Implementation of Section 203 of the Satellite Television Extension and Localism Act of 2010 (STELA); Amendments to Section 340 of the Communications Act

AGENCY:

Federal Communications Commission.

ACTION:

Final rule.

SUMMARY:

In this document, the Commission modifies its satellite television “significantly viewed” rules to implement Section 203 of the Satellite Television Extension and Localism Act of 2010 (STELA). Section 203 of the STELA amends Section 340 of the Communications Act, which gives satellite carriers the authority to offer out-of-market but “significantly viewed” broadcast television network stations as part of their local service to subscribers. The STELA requires the Commission to promulgate final rules in this proceeding on or before November 24, 2010.

DATES:

Effective December 29, 2010.

FOR FURTHER INFORMATION CONTACT:

Evan Baranoff, Evan.Baranoff@fcc.gov, of the Media Bureau, Policy Division, (202) 418-2120.

SUPPLEMENTARY INFORMATION:

This is a summary of the Commission's Report and Order and Order on Reconsideration (Order), FCC 10-193, adopted on Nov. 22, 2010, and released on Nov. 23, 2010. The full text of this document is available electronically via ECFS at http://fjallfoss.fcc.gov/ecfs/ or may be downloaded at http://hraunfoss.fcc.gov/edocs-public/attachmatch/FCC-10-130.pdf . (Documents will be available electronically in ASCII, Word 97, and/or Adobe Acrobat.) This document is also available for public inspection and copying during regular business hours in the FCC Reference Center, Federal Communications Commission, 445 12th Street, SW., CY-A257, Washington, DC 20554. The complete text may be purchased from the Commission's copy contractor, 445 12th Street, SW., Room CY-B402, Washington, DC 20554. Alternative formats are available for people with disabilities (Braille, large print, electronic files, audio format), by sending an e-mail to fcc504@fcc.gov or calling the Commission's Consumer and Governmental Affairs Bureau at (202) 418-0530 (voice), (202) 418-0432 (TTY).

Summary of the Report and Order and Order on Reconsideration

I. Introduction

1. With this Report and Order (“R&O”), we modify our satellite television “significantly viewed” rules to implement Section 203 of the Satellite Television Extension and Localism Act of 2010 (STELA). Section 203 of the STELA amends Section 340 of the Communications Act of 1934 (“Communications Act” or “Act”), which gives satellite carriers the authority to offer out-of-market but “significantly viewed” broadcast television stations as part of their local service to subscribers. We initiated this proceeding on July 23, 2010 by issuing a Notice of Proposed Rulemaking (“NPRM”). We received 20 comments and reply comments (from 17 parties) in response to our NPRM. With this R&O, we satisfy the STELA's mandate that the Commission promulgate final rules in this proceeding on or before November 24, 2010. In addition, in this Order on Reconsideration, we dispose of the pending petition for reconsideration of the 2005 SHVERA Significantly Viewed Report and Order.

2. Significantly viewed (“SV”) stations are television broadcast stations that the Commission has determined have sufficient over-the-air (i.e., non-cable or non-satellite) viewing to be considered local for certain purposes and so are not constrained by the boundary of the stations' local market or Designated Market Area (“DMA”). The individual TV station, or cable operator or satellite carrier that seeks to carry the station, may petition the Commission to obtain “significantly viewed” status for the station, and placement on the SV List. The designation of “significantly viewed” status allows a station assigned to one market to be treated as a “local” station with respect to a particular cable or satellite community in another market, and, thus, enables it to be carried by cable or satellite in that community in the other market. In general, SV status applies to only some communities or counties in a DMA and does not apply throughout an entire DMA. In contrast, the “local” station designation based on Nielsen's assignment to a particular DMA applies to the entire market. Whereas cable operators have had carriage rights for SV stations since 1972, satellite carriers have had such authority only since 2004 and may only retransmit SV network stations to “eligible” satellite subscribers. These satellite subscriber eligibility restrictions are intended to prevent satellite carriers from favoring an SV network station over the in-market (local) station affiliated with the same network.

3. Section 203 of the STELA changes the restrictions on subscriber eligibility to receive SV network stations from satellite carriers. To implement the STELA, we revise our satellite subscriber eligibility rules as follows:

• We find that the local service requirement in amended Section 340(b)(1) requires only that a satellite subscriber receive local-into-local satellite service as a precondition for that subscriber to receive SV stations. We find that the statute no longer requires a satellite subscriber to receive the specific local network station as a precondition for that subscriber to receive an SV station affiliated with the same network.
• We find that amended Section 340(b)(2) no longer requires that a satellite carrier offer “equivalent bandwidth” to the local and SV network station pair and instead imposes an “HD format” requirement. We find that the HD format requirement in amended Section 340(b)(2) requires that, in order to carry an SV station in high definition (HD) format, a satellite carrier must carry the local station affiliated with the same network in HD whenever such format is available from the local station.

 ○ The HD format requirement applies only where a satellite carrier retransmits to a subscriber the SV station in HD format. This requirement does not restrict a satellite carrier from retransmitting to a subscriber the SV station in standard definition (SD) format.

 ○ For purposes of the HD format requirement, the corresponding local (in-market) station will be considered “available” to the satellite carrier when the station: (1) Elects mandatory carriage or grants retransmission consent; (2) provides a good quality signal to the satellite carrier as required by Section 76.66(g) of the rules; and (3) is otherwise in compliance with the “good faith negotiation” and carriage provisions set forth in Sections 76.65 and 76.66 of the rules. However, the HD signal of the corresponding local station will be deemed “available” despite failure to reach agreement on the terms of retransmission if the satellite carrier is not in compliance with Section 76.65.

 ○ The HD format requirement requires satellite carriage of a secondary HD stream of a local station's multicast signal if that stream is affiliated with the same network as an SV station retransmitted in HD to satellite subscribers in the local market.

• We modify the Commission's 2005 interpretation of the Section 340(b)(3) exception, which is unchanged by the STELA, and find that, in the context of the newly revised statute, this exception permits a satellite carrier to offer an SV network station to a subscriber when there is no local affiliate of the same network present in the local market, even if the subscriber does not receive local-into-local service.

II. Background

4. In May 2010, Congress passed and the President signed the STELA, which amends the 1988 copyright laws and the Communications Act of 1934 to “modernize, improve and simplify the compulsory copyright licenses governing the retransmission of distant and local television signals by cable and satellite television operators.” Congress intended for the STELA to increase competition between cable and satellite providers, increase service to satellite subscribers, and update the law to reflect the completion of the digital television (DTV) transition. Notably, the STELA reauthorizes the statutory copyright license for satellite carriage of SV stations and moves that license from the distant signal statutory copyright license provisions to the local signal statutory copyright license provisions.

5. The STELA is the fourth in a series of statutes that address satellite carriage of television broadcast stations. In the 1988 Satellite Home Viewer Act (“1988 SHVA”), Congress established a statutory copyright license to enable satellite carriers to offer subscribers who could not receive the over-the-air signal of a broadcast station access to broadcast programming via satellite. The 1988 SHVA was intended to protect the role of local broadcasters in providing over-the-air television by limiting satellite delivery of network broadcast programming to subscribers who were “unserved” by over-the-air signals. The 1988 SHVA also permitted satellite carriers to offer distant “superstations” to subscribers.

6. In the 1999 Satellite Home Viewer Improvement Act (“SHVIA”), Congress expanded satellite carriers' ability to retransmit local broadcast television signals directly to subscribers. A key element of the SHVIA was the grant to satellite carriers of a statutory copyright license to retransmit local broadcast programming, or “local-into-local” service, to subscribers. A satellite carrier provides “local-into-local” service when it retransmits a local television signal back into the local market of that television station for reception by subscribers. Generally, a television station's “local market” is the DMA in which it is located. Each satellite carrier providing local-into-local service pursuant to the statutory copyright license is generally obligated to carry any qualified local television station in the particular DMA that requests carriage and complies with Commission rules, unless the station's programming is duplicative of the programming of another station carried by the carrier in the DMA or the station does not provide a good quality signal to the carrier's local receive facility. This is commonly referred to as the “carry one, carry all” requirement. The Commission implemented the SHVIA by adopting rules for satellite carriers with regard to carriage of broadcast signals, retransmission consent, and program exclusivity that generally paralleled the requirements for cable service.

