******************************************************** NOTICE ******************************************************** This document was converted from WordPerfect or Word to ASCII Text format. Content from the original version of the document such as headers, footers, footnotes, endnotes, graphics, and page numbers will not show up in this text version. All text attributes such as bold, italic, underlining, etc. from the original document will not show up in this text version. Features of the original document layout such as columns, tables, line and letter spacing, pagination, and margins will not be preserved in the text version. If you need the complete document, download the WordPerfect version or Adobe Acrobat version, if available. ***************************************************************** Appendix D Initial Regulatory Flexibility Act Analysis 1. As required by the Regulatory Flexibility Act ("RFA"), the Commission has prepared this Initial Regulatory Flexibility Analysis ("IRFA") of the possible significant economic impact on small entities by the possible policies and rules that would result from this Notice of Proposed Rulemaking ("Notice"). Written public comments are requested on this IRFA. Comments must be identified as responses to the IRFA and must be filed by the deadlines for comments on the Notice provided above in paragraph 40. The Commission will send a copy of the Notice, including this IRFA, to the Chief Counsel for Advocacy of the Small Business Administration. In addition, the Notice and IRFA (or summaries thereof) will be published in the Federal Register. 2. Need for, and Objectives of, the Proposed Rule Changes. On November 29, 1999, the Satellite Home Viewer Improvement Act of 1999 was enacted ("SHVIA"). Section 1008 of the SHVIA creates a new Section 339 of the Communications Act entitled "Carriage of Distant Television Stations by Satellite Carriers." The Notice discusses adoption of implementing regulations relating to the cable rules concerning network nonduplication, syndicated program exclusivity, and sports broadcasts to satellite carriers. Section 339(b) directs the Commission to apply these three cable rules to satellite carriers' retransmission of nationally distributed superstations to subscribers. The Commission is also to apply the sports broadcasts rule to satellite carrier's retransmission of network stations to subscribers, but only to the extent technically feasible and not economically prohibitive. 3. Legal Basis. The authority for the action proposed in this rulemaking is contained in Sections 1, 4(i) and (j), 339 of the Communications Act of 1934, as amended, 47 U.S.C.  151, 154(i) and (j), and 339. 4. Description and Estimate of the Number of Small Entities To Which the Proposed Rules Will Apply. The IRFA 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 proposed rules. The IRFA defines the term "small entity" as having the same meaning as the terms "small business," "small organization," and "small business concern" under Section 3 of the Small Business Act. Under the Small Business Act, a small business concern is one which: (1) is independently owned and operated; (2) is not dominant in its field of operation; and (3) satisfies any additional criteria established by the Small Business Administration ("SBA"). The rules we may adopt as a result of the Notice will affect television station licensees, satellite carriers and video program distributors and delivery services. 5. Television Stations. The proposed rules and policies will apply to television broadcasting licensees. The Small Business Administration defines a television broadcasting station that has no more than $10.5 million in annual receipts as a small business. Television broadcasting stations consist of establishments primarily engaged in broadcasting visual programs by television to the public, except cable and other pay television services. Included in this industry are commercial, religious, educational, and other television stations. Also included are establishments primarily engaged in television broadcasting and which produce taped television program materials. Separate establishments primarily engaged in producing taped television program materials are classified under another SIC number. There were 1,509 television stations operating in the nation in 1992. That number has remained fairly constant as indicated by the approximately 1,579 operating full power television broadcasting stations in the nation as of May 31, 1998. 6. Thus, the proposed rules will affect many of the approximately 1,579 television stations; approximately 1,200 of those stations are considered small businesses. These estimates may overstate the number of small entities since the revenue figures on which they are based do not include or aggregate revenues from non-television affiliated companies. 7. In addition to owners of operating television stations, any entity that seeks or desires to obtain a television broadcast license may be affected by the proposals contained in this item. The number of entities that may seek to obtain a television broadcast license is unknown. We invite comment as to such number. 8. Small Multiple Video Program Distributors ("MVPDs"): SBA has developed a definition of small entities for cable and other pay television services, which includes all such companies generating $11 million or less in annual receipts. This definition includes cable system operators, direct broadcast satellite services, multipoint distribution systems, satellite master antenna systems and subscription television services. According to the Census Bureau data from 1992, there were 1,758 total cable and other pay television services and 1,423 had less than $11 million in revenues. We address below services individually to provide a more precise estimate of small entities. 9. Direct Broadcast Satellite ("DBS"): There are four licenses of DBS services under Part 100 of the Commission's Rules. Three of those licensees are currently operational. Two of the licensees which are operational have annual revenues which may be in excess of the threshold for a small business. The Commission, however, does not collect annual revenue data for DBS and, therefore, is unable to ascertain the number of small DBS licensees that could be impacted by these proposed rules. DBS service requires a great investment of capital for operation, and we acknowledge that there are entrants in this field that may not yet have generated $11 million in annual receipts, and therefore may be categorized as a small business, if independently owned and operated. 