Implementation of the Satellite Home Viewer Extension and Reauthorization Act of 2004; Implementation of Section 340 of the Communications Act; Report and Order

With respect to a signal that originates as a digital signal of a network station, this section shall apply only if--* * * (B) either--(i) the retransmission of the local network station occupies at least the equivalent bandwidth as the digital signal retransmitted pursuant to this section; or (ii) the retransmission of the local network station is comprised of the entire bandwidth of the digital signal broadcast by such local network station.

91. The SHVERA directed the Commission to define the terms ``equivalent bandwidth'' and ``entire bandwidth,'' and provided that a satellite carrier not be: (1) Prevented from using compression technology; (2) required to use the identical bandwidth or bit rate as the local or distant broadcaster whose signal it is retransmitting; or (3) required to use the identical bandwidth or bit rate for a local network station as it does for a distant network station. (See 47 U.S.C. 340(i)(4)(A), (B) and (C); House Commerce Committee Report at 13 (``The Committee does not intend section 340(b)(2)(B) to prevent a satellite operator from using compression technology; to require a satellite operator to use the exact bandwidth or bit rate as the local or distant broadcaster whose signal it is retransmitting; or to require a satellite operator to use the exact bandwidth or bit rate for a local broadcaster as it does for a distant broadcaster.'')). 92. In the NPRM, we sought comment generally on these concepts of ``equivalent bandwidth'' and ``entire bandwidth.'' Our proposed rule, Sec. 76.54(h), required only that satellite carriers abide by the ``equivalent bandwidth'' and ``entire bandwidth'' requirements. We also explained the relationship between the format of the digital signal of the significantly viewed network affiliate and the format of the digital signal of the local network station. Finally, we asked whether satellite carriers must use the same compression techniques for both the local network station and the significantly viewed network affiliate. We noted that doing so may result in differences in real bandwidth and bit rate, depending on the programming content carried in the signals. For example, we said that a significantly viewed network affiliate broadcasting a sporting event would use more bandwidth than a local network station broadcasting an interview (i.e., talking head). In this example, we asked whether we should apply the same compression standard to both stations, thereby precluding the significantly viewed sporting event. We asked whether only comparable content that uses a comparable bit rate should be afforded equivalent bandwidth. We also asked whether we should require only that the same amount of bandwidth be made available to the local network station, allowing the local station to choose the amount of bandwidth it needs. 93. We adopt new Sec. 76.54(h) to require that satellite carriers comply with the ``equivalent bandwidth'' and ``entire bandwidth'' requirements. DIRECTV and NAB offer the most extensive comments on these concepts. Both agree that the Commission should not strictly define these concepts, but, instead, should offer examples of how these concepts would apply in certain circumstances. We agree. Our definition tracks the language of the statute; see 47 U.S.C. 340(b)(2)(B). In addition, pursuant to the statute, and in response to the comments, we will offer

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additional guidance concerning how these concepts will apply in certain situations. We recognize that we cannot anticipate every possible situation; therefore, we will resolve remaining questions about these concepts on a case-by-case basis. We also note that the SHVERA significantly viewed provisions are distinct from the local signal carriage requirements in section 338; 47 U.S.C. 338 governs the carriage of local television signals whereas 47 U.S.C. 340 governs the carriage of significantly viewed signals. Thus, our discussion in the context of significantly viewed is separate and apart from the digital signal carriage requirements that are under consideration in a separate proceeding. (See Carriage of Digital Television Broadcast Signals: Amendment to Part 76 of the Commission's Rules, CS Docket No. 98-120, Second Report and Order and First Order on Reconsideration, 20 FCC Rcd 4516 (2005)). Congress' focus in enacting section 340 and our focus in its implementation are on the circumstances in which a satellite carrier may offer a significantly viewed signal to a subscriber. Issues related to material degradation and mandatory carriage of local signals are not within the scope of this proceeding. (See 47 U.S.C. 340(d)(1); House Commerce Committee Report at 12 (``section 340(d)(1) also makes clear that any right of a station to have its signal carried in a local market under the carry-one, carry-all provisions of section 338 is not affected by the significantly viewed status of the signal in another market.'')). 94. We agree with DIRECTV and NAB that the concepts of ``equivalent bandwidth'' and ``entire bandwidth'' were created to prohibit satellite carriers from using technological means to discriminate against the digital signals of local stations in favor of the digital signals of significantly viewed stations. This seems clear given Congress' intent to prevent satellite carriage of a local network station's digital signal ``in a less robust format'' than the digital signal of the significantly viewed network affiliate. Certain situations are clear, as the commenters agree. For example: If the significantly viewed (SV) station and local station both transmit in HD, and a satellite carrier wishes to carry the HD signal of the SV station, then the carrier must also carry the local station in HD. 95. The SHVERA, however, recognized that not all local network stations will be broadcasting in HD or multicast format. Therefore, the statute permitted satellite carriage of a significantly viewed station's digital signal in HD or multicast format, while only carrying the affiliated local network station's digital signal in a single SD format, provided the local station only broadcasts in that single SD format. (See 47 U.S.C. 340(b)(2)(B)(ii) (permits satellite carriage where ``the retransmission of the local network station is comprised of the entire bandwidth of the digital signal broadcast by such local network station''); House Commerce Committee Report at 12 (``the local affiliate's choice to multicast does not prevent the satellite operator from retransmitting a significantly viewed signal of a distant affiliate of the network that chooses to broadcast in high-definition'')). Thus, we conclude that if the SV station transmits in HD and the local station transmits only a single SD stream, then a satellite carrier may carry the SV station's HD signal, while only carrying the local station's single SD stream. The comments agree with this result. Likewise, it follows that if a SV station transmits several multicast streams and the local station transmits only a single SD stream, then a satellite carrier may carry the SV station's multicast streams, while only carrying the local station's single SD stream. 96. Comparisons of the significantly viewed station's signal with the local station's multiplexed (multicast) signal present a more challenging problem for defining equivalent bandwidth. The statute expressly measured equivalency in terms of bandwidth, which calls for an objective comparison. We will base our comparisons on each station's use of its 6 MHz of bandwidth and a satellite carrier's carriage of the station in terms of megabits per second (mbps), or bit rate. We note that the maximum bit rate DTV broadcasters can use over-the-air in 6 MHz of spectrum is 19.4 mbps. (See Advanced Television Systems Committee (ATSC) standard A/53B, ATSC Digital Television Standard, Revision B (Annex D) (Aug. 7, 2001)). The statute expressly allowed satellite carriers to use compression technology, but carriers may not use such techniques in a manner that degrades the local station's signal more than the SV station's signal. NAB states the Commission should define equivalent and entire bandwidth to prevent satellite carriers from using technological means, including compression techniques, to discriminate against local digital signals or otherwise to favor significantly viewed distant digital signals. NAB states this principle of nondiscrimination should also encompass material degradation, functionalities such as interactivity, and hours of HD programming across dayparts and in total. DIRECTV agrees that a satellite carrier may not use compression techniques to materially degrade a local station's signal compared to that of the SV station. Although the Commission has defined what constitutes ``material degradation'' in the First Report and Order in the digital must carry proceeding, several parties have requested reconsideration of that decision; the reconsideration proceeding remains pending. (See Carriage of Digital Television Broadcast Signals: Amendment to Part 76 of the Commission's Rules, 16 FCC Rcd 2598, 2628-29 (2001) (petitions for reconsideration pending)). We will compare the appropriate bit rate under the circumstances. For example, we recognize that use of a higher compression technique (e.g., MPEG-4 rather than MPEG-2) will result in a lower bit rate but with the same effective result. In this respect, we agree with DIRECTV that a satellite carrier could comply with the rule even if it used different compression technology (e.g., MPEG-4 versus MPEG-2) or modulation technology (e.g., 8PSK versus QPSK) for the two sets of signals, provided there is no greater degradation of the local station's signal. To the extent a carrier wishes to use different compression techniques for the two stations, it may not do so in a way that is inconsistent with the equivalent bandwidth requirements described herein. We will consider whether carriers follow generally accepted engineering practices as well as any other relevant means to compare picture quality. 97. We will generally interpret equivalency to mean that a satellite carrier that wishes to carry a significantly viewed station must provide the local station with an opportunity to use the same amount of bandwidth as the significantly viewed station. Thus, a satellite carrier may carry the signal of a significantly viewed station only if the amount of bandwidth used to carry such station is equivalent to the amount of bandwidth used to carry the signal of the local station affiliated with the same network, unless of course the carrier is carrying the entire amount of bandwidth used by the local station for free over-the-air video programming. We must also consider that ``equivalent'' is not the same as identical, and that Congress has expressly stated that we should not impose a requirement for identical bandwidth or bit rate. (See 47 U.S.C. 340(i)(4)(A), (B) and (C)). We believe the statute requires ``equivalent'' bandwidth