7. In the 2004 Satellite Home Viewer Extension and Reauthorization Act (SHVERA), Congress established the framework for satellite carriage of “significantly viewed” stations. Specifically, the SHVERA expanded the statutory copyright license to allow satellite carriers to retransmit an out-of-market network station as part of their local service to subscribers where the Commission determined that distant station to be “significantly viewed” (based on over-the-air viewing). In providing this authority to satellite carriers, Congress sought to create parity with cable operators, who had already had such authority to offer SV stations to subscribers for more than 38 years. The Commission implemented the SHVERA's significantly viewed provisions by publishing a list of SV stations and adopting rules in the satellite context for stations to attain eligibility for significantly viewed status and for subscribers to receive SV stations from satellite carriers. The SHVERA mandated that the Commission apply the same station eligibility requirements (i.e., rules and procedures for parties to show that a station qualifies for significantly viewed status) to satellite carriers that already applied to cable operators. However, to prevent a satellite carrier from favoring SV stations over traditional local market stations, the SHVERA also imposed subscriber eligibility requirements that applied only to satellite carriers.

8. The SHVERA limited subscribers' eligibility to receive SV digital television stations from satellite carriers in two key ways. First, the SHVERA allowed a satellite carrier to offer SV stations only to subscribers that received the carrier's “local-into-local” service (the “local service” requirement). The Commission interpreted this local service requirement to further require that the subscriber receive the local station affiliated with a particular network (as part of the carrier's “local-into-local” service) in order for that subscriber to also receive an SV station affiliated with the same network (the “same network affiliate” requirement). Second, the SHVERA allowed a satellite carrier to offer an SV digital station to a subscriber only if the carrier also provided to that subscriber the local station affiliated with the same network in a format that used either (1) an “equivalent” amount of bandwidth for the local and SV network station pair, or (2) the “entire” bandwidth of the local station (the “equivalent or entire bandwidth” requirement). The Commission interpreted this provision to require an objective comparison of each station's use of its bandwidth in terms of megabits per second (mbps) or bit rate. The SHVERA provided for two exceptions to the local service limitations, contained in 47 U.S.C. 340(b)(3) and (b)(4). Section 340(b)(3) allows satellite carriage of an SV network station to a subscriber when there is no local station affiliated with the same television network as the SV station present in the local market. Section 340(b)(4) allows a satellite carrier to negotiate privately with the local network station to obtain a waiver of the subscriber eligibility restrictions in Sections 340(b)(1) and 340(b)(2).

III. Discussion

9. We adopt rules in this R&O to implement the STELA's amendments to Section 340(b) of the Communications Act. Our discussion below addresses the two substantive changes to Section 340(b)(1) and (b)(2), as well as how these amended provisions will work with the existing statutory exceptions in Section 340(b)(3) and (b)(4). We decline to address here the merits of Dish's petition for further rulemaking filed with its comments, as those issues are beyond the scope of this proceeding. Finally, we adopt some non-substantive, “housecleaning” rule changes.

10. The STELA amended Section 340(b) to read as follows:

(1) Service Limited to Subscribers Taking Local-Into-Local Service.—This section shall apply only to retransmissions to subscribers of a satellite carrier who receive retransmissions of a signal from that satellite carrier pursuant to section 338.

(2) Service Limitations.—A satellite carrier may retransmit to a subscriber in high definition format the signal of a station determined by the Commission to be significantly viewed under subsection (a) only if such carrier also retransmits in high definition format the signal of a station located in the local market of such subscriber and affiliated with the same network whenever such format is available from such station.

(3) The limitations in paragraphs (1) and (2) shall not prohibit a retransmission under this section to a subscriber located in a local market in which there are no network stations affiliated with the same television network as the station whose signal is being retransmitted pursuant to this section.

(4) Paragraphs (1) and (2) shall not prohibit a retransmission of a network station to a subscriber if and to the extent that the network station in the local market in which the subscriber is located, and that is affiliated with the same television network, has privately negotiated and affirmatively granted a waiver from the requirements of paragraph (1) and (2) to such satellite carrier with respect to retransmission of the significantly viewed station to such subscriber.

11. These amendments simplify the significantly viewed provisions in Section 340(b) of the Communications Act to make it easier for satellite carriers to offer SV stations to subscribers. Specifically, the STELA made two key changes to Section 340(b). First, the STELA eliminated the language in Section 340(b)(2)(A) that had required that subscribers receive the same local network affiliate and, instead, retains only the language requiring that the subscriber receive local-into-local satellite service in order to be eligible to receive SV stations. Second, the STELA replaces the “equivalent or entire bandwidth” requirement applicable to digital service, which was previously contained in Section 340(b)(2)(B), with an “HD format” requirement. The STELA did not amend the statutory exceptions in Sections 340(b)(3) and (b)(4) to the subscriber eligibility restrictions in Sections 340(b)(1) and (2).

A. The STELA Directs the Commission To Create a Workable Framework That Will Enable Satellite Carriers To Offer Both the SV and Local Stations to Consumers

12. We find that, in the STELA, Congress intended that the Commission create a workable framework for the satellite carriage of SV stations. Congress intended the 2004 SHVERA to promote parity with cable, while protecting localism by preventing satellite carriers from favoring an SV network station over the local in-market station affiliated with the same TV network. However, very few SV stations made their way into the living rooms of satellite TV consumers. The Satellite Carriers attribute this to the Commission's “restrictive” interpretation of Section 340(b) in the 2005 SHVERA Significantly Viewed Report and Order, which they maintain made satellite carriage of SV stations impractical or technically infeasible.

13. Congress seemed to agree. As stated in one House Report:

The Commission's implementation of section 340, including its interpretation of the “equivalent bandwidth” requirement, has generally served to discourage satellite carriers from using section 340 to provide significantly viewed signals to qualified households.

To achieve more widespread carriage of SV stations, the STELA amends Sections 340(b). As discussed below, Congress eliminated both the former Section 340(b)(2)(A), which required that digital local service subscribers receive the same network affiliate, and the former Section 340(b)(2)(B), which contained the “equivalent or entire bandwidth” requirement. Based on these changes to the statutory text, Congress intended more than merely to fix a technical implementation issue with the equivalent bandwidth requirement, as the Broadcaster Associations contend, but rather sought to simplify the law and increase service to satellite subscribers by encouraging SV carriage. In reauthorizing the SHVERA and mostly retaining its framework for the carriage of SV stations, the STELA also retains the key goals of its predecessor statute -to foster localism and promote parity between cable and satellite service.

14. The STELA's relocation of the statutory copyright license for SV stations into the “local” license provisions of the Copyright Act indicates that Congress considered the SV compulsory license to be more like the local license than like the distant signal license, recognizing that the SV station is “local” to the community in which it is significantly viewed. SV stations have SV status because they have been viewed over-the-air by a sufficient number of households in the community in the relevant market. The Senate Report notes that the SV provision “relates to the ability to receive locally-oriented programming.” Furthermore, satellite TV consumers deserve access to the same locally-oriented programming—including SV stations—as their cable-subscribing neighbors. Moreover, providing satellite carriers parity with cable was a core goal of the SHVERA in 2004 and it remains one today in the STELA. Therefore, our implementation of the statutory changes to Section 340(b) focuses on enabling satellite TV consumers to receive both the local in-market and SV stations from their carriers, as is the plain intent of Section 340. To achieve this objective, our interpretation of the statute reflects the practical realities of satellite local carriage, in accordance with Congress's intent to remove barriers to SV carriage.

15. In the STELA, Congress directs us to implement Section 340 in a practical way that will better enable satellite carriers to offer SV stations to their subscribers. We find that carriage of both the SV and local in-market stations will best foster localism and promote parity with cable, and so, in implementing the law we must balance protection of local in-market stations against the cost of making SV carriage technically infeasible or impractical.

