Before the Federal Communications Commission Washington, D.C. 20554 In the Matter of ) ) Advanced Television Systems ) and Their Impact upon the ) Existing Television Broadcast ) MM Docket No. 87-268 Service ) FIFTH REPORT AND ORDER Adopted: April 3, 1997 Released: April 21, 1997 By the Commission: Chairman Hundt and Commissioners Quello and Ness issuing separate statements; Commissioner Chong concurring in part and issuing a statement. Table of Contents Paragraph I. INTRODUCTION 1 II. ISSUE ANALYSIS 3 A. Goals 3 B Channel Bandwidth 8 C. Eligibility 13 D. Definition of Service 19 1. Spectrum Use 19 2. High Definition 37 E. Public Interest Obligations 45 F. Transition 51 1. Simulcast 51 2. Licensing of DTV and NTSC Stations 57 G. Application/Construction Period 61 H. Recovery Date 94 I. Noncommercial Stations 101 J. Must-Carry and Retransmission Consent 105 K. All Channel Receiver Issues 107 L. Review Issues 115 III. CONCLUSION 117 IV. ADMINISTRATIVE MATTERS 118 Appendix A: Rule Changes Appendix B: Final Regulatory Flexibility Analysis Appendix C: List of Commenting Parties Appendix D: Section V-D to Forms 301 and 340 Appendix E: List of Eligible Broadcasters I. INTRODUCTION 1. Television has played a critical role in the United States in the second half of the twentieth century. A technological breakthrough -- digital television -- now offers the opportunity for broadcast television service to meet the competitive and other challenges of the twenty-first century. 2. The Telecommunications Act of 1996 ("1996 Act") provided that initial eligibility for any advanced television licenses issued by the Commission should be limited to existing broadcasters, conditioned on the eventual return of either the current 6 MHz channel or the new digital channel. Today we adopt rules to implement the statute. Our rules are designed to give digital television the greatest chance to meet its potential. We recognize the challenges that will be faced by broadcasters in adopting this new technology. Accordingly, we have generally refrained from regulation and have sought to maximize broadcasters' flexibility to provide a digital service to meet the audience's needs and desires. Where appropriate, however, we have adopted rules we believe will ensure a smooth transition to digital television for broadcasters and viewers. These rules include an aggressive but reasonable construction schedule, a requirement that broadcasters continue to provide a free, over- the-air television service, and a simulcasting requirement phased in at the end of the transition period. Further, we recognize that digital broadcasters remain public trustees with a responsibility to serve the public interest. II. ISSUE ANALYSIS A. Goals 3. Digital technology holds great promise. It allows delivery of brilliant, high-definition, multiple digital-quality programs, and ancillary and supplementary services such as data transfer. But, while the opportunities afforded by digital technology are great, so are the risks. In recent years, competition in the video programming market has dramatically intensified. Cable, Direct Broadcast Satellite (DBS), Local Multipoint Distribution System (LMDS), wireless cable, Open Video Systems (OVS) providers, and others vie, or will soon vie, with broadcast television for audience. Many operators in those services are poised to use digital. Some, like DBS, actually transmit digitally today but must convert the signals to analog NTSC service for display on home receivers, while others have plans to implement digital technology in the future. Broadcasters have long recognized that they must make the switch to digital technology. The viability of digital broadcast television will require millions of Americans to purchase digital television equipment. Because of the advantages to the American public of digital technology -- both in terms of services and in terms of efficient spectrum management -- our rules must strengthen, not hamper, the possibilities for broadcast DTV's success. 4. In the Fourth Further Notice/Third Inquiry, we outlined the goals of: "1) preserving a free, universal broadcasting service; 2) fostering an expeditious and orderly transition to digital technology that will allow the public to receive the benefits of digital television while taking account of consumer investment in NTSC television sets; 3) managing the spectrum to permit the recovery of contiguous blocks of spectrum, so as to promote spectrum efficiency and to allow the public the full benefit of its spectrum; and 4) ensuring that the spectrum -- both ATV channels and recovered channels -- will be used in a manner that best serves the public interest." In the context of the implementation of a DTV standard, we also enumerated the goals: "1) to ensure that all affected parties have sufficient confidence and certainty in order to promote the smooth introduction of a free and universally available digital broadcast television service; 2) to increase the availability of new products and service to consumers through the introduction of digital broadcasting; 3) to ensure that our rules encourage technological innovation and competition; and 4) to minimize regulation and assure that any regulations that we do adopt remain in effect no longer than necessary." These goals can be distilled into the two essential objectives that underlie the decisions we make today. 5. First, we wish to promote and preserve free, universally available, local broadcast television in a digital world. Only if DTV achieves broad acceptance can we be assured of the preservation of broadcast television's unique benefit: free, widely accessible programming that serves the public interest. DTV will also help ensure robust competition in the video market that will bring more choices at less cost to American consumers. Particularly given the intense competition in video programming, and the move by other video programming providers to adopt digital technology, it is desirable to encourage broadcasters to offer digital television as soon as possible. We make decisions today designed to promote the viability of digital television services. Digital broadcasters must be permitted the freedom to succeed in a competitive market, and by doing so, attract consumers to digital. In addition, broadcasters' ability to adapt their services to meet consumer demand will be critical to a successful initiation of DTV. 6. Second, we wish to promote spectrum efficiency and rapid recovery of spectrum. Decisions that promote the success of digital television -- our first goal -- promote this goal as well. The more quickly that broadcasters and consumers move to digital, the more rapidly spectrum can be recovered and then be reallocated or reassigned, or both. The faster broadcasters roll out digital television, the earlier we can recover spectrum. 7. Our decisions today further these goals. They ensure that broadcasters have more flexibility in their business. Broadcasters will be able to experiment with innovative offerings and different service packages as they continue to provide at least one free program service and meet their public-interest obligations. We choose to impose few restrictions on broadcasters and to allow them to make decisions that will further their ability to respond to the marketplace. We leave to broadcasters' business judgment such decisions as whether to provide high definition television or whether, initially, to simulcast the NTSC stream on DTV, and what and how many ancillary and supplementary services to provide. To aid the launch of digital services, we provide for a rapid construction of digital facilities by network-affiliated stations in the top markets, in order to expose a significant number of households, as early as possible, to the benefits of DTV. We require those most able to bear the risks of introducing digital television to proceed most quickly. Our decisions here will foster the swift development of DTV, which should enable us to meet our target of ending NTSC service by 2006. To permit careful monitoring of the development of digital television and an opportunity to reassess the decisions we make today, we intend to conduct a review of DTV every two years until the cessation of NTSC service. B. Channel Bandwidth 8. Background. In the Fourth Further Notice/Third Inquiry, we noted that we had previously decided that DTV would be introduced by assigning existing broadcasters a temporary channel on which to operate a DTV station during the transition period. We also noted that the DTV transmission system was designed for a 6 MHz channel and added that "we continue to believe that providing 6 MHz channels for ATV purposes represents the optimum balance of broadcast needs and spectrum efficiency." Nonetheless, we invited comment on any means of achieving greater spectrum efficiency, and, in this section, we will discuss whether 6 MHz channels should be allotted. 9. Comments. All broadcasters filing comments support affording a second 6 MHz channel per broadcaster for DTV. Joint Broadcasters, for example, state that the entire 6 MHz is required; assigning less would deprive the public of HDTV and set back the transition, because the Grand Alliance system presupposes 6 MHz channels, and anything different would require an entirely new design and testing program. Additionally, equipment manufacturers generally support the provision of 6 MHz channels for DTV purposes, noting that 6 MHz of spectrum is required for HDTV broadcasts. 10. However, Media Access Project, et al. ("MAP") argues that the Commission should provide broadcasters only enough spectrum to provide one "free" digital program service, either by allocating less than 6 MHz channels to broadcasters, by allocating the spectrum to others and only affording broadcasters "must carry" rights; or by allocating the spectrum to broadcasters but requiring them to lease out excess capacity to unaffiliated programmers. Further, Home Box Office ("HBO") asserts that if the Commission determines that the public interest demands Standard Definition Television ("SDTV") or other auxiliary applications, it must take another look at whether an entire 6 MHz slice of new spectrum should go to incumbent broadcasters. 11. Decision. We invited comment in the Fourth Further Notice/Third Inquiry on any means of achieving greater spectrum efficiency. Based on the comments, we continue to believe that providing 6 MHz channels for DTV purposes "represents the optimum balance of broadcast needs and spectrum efficiency." We do not believe that greater spectrum efficiency can be achieved by adopting a different channel size. Indeed, use of 6 MHz channels would facilitate spectrum efficiency because making the DTV channel the same width as the analog channel will afford greater flexibility at the end of the transition in terms of the choice of channel the broadcaster retains for DTV purposes. 