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and precludes ``identical'' bandwidth in recognition of the fact that bandwidth use (or bit rate) will fluctuate from moment to moment. We thus conclude that if the SV station transmits in HD and the local station transmits multiplexed (multicast) signal, then a satellite carrier may carry the SV station's HD signal, provided it also carries as many of the local station's multicast channels as necessary to match the bandwidth provided to the SV station. Until the Commission addresses satellite carriage of digital signals in the pending DTV carriage rulemaking, the parties will privately determine which streams will be carried, since satellite carriage of local stations' digital signals is currently only pursuant to retransmission consent. This equivalence applies to the local or significantly viewed programming carried at the same time. 98. In adopting the comparative bit rate approach, we are aware that DIRECTV claims that such comparisons are technically infeasible, both because of the difficulties in calculating them and because of the number of signals that must be compared by the carrier. DIRECTV argues that we should interpret the concepts of equivalent and entire bandwidth only ``to prohibit material discrimination as measured on an overall carriage (not program-by-program or minute-by-minute) basis.'' DIRECTV states we should not require ``equivalence'' at any given moment, or require exact equality even when measured over a longer period of time. For example, DIRECTV argues that it should be allowed to retransmit a significantly viewed station's HD programming even if such programming does not occur at the same time or in exactly the same number of hours as the local station's HD programming. We disagree. Not only would this be contrary to the statute's language and intent (House Commerce Committee Report at 12 (``section 340(b)(2)(B) prevents the satellite operator from retransmitting a local affiliate's digital signal in a less robust format than a significantly viewed digital signal of a distant affiliate of the same network * * *'')), but we agree with NAB that DIRECTV's proposed interpretation would cause the type of material discrimination that DIRECTV itself argues the statute prohibits because it would allow satellite carriers to carry a significantly viewed station in a more favorable format than that of the local station during different times of the day. 99. We rest our conclusion on the statute, which speaks in terms of bandwidth, not material discrimination. Therefore, we will require satellite carriers to make an objective comparison, rather than a subjective one based on material discrimination. For example, if an SV station transmits an HD signal with a maximum bit rate of 15 mbps and the local station transmits six (multicast) channels each with a maximum bit rate of 3 mbps, then a satellite carrier may carry the SV station's HD signal, provided it also carries at least five of the local station's multicast signals. We will consider issues relating to comparisons on a case-by-case basis. If it is feasible and facilitates compliance, a satellite carrier may establish a ``set bit rate'' that will apply to the SV station's digital signal to ensure that the bandwidth devoted to the SV signal does not exceed the bandwidth devoted to the local station's signal, except for the normal fluctuations attributable to action or inaction in the programming. For example, a situation may occur where a satellite carrier ``sets'' its encoder to 12 mbps knowing that the encoder will deliver a stream within a range, such as 5%, which would generate an output that would vary from 11.4 to 12.6 mbps. Even if the local and SV station were both ``set'' to 12 mbps, it is possible that the actual result would be two streams with different maximums and different averages, simply based on the type of programming (e.g., sports versus drama). In practice, the SV station may generate a stream from 11.4 to 12.6 mbps and the local station may generate a stream from 11.7 to 12.1 mbps. In this case, as long as the carrier remains equitable in the treatment of both stations, it would meet the statutory requirement. We note that this would be consistent with the statute's requirement that we not require identical bandwidth or bit rate. NAB agrees that ``the equivalent bandwidth requirement is satisfied if the local station is broadcasting an SD stream containing a comedy program and the significantly viewed distant station is broadcasting an SD stream containing a drama program and, at any given instant, the drama (say, a high-speed chase) requires more bits than the comedy, provided that, on average, both SD streams are provided equivalent bandwidth. Similarly, if the local station is broadcasting its local news in HD and the distant significantly viewed station is broadcasting a sporting event in HD, the equivalent bandwidth requirement is satisfied so long as the multiplexer is `allocat[ing] bandwidth rationally as between [the] sports and `talking head' programming.' '' For instance, if an SV station transmits an HD signal with a maximum bit rate of 15 mbps and the local station transmits two (multicast) channels, one in HD with a maximum bit rate of 12 mbps and one in SD with a maximum bit rate of 3 mbps, and a satellite carrier wishes only to carry one signal for each station, then the carrier may not carry the SV station's HD signal, unless it caps (or ``sets'') the bit rate for such signal at a maximum of 12 mbps. 100. With respect to timing, if the SV station and local station are both multicasting, a satellite carrier may choose to carry only one channel for each station provided the signals are equivalent during the time they are carried. For example, assuming that the SV station and local station are both multicasting an HD and one or more SD channels at least sometime during the day, and a satellite carrier wants to carry only one channel for each station, if the SV station is transmitting its primetime programming in HD, and the carrier wants to carry that signal in HD, then it must also carry the local station's HD broadcast of primetime programming. However, if the local station is multicasting at 4:00 and singlecasting SD in primetime, the satellite carrier may carry the SV station's HD signal at 8:00, and is not required to carry the local station's multiplexed signal at 4:00. 101. EchoStar argues that requiring equivalency in terms of bandwidth would create an unconstitutional multicast must carry requirement, and that therefore we should only compare the primary feeds of both stations. We disagree with EchoStar's argument, as well as its premise. The carriage requirement, as noted above, is separate and distinct from the optional carriage of significantly viewed stations. (See 47 U.S.C. 340(d)(1)). The carrier is not required to carry local stations at all unless it chooses to do so. Mandatory satellite carriage applies only in Alaska and Hawaii. (See Implementation of Section 210 of the Satellite Home Viewer Extension and Reauthorization Act of 2004 to Amend Section 338 of the Communications Act, MB Docket No. 05-181, FCC 05-159 (rel. Aug. 23, 2005)). Elsewhere in the United States, satellite carriage of local stations is pursuant to ``carry-one, carry-all,'' which applies if a satellite carrier chooses to use the statutory copyright license for carriage of one or more local stations. See 47 U.S.C. 338(a); see also Satellite Broadcasting and Communications Ass'n v. FCC, 275 F.3d 337 (2001), cert. denied, 536 U.S. 922 (2002) (``SBCA'')). If it wishes to offer significantly viewed stations, carriage of local stations is a statutory condition precedent. This statutory requirement is based on Congressional intent to make