B. The STELA Eliminates the Requirement To Receive a Local Station Affiliated With the Same Network as the SV Station and Requires Instead That Subscribers Receive Local-Into-Local Service

16. We adopt our proposal to eliminate the requirement that a subscriber receive the local station affiliated with a specific network in order for that subscriber to also receive an SV station affiliated with the same network, and require instead that the subscriber receive local-into-local satellite service. We clarify, however, that a satellite carrier must comply with Section 76.65 of our rules, which codifies the requirement for good faith in retransmission consent negotiations, in order for it to carry an SV station. In the record, the Satellite Carriers support our proposal, while the Broadcaster Associations oppose it.

17. In the 2004 SHVERA, Congress authorized satellite carriers to offer SV stations to subscribers, but crafted Sections 340(b)(1) and 340(b)(2)(A) of the Act to protect localism by requiring that these subscribers also receive the local network affiliate (called the “local service” requirement). These two provisions, however, contained different language. Whereas the analog local service requirement in Section 340(b)(1) required only that the subscriber receive local service “pursuant to Section 338”—referring to the “carry one, carry all” carriage requirements that pertain to local stations, the digital local service requirement in Section 340(b)(2)(A) contained additional language that expressly required the subscriber to receive the local digital station that was “affiliated with the same television network” as the SV station (hereinafter referred to as the “same network affiliate” language). Thus, while each of these provisions explicitly required a subscriber to at least receive the satellite carrier's local-into-local service before that subscriber could receive an SV station, it was unclear (when considering the two provisions together) whether Section 340(b)(1) also required a subscriber to receive the specific local analog network station before that subscriber could receive the SV station affiliated with the same network. For example, it was unclear how the statute applied where there was a local network analog station, but such station failed to request local carriage, refused to grant retransmission consent, or was otherwise ineligible for local carriage.

18. In the 2005 SHVERA Significantly Viewed Report and Order, the Commission interpreted former Sections 340(b)(1) and 340(b)(2)(A) to require that the subscriber receive the specific local station that is affiliated with the same network as the SV station, whether the station's signal was analog or digital. Although former Section 340(b)(1) lacked the express “same network affiliate” language as that contained in its digital counterpart, the Commission interpreted the two provisions together and read the “same network affiliate” requirement into former Section 340(b)(1), based largely on the concept that Congress intended the two provisions to achieve similar ends. Accordingly, the Commission adopted Section 76.54(g) of the rules, based on the “same network affiliate” language in former Section 340(b)(2)(A).

19. As we tentatively concluded in the NPRM, new Section 340(b)(1) requires only that the subscriber receive local-into-local satellite service and no longer requires carriage of the local affiliate of the same network. New Section 340(b)(1) applies “only to retransmissions to subscribers of a satellite carrier who receive retransmissions of a signal from that satellite carrier pursuant to Section 338.” By providing simply that a subscriber must receive “a” signal from the satellite carrier pursuant to Section 338 before receiving a SV signal, the statute removes any precondition that a subscriber receive “the” local affiliate of the same network as the SV station. In drafting new Section 340(b)(1) for the STELA, Congress eliminated the “same network affiliate” language that appeared in the provision enacted as part of the SHVERA in 2004. Our interpretation that the new Section 340(b)(1) requires only that the subscriber receive local-into-local service is also consistent with the provision's heading: “Service Limited To Subscribers Taking Local-Into-Local Service,” as well as with the statutory copyright license for SV stations, which allows a satellite carrier to retransmit SV stations to subscribers that receive signals pursuant to the statutory copyright license for local signals but says nothing about the subscriber having to receive the signal of the local affiliate of the same network.

20. Based on the language of the amended text, Congress' purposes of facilitating SV carriage and achieving closer parity between cable and satellite providers, and the shift of the SV copyright license from the distant license to the local license, we conclude that the best interpretation of new Section 340(b)(1) is that the subscriber need only receive a local station pursuant to Section 338 in order to be eligible to receive SV stations, and that it need not receive the network affiliate affiliated with the same network as the SV station. The Broadcaster Associations disagree with the NPRM's interpretation of new Section 340(b)(1) and argue that the Commission should retain the interpretation it applied to the SHVERA, notwithstanding the change in the statutory language as enacted in the STELA. They note that, in implementing the SHVERA in 2005, the Commission interpreted the former analog local service provision in former Section 340(b)(1) and the former digital local service provision in former Section 340(b)(2)(A) to require that a satellite subscriber must receive the local affiliate of a specific network in order to be eligible to receive the SV station affiliated with the same network. The SHVERA, in contrast to the STELA, included language expressly requiring receipt of the “same network affiliate” in the provision applying to eligibility for a digital SV station. The Commission, relying on the language in the former digital provision, applied the requirement to subscriber eligibility for both analog and digital SV stations. The Broadcaster Associations contend that we should retain the former interpretation and apply it to the new STELA provision despite the removal of the old language. They argue that nothing has materially changed with respect to the local service requirement, other than the completion of the DTV transition and, therefore, that the Commission's prior interpretation of Section 340(b)(1) should not change. They argue that Congress “re-enacted” the Commission's 2005 interpretation of former Section 340(b)(1) because it did not substantively change that provision, thereby giving its “implicit approval” of that interpretation. We reject these arguments as they ignore that the STELA does, in fact, materially change the SHVERA's local service requirements.

21. The Broadcaster Associations assert that we must presume that Congress was aware of the Commission's prior interpretation of the local service provision. By the same reasoning, however, we must also presume that Congress was aware of the basis for that interpretation: Namely, the “same network affiliate” language in the former digital local service requirement in former Section 340(b)(2)(A). Congress intentionally removed that requirement when it chose to strike that language in favor of the former analog local service limitation language. As we said in the NPRM, Congress chose to discard the “same network affiliate” language in the former digital local service requirement in Section 340(b)(2)(A), which the Commission had relied upon for its more restrictive interpretation of the former analog local service requirement in Section 340(b)(1). As Dish notes: “Congress' eraser is no less dispositive than its pen.” Moreover, our interpretation is consistent with Congress' intent to facilitate carriage and availability of SV stations for more satellite subscribers, and, thereby, to achieve closer parity with cable carriage of SV stations.

22. The Broadcaster Associations also argue that because both the former and new Section 340(b)(2) contain the “same network affiliate” language, the need to reconcile these two provisions remains. Moreover, they argue that because three out of four of the Section 340(b) provisions contain the “same network affiliate” language, we should read that language into the one that does not: The new local service requirement. We reject both claims. New Section 340(b)(2) is a different requirement from the other provisions of Section 340(b), and addresses only when a satellite carrier may provide the HD signal of an SV station. Moreover, contrary to the Broadcaster Associations' assertion, we find that Congress's inclusion of the “same network affiliate” language in three out of four of the Section 340(b) provisions and not in the amended digital local service provision indicates that such exclusion was intentional.

23. We recognize that there may be tension in some circumstances between the goals of protecting localism, on the one hand, and achieving closer parity between pay television providers and increasing SV carriage, on the other. Specifically, our interpretation below of the STELA's amendments to Sections 340(b)(1) and (b)(2) makes it possible for a satellite carrier to carry an SV network station, even in HD format, without also carrying the corresponding local in-market affiliate if that local station has not granted retransmission consent. The Broadcaster Associations argue that this undermines local service. However, because SV status generally applies to only some areas in a DMA and not throughout an entire DMA, we find it unlikely that an SV station could permanently substitute for a local in-market station, even in the provision of network programming to the market. Moreover, because most viewers want to watch their local stations, we do not think that carriage of only SV stations would satisfy most subscribers for an extended time. Furthermore, as the Broadcaster Associations have noted in a different proceeding, retransmission consent impasses resulting in loss of a local station are relatively rare and, when they do occur, they are usually short-lived. Although the Broadcaster Associations do provide a few examples of markets where they have concerns that satellite carriers could rely on carriage of an SV station to the exclusion of the local in-market station, the record does not reflect instances in which an SV station has supplanted an in-market station in the cable or satellite context. Therefore, we will monitor how the rules adopted in this order are working to determine if there are abuses, unintended consequences, or misuse of the rules that might lead to violations of the good faith requirements associated with retransmission consent negotiations. Now that we have established a practical framework for satellite carriage of SV stations, we expect Satellite Carriers to offer SV stations to consumers wherever possible. However, if our implementation of Section 340(b) results in satellite carriers using SV stations to supplant, rather than supplement, their carriage of local in-market stations, we will reexamine our rules and our statutory analysis here in light of Congress' goals. In light of our conclusion that the new language in the STELA no longer requires subscriber receipt of a specific local station, we revise Section 76.54(g). The amended rule requires that a subscriber receive the satellite carrier's local-into-local service as a precondition for the subscriber to receive SV stations.