12. Moreover, contrary to those comments that disagreed with allotting 6 MHz channels for DTV, we believe that the use of 6 MHz channels is necessary to provide viewers and consumers the full benefits of digital television made possible by the DTV Standard, including high definition television ("HDTV"), standard definition television, and other digital services. The DTV Standard was premised on the use of 6 MHz channels. To specify a different channel size at this late date would not promote our goals in adopting the DTV Standard and would prolong the conversion to DTV. Specifically, we believe that failing to specify a 6 MHz channel would undermine our goals, expressed in the Fourth Report and Order, of fostering an expeditious and orderly transition to digital technology and managing the spectrum to permit the recovery of contiguous blocks of spectrum and promote spectrum efficiency. The conversion to DTV would undoubtedly be significantly delayed if we set aside the longstanding expectations of the parties, on which they have based the technology and established their plans, and specified a different channel bandwidth. Accordingly, we reaffirm our earlier judgment and will allot 6 MHz channels for DTV. C. Eligibility 13. Background. We proposed to limit initial eligibility for DTV channels to existing broadcasters. Our proposed criteria for existing broadcasters included full-service television broadcast station licensees, permittees authorized as of October 24, 1991, and parties with applications for a construction permit on file as of October 24, 1991, who are ultimately awarded a full-service broadcast license. After release of the Fourth Further Notice/Third Inquiry, Congress statutorily addressed eligibility in the 1996 Act. Congress instructed the Commission to limit the initial eligibility for advanced television licenses to persons that, as of the date of the issuance of the licenses, are licensed to operate a television broadcast station or hold a permit to construct such a station. The 1996 Act did not change the fact that the Commission lacks statutory authority to auction broadcast spectrum. 14. Comments. We sought comment on the potential impact of the eligibility restriction on the Commission's policy of fostering programming and ownership diversity. Few commenters address this topic. However, some commenters address the basic issue of the eligibility restriction. For example, some argue that allowing broadcasters to offer subscription services without opening up that opportunity to competitors would violate the legal principles enunciated in Ashbacker Radio Corporation v. FCC, 326 U.S. 327 (1945), discussed below. Others maintain that the Commission faces an Ashbacker problem unless it mandates that broadcasters provide HDTV. General Instrument argues that "allowing existing broadcasters too much 'flexible use' of the 6 MHz ATV allocation raises the Ashbacker problem by changing the primary service provided rather than merely modifying existing licenses," but that the Commission could avoid Ashbacker problems by requiring that the predominant use of the DTV spectrum be for HDTV transmission. HBO argues that if we were to allow the DTV channel to be put to uses other than HDTV, for which broadcasters have no more established interest or expertise than potential competing applicants, the public interest rationale for granting the spectrum to incumbents without a competitive process would evaporate. 15. Another eligibility issue raised by commenters concerns the restriction of initial eligibility to full-service licensees. LPTV commenters such as Abacus Television point out the contribution that LPTV stations make in providing television service to underserved areas as well as the local and specialized nature of the services they provide. These comments also contend that the Commission has long found that diversification of mass media ownership serves the public interest by promoting diversity of program and service viewpoints and by preventing undue concentration of economic power. According to Abacus Television, excluding LPTV from the analog to digital transition would undermine these principles. Further, Abacus argues, it would exclude the vast majority of minority television licensees and permittees and is antithetical to increasing ownership diversity. Abacus argues that the Commission should perform a market-by-market analysis to determine which LPTV stations could be accommodated; absent that, it could minimize the effect on LPTV stations by adding a second phase to the process of creating a Table of Allotments to address the accommodation of LPTV service next, after it has begun the conversion process for full power television licensees. It offers suggestions on how to carry out this phase. WatchTV, Inc. also argues that the Commission should make unused digital channels available to existing low power operators on the same terms and conditions as it may adopt for small market broadcasters and educational licensees before it allows new entrants to apply. Additionally, White Eagle Partners believes that LPTV stations should be eligible to receive 6 MHz DTV channels. 16. Still other LPTV commenters argue that neither LPTV stations nor full service stations should be afforded a second 6 MHz channel. Community Broadcasters Association ("CBA") believes that a dual channel DTV scenario would be an inefficient use of spectrum, requiring not only immense private investment, but also leading to a host of logistical and other problems that will negate many of the benefits of DTV. CBA argues that full power and LPTV stations should be permitted to convert to DTV on their present channel at any time. 17. Decision. In the 1996 Act, Congress specifically addressed the eligibility issue. Congress provided that the Commission "should limit the initial eligibility for [DTV] licenses to persons that, as of the date of such issuance, are licensed to operate a television broadcast station or hold a permit to construct a station (or both) . . ." In comments filed before passage of the 1996 Act, some parties argue that granting incumbent broadcasters the exclusive right to apply for the DTV spectrum raises potential problems under Ashbacker Radio Corporation v. FCC, 326 U.S. 327 (1945), and its progeny. Other commenters argue similarly that Ashbacker concerns are raised unless the Commission imposes an HDTV mandate. However, given Congress' explicit direction, there is now no statutory basis to question the Commission's authority to limit initial eligibility to existing broadcasters. Following Congress' direction, we determine that initial eligibility should be limited to those broadcasters who, as of the date of issuance of the initial licenses, hold a license to operate a television broadcast station or a permit to construct such a station, or both. 18. We will continue our previously adopted policy to limit initial eligibility for DTV licenses to existing full-power broadcasters. We previously determined that there is insufficient spectrum to include LPTV stations and translators, which are secondary under our rules and policies, to be initially eligible for a DTV channel. As we noted in the Sixth Further Notice, in order to provide DTV allotments for existing full service stations, it will be necessary to displace LPTV stations and TV translator stations to some degree, especially in major markets. We have not been able to find a means of resolving this problem. However, we note that limiting initial eligibility to full-power broadcasters does not necessarily exclude LPTV stations from the conversion to digital television. Moreover, in the Sixth Further Notice, we made a number of proposals to mitigate the impact on LPTV stations, and, in the Sixth Report and Order, we adopt a number of measures intended to minimize the impact of DTV implementation on LPTV service. D. Definition of Service 1. Spectrum Use 19. Background. The Fourth Further Notice/Third Inquiry reaffirmed our intention to preserve and promote universal, free, over-the-air television. We recognized that broadcast television has become an important part of American life and thus stated "we envision that the 6 MHz channel earmarked for [DTV] will be used for free, over-the-air broadcasting." We also recognized the increased flexibility that DTV offered broadcasters and noted that "allowing at least some level of flexibility would increase the ability of broadcasters to compete in an increasingly competitive marketplace, and would allow them to serve the public with new and innovative services." 20. The DTV Standard, adopted by the Commission in the Fourth Report and Order, permits broadcasters to offer a variety of services. It allows broadcasters to offer free television of higher resolution than analog technology. It allows the broadcast of at least one, and under some circumstances two, high definition television programs; and it allows "multicasting," the simultaneous transmission of three, four, five, or more digital programs. The Standard also allows for the broadcast of CD-quality audio signals. And it permits the rapid delivery of large amounts of data: an entire edition of the local newspaper in less than two seconds, sports information, computer software, telephone directories, stock market updates, interactive educational materials and, indeed, any information that can be translated into digital bits. In addition to allowing broadcasters to transmit video, voice, and data simultaneously, the DTV Standard allows broadcasters to do so dynamically, meaning that they can switch back and forth quickly and easily. For example, a broadcaster could transmit a news program consisting of four separate SDTV programs for local news, national news, weather and sports; while interrupting that programming with a single high definition television commercial with embedded data about the product; or transmit a motion picture in a high definition format, while simultaneously using the excess capacity for transmission of data unrelated to the movie. 