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satellite carriage of significantly viewed stations comparable to cable carriage of significantly viewed stations in light of the ``must carry'' regime that requires cable to carry local stations in every market. (See House Commerce Committee Report at 1 (seeking ``regulatory parity by extending to satellite operators the same type of authority cable operators already have to carry `significantly viewed' signals into a market'')). Carriage of local stations as a condition to carriage of out-of-market stations offers satellite carriers a choice, not a requirement. Further, we agree with NAB that EchoStar's argument is not supported by the statute or legislative history. The statute expressly requires a comparison of bandwidth, and not primary feeds. 102. We believe we have struck the appropriate balance between permitting the satellite delivery of a significantly viewed digital signal and protecting a local broadcaster against the delivery of its signal in a less favorable format than that of an out-of-market station, while adhering to the express language in the statute. We amend Sec. 76.54 accordingly. 103. We noted in the NPRM that the SHVERA required that the same ``equivalent bandwidth'' definition developed pursuant to new section 340(h)(4), be used for purposes of section 339(a)(2)(D)(iii)(II). 46 n.126. We did not receive comments on this issue. As required by the SHVERA, our definition in Sec. 76.54(h) for purposes of the provisions concerning ``distant digital signals'' of network stations must also be applied to new section 339(a)(2)(D)(iii)(II).