C. The STELA Eliminates the “Equivalent or Entire Bandwidth” Requirement and Replaces it with an “HD Format” Requirement

24. We adopt our proposal to eliminate the “equivalent or entire bandwidth” requirement and to provide, in its place, that a satellite carrier may retransmit the HD signal of an SV station to a subscriber only if such carrier also retransmits the HD signal of the local station affiliated with the same network whenever that signal is available in HD format. Both the Broadcaster Associations and Satellite Carriers agree with this conclusion. The commenters disagree, however, how to interpret and implement the new “HD format” requirement.

25. In the 2004 SHVERA, Congress enacted the “equivalent or entire” bandwidth requirement to prevent a satellite carrier from using technological means to discriminate against a local network station in favor of the SV network affiliate. The Commission codified these requirements in Section 76.54(h) of the rules, which tracks the language of SHVERA. In implementing that provision, the Commission strictly interpreted the statutory requirement for “equivalent bandwidth.” As a result, satellite carriers have been required to ensure equality between the satellite bandwidth allocated to carriage of the local station and the SV stations on virtually a minute-by-minute basis, making carriage of SV stations so burdensome that they are rarely carried.

26. The STELA eliminated the “equivalent or entire bandwidth” requirement from the statute, and replaced it with “HD format.” In doing so, Congress intended to facilitate satellite carriage of SV stations, which Congress thought was thwarted by the Commission's implementation of the predecessor provision. The legislative history also shows that Congress wanted to simplify the law and increase service to satellite consumers. Congress' principal concern was simply to clarify that a satellite carrier may provide an SV station in HD format as long as the carrier also carries the corresponding local network affiliate in HD format if it is available in HD format.

27. Accordingly, we revise Section 76.54(h) to eliminate the “equivalent or entire bandwidth” requirement and to provide that a satellite carrier may retransmit the HD signal of an SV station to a subscriber only if such carrier also retransmits the HD signal of the local station affiliated with the same network whenever that signal is available in HD format. This part of the rule tracks the amended statutory language. In addition, as discussed below, we adopt additional rules to interpret and implement the new “HD format” requirement.

1. “HD Format” Requirement Applies Only Where a Satellite Carrier Retransmits the SV Station in HD Format

28. We adopt our tentative conclusion in the NPRM that the “HD format” requirement in Section 340(b)(2) applies only where a satellite carrier retransmits the SV station in HD format and does not restrict satellite carriage of the SV station in SD format. The Satellite Carriers support this conclusion, while the Broadcaster Associations oppose it.

29. The Broadcaster Associations object to the additional language in our proposed Section 76.54(g)(2) clarifying that the “HD format” requirement does not apply to satellite carriage of an SV station in SD format. They argue that the statute requires satellite carriage of a local station in SD format if the satellite carrier retransmits the SV station in SD format. We disagree. As discussed above, the amended local service requirement in Section 340(b)(1) now requires only that a satellite subscriber receive the satellite carrier's local-into-local service as a precondition for the subscriber to receive SV stations. Moreover, the express language of the HD format requirement in Section 340(b)(2) applies only when a satellite carrier transmits an SV station in HD format. Therefore, in order for a satellite carrier to retransmit to a subscriber an SV station in SD format, the statute does not require satellite carriage of the local station affiliated with the same network in SD format.

30. Accordingly, we adopt our tentative conclusion that Section 340(b)(2) only limits satellite carriage of an SV station in HD format and does not apply if the satellite carrier only carries the SV station in SD format, and we adopt this requirement in new Section 76.54(g)(2). We also adopt our proposal that, for purposes of this provision, “HD format” refers to a picture quality resolution of 720p, 1080i, or higher. We received no opposition to this proposal.

2. “HD Format” Requirement Applies When a Local Station Makes Itself Technically and Legally “Available” to Satellite Carrier

31. We conclude that, for a local (in-market) station to be “available” for purposes of the “HD format” requirement in Section 340(b)(2), the local station must: (1) Timely request carriage (i.e., elect mandatory carriage or grant retransmission consent); (2) provide a good quality HD signal to the satellite carrier's local receive facility (LRF) in accordance with Section 76.66(g) of the Commission's rules; and (3) otherwise comply with Sections 76.65 and 76.66. We believe that the statute's use of the term “available,” instead of “broadcast” or “transmitted,” signifies that Congress did not intend a narrow technical meaning and affords us discretion to create a workable framework for satellite carriage of SV stations. Our conclusion is supported by Dish and DIRECTV, while the Broadcaster Associations oppose it.

32. The STELA establishes the new “HD format” requirement in Section 340(b)(2) to permit a satellite carrier to retransmit an SV network station in HD “only if such carrier also retransmits in high definition format the signal of a station located in the local market of such subscriber and affiliated with the same network whenever such format is available from such station.” In the NPRM, we sought comment on the significance of this language. We also sought comment on whether satellite carriers would face any technical problems in complying with our proposed rules.

33. The STELA does not define the term “available” for purposes of Section 340. The legislative history likewise does not explain the meaning of the term. The Satellite Carriers and Broadcaster Associations offer competing interpretations as to what “available” should mean in this context. Dish argues that we should interpret this language to mean that, “if the local station has not elected must carry and has not signed a retransmission consent agreement, or fails to provide a good quality signal in accordance with [Section] 76.66(g), then the signal should be deemed not available for purposes of the [“HD format” requirement], and the satellite carrier should be able to supply the SV station in HD.” Dish argues that this interpretation is necessary to prevent a local station from depriving satellite subscribers of both the local and the SV station in the event of an impasse in retransmission negotiations, which they assert would be “a result directly at odds with Congress' express intent to make SV stations more available to satellite subscribers.” The Broadcaster Associations oppose Dish's proposal, asserting that the Satellite Carriers' interpretations of the new “HD format” requirement “are motivated by a desire to affect retransmission consent negotiations.”

34. The Broadcaster Associations argue that the term “available” should mean “whenever the television station is transmitting or broadcasting the relevant channel in HD format.” They argue that this interpretation is most consistent with other parts of the statute, such as Sections 339 and 342 of the Act. We disagree. The Sections cited by the Broadcaster Associations pertain to a different use of the term “available” in different contexts and are expressly limited to those contexts. Moreover, even if we were to rely on the definition of “available” in Section 339 or the reference to “availability” in Section 342, the term “available” in the context of SV carriage would remain ambiguous. Section 339 relates to whether a satellite carrier's local-into-local package is “available” to a subscriber. If so, the subscriber is not eligible for distant signals (i.e., “no distant, where local”). In the context of HD signal availability in Section 340, ascribing this meaning to the term “available” could support either the Satellite Carriers' interpretation that the HD signal is not available if the local station does not grant consent for retransmission or the Broadcaster Associations' interpretation that the HD signal is available if broadcast. Similarly, Section 342 refers to the “availability level” of a satellite signal as a means of defining “good quality satellite signal” for purposes of a satellite carrier's eligibility for certification as a “qualified carrier.” We do not see the relevance of satellite signal coverage in the context of Section 342 to the interpretation of Section 340. Moreover, here again, even by strained analogy, signal availability could mean the physical presence of the signal, as the Broadcaster Associations argue, or the ability to receive and use the signal, as the satellite carriers contend.

35. In contrast to the Broadcaster Associations' attempt to import uses of the word from other contexts, the Satellite Carriers describe the circumstances in which the HD format requirement is intended to apply: When the satellite carrier receives a station's HD signal and the permission to retransmit it but chooses not to retransmit the HD version and instead converts the HD signal to a standard definition (“SD”) signal. We believe that this interpretation is most consistent with common usage of the term “available.” In contrast, we think it strains the common meaning of the term to consider “available” a signal that the satellite carrier is legally barred from carrying.