21. In light of the flexibility and new capabilities of digital television, we asked to what extent we should permit broadcasters to use their DTV spectrum for uses other than free, over-the-air television. Recognizing that broadcasters are currently allowed to use a portion of their broadcast spectrum for ancillary or supplementary uses that do not interfere with the primary broadcast signal, we asked whether we should permit such uses of the DTV spectrum, and, if so, how such uses should be defined and what portion of the DTV system's capacity should be allowed for such ancillary and supplementary services. Assuming we permitted ancillary and supplementary services, we also asked to what extent we should allow broadcasters to use DTV spectrum for services that go beyond traditional broadcast television or ancillary and supplementary uses analogous to those allowed under the current regulatory structure. We also asked whether broadcasters should be permitted to provide nonbroadcast and/or subscription services, and, if permitted, how such services should be defined, how much of the DTV capacity should be allowed for such uses, and what, if any, regulation would be appropriate for such services. 22. Comments. Most commenters support affording flexibility to broadcasters to provide ancillary and supplementary services. Joint Broadcasters favor the provision of any ancillary and supplementary services other than those limited by the Telecommunications legislation then pending. Viacom urges that DTV licensees should be authorized to explore the full potential of the ATSC DTV system as long as those uses do not adversely affect the broadcaster's free video service. AAPTS/PBS favors ancillary broadcast and nonbroadcast use of the DTV channel, noting that flexible use will serve the public interest by helping to spur development of new technologies and to provide greater opportunities for noncommercial stations to enhance their public service to their respective communities. A noncommercial station could, for example, utilize digital transmission to distribute program-related course materials, textbooks, student and teacher guides, computer software and content areas of the World Wide Web as part of the station's instructional programming. Further, noncommercial stations could use ancillary and supplementary services, without regard to the educational content, as a revenue source to support nonprofit services and operations and the transition to DTV. 23. Microsoft argues that licensees should be given maximum flexibility to provide a wide variety of services and any definition of free over-the-air broadcasting should be narrowly defined in the DTV environment. Texas Instruments, Inc. ("Texas Instruments") argues that it is premature for the Commission to regulate the mix of DTV services by requiring a certain amount of capacity to be used for video programming; freedom from regulatory restraints will enhance television's functionality and appeal beyond entertainment to encompass new and unforeseen services. 24. Equipment manufacturers such as General Instrument, Motorola, Thomson, and Zenith, and EIA urge that the Commission should permit flexible use of the DTV channel consistent with the preservation of free over-the-air television and as long as there is a substantial commitment to HDTV. Motorola, however, supports a more restrictive definition of ancillary services. The Digital Grand Alliance states that, while the predominant use should be for free over-the-air television and a minimum number of HDTV hours should be broadcast, the Commission should permit flexible uses of the DTV channel. Cohen, Dippell and Everist argues that a broadcaster should be permitted to provide new and innovative services that do not cause objectionable interference to existing users, provided that the primary use is broadcasting to the general public. 25. NYNEX and Personal Communications Industry Association ("PCIA") urge that the primary use of the DTV channel should be free over-the-air broadcasting. NYNEX urges that allowing broadcasters to provide nonbroadcast and subscription services would threaten free, universal broadcasting and should be permitted only as a residual use of spectrum capacity. PCIA urges that a DTV licensee should be permitted to offer broadcast-related services, such as closed captioning, pay programming, broadcast or narrowcast audio service, and home shopping, but should not be allowed to offer mobile radio services like paging without open competition for DTV licenses by all qualified applicants. Golden Orange suggests that the Commission should permit all types of broadcast ancillary services that do not cause interference to the primary HDTV requirement it urges the Commission to adopt, but that the Commission should not permit nonbroadcast services or non- TV subscription services. HBO argues that the second channel should be used for HDTV and opposes affording broadcasters flexible use of the channel, but adds that if the Commission permits flexibility in the use of the channel, it should nonetheless require that a substantial portion of the day be devoted to HDTV programming. The Benton Foundation opposes spectrum flexibility as affording broadcasters an unfair competitive advantage over competitors and argues that the principal use of the second channel, defined as a minimum of 75% of capacity, should be for broadcast. 26. Broadcasters, as a group, express their staunch support for the continuation of our tradition of universal and free broadcast television. For example, the comments of the Joint Broadcasters, a group constituting a wide cross-section of broadcast television stations and networks, emphasize broadcasters' commitment to provision of free television service. ALTV, Pacific FM, and Busse argue that broadcasters should be required to offer at least one free over-the-air channel enhanced by digital technology but should otherwise be unfettered as to the services they provide. MAP and the Benton Foundation argue that because broadcasters will receive free and exclusive use of the broadcast spectrum, free, over-the-air broadcasting should comprise no less than 75% of a broadcaster's capacity. 27. Decision. As we have noted before, an overarching goal of this proceeding is to promote the success of a free, local television service using digital technology. Broadcast television's universal availability, appeal, and the programs it provides -- for example, entertainment, sports, local and national news, election results, weather advisories, access for candidates and public interest programming such as education television for children -- have made broadcast television a vital service. It is a service available free of charge to anyone who owns a television set, currently 98% of the population. 28. We expect that the fundamental use of the 6 MHz DTV license will be for the provision of free over-the-air television service. In order to ease the transition from our current analog broadcasting system to a digital system, we will require broadcasters to provide on their digital channel the free over-the-air television service on which the public has come to rely. Specifically, broadcasters must provide a free digital video programming service the resolution of which is comparable to or better than that of today's service and aired during the same time periods that their analog channel is broadcasting. 29. We wish to preserve for viewers the public good of free television that is widely available today. At the same time, we recognize the benefit of permitting broadcasters the opportunity to develop additional revenue streams from innovative digital services. This will help broadcast television to remain a strong presence in the video programming market that will, in turn, help support a free programming service. Thus, we will allow broadcasters flexibility to respond to the demands of their audience by providing ancillary and supplementary services that do not derogate the mandated free, over-the-air program service. Ancillary and supplementary services could include, but are not limited to, subscription television programming, computer software distribution, data transmissions, teletext, interactive services, audio signals, and any other services that do not interfere with the required free service. 30. This decision is supported by the overwhelming weight of the record. Consistent with precedent that has treated telecommunications services provided by an NTSC station other than the regular television program service as ancillary, we will consider as ancillary and supplementary any service provided on the digital channel other than free, over-the-air services. In addition, we will not impose a requirement that the ancillary and supplementary services provided by the broadcaster must be broadcast-related. 31. The approach we take here, of allowing broadcasters flexibility to provide ancillary and supplementary services is supported both generally and specifically by the 1996 Act, enacted after issuance of the Fourth Further Notice/Third Inquiry. In general, the 1996 Act seeks "[t]o promote competition and reduce regulation in order to secure lower prices and higher quality services for American telecommunications consumers and encourage the rapid deployment of new telecommunications technologies." More importantly, the 1996 Act specifically gives the Commission discretion to determine, in the public interest, whether to permit broadcasters to offer such services. Section 336(a)(2) of the Communications Act, contained in Section 201 of the 1996 Act, provides that if the Commission issues additional licenses for advanced television services, it "shall adopt regulations that allow the holders of such licenses to offer such ancillary or supplementary services on designated frequencies as may be consistent with the public interest, convenience, and necessity." 32. Section 336(b)(2) sets out the specific parameters of our authority to permit ancillary and supplementary services, and the approach we take here fully complies with those parameters. Thus, under Section 336(b)(2), the Commission is required to limit ancillary and supplementary services to avoid derogation of any advanced television services that the Commission may require. The Commission has exercised its discretion and is requiring broadcasters to continue to provide the free over-the-air service on which the public has come to rely. We herein require that any ancillary and supplementary services broadcasters provide will not derogate that required service. Further, Section 336(b)(1) requires that the Commission may only permit broadcasters to offer ancillary or supplementary services "if the use of a designated frequency for such services is consistent with the technology or method designated by the Commission for the provision of advanced television services. . . ." 