C. Section 341's Special Rules for Certain Counties and Markets

1. Section 341(a) Confers Significantly Viewed Status to Certain Counties in Oregon 104. Section 211 of the SHVERA created section 341(a) of the Act, which authorizes the retransmission of certain stations deemed to be significantly viewed, in accordance with Sec. 76.54 of our rules, ``to subscribers in an eligible county.'' 47 U.S.C. 341(a) (``Carriage of television signals to certain subscribers'') provides: (1) In General-- A cable operator or satellite carrier may elect to retransmit, to subscribers in an eligible county: (A) Any television broadcast stations that are located in the State in which the county is located and that any cable operator or satellite carrier was retransmitting to subscribers in the county on January 1, 2004; or (B) up to 2 television broadcast stations located in the State in which the county is located, if the number of television broadcast stations that the cable operator or satellite carrier is authorized to carry under paragraph (1) is less than 3. (2) Deemed Significantly Viewed. Any station described in subsection (a) is deemed to be significantly viewed in the eligible county within the meaning of Sec. 76.54 of the Commission's regulations (47 CFR 76.54). (3) Definition of Eligible County. For purposes of this section, the term `eligible county' means any 1 of 4 counties that: (A) Are in a single State; (B) on January 1, 2004, were each in designated market areas in which the majority of counties were located in another State or States; and (C) as a group had a combined total of 41,340 television households according to the U.S. Television Household Estimates by Nielsen Media Research for 2003-2004. (4) Limitation. Carriage of a station under this section shall be at the option of the cable operator or satellite carrier. In the NPRM, we tentatively concluded that this provision applies only to certain counties in the State of Oregon, and requires that stations in these eligible counties be ``deemed significantly viewed'' and added to the SV list. At the time of the NPRM, we were unable to identify which stations might qualify under this provision and so we did not include them in the SV List. We did, however, request comment to identify and confirm the stations that would qualify under this provision. 105. We find that section 341(a) applies to four counties in the State of Oregon--Grant, Malheur, Umatilla and Wallowa. Our determination, which is supported by the commenters on this issue, is based on the fact that section 341(a) explicitly limits an ``eligible county'' to ``any one of four counties'' ``in a single state'' that ``as a group had a combined total of 41,340 television households according to the U.S. Television Household Estimates by Nielsen Media Research for 2003-2004.'' A staff review of the U.S. Television Household Estimates by Nielsen Media Research for 2003-2004, as well as the comments on this issue, shows these four counties to be Grant (3,040 TV households), Malheur (10,350 TV households), Umatilla (25,050 TV households) and Wallowa (2,910 TV households), which have a combined total of 41,340 television households according to the U.S. Television Household Estimates by Nielsen Media Research for 2003-2004. 106. At this time, we are still unable to identify which stations might qualify under section 341(a) and so we will not include them in the SV List. No comments have identified any stations that would qualify for significantly viewed status pursuant to this provision. Thus, there is insufficient information in the record to make such determinations. EchoStar has asked that we require the cable systems in the affected counties to provide information about which stations were carried on cable systems as of January 1, 2004. We believe EchoStar and other interested parties should contact cable operators or stations directly. They may contact the Media Bureau on a case-by-case basis if cable systems are not cooperative with requests for such information. In terms of adding stations to the SV List, we will permit a station that qualifies for carriage under section 341(a), or a cable operator or satellite carrier that seeks to carry such a station, to petition the Commission for significantly viewed status pursuant to this provision. Such a petition must demonstrate that the station qualifies for carriage under section 341(a). 2. Section 341(b) Precludes Carriage of Significantly Viewed Signals Into Palm Springs and Bakersfield DMAs 107. Section 211 of the SHVERA created section 341(b) of the Act, which prevents a satellite carrier from carrying ``the signal of a television station into an adjacent local market that is comprised of only a portion of a county, other than to unserved households located in that county.'' 47 U.S.C. 341(b) (``Certain Markets'') provides: ``Notwithstanding any other provision of law, a satellite carrier may not carry the signal of a television station into an adjacent local market that is comprised of only a portion of a county, other than to unserved households located in that county.'' In the NPRM, we said this provision applies only to the DMAs of Palm Springs and Bakersfield, because they are the only DMAs that appear to satisfy the definition. 108. We find that section 341(b) prevents a satellite carrier from retransmitting a significantly viewed signal into the DMAs of Palm Springs and Bakersfield, CA. These are the only DMAs which satisfy the definition in section 341(b). The commenters on this issue support this conclusion. We thus adopt a new rule to implement this provision.

D. Enforcement and Notice Provisions

1. Enforcement of Section 340 109. The SHVERA, in section 340(f), created an enforcement mechanism for the new provisions regarding satellite delivery of significantly viewed signals. (See 47 U.S.C. 340(f), as added by section 202 of the SHVERA; 47 U.S.C. 339(a)(3), as amended by section 204 of