10. Home Satellite Delivery ("HSD"): The market for HSD service is difficult to quantify. Indeed, the service itself bears little resemblance to other MVPDs. HSD owners have access to more than 265 channels of programming placed on C-band satellites by programmers for receipt and distribution by MVPDs, of which 115 channels are scrambled and approximately 150 are unscrambled. HSD owners can watch unscrambled channels without paying a subscription fee. To receive scrambled channels, however, an HSD owner must purchase an integrated receiver-decoder from an equipment dealer and pay a subscription fee to an HSD programming package. Thus, HSD users include: (1) viewers who subscribe to a packaged programming service, which affords them access to most of the same programming provided to subscribers of other MVPDs; (2) viewers who receive only non-subscription programming; and (3) viewers who receive satellite programming services illegally without subscribing. Because scrambled packages of programming are most specifically intended for retail consumers, these are the services most relevant to this discussion. 11. According to the most recently available information, there are approximately 30 program packages nationwide offering packages of scrambled programming to retail consumers. These program packages provide subscriptions to approximately 2,314,900 subscribers nationwide. This is an average of about 77,163 subscribers per program package. This is substantially smaller than the 400,000 subscribers used in the Commission's definition of a small MSO. Furthermore, because this is an average, it is likely that some program packages may be substantially smaller. 12. Entities which may be indirectly affected by the rules we may adopt as a result of the Notice are cable television systems. 13. Cable Systems: The Commission has developed, with SBA's approval, our own definition of a small cable system operator for the purposes of rate regulation. Under the Commission's rules, a "small cable company" is one serving fewer than 400,000 subscribers nationwide. Based on our most recent information, we estimate that there were 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 over 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 systems operators that may be affected by the decisions and rules emanating out of the Notice. 14. The Communications Act also contains a definition of a small cable system operator, which is "a cable operator that, directly or through an affiliate, serves in the aggregate fewer than 1% of all subscribers in the United States and is not affiliate with any entity or entities whose gross annual revenues in the aggregate exceed $250,000,000." The Commission has determined that there are 61,700,000 subscribers in the United States. Therefore, an operator serving fewer than 617,000 subscribers shall be deemed a small operator, if its annual revenues, when combined with the total annual revenues of all of its affiliates, do not exceed $250 million in the aggregate. Based on available data, we find that the number of cable operators serving 617,000 subscribers or less totals approximately 1,450. Although it seems certain that some of these cable system operators are affiliated with entities whose gross annual revenues exceed $250,000,000, we are unable at this time to estimate with greater precision the number of cable system operators that would qualify as small cable operators under the definition in the Communications Act. It should be further noted that recent industry estimates project that there will be a total of 64,000,000 subscribers and we have based our fee revenue estimates on that figure. 14. Description of Projected Reporting, Recordkeeping and other Compliance Requirements. In order to implement Section 1008 of the Satellite Home Viewer Improvement Act of 1999, which creates a new Section 339 of the Communications Act, the Commission has proposed to add new rules and modify others, as the provisions at issue previously were applicable only to cable. We have yet to determine whether to amend existing provisions of the Commission's rules, or to adopt some other regulatory framework or procedures. There are compliance requirements involving the nonduplication protection, syndicated exclusivity, and sports blackout rules. To exercise nonduplication protection and syndicated exclusivity protection, the rights holder to specific network or syndicated programming will have to notify and report to the satellite carrier, and do so within 60 days of the signing of a contract affording exclusivity rights. Such notification and reporting is required to take place within a shorter time period in the sports blackout context. In certain instances, staff may have to dedicate time and effort to monitoring and ensuring that notifications are properly given in a timely manner to satellite carriers. 15. There may be costs associated with hiring accounting or engineering personnel, as there may be instances where entities may have to provide detailed information relating to such aspects of their particular operations. Specifically, costs here may relate possibly to conducting engineering studies to accurately determine zones of protection. Further, there will likely be costs in equipment necessary to carry out deletions. The Commission recognized the significant costs involved in implementing deletions and exempted systems having 1,000 or fewer subscribers. 16. In terms of record keeping, entities may have to keep a record of the contractual terms and agreements and may be required to maintain such information within their business environment. At this time, small businesses might not be impacted differently in any of the above, but we seek comment on these matters. 17. Steps Taken to Minimize Significant Impact on Small Entities, and Significant Alternatives Considered. The RFA requires an agency to describe any significant alternatives that it has considered in reaching its proposed approach, which may include the following four alternatives: (1) the establishment of differing compliance or reporting requirements or timetables that take into account the resources available to small entities; (2) the clarification, consolidation, or simplification of compliance or reporting requirements under the rule for small entities; (3) the use of performance, rather than design, standards; and (4) an exemption from coverage of the rule, or any part thereof, for small entities. 18. As indicated, the provisions of Section 339 refer to superstations and network stations, in terms of television broadcast stations. This legislation, however, applies to small entities and large entities equally. The Commission acknowledges that consideration should be given to possible differences in size of entities, as evidenced by the fact that there are certain exemptions in the application of these rules. Overall, at this time, small entities are not treated differently and might not be impacted differently, but we seek comment. 19. Federal Rules Which Duplicate, Overlap, or Conflict with the Commission's Proposals. None.