36. The Satellite Carriers also address the practical impact of defining the term “available” as suggested by the Broadcaster Associations. They explain that they offer local service in some markets only in HD. Therefore, an SV station originating from such a market would have one HD feed covering both the station's local market and SV area and there would be no technical way for the satellite carrier to down-convert the HD feed signal to SD only in the SV area. Moreover, a satellite carrier would likely not have the capacity on its spot beam to add a duplicative, SD version of the station. Therefore, if a local station withholds retransmission consent, the Satellite Carriers would have to either down-convert the SV station from HD to SD in its own local market or not carry it as an SV station, frustrating the intent of the statute.

37. The question then is whether an HD signal is “available” for purposes of the statute any time a broadcaster is transmitting an HD signal, or whether the term “available” takes into account practical and legal considerations, such as whether the broadcaster is delivering a “good quality signal” to the satellite carrier and the satellite carrier is legally permitted to carry it (i.e., the broadcaster has elected mandatory carriage or granted retransmission consent). We believe the term is ambiguous and thus should be defined in a manner that best effectuates the text, history and purposes of the statute. As discussed above, we believe the overriding goal of the legislative changes made in Section 340 is to facilitate satellite carriage of SV stations and remove the obstacles to carriage created by our interpretation of SHVERA. With this goal in mind, we find that the term “available” within the context of Section 340(b)(2) is best interpreted by taking into account whether the satellite carrier has the legal authority to transmit the local broadcaster's signal and has been provided a “good quality” signal, and we believe that this interpretation is most consistent with common usage of the term.

38. We agree with the Broadcaster Associations that our rules must protect localism, but disagree that we must protect the in-market station at the cost of making satellite carriage of the SV station impractical. The Broadcaster Associations' argument fails to take into account that the SV station is generally not significantly viewed throughout an entire market. Indeed, the Satellite Carriers contend that stations that are significantly viewed outside of their own markets are generally significantly viewed only in small portions of neighboring markets, making it unlikely that satellite carriers could use SV stations to replace local stations in other markets. As noted above, we also find it unlikely that an SV station could permanently substitute for a local in-market station to the satisfaction of subscribers throughout the market.

39. We are persuaded that, if we were to adopt the Broadcaster Associations' interpretation that a station's HD signal is “available” even when it has not granted retransmission consent or is not providing a “good quality” signal, the satellite carrier in many cases will have to downconvert the SV station or not carry the SV station at all due to limited satellite capacity, and Congressional intent will, again, be thwarted. If, on the other hand, we were to conclude that a station's HD signal is not “available” unless the carrier has the legal right to carry the station and a “good quality” signal is being provided, the satellite carrier will be able to carry an SV station and, in the overwhelming majority of cases, will continue to have the incentive to reach a retransmission consent agreement with the local station. Thus, this interpretation will likely result in carriage of both the SV and local stations. We acknowledge that this interpretation may affect retransmission consent negotiations in some situations by giving a satellite carrier the opportunity to provide network programming to some subscribers through the SV station. This interpretation may also affect the local station's leverage in negotiations because in certain areas of the DMA it would no longer be the only source of programming from that network to some satellite subscribers. We conclude, however, that this is the best interpretation of the statutory language because it ensures that the overall intent of the statutory provisions to promote SV carriage is carried out.

40. Therefore, we find that Section 340(b)(2) is best interpreted to enable satellite TV consumers to receive both the SV and in-market stations as part of their carrier's local service package. Accordingly, we amend Section 76.54(g)(2). We note, however, that our interpretation here assumes that both parties are negotiating in good faith in compliance with our rules. If the local station is willing to grant consent and make its HD signal available, but the satellite carrier is not negotiating for retransmission consent in good faith, as required by Section 76.65, then the local station's HD signal will be deemed available. The amended Section 76.54(g)(2) includes this condition.

3. “HD Format” Requirement Applies to a Local Station's HD Multicast Signal

41. We find that the “HD format” requirement is best interpreted to require carriage of any HD signal of a local station affiliated with the same network as the SV station, regardless of whether the local station broadcasts the HD signal as a primary or as a secondary multicast stream. The Broadcaster Associations and Dish debate whether the statute's use of the term “signal” includes a multicast stream, with the Broadcaster Associations arguing it does and Dish arguing it does not.

42. In the NPRM, we sought comment on how the “HD format” requirement in Section 340(b)(2) should apply in the event a satellite carrier wants to retransmit an SV network affiliate in HD and there is an in-market (local) station that is broadcasting multiple streams of programming (“multicasting”) and more than one of the streams is in HD format and affiliated with a network. We asked whether the satellite carrier is required to carry the secondary stream in HD in order to be permitted to retransmit an SV station affiliated with the same network in HD, notwithstanding that the in-market station's primary stream is affiliated with a different network. In other words, would a satellite carrier be required to carry more than one HD programming stream of an in-market station if the in-market station is multicasting HD streams that are affiliated with different networks in order for the satellite carrier to carry an SV station affiliated with each network in HD? We also considered whether we could address this situation on a case-by-case basis. In their comments, both the Broadcaster Associations and the Satellite Carriers seek a Commission decision on the multicast question.

43. We conclude that the statute's use of the term “signal” in this context does not differentiate between streams that are primary or secondary. For purposes of carriage of SV signals in HD, the question is whether there is an in-market station affiliated with the same network as the SV station that makes its HD signal available to the satellite carrier. If so, the satellite carrier may not carry the SV station in HD format unless it carries the local station affiliated with the same network in HD format. Dish argues that Section 340(b)(2) does not expressly use the term “multicast stream,” but, as noted by the Broadcaster Associations, this section also does not expressly use the term “primary stream.” Dish notes that, for purposes of the broadcast carriage requirements, a satellite carrier is generally only required to carry the stream that a station deems its “primary” stream if the station elects mandatory carriage. That carriage requirement, however, is not determinative of which signal a satellite carrier is required to carry in order to carry a particular SV station in HD format under Section 340(b)(2). As stated above, when an SV station is carried in HD, we interpret Section 340(b)(2) as requiring carriage of any available HD signal of a local station affiliated with the same network as the SV station. We amend Section 76.54(g)(2) accordingly.

44. Though appearing to acknowledge that the “HD format” requirement applies to multicast channels, DIRECTV expresses concern that applying the HD format requirement to multicast streams would make carriage of SV stations technically problematic because of what it calls the “mushroom” problem; that is, “if a new, [HD] network affiliate suddenly appeared on the multicast stream of an existing station, [DIRECTV] would have to drop or downrez the [SV] station until [DIRECTV] could negotiate carriage and make room for the `new' local station.” We believe our definition of “available” in the HD format requirement may alleviate this “mushroom” problem in many cases because a new HD multicast stream would not be available to the satellite carrier until the station grants retransmission consent for that stream. Additionally, if the new HD multicast stream is a new station, our existing satellite carriage rules already recognize that satellite carriers may face technical issues associated with commencing carriage of new broadcast signals in a local market. We recognize, however, that a satellite carrier may nonetheless face a “mushroom” problem where a new HD multicast stream is introduced by an existing station in the local market and such station has previously granted carriage consent. Furthermore, the satellite carrier may not be able to accommodate the new HD multicast stream in the market on its spot beam. Therefore, to minimize consumer disruption, we recognize that satellite carriers may need additional time to come into compliance with the HD format rule without having to drop an existing SV station while they make the technical adjustments necessary to carry a new HD format network stream. We will consider special circumstances on a case-by-case basis, considering when the satellite carrier was informed of the introduction of a multicast stream containing HD signals in relation to the existing HD carriage of an SV station affiliated with the same network, as well as the carrier's compliance with its notice requirements with respect to carriage of SV signals.