33. Moreover, we believe that the approach we take here will serve the public interest by fostering the growth of innovative services to the public and by permitting the full possibilities of the DTV system to be realized. One of our goals is to promote spectrum efficiency. Encouraging an expeditious transition from analog to digital television and a quick recovery of spectrum will promote that goal. By permitting broadcasters to assemble packages of services that consumers desire, we will promote the swift acceptance of DTV and the penetration of DTV receivers and converters. That, in turn, will help promote the success of the free television service. As discussed above, digital television promises a wealth of possibilities in terms of the kinds and numbers of enhanced services that could be provided to the public. Indeed, we believe that giving broadcasters flexibility to offer whatever ancillary and supplementary services they choose may help them attract consumers to the service, which will, in turn, hasten the transition. In addition, the flexibility we authorize should encourage entrepreneurship and innovation. For example, it may encourage the development of compression technologies that could allow even more digital capacity on a 6 MHz channel, paving the way for multiple high definition programs and more free programming than would otherwise be offered. 34. There is no public interest harm in permitting ancillary and supplementary services; indeed, to the contrary, allowing such services contributes to efficient spectrum use and can expand and enhance use of existing spectrum. In this case, technological advancements, i.e., digital technology, have made it possible for broadcasters to provide continuing free, over-the-air service and still have the capacity to provide other innovative services. It would be contrary to the public interest to handicap broadcasters in providing these services and to deprive consumers of the opportunity to purchase the services they desire. We note, however, that we will review our flexible approach to permitted ancillary and supplementary services during the periodic reviews established herein and make adjustments to our rules as needed. 35. We note that the 1996 Act requires the Commission to establish a fee program for ancillary or supplementary services provided by digital licensees if subscription fees are required in order to receive such services or if the licensee directly or indirectly receives compensation from a third party in return for transmitting material furnished by such third party (other than commercial advertisements used to support broadcasting for which a subscription fee is not required). We will issue a Notice to consider proposals as to how that statutory provision should be implemented. 36. In addition, consistent with the 1996 Act, non-broadcast services provided by digital licensees will be regulated in a manner consistent with analogous services provided by other persons or entities. We already follow such an approach with respect to ancillary and supplementary services provided by NTSC licensees, for example, on the VBI and the video portion of the analog signal. 2. High Definition 37. Background. In the Fourth Further Notice/Third Inquiry, the Commission noted that the Grand Alliance system would provide broadcasters new flexibility and new capabilities to provide not only high definition television but also multiple program streams, as well as a variety of nonvideo and/or subscription-based services. After noting that allowing at least some level of flexibility would increase the ability of broadcasters to compete in an increasingly competitive marketplace, would permit new and innovative services to be provided to the public, and would allow for a more rapid transition to digital broadcasting, the Commission requested comment as to whether it should require broadcasters to provide a minimum amount of high definition television and, if so, what minimum amount should be required. 38. Comments. Many commenters are opposed to a minimum HDTV requirement. Commenters urging the Commission not to apply a minimum HDTV requirement but rather to leave that determination to the marketplace and thus to broadcasters and viewers include the National Association of Broadcasters ("NAB"), ALTV, the Benton Foundation, Microsoft Corporation, Telemundo Group, Inc. ("Telemundo"), and AAPTS/PBS. NAB notes that mandating a certain amount of HDTV could impair broadcasters' ability rapidly to fuel development of the DTV market with complementary program offerings and could prolong the transition to digital television. NAB states: "By providing maximum latitude, the Commission will encourage development of diverse new programming services that will facilitate the most rapid acceptance of ATV and lead to the most rapid return of NTSC spectrum." ALTV states that a minimum HDTV requirement would be burdensome and, moreover, superfluous because the broadcast industry has maintained its commitment to implement HDTV. According to ALTV, independent stations rely on syndicated and local programming, which is less likely to be produced in an HDTV format, so a minimum HDTV requirement would have a disproportionately burdensome impact on independents. ALTV states that any minimum HDTV requirement, if and when justified by future circumstances, should be adopted later in the transition, as more HDTV programming comes on the market. Telemundo notes that a minimum HDTV requirement would negatively impact foreign language stations and networks, many of which feature programming produced outside the United States, where HDTV production is likely to lag domestic HDTV production. AAPTS and PBS, in joint comments, oppose a minimum HDTV requirement, noting that the Commission can rely on broadcasters and public television's commitment to HDTV, and argue that if the Commission adopts an HDTV requirement, it should be "liberally waived" for noncommercial stations (particularly those analog stations that may share a DTV channel in the transition). The Benton Foundation argues that mandating an HDTV minimum serves no public interest because it does not increase the number of voices in the marketplace or contribute to the civic discourse of democracy. 39. Support for a minimum HDTV requirement is expressed by three networks, HBO, NYNEX Corporation, receiver manufacturers, Viacom, Golden Orange Broadcasting Co., Inc. ("Golden Orange"), and the National Consumers League. Supporters of a minimum requirement generally argue that a requirement will help promote the early availability of HDTV programming, create demand for HDTV receivers, stimulate the market, and speed the transition. Golden Orange, for example, notes that without HDTV, the public will not be motivated to buy receivers. HBO argues that the legal and policy principles that justify awarding incumbent broadcasters a second channel for DTV do not permit broadcasters to use this second channel for any thing other than HDTV programming, and, if the FCC allows other than HDTV programming, it should require that a substantial portion of the broadcast day, especially during dayparts and prime time, be devoted exclusively to HDTV. These commenters vary on the amount of HDTV programming that should be required and on how the minimum should be implemented. 40. While believing that the marketplace is the best determinant of the optimum balance between HDTV and other DTV services, Joint Broadcasters support a minimum HDTV requirement if necessary to assure HDTV a fair chance in the marketplace. Joint Broadcasters also declare their support for HDTV as the "centerpiece" of the digital television system and note the commitment of many broadcast organizations to provide HDTV. MAP, which supports allotting only enough capacity to broadcasters to provide one free, over-the-air, digital program service, argues accordingly that there is little reason for the Commission to mandate HDTV. However, MAP notes that the only justification for affording broadcasters exclusive use of the entire 6 MHz of spectrum is that they will deliver significant amounts of HDTV programming. 41. Decision. Our decisions today, and our previous adoption of the DTV Standard, give broadcasters the opportunity to provide high definition television programming, but we decline to impose a requirement that broadcasters provide a minimum amount of such programming and, instead, leave this decision to the discretion of licensees. The DTV Standard will allow broadcasters to offer the public high definition television, as well as a broad variety of other innovative services. We believe that we should allow broadcasters the freedom to innovate and respond to the marketplace in developing the mix of services they will offer the public. In this regard, we endeavor to carry out the premises of the 1996 Act which, as noted above, seeks "[t]o promote competition and reduce regulation in order to secure lower prices and higher quality services for American telecommunications consumers and encourage the rapid deployment of new telecommunications technologies." There is no reason to involve the government in a decision that should properly be based on marketplace demand. The 1996 Act specifically affords the Commission discretion whether or not to require minimum high resolution television programming. 42. Our decisions to adopt the DTV Standard and to use 6 MHz channels permit broadcasters to provide high definition television in response to viewer demand. If we do not mandate a minimum amount of high resolution television, we anticipate that stations may take a variety of paths: some may transmit all or mostly high resolution television programming, others a smaller amount of high resolution television, and yet others may present no HDTV, only SDTV, or SDTV and other services. We do not know what consumers may demand and support. Since broadcasters have incentives to discover the preferences of consumers and adapt their service offerings accordingly, we believe it is prudent to leave the choice up to broadcasters so that they may respond to the demands of the marketplace. A requirement now could stifle innovation as it would rest on a priori assumptions as to what services viewers would prefer. Broadcasters can best stimulate consumers' interest in digital services if able to offer the most attractive programs, whatever form those may take, and it is by attracting consumers to digital, away from analog, that the spectrum can be freed for additional uses. Further, allowing broadcasters flexibility as to the services they provide will allow them to offer a mix of services that can promote increased consumer acceptance of digital television, which, in turn, will increase broadcasters' profits, which, in turn, will increase incentives to proceed faster with the transition. 