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If you need the complete document, download the WordPerfect version or Adobe Acrobat version, if available. ***************************************************************** Before the Federal Communications Commission Washington, D.C. 20554 In the Matter of) ) Revisions to Part 21 of the ) CC Docket No. 86-179 Commission's Rules regarding the ) Multipoint Distribution Service ) SECOND REPORT AND ORDER Adopted: April 14, 1998 Released: May 4, 1998 By the Commission: INTRODUCTION 1. Petitions for Review of the Commission's Report and Order in this proceeding were filed with the United States Court of Appeals for the District of Columbia Circuit ("D.C. Circuit"), and then remanded to the Commission, at our request, for consideration of the impact of two subsequently issued D.C. Circuit opinions, National Association for Better Broadcasting v. FCC, 849 F.2d 665 (D.C. Cir. 1988) ("NABB II") and Telecommunications Research and Action Center v. FCC, 836 F.2d 1349 (D.C. Cir. 1988) ("TRAC"). The issue on review was whether, in light of the D.C. Circuit decisions in NABB II and TRAC, the Commission was correct in treating the Multipoint Distribution Service ("MDS") as a non-broadcast service, and thus not subject to certain statutory broadcast obligations. Consistent with NABB II and TRAC, we will continue to classify subscription MDS as a non-broadcast service. We will, however, for the reasons stated below, defer the classification of non-subscription MDS, and will require prior notification and Commission approval before MDS service can be offered on a non- subscription basis. BACKGROUND 2. The Report and Order in this proceeding allowed MDS licensees to provide service on either a common carrier or non-common carrier basis. In the Report and Order, the Commission also determined that, given its earlier decision in another proceeding that subscription video services are non-broadcast, MDS, which is provided on a subscription basis, is not subject to the broadcast obligations contained in Title III. The Commission did not, however, consider the possibility that MDS might also be offered on a non-subscription basis. 3. The National Association for Better Broadcasting and the Telecommunications Research and Action Center (collectively, "Petitioners") jointly filed in the D.C. Circuit a petition for review of the Report and Order, seeking reversal of the portions of the Report and Order which indicated that MDS transmissions are not broadcasting as defined in Section 3 of the Communications Act, 47 U.S.C.  153, and thus not subject to the broadcast obligations contained in Title III of the Act. The D.C. Circuit held the petitions in abeyance pending its decisions in TRAC and NABB II, which involved related issues. The D.C. Circuit subsequently granted the Commission's unopposed request for remand of the present proceeding so that further consideration could be given to the issues raised by Petitioners in light of the NABB II and TRAC cases. 4. In NABB II, the court affirmed a Commission decision holding that subscription video services are not broadcasting services subject to Title III broadcasting obligations. In TRAC, however, the D.C. Circuit remanded to the Commission a decision that failed to determine the proper regulatory classification for non-subscription service offered on Instructional Television Fixed Service ("ITFS") excess capacity. The court in TRAC noted that the appropriate classification for subscription video services was the subject of a separate proceeding. The court expressed concern, however, about possible statutory violations that could result if ITFS excess capacity was offered on a non-subscription basis, without the Commission's knowledge, and without the Commission having made any prior determination as to whether broadcasting obligations applied. 5. Given these concerns, the court in TRAC remanded the ITFS rulemaking and ordered the Commission "to make the basic classification determination or to explain why it should not have to at this time." The court further stated that if the Commission continued to defer the classification question, "it should explain what useful information it expects to learn in any interim period and at a minimum, consider requiring licensees to inform the agency of any plans to provide [excess capacity] ITFS on a non-subscription basis." In response to the TRAC decision, the Commission issued an order that continued to defer classification of non-subscription service on ITFS excess capacity, but required prior Commission notification and approval prior to the offering of non-subscription excess capacity services on ITFS facilities. No petitions for review of that decision were filed. DISCUSSION 6. Consistent with the D.C. Circuit's decision in NABB II to affirm the Commission's determination that subscription video services are nonbroadcasting services, we will continue to classify subscription MDS as a non-broadcast service. Furthermore, consistent with the D.C. Circuit's decision in TRAC, we will continue to defer classification of non-subscription MDS service because we believe that it is appropriate to do so at this time. We are unaware, to date, of any instances where MDS has been offered on other than a subscription basis. We further note that MDS service providers, like ITFS licensees, have been authorized to provide point-to- multipoint services, not broadcasting services, in keeping with the point-to-point nature of the service. Additionally, the MDS industry is currently experiencing new growth and development. Following a period of several years in which a freeze was placed on the filing of applications for new MDS facilities, the Commission has completed its auction of the remaining available MDS channels, and has processed nearly all of the station applications filed by auction winners. In addition, MDS operators, including auction winners and existing licensees, are now engaging in numerous transactions, including transfers and assignments of MDS licenses. The MDS industry has also recently attracted new participants, including telephone companies, which have provided additional capital needed for further expansion. Technical improvements, including digital compression, may enhance the ability of MDS to compete in the multichannel video programming marketplace. 