D. Statutory Exceptions to the Subscriber Eligibility Limitations

45. While the STELA revises the subscriber eligibility limitations on receipt of SV service in Sections 340(b)(1) and 340(b)(2), it does not amend the statutory exceptions to those limitations in Sections 340(b)(3) and 340(b)(4). As noted above, the Section 340(b)(3) exception permits a satellite carrier to offer an SV network station to a subscriber when there is no local network affiliate present in the local market, and the Section 340(b)(4) exception permits a satellite carrier to privately negotiate with the local network station to obtain a waiver of the eligibility restrictions. The Broadcaster Associations argue that if Section 340(b)(1) were construed simply to require receipt of some local-into-local service, rather than local-into-local carriage of the local affiliate of the same network as the SV station, that reading would render superfluous the exceptions to Section 340(b)(1) contained in Sections 340(b)(3) and (b)(4). To support their argument, the Broadcaster Associations rely on the Commission's 2005 decision that the “best reading” of the SHVERA version of Section 340(b)(1) required receipt of the local affiliate of the same network because, under any other reading, “there would be no need” for the Section 340(b)(3) or (b)(4) exceptions to Section 340(b)(1). We reject the Broadcaster Associations' argument and find that our 2005 interpretation was not necessary to give effect to the Section 340(b)(3) and (b)(4) exceptions. Giving effect to the most natural reading of Section 340(b)(1)—which lacks the “same network affiliate” language found elsewhere in Section 340 and simply requires receipt of some local-into-local service as a condition of retransmitting SV stations—does not render either Section 340(b)(3) or Section 340(b)(4) superfluous. For example, in a situation where a satellite carrier does not offer a local-into-local package and thus Section 340(b)(1) would otherwise prohibit retransmission of any SV network station, Section 340(b)(3) would allow retransmission of an SV station to subscribers where there is no local station affiliated with the same television network as the SV station in the market (e.g., an SV station that is an ABC affiliate could be retransmitted if there is no local ABC affiliate). Likewise, if a subscriber does not receive the local-into-local package, thereby failing to meet the requirements of Section 340(b)(1), retransmission of an SV station to that subscriber would nonetheless be permissible under Section (b)(4) if the local station affiliated with the same network as the SV station grants a waiver from the requirements of Section 340(b)(1) (e.g., the local ABC affiliate permits the satellite carrier to retransmit an SV station that is an ABC affiliate). These examples show that the exceptions of (b)(3) and (b)(4) have meaning even when we read (b)(1) simply to require receipt of some local-into-local service as a condition of retransmitting SV stations. Further, we reject the Broadcaster Associations' argument that because Congress did not amend Sections 340(b)(3) and (b)(4) when it adopted the STELA in 2010, the Commission may not depart from its 2005 interpretation of Section 340(b)(1). This argument ignores that an agency is free within the limits of reasoned interpretation to change course so long as it adequately justifies the change. In 2005, the Commission construed what it found to be an ambiguous provision in Section 340(b)(1) by adopting a reading that the Commission believed would best harmonize Section 340(b)(1) with Sections 340(b)(2), (b)(3) and (b)(4). Given the modifications to Sections 340(b)(1) and (b)(2) enacted in STELA and Congress's intent to ease carriage of SV stations, nothing in that legislation suggests that Congress intended to lock in the Commission's 2005 interpretation of Section 340(b)(1) or restrict the Commission's discretion to interpret the revised eligibility requirements. As explained above, we now conclude that our earlier reading was not in fact necessary to harmonize the various provisions of Section 340(b). Moreover, our reading of Section 340(b)(1) here better serves the STELA's goals of improving service options for satellite subscribers by allowing SV carriage in additional situations.

46. In the 2005 SHVERA Significantly Viewed Report and Order, the Commission interpreted the Section 340(b)(3) exception to allow a satellite carrier to retransmit an SV station to a subscriber when there is no local affiliate of the same network present in that market, provided that the subscriber subscribes to and receives the carrier's local-into-local service. Under our new interpretation of the subscriber eligibility limitations in Section 340(b)(1) and (2), the Section 340(b)(3) exception permits a subscriber to receive an SV network affiliate, even if he or she does not subscribe to local-into-local service, if there is no affiliate of that network in his or her local market. In other words, Section 340(b)(3) operates as an exception to any limitations on subscriber eligibility to receive a SV station if there is no affiliate of the same network as the SV station in the local market. Because it gives effect to the language of Section 340(b)(3), as well as the amended language of the statute's subscriber eligibility limitations, and will serve the STELA's overarching goal of fostering SV carriage while protecting localism, we conclude that our new interpretation represents the best reading of Section 340(b)(3) in the context of the statute as a whole.

47. In this respect, we modify the Commission's 2005 interpretation of Section 340 and decline to adopt our tentative conclusion in the NPRM that the statutory exceptions should continue to apply as before. Section 340(b)(3) allows a satellite subscriber to receive an SV station notwithstanding the restrictions imposed by Sections 340(b)(1) and (b)(2) if there are no network stations affiliated with the same network as the SV station. Thus, even if the subscriber does not subscribe to local-into-local service, as would otherwise be required by Section 340(b)(1), the subscriber can receive an SV station if there is no local station affiliated with the same network as that SV station. We recognize that the compulsory copyright license, now in 17 U.S.C. 122(a)(2), limits SV service to markets in which local-into-local service is offered. However, we disagree that this requires us to read a requirement into the Communications Act that is not there. The compulsory copyright license in 17 U.S.C. 122(a)(2) permits waivers and automatically grants them if the in-market station affiliated with the same network as the out-of-market SV station does not respond to the satellite carrier's waiver request. As a practical matter, if there is no affiliate in the market, then there is no affiliate who can respond to a waiver request or grant a waiver under Section 122(a)(2). Thus, the satellite carrier could ultimately offer the SV station because the waiver request would, inevitably, go unanswered. Accordingly, we interpret the Section 340(b)(3) in accordance with its express language. We find it unnecessary to change the text of the rule that corresponds to the Section 340(b)(3) exception because the rule uses the statutory language and is consistent with the interpretation adopted here.

E. Dish Petition for Further Rulemaking

48. We decline to consider here Dish's petition for further rulemaking (filed with its comments in this docket) as it is not within the scope of this proceeding. The Dish petition seeks two changes to the Commission's rules. First, Dish asks the Commission to adopt a rule “that tying retransmission consent to restrictions on SV station carriage” violates the requirement that parties negotiate retransmission consent in good faith. Dish's first proposal to change the retransmission consent rules could have been filed in our open proceeding on retransmission consent issues in MB Docket No. 10-71. Second, Dish seeks to amend the Commission's rules for determining when a station qualifies for “significantly viewed” status in order to address the “orphan county” problem, which refers to the situation in which a county in one State is assigned to a neighboring State's DMA and there are few, if any, stations assigned to that DMA which are licensed to communities located in the State in which the county is located. This proposal is better addressed in our proceeding to implement Section 304 of the STELA. We also note, as the Broadcaster Associations point out, that any changes to the Commission's existing rules for determining significantly viewed status would be inconsistent with the statute's requirement that we use the same rules for making significantly viewed determinations that were in effect for cable operators as of April 15, 1976.

F. Housecleaning Rule Changes

49. In this section, we make non-substantive changes to update our significantly viewed rules. In the NPRM, we sought comment on these rule changes. The Broadcaster Associations and Satellite Carriers support these changes. Accordingly, we adopt the NPRM's proposed housecleaning rule changes.

50. Section 76.5(i). We amend Section 76.5(i) of the rules to replace its references to the term “non-cable” with the term “over-the-air.” In the 2005 SHVERA Significantly Viewed Report and Order, the Commission made this change to Section 76.54 to reflect the rule's true meaning, that being to indicate over-the-air viewing. The Commission explained that, in the 1972 Order, the concept of significant viewing was adopted to apply to over-the-air households, which at the time essentially meant households without cable (i.e., non-cable households). Thus, amending Section 76.5(i) to change “non-cable” to “over-the-air” reflects the true intent of the rule as it was in 1976, and is more consistent with the STELA's intent to establish parity between cable and satellite.

51. Section 76.54(c). We amend Section 76.54(c) of the rules to strike the outdated reference to the analog Grade B contour. In the 2004 SHVERA Significantly Viewed Report and Order, the Commission revised this rule to add the appropriate service contour relevant for a station's digital signal—that being the noise limited service contour (“NLSC”). With the completion of the transition, we now can eliminate the reference to the Grade B contour.

G. Order on Reconsideration Dismisses Pending Petition as Moot

52. In this Order on Reconsideration, we dismiss as moot the petition for reconsideration filed jointly by DIRECTV and Dish of the Commission's SHVERA Significantly Viewed Report and Order. The petition seeks reconsideration of two decisions in the SHVERA Significantly Viewed Report and Order.