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the SHVERA (requires Commission enforcement of the new provisions concerning distant digital signal carriage pursuant to the provisions of section 340(f)). Section 340(f)(1) states that the Commission will respond to a complaint by issuing a ``cease and desist order'' and may provide for damages if requested and proven by the station filing the complaint. 47 U.S.C. 340(f)(1) provides: (1) ORDERS AND DAMAGES. Upon complaint, the Commission shall issue a cease and desist order to any satellite carrier found to have violated this section in carrying any television broadcast station. Such order may, if a complaining station requests damages: (A) provide for the award of damages to a complaining station that establishes that the violation was committed in bad faith, in an amount up to $50 per subscriber, per station, per day of the violation; and (B) provide for the award of damages to a prevailing satellite carrier if the Commission determines that the complaint was frivolous, in an amount up to $50 per subscriber alleged to be in violation, per station alleged, per day of the alleged violation. The SHVERA provided for monetary penalties up to $50 per subscriber, per station, per day if the station establishes that the satellite carrier committed the violation in bad faith, and provides that the Commission may impose similar damages on the complaining station if the Commission determines that the complaint was frivolous. 110. The statute does not define ``bad faith'' or ``frivolous,'' but in the NPRM we noted some language in a floor statement by Subcommittee Chairman Upton to suggest that a Commission finding of damages would be warranted if (1) a satellite carrier lacks a good faith belief that the carriage of the challenged signal was lawful or (2) a broadcaster seeks damages in bad faith. (See Upton Floor Statement at 1 (``If a broadcast station seeks damages, section 340(f)(1)(A) authorizes the FCC to award the station up to $50 per subscriber illegally served, per station illegally carried, per day of the violation if the FCC finds that the satellite operator did not have a good-faith belief that provision of the signal was lawful. Conversely, if a broadcaster seeks damages and the FCC finds that the broadcaster's claims were made in bad faith, section 340(f)(1)(B) allows the FCC to award the satellite operator up to $50 per subscriber, per station, per day that the broadcaster alleged the satellite operator was serving in violation of section 340.'')). Chairman Upton further states that if the broadcaster filing the complaint does not seek damages, then a finding of damages against either party by the Commission would not be appropriate. 111. In the NPRM, we tentatively concluded to address allegations of bad faith or frivolousness on a case-by-case basis. We asked whether there were particular circumstances that would generally warrant such a finding. (``For example, if the only violation of section 340 were the failure to notify all broadcast stations in a market 60 days prior to commencing carriage of the significantly viewed stations, would such conduct constitute bad faith by the satellite carrier? Would seeking damages for failure to notify one station constitute a frivolous complaint by a broadcaster?'') We did, however, tentatively conclude that it would not constitute bad faith for a satellite carrier to carry a station listed as significantly viewed in a community on the SV List during the pendency of this proceeding, even if the listing is later shown to be incorrect, provided the carrier follows the other statutory and regulatory requirements. 112. The SHVERA, in section 340(f)(2), required the Commission to issue final determinations within 180 days of the filing of a complaint concerning section 340. 47 U.S.C. 340(f)(2) provides: (2) COMMISSION DECISION. The Commission shall issue a final determination resolving a complaint brought under this subsection not later than 180 days after the submission of a complaint under this subsection. The Commission may hear witnesses if it clearly appears, based on written filings by the parties, that there is a genuine dispute about material facts. Except as provided in the preceding sentence, the Commission may issue a final ruling based on written filings by the parties. The statute permitted but did not require the Commission to hold hearings to resolve genuine disputes over material facts. In the NPRM, we tentatively concluded to use our existing procedures for Petitions for Special Relief as the procedural framework for complaints concerning significantly viewed status. We proposed that parties would follow the pleading requirements in Sec. 76.7(a)(1) and (b)(1) for petitions, which would allow us to issue a ruling on complaints. 113. Determinations of bad faith or frivolousness. Because questions of bad faith or frivolousness often turn on the specific facts of a particular case, we affirm our tentative conclusion in the NPRM and will make determinations of bad faith or frivolousness on a case-by-case basis. The commenters on this issue support our conclusion. The commenters, however, split as to the amount of guidance we should offer at this time. NAB states that it would be premature to identify specific circumstances of bad faith or frivolousness. DIRECTV and EchoStar seek confirmation about whether certain conduct would constitute bad faith. DIRECTV and EchoStar argue that we should not find bad faith where a carrier inadvertently failed to make a required notice. EchoStar also argues that complaints by broadcasters that are filed en masse without regard to the merits or that concern a third-party broadcaster should be considered frivolous. In the absence of specific facts, we cannot come to definitive conclusions regarding what circumstances warrant a finding of bad faith. Nevertheless, in response to the comments of DIRECTV and EchoStar, we will note that, as a general rule, we will find bad faith where there has been some evidence of a dishonest belief or purpose and we will not find bad faith where there has been only an honest mistake. Black's Law Dictionary characterizes bad faith as having a dishonest belief or purpose. (See e.g., 47 CFR 76.65(d) (burden of proof is on the complainant to establish a good faith violation); Review of the Section 251 Unbundling Obligations of Incumbent Local Exchange Carriers, 18 FCC Rcd 16978, 17406, para. 706 (2003) (stating that a party's gamesmanship, refusal to negotiate, or actions causing unnecessary delay may lead to a finding of bad faith)). Likewise, as a general rule, we will find a complaint to be frivolous upon evidence that a complaint was filed without regard to the merits or brought for an unreasonable purpose. Black's Law Dictionary characterizes a frivolous claim as one lacking legal basis or legal merit. (See e.g. 47 CFR 73.3592(a)(1) (stating that an application is not filed in good faith where its purpose is to delay or hinder grant of another application); William P. Johnson & Hollis P. Johnson, d/b/a Radio Carrollton, 69 FCC 2d 1139, 1150, para. 24 (1978) (explaining that a ``strike pleading'' is one filed in bad faith for the primary purpose of blocking, impeding, or delaying the grant of an application)). 114. We will affirm, however, our tentative conclusion that carriage instituted in reliance on the SV List, and otherwise in compliance with the SHVERA and the Commission's rules, should not be treated as a ``bad faith'' violation, notwithstanding a subsequent conclusion that the SV List was in error. We agree with EchoStar that such use of the SV List was contemplated by the SHVERA. Congress intended for satellite