7. Given these significant developments now occurring in the MDS industry, the Commission believes that prematurely classifying non-subscription MDS, a service that does not yet exist and that may never be proposed, would be inadvisable. Instead, the Commission believes that proper classification of non-subscription MDS as either broadcast or non-broadcast should be done in the context of an actual service proposal, so the Commission will have "concrete information regarding its precise nature and method of operation." As we stated in the order deferring classification of non-subscription service offered on ITFS excess capacity: It remains apparent that any such service, which has yet to define itself, can be classified more appropriately, more capably, and more efficiently with concrete information regarding its precise nature and method of operation. Accordingly, no attempt will be made to classify here by Rule Making services which do not exist at this time, which may never exist, and whose actual permutations cannot now be predicted. Additionally, we also noted that, unlike subscription services, "the classification of non- subscription services may require case-by-case examination of a multiplicity of facts and circumstances surrounding the transmissions to determine the transmitter's intent or other relevant classification factor(s)." 8. To avoid the possibility of statutory or rule violations that could result from MDS licensees offering non-subscription MDS service, we are, consistent with the D.C. Circuit's decision in TRAC (and similar to our ITFS decision on remand), amending our rules to require prior notification, and Commission approval, before MDS service may be offered on a non- subscription basis. This notification and approval requirement will allow the Commission to determine whether a proposed non-subscription MDS service is a broadcast service before such service commences. An indicated above, we are not aware of any instances in which MDS service has been offered on a non-subscription basis. In the event that such service is currently being offered, we require that the Commission be notified within 30 days from the effective date of this order. Such notification shall include full details regarding the non-subscription operation and service offerings. PROCEDURAL MATTER 9. Final Regulatory Flexibility Act Certification. Pursuant to the Regulatory Flexibility Act of 1980, as amended ("RFA"), it is hereby certified that the notification requirement for non-subscription MDS service adopted herein will not have a significant economic impact on a substantial number of small entities. As indicated above in  6-8, we are not aware of any instances in which MDS service has been offered on a non-subscription basis. Thus, the only impact of the notification requirement will be the submission of data concerning non-subscription MDS service from the limited number (if any) of MDS applicants and licensees that may one day choose to develop and provide such service. 10. The Commission will send a copy of this final certification, along with this Second Report and Order, in a report to Congress pursuant to the Small Business Regulatory Enforcement Fairness Act of 1996, 5 U.S.C.  801(a)(1)(A), and to the Chief Counsel for Advocacy of the Small Business Administration, 5 U.S.C.  605(b). A copy of this certification will also be published in the Federal Register. ORDERING CLAUSES 12. Accordingly, IT IS ORDERED, That pursuant to the authority of Sections 4(i) and 303(r) of the Communications Act of 1934, as amended, 47 U.S.C.  154(i) and 393(r), this Second Report and Order is adopted, and Part 21 of the Commission's Rules ARE AMENDED as set forth in the attached Appendix. 13. IT IS FURTHER ORDERED, That the rule amendment set forth in the Appendix WILL BECOME EFFECTIVE 70 days after publication in the Federal Register, following approval by the Office of Management and Budget, unless a notice is published in the Federal Register stating otherwise. 14. IT IS FURTHER ORDERED, That the Commission's Office of Public Affairs, Reference Operations Division, SHALL SEND a copy of this Second Report and Order, including the Final Regulatory Flexibility Act Certification, to the Chief Counsel for Advocacy of the Small Business Administration, in accordance with Section 605(b) of the Regulatory Flexibility Act, 5 U.S.C.  601 et seq. 15. IT IS FURTHER ORDERED, That CC Docket No. 86-179 IS TERMINATED. FEDERAL COMMUNICATIONS COMMISSION Magalie Roman Salas Secretary APPENDIX I. Part 21 of Chapter 1 of Title 47 of the Code of Federal Regulations is amended as follows: PART 21 - DOMESTIC PUBLIC FIXED RADIO SERVICES 1. The authority citation for Part 21 continues to read as follows: Authority: Secs. 1, 2, 4, 201-205, 208, 215, 218, 303, 307, 313, 314, 403, 404, 410, 602; 48 Stat. 1064, 1066, 1070-1073, 1076, 1077, 1080, 1082, 1083, 1087, 1094, 1098, 1102, as amended; 47 U.S.C. 151, 154, 201-205, 208, 215, 218, 303, 307, 313, 314, 403, 602; 47 U.S.C. 552, 554. II. The following section is added as an amendment to Part 21 of Chapter 1 of Title 47 of the Code of Federal Regulations:  21.940 Non-subscription MDS service. The Commission must be notified, and prior Commission approval obtained, before Multipoint Distribution Service or Multichannel Multipoint Distribution Service may be provided on a non-subscription basis.