53. First, the petition challenges the Commission's interpretation that the analog “local service” requirement in former Section 340(b)(1) also contains the “same network affiliate” requirement. The STELA eliminates former Sections 340(b)(1) and (b)(2)(A). The R&O accompanying this Order on Reconsideration revises the satellite television significantly viewed rules to eliminate the analog local service requirement, as well as the digital “same network affiliate” requirement. Accordingly, this issue is moot.

54. Second, the petition challenges the Commission's interpretation of the digital service “equivalent bandwidth” requirement in former Section 340(b)(2)(B). The STELA eliminates the “equivalent bandwidth” requirement in former Section 340(b)(2)(B) and, in the R&O accompanying this Order, we revise the satellite television significantly viewed rules to eliminate this requirement. Accordingly, this issue is also moot and we dismiss the petition.

IV. Conclusion

55. In this R&O, we implement the STELA amendments to the SV provisions that apply to satellite carriers. We have been mindful that Congress amended the SV provisions to create a more workable framework to facilitate satellite carriage of SV stations and thereby provide satellite subscribers with greater choice of programming and to improve parity and competition between satellite and cable carriage of broadcast stations. We have also considered the importance of localism and balanced access to SV stations with the benefits of continued carriage of local stations. The rules adopted by this Order will advance these goals for the benefit of consumers and the competitive market for video distribution.

V. Procedural Matters

A. Final Regulatory Flexibility Act Analysis

56. As required by the Regulatory Flexibility Act of 1980, as amended (“RFA”) the Commission has prepared this present Final Regulatory Flexibility Analysis (“FRFA”) relating to this Report and Order. As required by the 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 FRFA conforms to the RFA.

1. Need for, and Objectives of, the Final Rule Changes

57. This document adopts changes to the Commission's satellite television “significantly viewed” rules to implement Section 203 of the Satellite Television Extension and Localism Act of 2010 (STELA). We initiated this proceeding on July 23, 2010 by issuing a Notice of Proposed Rulemaking (NPRM). With this R&O, we satisfy the STELA's mandate that the Commission adopt final rules in this proceeding on or before November 24, 2010.

58. Section 203 of the STELA amends Section 340 of the Communications Act, which gives satellite carriers the authority to offer out-of-market but “significantly viewed” broadcast television stations as part of their local service to subscribers. The designation of “significantly viewed” status allows a station assigned to one DMA to be treated as a “local” station with respect to a particular cable or satellite community in another DMA, and, thus, enables cable or satellite carriage into said community in that other DMA. Whereas cable operators have had carriage rights for “significantly viewed” (“SV”) stations since 1972, satellite carriers have had such authority only since the 2004 Satellite Home Viewer Extension and Reauthorization Act of 2004 (SHVERA) and may only retransmit SV network stations to “eligible” satellite subscribers. The satellite subscriber eligibility rules impose conditions on when satellite carriers may retransmit SV stations to subscribers. These conditions are intended to prevent satellite carriers from favoring an SV network station over the in-market (local) station affiliated with the same network. We note that the nature of SV carriage under Section 340 is permissive (and not mandatory), meaning the statute applies when a satellite carrier chooses to carry an SV station and has obtained retransmission consent from such SV station.

59. Section 203 of the STELA changes the restrictions on subscriber eligibility to receive SV network stations from satellite carriers. To implement the STELA, we revise our satellite subscriber eligibility rules as follows:

• We find that the local service requirement in amended Section 340(b)(1) requires only that a satellite subscriber receive local-into-local satellite service as a precondition for that subscriber to receive SV stations. We find that the statute no longer requires a satellite subscriber to receive the specific local network station as a precondition for that subscriber to receive an SV station affiliated with the same network.
• We find that amended Section 340(b)(2) no longer requires that a satellite carrier offer “equivalent bandwidth” to the local and SV network station pair and instead imposes an “HD format” requirement. We find that the HD format requirement in amended Section 340(b)(2) requires that, in order to carry an SV station in high definition (HD) format, a satellite carrier must carry the local station affiliated with the same network in HD whenever such format is available from the local station.

○ The HD format requirement applies only where a satellite carrier retransmits to a subscriber the SV station in HD format. This requirement does not restrict a satellite carrier from retransmitting to a subscriber the SV station in standard definition (SD) format.

○ For purposes of the HD format requirement, the corresponding local (in-market) station will be considered “available” to the satellite carrier when the station: (1) Elects mandatory carriage or grants retransmission consent; (2) provides a good quality signal to the satellite carrier as required by Section 76.66(g) of the rules; and (3) is otherwise in compliance with the “good faith negotiation” and carriage provisions set forth in Sections 76.65 and 76.66 of the rules. However, the HD signal of the corresponding local station will be deemed “available” despite failure to reach agreement on the terms of retransmission if the satellite carrier is not in compliance with Section 76.65.

○ The HD format requirement requires satellite carriage of a secondary HD stream of a local station's multicast signal if that stream is affiliated with the same network as an SV station retransmitted in HD to satellite subscribers in the local market.

• We modify the Commission's 2005 interpretation of the Section 340(b)(3) exception, which is unchanged by the STELA, and find that, in the context of the newly revised statute, this exception permits a satellite carrier to offer an SV network station to a subscriber when there is no local affiliate of the same network present in the local market, even if the subscriber does not receive local-into-local service.

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

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

3. Description and Estimate of the Number of Small Entities to Which the Rules Will Apply

61. The RFA directs agencies to provide a description of and, where feasible, an estimate of the number of small entities that may be affected by the proposed rules, if adopted. The RFA generally defines the term “small entity” as having the same meaning as the terms “small business,” “small organization,” and “small governmental 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”). Below, we provide a description of such small entities, as well as an estimate of the number of such small entities, where feasible.

62. Satellite Carriers. The term “satellite carrier” means an entity that uses the facilities of a satellite or satellite service licensed under Part 25 of the Commission's rules to operate in the Direct Broadcast Satellite (DBS) service 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 SHVERA Significantly Viewed Report and Order, the Commission concluded that the definition of “satellite carrier” includes all three of these types of entities.

63. 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. DBS, by exception, is now included in the SBA's broad economic census category, “Wired Telecommunications Carriers,” which was developed for small wireline firms. Under this category, the SBA deems a wireline business to be small if it has 1,500 or fewer employees. However, the data we have available as a basis for estimating the number of such small entities were gathered under a superseded SBA small business size standard formerly titled “Cable and Other Program Distribution.” The definition of Cable and Other Program Distribution provided that a small entity was one with $12.5 million or less in annual receipts. Currently, only two entities provide DBS service, which requires a great investment of capital for operation: DIRECTV and EchoStar Communications Corporation (“EchoStar”) (marketed as the DISH Network). Each currently offer subscription services. DIRECTV and EchoStar each report annual revenues that are in excess of the threshold for 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 service provider. We seek comments that have data on the annual revenues and number of employees of DBS service providers.

64. 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. FSS, by exception, is now included in the SBA's broad economic census category, “Wired Telecommunications Carriers,” which was developed for small wireline firms. Under this category, the SBA deems a wireline business to be small if it has 1,500 or fewer employees. However, the data we have available as a basis for estimating the number of such small entities were gathered under a superseded SBA small business size standard formerly titled “Cable and Other Program Distribution.” The definition of Cable and Other Program Distribution provided that a small entity was one with $12.5 million or less in annual receipts. Although a number of entities are licensed in the FSS, not all such licensees use FSS frequencies to provide subscription services. The two 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.

65. Television Broadcasting. The SBA defines a television broadcasting station as a small business if such station has no more than $14.0 million in annual receipts. Business concerns included in this industry are those “primarily engaged in broadcasting images together with sound.” The Commission has estimated the number of licensed commercial television stations to be 1,392. According to Commission staff review of the BIA/Kelsey, MAPro Television Database (“BIA”) as of April 7, 2010, about 1,015 of an estimated 1,380 commercial television stations (or about 74 percent) have revenues of $14 million or less and, thus, qualify as small entities under the SBA definition. The Commission has estimated the number of licensed noncommercial educational (NCE) television stations to be 390. 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. The Commission does not compile and otherwise does not have access to information on the revenue of NCE stations that would permit it to determine how many such stations would qualify as small entities.