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carriers to ``start carrying the signals on the list pending adoption of the rules.'' 115. Enforcement procedures. We will use our existing procedures for Petitions for Special Relief as the procedural framework for complaints concerning significantly viewed status, as proposed in the NPRM. Because section 340(f) expressly provides for issuance of a cease and desist order to remedy violations of the significantly viewed provisions but does not require a hearing, we are not required to follow the provisions in section 312(c) of the Communications Act. (See 47 U.S.C. 312(c) (requires service of an order to show cause and a hearing before revoking a license or issuing a cease and desist order pursuant to 47 U.S.C. 312(b))). The procedures for Petitions for Special Relief, which the Commission uses to process cable and satellite carriage complaints, as well as complaints concerning the exclusivity rules and other cable and satellite regulations, will afford the parties ample opportunity to raise and respond to allegations while ensuring that the Commission can complete action within the 180 day statutory deadline. Parties must follow the pleading requirements in Sec. 76.7(a)(1) and (b)(1) for petitions. No commenters addressed this issue. 116. We affirm our finding that sections 340(f)(3) and (4) provide that remedial actions taken by the Commission pursuant to section 340 are in addition to and have no effect upon actions taken pursuant to the copyright provisions of title 17. 47 U.S.C. 340(f)(3) and (4) provide: (3) REMEDIES IN ADDITION. The remedies under this subsection are in addition to any remedies available under title 17, United States Code. (4) NO EFFECT ON COPYRIGHT PROCEEDINGS. Any determination, action, or failure to act of the Commission under this subsection shall have no effect on any proceeding under title 17, United States Code, and shall not be introduced in evidence in any proceeding under that title. In no instance shall a Commission enforcement proceeding under this subsection be required as a predicate to the pursuit of a remedy available under title 17. The meaning of these provisions is clear that neither action nor inaction by the Commission will have any effect on the filing of a copyright infringement or other action under title 17, nor on the remedies ordered by the appropriate forum thereunder. 2. Notice Concerning Retransmission of Significantly Viewed Stations 117. Section 340(g) requires satellite carriers to provide written notice to all television broadcast stations in a market at least 60 days before retransmitting a significantly viewed signal pursuant to section 340 into that market. Section 340(g), entitled ``Notices Concerning Significantly Viewed Stations'' states that ``[e]ach satellite carrier that proposes to commence the retransmission of a station pursuant to this section in any local market shall--(1) not less than 60 days before commencing such retransmission, provide a written notice to any television broadcast station in such local market of such proposal; and (2) designate on such carrier's website all significantly viewed signals carried pursuant to section 340 and the communities in which the signals are carried.'' The provision also requires satellite carriers to list on their websites all significantly viewed signals carried pursuant to section 340. In the NPRM, we tentatively concluded that these written notices must be sent to the station's principal place of business, as listed in the Commission's database, by certified mail, return receipt requested. We also tentatively concluded that satellite carriers must publish a list on their websites that will identify all of the significantly viewed signals they are carrying, by market and community. 118. We adopt Sec. 76.54(e) to require, as proposed, that written notices must be sent by satellite carriers to a station's principal place of business, as listed in the Commission's database, by certified mail, return receipt requested. Reliance on the information in the Commission's database is consistent with other provisions of the SHVERA. (See e.g., 47 U.S.C. 338(h)(2)(c), as amended by SHVERA (requires the Commission to amend its rules to specifically require use of the Commission's consolidated database system for a television station licensee's address)). Most commenters agree with this conclusion. Licensees are encouraged to update the database to show where they want to receive notices. We agree that licensees should be mindful of their database listings; however, we disagree with DIRECTV that delivery of notices to P.O. boxes via certified mail may cause difficulties. Staff inquiry to the United States Postal Service (USPS) has verified that certified mail may be sent to a P.O. Box. Because certified mail requires a signature, a delivery notice will be left inside the P.O. Box to make the addressee aware that the item is available to be signed for at their Post Office. For more information, visit the USPS website at http://www.usps.com/. We find that requiring that the notices be sent via certified mail, return receipt requested is consistent with our rules, and ensures compliance with the statute. Certified mail will provide the carrier with proof that it mailed the notice to the address listed in the database; Return Receipt will provide the carrier with proof that the notice was delivered to the appropriate address. We disagree with DIRECTV and EchoStar that delivery via certified mail, return receipt requested is unnecessary. We find such delivery is necessary to evidence delivery of the notice. Finally, we revise our proposed rule to clarify that satellite carriers must also provide the carriage election notifications described in Sec. 76.66(d)(5)(i). In the Procedural Rules Order, we revised Sec. 76.66 of our rules to provide for carriage elections on a county basis, unified retransmission consent negotiations, and notifications by satellite carriers to local broadcasters concerning carriage of significantly viewed signals; Procedural Rules Order, 20 FCC Rcd 7780, 7784-85, para. 10-11 (2005). 119. We will also require satellite carriers to publish a list on their websites that will identify all of the significantly viewed signals they are carrying, by market and community. EchoStar has asked us to consider whether its proposed zip-code look-up function which would permit a visitor to type in a zip code to retrieve a list of the significantly viewed stations available to viewers in that zip code, would satisfy this statutory requirement. We find that it would not, unless this database would allow searchers to view a complete listing of all of EchoStar's significantly viewed signals, both by market and community. The statutory language clearly requires that a carrier post on its website all of its significantly viewed signals. We thus agree with NAB that EchoStar's proposed zip-code function would not satisfy the statute. 120. EchoStar asks that satellite carriers should have 10 days to update their website listing with any changes. We find this is consistent with the time afforded the Commission in making updates to its website SV List (47 U.S.C. 340(c)(2)). 121. The SHVERA stated that notice must be afforded to ``any television broadcast station in such local market of such proposal.'' (47 U.S.C. 340(g)(1)). Given the breadth of this language, we tentatively concluded in the NPRM that satellite carriers must provide notice to stations in the relevant market even if they are not affiliated with the same network of the significantly viewed station whose signal is being carried, regardless of whether they are carried by the satellite carrier as local stations

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pursuant to section 338. We recognized that stations seemingly unaffected by the significantly viewed status of unaffiliated stations would nonetheless be entitled to receive such notice under our rules. We affirm this tentative conclusion, based on the plain language of the statute. We received no comments on this issue.

V. Procedural Matters

A. Final Regulatory Flexibility Act Analysis

122. As required by the Regulatory Flexibility Act of 1980, as amended (RFA) an Initial Regulatory Flexibility Analysis (IRFA) was incorporated in the Notice of Proposed Rulemaking (NPRM) to this proceeding. The Commission sought written public comment on the proposals in the NPRM, including comment on the IRFA. The Commission received no comments on the IRFA. This present Final Regulatory Flexibility Analysis (FRFA) conforms to the RFA.

B. Need for, and Objectives of, the Report and Order

123. This Report and Order (R&O) adopts rules to implement section 202 of the Satellite Home Viewer Extension and Reauthorization Act of 2004 (SHVERA). Section 202 of the SHVERA created section 340 of the Communications Act and amended the copyright laws to provide satellite carriers with the authority to offer Commission-determined ``significantly viewed'' signals of out-of-market (or ``distant'') broadcast stations to subscribers. This R&O satisfies the SHVERA's mandate that the Commission adopt rules implementing section 340 within one year of the statute's enactment. For specific examples of rules adopted, see the Summary in Section III.A.5. of the R&O.