43. We have also been persuaded by the arguments that a minimum high definition television requirement would be burdensome on some broadcasters. We note the arguments of ALTV and Telemundo as to the difficulties a minimum high resolution television requirement might impose on independent stations and foreign language stations, respectively. We acknowledge the contributions of such stations and the programming they provide to the diversity of our broadcast television service and hesitate to impose a requirement that might make it more difficult for such stations to convert to digital television, perhaps even undermining their ability to do so. We are not convinced that high definition television programming should be mandated where to mandate it might impose significant burdens on stations, particularly where, as will be discussed below, it appears that the marketplace will provide high definition television programming even absent a governmental requirement to that effect. 44. We note that some commenters argued that a high definition television mandate is necessary to give program producers and equipment manufacturers the necessary incentives to support high resolution television, and to provide viewers and consumers enough high resolution television programming to foster demand for such programming and to drive DTV receiver purchases. To the contrary, however, we believe that a minimum high definition television requirement is unnecessary to achieve these goals. We note in this regard that broadcasters and networks have emphasized their commitment to high definition television. We find nothing in the record that identifies a market failure or other reason to impose a governmental requirement for high definition television. High definition television will afford broadcasters an important tool in the increasingly competitive video programming market. There is no reason to believe that a government mandate is necessary to ensure that high definition television gets a fair chance in the marketplace. E. Public Interest Obligations 45. Background. As we stated in the Fourth Further Notice, the rules imposing public interest obligations on broadcast licensees originate in the statutory mandate that broadcasters serve the "public interest, convenience, and necessity," as well as other provisions of the Communications Act. These obligations include the requirements that broadcasters must provide "reasonable access" to candidates for federal elective office and must afford "equal opportunities" to candidates for any public office and that weekly they must provide three hours of children's educational programming. Licensees must also adhere to restrictions on the airing of indecent programming and must comply with the 1996 Act provisions relating to the rating of video programming. In the Fourth Further Notice/Third Inquiry, the Commission noted that these current public interest rules were developed under the analog model and therefore were shaped by the limitations inherent in analog technology. The Commission sought comment on whether the greater capabilities afforded by digital technology should affect licensees' obligations to serve the public interest, and if so, how those obligations might be adapted to the digital context. 46. Comments. Commenters generally agree that existing public interest obligations should continue to apply, at the very least, to free, over-the-air programming on DTV. They differ greatly, however, on whether, and if so, how, the public interest obligation should be applied and possibly expanded in a DTV world. Joint Broadcasters argue that public interest obligations should continue to apply to NTSC through the transition, and to all the DTV services, but that there is no need to impose additional obligations on the transition channel. ALTV comments that on DTV, free broadcast television service should continue to be subject to the public interest obligations now applied to NTSC, but that no public interest obligations should apply to nonbroadcast services. General Instrument argues that public interest obligations should attach to free, over-the-air broadcasting on DTV, but that for provision of subscription services, broadcasters should be required to pay a fee to compensate the public. 47. Some commenters offered specific proposals on how the broadcasters' public-interest obligations could be reconceptualized and adapted in light of the new possibilities offered by digital technology. MAP argues that public interest obligations should apply to each program service, including subscription services, provided over DTV spectrum. MAP proposes that broadcasters be required to provide "new and different public service in exchange for the opportunity to convert to digital television," including free time for political candidates, noncommercial public access, and dedication of 20% of total program time to children's educational and informational programming." Alliance for Community Media suggests that, at a minimum, public interest guidelines should contain a quantitative measure of programming including: local news and information; educational programs for children and adults; material helpful to nonprofit, charitable, health, or social-service organizations; and programs to allow elected officials and nonprofit organizations to communicate to the community. The Benton Foundation urges that broadcasters be required to provide, for example, at least six hours of children's educational television, free time for candidates, and access to programming time by members of the community. 48. Decision. In this proceeding we seek to promote the successful transition of analog broadcast television into a digital broadcast television service that serves the public interest. Broadcasters have long been subject to the obligation to serve the "public interest, convenience and necessity." In the 1996 Act, Congress provided that broadcasters' public interest obligations extend into the digital environment: "(d) Public Interest Requirement. --Nothing in this section shall be construed as relieving a television broadcasting station from its obligation to serve the public interest, convenience, and necessity. In the Commission's review of any application for renewal of a broadcast license for a television station that provides ancillary or supplementary services, the television licensee shall establish that all of its program services on the existing or advanced television spectrum are in the public interest." In enacting this provision, Congress clearly provided that broadcasters have public interest obligations on the program services they offer, regardless of whether they are offered using analog or digital technology. 49. In the digital television era, although many aspects of the business and technology of broadcasting may be different, broadcasters will remain trustees of the public's airwaves. Our current rules were developed when technology permitted broadcasters to provide just one stream of programming over a 6 MHz channel. We recognize, however, that digital technology expands the effective capacity of 6 MHz of spectrum. For example, it permits, but does not require, licensees to provide several program streams, as well as other digital services, on the 6 MHz channel of spectrum that we are assigning them. The dynamic and flexible nature of digital technology creates the possibility of new and creative ways for broadcasters to serve the country and the public interest. 50. Some argue that broadcasters' public interest obligations in the digital world should be clearly defined and commensurate with the new opportunities provided by the digital channel broadcasters are receiving. Others contend that our current public interest rules need not change simply because broadcasters will be using digital technology to provide the same broadcast service to the public. We are not resolving this debate today. Instead, at an appropriate time, we will issue a Notice to collect and consider all views. As we authorize digital service, however, broadcast licensees and the public are on notice that existing public interest requirements continue to apply to all broadcast licensees. Broadcasters and the public are also on notice that the Commission may adopt new public interest rules for digital television. Thus as to the public interest, our action today forecloses nothing from our consideration. F. Transition 1. Simulcast 51. Background. In our 1992 Second Report/Further Notice, we determined that DTV licensees should simulcast on their NTSC channel the programming offered on their DTV channel. Specifically, we adopted, as a preliminary matter, a 50 percent simulcasting requirement, beginning one year after the six-year application and construction period, increasing to 100 percent two years later. Our early simulcast decisions were based on the expectation that DTV would primarily consist of the broadcast of a single HDTV program service. However, as DTV technology developed, we learned that DTV would be able to do much more than we initially expected and that it would be possible to transmit multiple simultaneous SDTV program services on a single 6 MHz channel. Recognizing that a licensee would be unable to simulcast multiple program services on its NTSC channel, we stated in the Fourth Further Notice that our simulcast requirement must be revisited and we must consider alternatives. In addition, we stated that we still perceived a need for a simulcast requirement, albeit different from that first envisioned, and proposed to require the simulcast of all material being broadcast on the licensee's NTSC channel on a program service of the DTV channel. We requested comment on this proposal. 