given, we decline to expand the exclusivity rules to apply to regional or so-called unitary packages. If the program for which protection is sought is not, in fact, duplicated by the distant programming imported by the cable system or satellite carrier, then neither the network non-duplication nor syndicated exclusivity rules apply. Two Network Affiliates in One DMA 82. In the NPRM we asked for comment on the possibility and ramifications of a ``two-affiliates-in-one market scenario'' with respect to the sports blackout rule. We described the possibility that, in areas in which there are two affiliates of the same network within the same DMA, a subscriber would be eligible to receive both network stations based on the satellite carrier's ``local-into-local'' license because the subscriber resides in the DMA of both stations. Thus, in this circumstance, the sports blackout requirement of the SHVIA could, conceivably, apply to retransmission of local, rather than distant, network stations where the geographic area for purposes of the sports blackout zone surrounding one of the affiliates is smaller than the DMA. If one of the affiliates is not carrying the event, the sports blackout rule might be triggered. If the second affiliate is carrying the event, then the satellite carrier might be required to black out the event being transmitted by the second affiliate to subscribers within the 35 mile zone. We received scant response to this scenario. We believe these comments confirm that this situation is unlikely ever to occur because the contractual arrangements allow the rights holder to prohibit both affiliates from broadcasting the event in question. Therefore, we see no reason at this time to provide for this situation in the rules. Technical Revisions to the Rules: Sec. 76.5(gg) 83. The NPRM identified several of the cable exclusivity rules that contain out-dated cross-references to other sections. We sought comment on how these editorial corrections should be made. In particular, we noted that the cable sports blackout rule (Sec. 76.67, amended rule Sec. 76.111) contains a cross-reference to Sec. 76.5(gg) to determine when the sports blackout rule is triggered. Section 76.5(gg) was eliminated for reasons unrelated to the operation of the sports blackout rule, and no replacement reference is provided. The NPRM asked whether we should simply reinstate a standard based on the original criteria incorporated into former Sec. 76.5(gg) or adopt a new standard. 84. Former Sec. 76.5(gg) of the Commission's rules referred to the 1972 must carry rules to determine whether a station was considered ``local.'' The cable sports blackout rule is intended to be triggered only when no ``local'' television station carried by a cable system is broadcasting the subject sporting event for which protection is sought. In general, the 1972 must carry rules considered a television station ``local'' if the subject cable community served was located within the station's specified zone. In contrast, the current must carry rules consider a television station ``local'' if it is located in the same DMA as a cable community. The National Hockey League (NHL) maintains that any replacement for Sec. 76.5(gg) should incorporate the 1972 must carry rules definition of a ``local'' television station's market area. We agree. The use of DMA's would unnecessarily undermine the application of the sports blackout rule because DMAs may encompass hundreds of miles. In such a DMA, stations carrying the event located hundreds of miles distant from the relevant protected zone would be considered ``local.'' If considered ``local,'' the holder of the rights to the event could not assert the sports blackout rule without blacking out such distant over-the-air carriage if the station had must carry rights. 85. For the limited purpose of the application of the sports blackout rule, the provisions of the former Sec. 76.5(gg) can be substantially shortened and consolidated. Because the purpose of the sports blackout rule is simply to ensure that the rights holders to local events can exercise their contractual exclusivity rights, it is unnecessary to re-instate the complex definition of ``local'' that was used for the 1972 must carry regime or the 1987 rate regulations. It is not our intention to change the operation of the cable sports blackout rule. This revision merely incorporates within the cable and satellite sports blackout rules the relevant concept from the former Sec. 76.5(gg). Other Technical Corrections 86. The NPRM also included, in Appendix C, two other provisions that require minor, technical corrections. No comments were received regarding these provisions. In the absence of any objection, we make these modifications, as proposed, including an editorial change to the top 100 market list contained in the rules (correcting the markets listed at Sec. 76.51(a)(2) and (a)(28)), and a correction to Sec. 76.5 to reflect that the reference to Sec. 76.5(o) in Sec. 76.5(ii) should be Sec. 76.5(m). 87. In addition, we note that Sec. 73.658(m) contains a reference to the Arbitron list of smaller markets. As discussed in the Commission's recent Market Modification Order, Arbitron is no longer tracking television viewership. The Nielsen Research Company produces a similar list of markets, which is current. We will, therefore, revise this section of the rules to accomplish this updated cross-reference. 88. We are also taking this opportunity to delete several provisions from the cable exclusivity rules (Secs. 76.94, 76.105 (formerly Sec. 76.155), 76.97 and 76.163) that have no further