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

124. There were no comments filed that specifically addressed the rules and policies proposed in the IRFA.

D. Description and Estimate of the Number of Small Entities To Which the Proposed Rules Will Apply

1. Entities Directly Affected by Proposed Rules 125. 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 generally defines the term ``small entity'' as having the same meaning as the terms ``small business,'' small organization,'' and ``small government jurisdiction.'' In addition, the term ``small business'' has the same meaning as the term ``small business concern'' under the Small Business Act. A small business concern is one which: (1) Is independently owned and operated; (2) is not dominant in its field of operation; and (3) satisfies any additional criteria established by the Small Business Administration (SBA). 126. The rules adopted by this R&O, as required by statute, will permit the distribution of Commission-determined ``significantly viewed'' signals by statutorily defined ``satellite carriers'' to consumers. Therefore, ``satellite carriers,'' which includes Direct Broadcast Satellite (DBS), will be directly and primarily affected by the rules adopted herein. In addition, the rules adopted herein will also directly affect television stations, which may be carried via satellite under the SHVERA if determined to be significantly viewed, and cable operators, which would share some of the new and revised rules with satellite carriers. We also believe that private cable operators (PCOs), also known as satellite master antenna television (SMATV) systems, may be directly affected because PCOs often use DBS video programming as part of their service package to subscribers. Therefore, in this FRFA, we consider the impact of the rules on small television broadcast stations, small cable and satellite operators and other small entities. A description of such small entities, as well as an estimate of the number of such small entities, is provided below. 127. Satellite Carriers. The SHVERA defined the term ``satellite carrier'' by reference to the definition in the copyright title 17. This definition includes entities providing services as described in 17 U.S.C. 119(d)(6) using the facilities of a satellite or satellite service licensed under part 25 of the Commission's rules to operate in Direct Broadcast Satellite (DBS) or Fixed-Satellite Service (FSS) frequencies. As a general practice, not mandated by any regulation, DBS licensees usually own and operate their own satellite facilities as well as package the programming they offer to their subscribers. In contrast, satellite carriers using FSS facilities often lease capacity from another entity that is licensed to operate the satellite used to provide service to subscribers. These entities package their own programming and may or may not be Commission licensees themselves. In addition, a third situation may include an entity using a non-U.S. licensed satellite to provide programming to subscribers in the United States pursuant to a blanket earth station license. In the Order, we conclude that the definition of ``satellite carrier'' would include all three types of entities described above. 128. Direct Broadcast Satellite (DBS) Service. DBS service is a nationally distributed subscription service that delivers video and audio programming via satellite to a small parabolic ``dish'' antenna at the subscriber's location. Because DBS provides subscription services, DBS falls within the SBA-recognized definition of Cable and Other Program Distribution. This definition provides that a small entity is one with $12.5 million or less in annual receipts. Currently, only four operators hold licenses to provide DBS service, which requires a great investment of capital for operation. All four currently offer subscription services. Two of these four DBS operators, DIRECTV and EchoStar Communications Corporation (EchoStar), report annual revenues that are in excess of the threshold for a small business. A third operator, Rainbow DBS, is a subsidiary of Cablevision's Rainbow Network, which also reports annual revenues in excess of $12.5 million, and thus does not qualify as a small business. The fourth DBS operator, Dominion Video Satellite, Inc. (Dominion), offers religious (Christian) programming and does not report its annual receipts. The Commission does not know of any source which provides this information and, thus, we have no way of confirming whether Dominion qualifies as a small business. Because DBS service requires significant capital, we believe it is unlikely that a small entity as defined by the SBA would have the financial wherewithal to become a DBS licensee. Nevertheless, given the absence of specific data on this point, we acknowledge the possibility that there are entrants in this field that may not yet have generated $12.5 million in annual receipts, and therefore may be categorized as a small business, if independently owned and operated. 129. Fixed-Satellite Service (FSS). The FSS is a radiocommunication service between earth stations at a specified fixed point or between any fixed point within specified areas and one or more satellites. The FSS, which utilizes many earth stations that communicate with one or more space stations, may be used to provide subscription video service. Therefore, to the extent FSS frequencies are used to provide subscription services, FSS falls within the SBA-recognized definition of Cable and Other Program Distribution, which includes all such companies generating $12.5 million or less in revenue