52. Comments. Broadcasters are divided on the necessity of a simulcast requirement. Numerous comments note that simulcasting is certain to occur even in the absence of a mandate. The Joint Broadcasters emphasize that they believe that much simulcasting of NTSC programming on the DTV channel would happen in the normal course. However, because broadcasters have differing views on the need for a requirement, the group declined to take a position on that issue. NAB and ALTV maintain that a simulcast requirement would be counterproductive and may delay development and penetration of DTV, especially during the early stages of the transition. However, NAB acknowledges that a phase-in of simulcasting near the end of the transition could be an effective means of preventing disenfranchisement of the remaining NTSC viewers. ABC and CBS argue that a simulcast requirement should apply from the outset of the transition. CBS argues that a simulcast requirement could spur the sale of DTV equipment and ensure that DTV and NTSC broadcast services do not evolve into separately programmed services. NBC supports a 50% simulcasting requirement to allow for some innovation. Broadcasters and other commenters arguing against the advisability of a simulcast requirement maintain that rigid requirements would hamper broadcasters' ability to promote and provide the programming that was most likely to draw viewers to the DTV channel. They argue that transition to DTV would occur most rapidly if broadcasters had the maximum flexibility to experiment with new services and to put together offerings that would best satisfy viewers. Commenters point out that simulcasting would slow the transition by preventing broadcasters from enticing viewers to DTV by making desirable programming available on DTV that is not available on NTSC. ALTV also argues that any requirement would be based on speculation about the development of digital service, and therefore imposition of any rule, if necessary at all, should be postponed. 53. Equipment manufacturers recommend that a simulcast requirement be tailored to promote a rapid transition to HDTV and DTV and recovery of NTSC spectrum. The cable industry supports a simulcast HDTV service, that is the broadcast of one program over two channels to the same area at the same time. Public-interest groups generally support requiring DTV broadcasters to simulcast their NTSC service on the DTV channel. Commenters supporting a simulcast requirement argue that such a requirement would expedite the transition from analog to digital by guaranteeing that popular programming services continue to be available, in enhanced technical quality, on the DTV channel. They also point out that simulcasting would prevent the development of two separately programmed services, which might delay the transition. As to the question of phase-in, the Digital Grand Alliance suggests that simulcast requirements be minimal in the early years of the transition to facilitate innovative HDTV programming, and more comprehensive in the later years to avoid perpetuating unique NTSC programming that would make it difficult to cease NTSC broadcasts. Throughout the transition, one DTV program stream should be identical to the program stream carried on the NTSC channel. 54. Decision. We decline to adopt a simulcast requirement for the early years of the transition. In order to help reclaim spectrum at the end of the transition period, however, we adopt by the sixth year from the date of adoption of this Report and Order a requirement of 50% simulcasting of the video programming of the analog channel on the DTV channel; by the seventh year, a 75% simulcasting requirement; by the eighth year, a 100% simulcasting requirement, until the analog channel is terminated and that spectrum returned. 55. We have previously recognized the need to afford broadcasters flexibility to program their DTV channels to attract consumers, especially during the critical launch phase of DTV. We do not adopt a simulcast requirement during the early years of the transition in order to give broadcasters the ability to experiment with program and service offerings. We are convinced by commenters who argue that many consumers' decisions to invest in DTV receivers will depend on the programs, enhanced features, and services that are not available on the NTSC service, and a simulcast requirement might limit broadcasters' ability to experiment with the full range of digital capabilities. Because the DTV channels represent valuable resources with large opportunity costs, we believe licensees will have economic incentives to provide programming and services that will attract consumers to DTV. In any event, a simulcast requirement during this initial transition phase appears to be unnecessary because the record suggests that marketplace forces will ensure that the best NTSC programming will be simulcast on the digital channel and broadcasters have indicated that they will simulcast NTSC programs on the DTV channel even in the absence of a requirement. 56. While we believe that a simulcast requirement is not warranted during the early years of the transition, there are benefits to a simulcast requirement near the end of the transition period. Such a requirement will help ensure that consumers will enjoy continuity of free over-the-air program service when we reclaim the analog spectrum at the conclusion of the transition period. It may be difficult to terminate analog broadcast service if broadcasters show programs on their analog channels but not on their digital channels. We believe that it will be easier to terminate analog services and reclaim the spectrum at the end of the transition if most broadcast households are capable of receiving DTV signals and these households do not suffer the loss of a current program service only offered on analog channels. Thus, we will require a phased-in simulcasting requirement as follows: By the sixth year from the date of adoption of this Report and Order, we adopt a 50% simulcasting requirement; by the seventh year, we adopt a 75% simulcasting requirement; by the eighth year, we adopt a 100% simulcasting requirement which will continue until the analog channel is terminated and the analog spectrum returned. We recognize that we will need to define clearly "simulcasting" in the context of DTV and will do so as part of our two-year reviews or other appropriate proceeding. 2. Licensing of DTV and NTSC Stations 57. Background. The Second Report/Further Notice determined to treat the licensee as having two separate licenses. In the Fourth Further Notice/Third Inquiry, however, the Commission tentatively concluded that substantial benefits could be obtained if the NTSC and ATV facilities were instead authorized under a single, unified license. The Commission tentatively decided that such a policy would ease administrative burdens on the Commission and broadcasters alike by reducing the number of applications that would have to be filled out, filed, and processed, and would be consistent with our authority under Section 316 of the Act to modify an existing license. Licensing the two facilities under a single license would also retain the policy announced in the Second Report/Further Notice of treating both facilities the same for revocation/nonrenewal purposes. 58. Comments. Those commenters, which include broadcasters, networks, and equipment manufacturers, who address this issue largely support our revised proposal for a single, paired license. One commenter, broadcaster Golden Orange, argues that the DTV and NTSC stations should have separate licenses. 59. Decision. We adopt our tentative conclusion, echoed by nearly all those who commented, that the NTSC and DTV facilities should be licensed under a single, paired license. As determined earlier, this system will help the Commission and broadcasters alike by keeping administrative burdens down. It is also consistent with our intention to treat the DTV license and the NTSC license together for the purposes of revoking or not renewing a license. Once broadcasters have satisfied construction and transmission requirements, they will receive a single, paired license for the DTV and NTSC facilities. 60. One of our objectives is to promote broadcasters' ability to build digital businesses so that their valuable free programming service will continue. We anticipate that some licensees may find it beneficial to develop partnerships with others to help make the most productive and efficient use of their channels. We intend to give broadcasters flexibility in structuring business arrangements and attracting capital to build a successful DTV business. One of our overarching objectives is to promote the success of digital television. We anticipate that some licensees may find it beneficial to develop partnerships with others to help make the most productive and efficient use of their channel, and we will look with favor on such arrangements. Broadcasters may find it useful to work with other broadcasters or others who have special expertise in exploiting digital technology. Parties could come together for the sharing of facilities, costs, and equipment, the development and provision of programming and service offerings, access to capital and financing, the establishment of business plans, and the like. Such arrangements will aid both broadcaster and public, by helping the broadcaster achieve the most competitive and beneficial business strategy and by ensuring for the public the best use of the digital spectrum, including not only the most efficient use of the spectrum but also the greatest array of valuable services. Variations on partnerships have arisen in other contexts, which indicates that they are efficient and useful. For example, in the common network/affiliate relationship, a network provides programming and advertising that its affiliates may use. Another example is the Commission's authorization of Instructional Television Fixed Services (ITFS) licensees to lease, for profit, their excess capacity to other service providers. We are receptive to the establishment of like arrangements in the DTV context. Whatever the arrangement, it is the licensee who remains responsible for ensuring the fulfillment of all obligations incumbent upon a broadcast licensee. G. Application/Construction Period 61. Background. The Second Report/Further Notice adopted a two year application period and an additional three years for construction of a DTV facility. We were concerned that without a specific timetable, some parties might delay construction while waiting for others to take the lead, to the detriment of our goal of expeditious DTV implementation. We clarified that broadcasters who did not apply and construct within the established time period (and who failed to obtain an extension of time) would lose their initial eligibility for a DTV frequency. We noted that existing policies regarding extensions of time would afford broadcasters adequate flexibility to cope with unforeseen implementation problems. We defined "construction" as the capability of emitting DTV signals, regardless of the source of these signals (e.g., local origination, pass-through of a network signal, or other signal). This definition of construction would allow broadcasters to "phase-in" full DTV implementation as their individual circumstances and markets permit. 