66. 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.

67. Satellite Master Antenna Television (SMATV) Systems, also known as Private Cable Operators (PCOs). SMATV systems or PCOs are video distribution facilities that use closed transmission paths without using any public right-of-way. They 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. SMATV systems or PCOs are now included in the SBA's broad economic census category, “Wired Telecommunications Carriers,” which was developed for small wireline firms. Under this category, the SBA deems a wireline business to be small if it has 1,500 or fewer employees. However, the data we have available as a basis for estimating the number of such small entities were gathered under a superseded SBA small business size standard formerly titled “Cable and Other Program Distribution.” The definition of Cable and Other Program Distribution provided that a small entity was one with $12.5 million or less in annual receipts. As of June 2004, there were approximately 135 members in the Independent Multi-Family Communications Council (IMCC), the trade association that represents PCOs. The IMCC indicates that, as of June 2006, PCOs serve about 1 to 2 percent of the multichannel video programming distributors (MVPD) marketplace. 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, as of June 2006, PCOs serve approximately 900,000 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 10 PCOs, we believe that a substantial number of PCOs may have been categorized as small entities under the now superseded SBA small business size standard for Cable and Other Program Distribution.

4. Description of Projected Reporting, Recordkeeping, and Other Compliance Requirements

68. The final rules do not impose any new reporting, recordkeeping or other compliance requirements.

5. Steps Taken to Minimize Significant Economic Impact on Small Entities, and Significant Alternatives Considered

69. 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 (among others): (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.

70. In the NPRM, we invited comment on whether there were any alternatives we should consider to our proposed implementation of the statutory amendments to Section 340(b) that would minimize any adverse impact on small businesses, but which are consistent with the statute and its goals and also maintain the benefits of our proposals. We explained that STELA's amendments to Section 340(b) intend to facilitate satellite carriage of SV stations, with the expectation that this will increase satellite TV service to consumers and promote regulatory parity between cable and satellite service. We tentatively concluded that our proposed rule changes implement the statute in the way that is most consistent with the plain language of the statute. We also noted that the plain language of the statute did not appear to give us discretion to treat small entities differently from larger ones, but sought comment on this question. We received no comments to the IRFA in the NPRM. We, therefore, affirm our conclusions in the NPRM's IRFA.

71. We find in the R&O that Congress amended the SV provisions to create a more workable framework to facilitate satellite carriage of SV stations and, thus, improve parity and competition between satellite and cable. Satellite carriers, and the SV stations which they would carry, will certainly benefit from the opportunity for increased TV service afforded by the STELA's changes to the SV program. Furthermore, consumers of satellite TV service will benefit from greater choice of programming. We find that any adverse impact to these entities is unlikely because SV carriage under Section 340 is permissive (and not mandatory); that is, the satellite carrier chooses to carry an SV station and the SV station must grant its consent to be carried.

72. While we have included this complete FRFA, we note that we could have certified that this rulemaking will not have a “significant economic impact on a substantial number of small entities.” The rules impose compliance requirements only on the two DBS service providers, neither of which qualify as a small entity.

6. Report to Congress

73. The Commission will send a copy of this R&O, including this FRFA, in a report to be sent to Congress pursuant to the Congressional Review Act. In addition, the Commission will send a copy of the R&O, including the FRFA, to the Chief Counsel for Advocacy of the SBA. A copy of the R&O and FRFA (or summaries thereof) will also be published in the Federal Register.

B. Final Paperwork Reduction Act of 1995 Analysis

74. This Report and Order has been analyzed with respect to the Paperwork Reduction Act of 1995 (“PRA”), and does not contain any new or modified information collection requirements. In addition, therefore, it does not contain any new or modified “information collection burden for small business concerns with fewer than 25 employees,” pursuant to the Small Business Paperwork Relief Act of 2002.

C. Congressional Review Act

75. The Commission will send a copy of this Report and Order in a report to be sent to Congress and the Government Accountability Office, pursuant to the Congressional Review Act.

D. Additional Information

76. For more information on this Report and Order, please contact Evan Baranoff, Evan.Baranoff@fcc.gov, of the Media Bureau, Policy Division, (202) 418-2120.

VI. Ordering Clauses

77. Accordingly, it is ordered that pursuant to Section 203 of the Satellite Television Extension and Localism Act of 2010 (STELA), and Sections 1, 4(i) and (j), and 340 of the Communications Act of 1934, as amended, 47 U.S.C. 151, 154(i) and (j), and 340, this Report and Order IS adopted, and the Commission's rules are hereby amended as set forth in the final rule changes appendix (Appendix B) attached to this Report and Order.

78. It is also ordered that, pursuant to the authority contained in Sections 203(b) and 307 of the STELA, STELA secs. 203(b) and 307, the rules adopted in this Report and Order are adopted and will be effective 30 days after date of publication in the Federal Register.

79. It is also ordered that, pursuant to Sections 1, 4(i) and (j), and 340 of the Communications Act of 1934, as amended, 47 U.S.C. 151, 154(i) and (j), and 340; and Section 1.429 of our rules, 47 CFR 1.429, the petition for reconsideration in MB Docket No. 05-49 which was filed jointly by DIRECTV and Dish (formerly Echostar) is dismissed as moot.

80. It is further ordered that, pursuant to the Congressional Review Act, 5 U.S.C. 801(a)(1)(A), the Commission will send a copy of this Report and Order in a report to Congress and the General Accounting Office.

81. It is further ordered that the Commission's Consumer and Governmental Affairs Bureau, Reference Information Center, will send a copy of this Report and Order, including the Final Regulatory Flexibility Analysis, to the Chief Counsel for Advocacy of the Small Business Administration.

List of Subjects in 47 CFR Part 76

• Satellite television

Final Rules

For the reasons discussed in the preamble, the FCC amends 47 CFR part 76 as follows:

PART 76—MULTICHANNEL VIDEO AND CABLE TELEVISION SERVICE

1. The authority citation for part 76 continues to read as follows:

Authority: 47 U.S.C. 151, 152, 153, 154, 301, 302, 302a, 303, 303a, 307, 308, 309, 312, 315, 317, 325, 339, 340, 341, 503, 521, 522, 531, 532, 534, 535, 536, 537, 543, 544, 544a, 545, 548, 549, 552, 554, 556, 558, 560, 561, 571, 572, 573.

2. Amend § 76.5(i) by removing the words “other than cable television” and adding in their place the words “over-the-air” and in the Note following paragraph (i) remove the word “noncable” each place it appears and add in its place the words “over-the-air”.

3. Amend § 76.54 by revising the first sentence in paragraph (c), revising paragraph (g), removing and reserving paragraph (h), and revising paragraph (i), to read as follows:

Note:

The following Appendix will not be included in the Code of Federal Regulations.

Appendix: List of Commenters

Comments:

1. Atkinson, Ronald; resident of Durango, Colorado

2. Brown, Marilyn T.; League of Women Voters of La Plata County

3. Bruen, Elizabeth; resident of Durango, Colorado

4. Calahan, Michael; Citizens For Colorado TV Access

5. City of Durango; City Manager

6. DIRECTV, Inc. (“DIRECTV”)

7. DISH Network L.L.C. (“Dish”)

8. Dulson, Laurie; resident of southwest Colorado

9. Flatten, Ann; resident of La Plata County, Colorado

10. La Plata County, Colorado; Board of County Commissioners

11. National Association of Broadcasters (“NAB”) and the ABC, CBS, FBC (Fox), and NBC Television Affiliates Associations (joint comments) (jointly, the “Broadcaster Associations”)

12. Necchik, Elayne and John; residents of Durango, Colorado

13. Roberts, Ellen; Colorado State Representative, House District 59

14. Salazar, John T.; U.S. House Representative, 3rd District of Colorado

15. Schafer, Marie L.; resident of southwest Colorado

16. Staby, Paul and Carolyn; residents of Durango, Colorado

17. Whitehead, Bruce T.; Colorado State Senator, Senate District 6

Reply Comments:

1. Broadcaster Associations

2. DIRECTV

3. Dish