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annually. Although a number of entities are licensed in the FSS, not all such licensees use FSS frequencies to provide subscription services. Two of the DBS licensees (EchoStar and DIRECTV) have indicated interest in using FSS frequencies to broadcast signals to subscribers. It is possible that other entities could similarly use FSS frequencies, although we are not aware of any entities that might do so. 130. Cable and Other Program Distribution. Cable system operators fall within the SBA-recognized definition of Cable and Other Program Distribution, which includes all such companies generating $12.5 million or less in revenue annually. According to the Census Bureau data for 1997, there were a total of 1,311 firms that operated for the entire year in the category of Cable and Other Program Distribution. Of this total, 1,180 firms had annual receipts of under $10 million and an additional 52 firms had receipts of $10 million or more, but less than $25 million. In addition, limited preliminary census data for 2002 indicates that the total number of Cable and Other Program Distribution entities increased approximately 46 percent between 1997 and 2002. The Commission estimates that the majority of providers in this category of Cable and Other Program Distribution are small businesses. 131. Cable System Operators (Rate Regulation Standard). 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 400,000 or fewer subscribers nationwide. We last estimated that there were 1,439 cable operators that qualified as small cable companies at the end of 1995. Since then, some of those companies may have grown to serve more than 400,000 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 1,439 small entity cable system operators that may be affected by the rules adopted in this Order. 132. Cable System Operators (Telecom Act Standard). The Communications Act of 1934, as amended, also contains a size standard for a ``small cable operator,'' which is ``a cable operator that, directly or through an affiliate, serves in the aggregate fewer than one percent of all subscribers in the United States and is not affiliated with any entity or entities whose gross annual revenues in the aggregate exceed $250,000,000.'' The Commission has determined that there are 67.7 million subscribers in the United States. Therefore, an operator serving fewer than 677,000 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 estimate that the number of cable operators serving 677,000 subscribers or less totals approximately 1,450. The Commission neither requests nor collects information on whether cable system operators are affiliated with entities whose gross annual revenues exceed $250 million, and therefore is unable at this time to estimate more accurately the number of cable system operators that would qualify as small cable operators under the size standard contained in the Communications Act. 133. Television Broadcasting. The SBA defines a television broadcasting station as a small business if such station has no more than $12 million in annual receipts. Business concerns included in this industry are those ``primarily engaged in broadcasting images together with sound.'' According to Commission staff review of the BIA Publications, Inc. Master Access Television Analyzer Database (BIA) on October 18, 2005, about 873 of the 1,307 commercial television stations (or about 67 percent) have revenues of $12 million or less and thus qualify as small entities under the SBA definition. We note, however, that, in assessing whether a business concern qualifies as small under the above definition, business (control) affiliations must be included. Our estimate, therefore, likely overstates the number of small entities that might be affected by our action, because the revenue figure on which it is based does not include or aggregate revenues from affiliated companies. There are also approximately 2,098 licensed low power television (LPTV) stations, 4,491 licensed TV translators, 598 licensed Class A stations, and 11 TV booster stations. Given the nature of these services, we will presume that these licensees qualify as small entities under the SBA definition. 134. In addition, an element of the definition of ``small business'' is that the entity not be dominant in its field of operation. We are unable at this time to define or quantify the criteria that would establish whether a specific television station is dominant in its field of operation. Accordingly, the estimate of small businesses to which rules may apply do not exclude any television station from the definition of a small business on this basis and are therefore over-inclusive to that extent. Also as noted, an additional element of the definition of ``small business'' is that the entity must be independently owned and operated. We note that it is difficult at times to assess these criteria in the context of media entities and our estimates of small businesses to which they apply may be over-inclusive to this extent. 135. Private Cable Operators (PCOs) also known as Satellite Master Antenna Television (SMATV) Systems. PCOs, also known as SMATV systems or private communication operators, are video distribution facilities that use closed transmission paths without using any public right-of-way. PCOs acquire video programming and distribute it via terrestrial wiring in urban and suburban multiple dwelling units such as apartments and condominiums, and commercial multiple tenant units such as hotels and office buildings. The SBA definition of small entities for Cable and Other Program Distribution Services includes PCOs and, thus, small entities are defined as all such companies generating $12.5 million or less in annual receipts. Currently, there are approximately 135 members in the Independent Multi-Family Communications Council (IMCC), the trade association that represents PCOs. Individual PCOs often serve approximately 3,000-4,000 subscribers, but the larger operations serve as many as 15,000-55,000 subscribers. In total, PCOs currently serve approximately 1.1 million subscribers. Because these operators are not rate regulated, they are not required to file financial data with the Commission. Furthermore, we are not aware of any privately published financial information regarding these operators. Based on the estimated number of operators and the estimated number of units served by the largest ten PCOs, we believe that a substantial number of PCOs qualify as small entities. 2. Entities Not Directly Affected by Proposed Rules 136. Because the SHVERA authorized carriage of significantly viewed stations only by ``satellite carriers,'' we find that our rules implementing the SHVERA will not directly affect other multichannel video programming distributors (MVPDs), such as home satellite dish (HSD) services, multipoint distribution services (MDS)/multichannel multipoint distribution service (MMDS), Instructional Television Fixed Service (ITFS), local multipoint distribution service (LMDS) and open video systems (OVS). In the NPRM, we invited comment on our tentative conclusion. We received no comments on this issue. We confirm our

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conclusion that these entities fall outside the scope of this FRFA. Accordingly, we do not discuss these entities, which were listed in the IRFA.

E. Description of Projected Reporting, Record Keeping and Other Compliance Requirements

137. The SHVERA was enacted to permit satellite carriage of Commission-determined ``significantly-viewed'' signals of out-of-market broadcast stations to consumers. The SHVERA allowed satellite carriers and broadcast stations to obtain ``significantly-viewed'' status for satellite carriage pursuant to section 340 of the Act. Therefore, it does not impose any mandatory reporting, recordkeeping and other compliance requirements, unless a satellite carrier and station choose to take advantage of the SHVERA's provisions. 138. The rules adopted which may directly affect reporting, recordkeeping and other compliance requirements are described below. This Order requires that satellite carriers and broadcast stations seeking a ``significantly viewed'' designation for a station and the community containing such station pursuant to section 340 must follow the same petition process now in place for cable operators (and broadcast stations), as required by Sec. Sec. 76.5, 76.7 and 76.54 of the Commission's rules. Therefore, entities seeking a ``significantly viewed'' designation must file a petition pursuant to the pleading requirements in Sec. 76.7(a)(1) and use the method described in Sec. 76.54 to demonstrate that the station is significantly viewed as defined in Sec. 76.5(i). Parties filing such petitions must also comply with the existing notification requirements of Sec. 76.54(c). 139. Furthermore, this Order will (1) create a limited right for a station or distributor to assert non-duplication and exclusivity rights with respect to a station carried by a satellite carrier as significantly viewed; (2) allow that significantly viewed station to assert the significantly viewed exception, just as a station would with respect to cable carriage; and (3) allow the station or distributor asserting exclusivity to petition the Commission for a waiver from the exception. The assertion of these rights will require affected parties to file Sec. 76.7 petitions. 140. This Order also will rely on the Commission's existing Sec. 76.7 petition process as the procedural framework for the filing of complaints filed pursuant to new section 340. Thus, interested parties that wish to report section 340 violations must file a Petition for Special Relief under Sec. 76.7. 141. As required by section 340(g)(1), this Order adds a new rule, Sec. 76.54(e), to require satellite carriers seeking to retransmit significantly viewed signals pursuant to new section 340 to provide 60 days written notice to all stations located in the local market. As required by section 340(g)(2), this Order also adds a new rule, Sec. 76.54(f), to require satellite carriers retransmitting significantly viewed stations pursuant to new section 340 to publish a list of all such stations on their website. These proposed rules do not impose any burden on broadcast stations, but rather are intended to protect the rights of broadcast stations, including small stations.

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