62. In the Third Report/Further Notice, we adjusted the application deadline from a two- year to a three-year period, and provided for a total six-year application and construction period with those applying early having a longer portion of the six-year period to devote to construction of DTV facilities. We explained that the deadlines for application and construction would assist in our reclamation of the reversion channel and our sliding scale approach would provide sufficient relief to small-market stations which produce less revenue. While we recognized that some stations would be market leaders in the implementation of DTV, we remained concerned that such leadership may not emerge, at least in certain markets, unless we established a clear framework for the DTV transition. 63. The Fourth Further Notice/Third Inquiry proposed a procedure by which broadcasters would have six months in which to make an election and confirm to the Commission that they want a DTV license. After that, they would have the remainder of the three-year period in which to supply any required supporting data, and a total of six years to complete construction. If they would elect not to construct a DTV facility, or would elect but then fail to construct, their NTSC licenses would expire at the end of the DTV conversion period, and they would be required to cease broadcasting. We sought comment on all aspects of the construction period. We asked whether certain classes of stations should be afforded special relief, and if so, which classes. 64. Comments. While most commenters do not specifically address the election period, some voice approval of a six-month election period. The Digital Grand Alliance, however, suggests that the six-month election period be accompanied by a mechanism to ensure that this election represents real commitment to convert, such as the imposition of a non-refundable application fee, a substantial deposit refunded at commencement of DTV broadcast, or a fine if the broadcaster fails to commence DTV broadcast. On the other hand, Busse and Pacific FM argue that the 6-month election period is not a viable choice, because those who do not want a DTV license have, in effect, elected to go out of business since, under the Commission's proposal, all licensees will be required to cease broadcasting in NTSC at the end of the transition period. 65. Commenters voice many views. Many generally support the Commission's suggested timeframe, but suggest that the Commission take account of the fact that practical impediments may arise to implementation. While in support of the proposal for many stations, Joint Broadcasters, joined by ALTV, propose that a less demanding schedule and liberal waivers apply to help stations facing difficulty, such as noncommercial stations, small stations, those in small or rural markets, or in financial distress, as well as for those stations that face FAA, zoning, or other similar problems. Busse points out that even stations in large markets -- such as those with religious or specialty formats -- may have difficulty making a timely transition. NAB suggests that the construction deadline be staggered on a market-by-market basis, in which large-market stations have six years, and small-market stations have three or six additional years, to complete construction, and in addition that waivers for problems such as zoning approvals also be available. The Association of Federal Communications Consulting Engineers argues that the six-year implementation period is inadequate, given the number of stations that will need to acquire transmission equipment, input/monitoring equipment, and tower structures during that limited time frame. Christian Communications of Chicagoland proposes that the Commission recognize that the application/construction period operate as a "guideline subject to revision" rather than a set deadline. 66. Others maintain that, at least in some cases, the six-year period is too long. Thomson and the Digital Grand Alliance propose that the Commission shorten the application and construction periods at least in the 25 largest markets, but do not specify what period would be appropriate. General Instrument proposes that a three-year construction period be considered for major markets, and a six-year period for smaller markets. Motorola argues that, given the notice that broadcasters have been afforded, the appropriate time table is a six-month application period, a six-month processing and grant period, and a two-year construction period. 67. Decision. We will apply a streamlined three-stage application process to the group of initially eligible analog permittees and licensees allotted a paired channel in the DTV Table of Allotments. We will soon issue a Public Notice detailing the procedures to be followed, but will describe them briefly here. 68. Stage One -- Initial Modification License for DTV. Pursuant to the 1996 Act and the eligibility criteria discussed above, we issue, by this paragraph and the attached Appendix E, additional DTV licenses to those initially eligible to receive them. 69. The statute directs us to limit initial eligibility for DTV licenses to persons that, as of the date of the issuance of the licenses, are licensed to operate a television broadcast station or hold a permit to construct such a station, or both. As the statute contemplates, we hereby issue a license to all eligible licensees and permittees, a list of which is attached to this Report and Order as Appendix E. We conclude that it more effectively effectuates the congressional scheme to implement the statute through a three-phased process, with the first phase consisting of the initial DTV license, rather than through our conventional procedure. Use of the conventional licensing process would prevent us from establishing a date certain at which to determine initial eligibility, a process that is necessary to allow us to establish the Table of Allotments. Thus, we hereby issue a license, conditioned upon satisfaction of the additional requirements set out in && 70-75 below. This license will modify the analog television permit or license; however, licensees may not begin construction or transmission until the additional conditions are met. The license is also conditioned upon the requirement that "either the additional license or the original license held by the licensee be surrendered to the Commission for reallocation or reassignment (or both) pursuant to Commission regulation." 70. Request for Cancellation. We presume that the recipients will welcome receipt of their initial DTV License and will be fully committed to the conversion to DTV. Nonetheless, there may be some broadcasters who do not wish to receive a second channel to convert to DTV. We wish to reclaim these second channels as quickly as possible so that the spectrum may be awarded to those who would use it quickly and effectively, and we earlier proposed a six-month election period to accomplish this result. We now believe that a six-month election period is too long. Given the length of this proceeding and the public benefits of acting quickly, we believe that broadcasters have already had ample time to consider many options, and will shorten the "election" period. In order to achieve the benefits of a rapid election and in the interests of spectrum efficiency, we ask that licensees who wish to cancel the initial DTV license do so by writing the Commission within 90 days from the release date of the DTV Table of Allotments adopted in the Sixth Report and Order. 71. Stage Two -- Certification or Application for Construction Permit. To receive authorization for commencement of construction, an Initial DTV Licensee must file Form 301 and the appropriate fee to obtain a construction permit. Noncommercial stations must file Form 340. The application must be filed before the mid-point in a particular applicant's required construction period has expired. The Bureau will begin acting upon applications as soon as this Report and Order becomes effective. 72. We will apply a certification procedure for applicants that answer "yes" to a checklist of requirements contained in the construction permit application; these certifications will be automatically granted. Given the very rapid review permitted by this streamlined procedure, we will be able to grant a construction permit to broadcasters within a matter of days of submission of this form. Other applicants will be required to furnish additional technical information. 73. In the Fifth Further Notice, supra at & 59, we sought comment on whether specific TV technical and procedural rules should be applied to DTV and whether modification of the rules was needed. Among those NTSC TV rules were Section 73.685 and 73.1030. No comments addressed these issues. We herein establish a minimum set of technical requirements that will allow us to process these DTV construction permit applications. Fundamentally, a DTV application must conform to the DTV Table we are creating in the Sixth Report and Order, specifying the indicated channel at a transmitter site, effective radiated power ("ERP") and antenna height meeting the restrictions imposed in that document. As described in the Sixth Report and Order, applications specifying a transmitter site within five kilometers of the site assumed in the DTV Table and also specifying an ERP and antenna height that do not exceed the values in the DTV Table will be accepted and not subject to interference-protection processing. Further, in order to avoid exposing the public to dangerous situations, we will continue the NTSC TV practice of verifying that the FAA has made any necessary determination that the proposed tower does not represent a hazard to air navigation, and we will require DTV applicants to certify as to no significant environmental impact or to include an environmental statement as described in Section 1.1307 of our rules, including consideration of RF radiation levels. In addition, to avoid altering an AM radio station's radiation pattern in a way that could cause interference in the AM radio band, we will require DTV applications to comply with Section 73.658(h). To avoid interference to our spectrum monitoring functions and to radio astronomy observations, we will also require DTV applications to comply with Section 73.1030. Additionally, as discussed below, the DTV service contour will be required to encompass the community of license. 74. To speed the process, we will consider the DTV applications or certifications as involving a minor change in facilities and will process them accordingly. Since this application will be for a minor change, applicants will not have to supply full legal or financial qualifications information. We will not initially require full-replication of the analog station's coverage area by DTV facilities. Accordingly, we will accept initial construction permit applications from applicants who demonstrate that their DTV coverage encompasses the community of license. In situations where applicants seek a waiver of any of our requirements, we will entertain requests to allow them to begin construction, at their own risk, prior to the grant of a construction permit. 75. Stage Three -- Application for License to Cover Construction Permit for a DTV Facility. When construction of the DTV facility has been completed, the permittee may commence program tests upon notification to the FCC, provided that an application for a license to cover the construction permit for the DTV facility, on Form 302, is filed within ten days, along with the appropriate fee. 76. Construction Schedule. We have decided to adopt the following construction requirements. Stations affiliated with ABC, CBS, Fox and NBC must build digital facilities in the ten largest television markets by May 1, 1999. Stations affiliated with ABC, CBS, Fox and NBC in the top 30 television markets, not included above, must construct DTV facilities by November 1, 1999. All other commercial stations must construct DTV facilities by May 1, 2002. All noncommercial stations must construct their DTV facilities by May 1, 2003. We note that 24 stations in the top ten markets have voluntarily committed in writing to the Commission to building DTV facilities within 18 months. We applaud these broadcasters' voluntary commitments to give a great number of viewers access to a DTV signal in a very short period. This important step means that a significant portion of the public will be able to receive multiple signals by the holiday shopping season, when nearly 40 percent of all receivers are sold. We ask that those stations that have represented to the Commission that they will have completed construction of the DTV facility by November 1, 1998, file reports at six-month intervals, beginning on November 1, 1997, stating that their plans to meet these deadlines are on schedule or specifying any difficulties encountered in attempting to meet these deadlines. 77. We will grant an extension to the applicable deadline where a broadcaster has been unable to complete construction due to circumstances that are either unforeseeable or beyond the licensee's control if the licensee has taken all reasonable steps to resolve the problem expeditiously. Such circumstances include, but are not limited to, the inability to construct and place in operation a facility necessary for transmitting DTV, such as a tower, because of delays in obtaining zoning or FAA approvals, or similar constraints, or the lack of equipment necessary to transmit a DTV signal. We do not anticipate that the circumstance of "lack of equipment" would include the cost of such equipment. With respect to extensions of the applicable construction deadline, the Commission will take into account problems encountered that are unique to DTV conversion, and will modify its existing policies regarding extensions accordingly. Authority is delegated to the Chief of the Mass Media Bureau to grant an extension of time of up to six months beyond the applicable construction deadline, upon demonstration by the DTV licensee or permittee that the standard discussed above is met, but the Bureau may grant no more than two extension requests upon delegated authority. Subsequent extension requests will be referred to the Commission. 78. Our decision to adopt different requirements for different categories of broadcasters is similar to the market-staggered approach favored by most broadcasters and equipment manufacturers. We agree that the most viewed stations in the largest television markets can be expected to lead the transition to DTV and that these stations are better situated to invest the capital necessary to establish the first DTV stations. We also agree that smaller market stations will find it easier to begin DTV service after learning from the experience gained by the larger market stations. In addition, we agree that our staggered construction schedule will help keep costs lower for smaller market stations, as equipment costs decrease as the market matures. In addition, a tiered approach allows us to ensure that DTV quickly reaches a large percentage of U.S. television households while placing requirements on a relatively small number of stations. 79. Our earlier preliminary decision to provide for an across-the-board six-year application/construction schedule is no longer appropriate. We now believe that a general six-year construction schedule would unnecessarily delay the realization of our goals of free, universal DTV service and spectrum recovery. A six-year construction schedule for all commercial stations anticipated neither the rapid development of digital technologies nor the ability of manufacturers and suppliers to provide DTV equipment. In light of these changes, we now believe that the six-year construction period is too long. Instead, we believe that an aggressive construction schedule should be implemented for several reasons. 80. First, digital broadcast television stands a risk of failing unless it is rolled out quickly. Many operators in other media such, as DBS, cable, and wireless cable use or plan to use digital technology. Unless digital television broadcasting is available quickly, other digital services may achieve levels of penetration that could preclude the success of over-the-air, digital television. Viewers who have leased or purchased digital set-top boxes from competing digital media may be less likely to purchase DTV receivers or converters. If digital, over-the-air television does not succeed, however, viewers will be without a free, universally available digital programming service. 81. Second, a rapid construction period will promote DTV's competitive strength internationally, as well as domestically. Other countries are moving swiftly to establish their own terrestrial digital television services. For example, the United Kingdom is scheduled to begin broadcasting terrestrial digital television by 1998 or earlier. Japan has recently announced that it will move from analog high definition television to digital television. Neither European nor Japanese digital standards are compatible with the U.S. standard. In the DTV Standard proceeding, equipment manufacturers and labor unions argued that quick and decisive action was necessary to permit American companies to compete internationally. The National Telecommunications and Information Administration and the Office of Science and Technology Policy argued that absent quick action, America might relinquish its technological lead to international competitors, while rapid adoption would spur the American economy in terms of manufacturing, trade, technological development, international investment, and job growth. Rapid introduction of digital television in the U.S. will help facilitate its adoption abroad. 82. Third, an aggressive construction schedule helps to offset possible disincentives that any individual broadcaster may have to begin digital transmissions quickly, as well as the possible absence of market forces that might themselves ensure rapid construction. We recognize that an individual broadcaster may consider implementation of DTV to require it to invest funds in order to capture viewers for which it is already receiving advertising revenue. Such a broadcaster might prefer to wait until others have converted to digital for a number of reasons, including lower equipment costs. On the other hand, a broadcaster may recognize first-mover advantages, such as being first to market with programs in higher definition or with ancillary data services. Our schedule ensures rapid construction in major markets. 83. Fourth, a rapid build-out works to ensure that recovery of broadcast spectrum occurs as quickly as possible. As we discuss in the Sixth Report and Order, at the end of the transition we plan to recover 78 MHz of clear spectrum in addition to the 60 MHz of partially encumbered spectrum we plan to recover in the near future from channels 60-69. We will also recover at the end of the transition that spectrum within channels 60-69 that is still needed for analog and digital television broadcasting during the transition. 84. By adopting construction requirements, we hope to give the various industries involved the certainty to move forward. Penetration of color television sets, for example, was limited until the three major networks began transmitting prime time programming in color. This provides evidence that consumers may not purchase great numbers of DTV sets or converters until multiple stations in their market are transmitting DTV, and that we therefore should adopt construction requirements that ensure that there are multiple digital television broadcasters operating. Television manufacturers plan to have the first digital television sets ready for purchase by the public by mid- 1998. The construction schedule set forth here provides that multiple stations in most of the top ten markets are operating at roughly that time. 85. Our construction schedule will facilitate our goal of having at least 40 facilities affiliated with the four top networks in the top 10 markets transmitting DTV by May 1, 1999. Within roughly 24 months in each of the top 10 markets, which cover approximately 30 percent of U.S. television households, viewers will have DTV transmissions available from multiple stations. These signals will come from network affiliates, which are generally the stations with the highest ratings in the market. In the top 30 markets, network-affiliated stations must construct digital facilities by November 1, 1999. These markets include 53 percent of U.S. television households. Stations in the second category will benefit from the success of the stations in the first category, as word spreads from the largest markets to those medium-sized markets. The May 1, 1999, requirement applies to only 40 of the country's approximately 1200 commercial television stations, and only 80 additional stations will be affected by the November 1, 1999, deadline. Over one thousand commercial stations will have until May 1, 2002, to plan for and implement their DTV facilities. Noncommercial stations will have until May 1, 2003, to construct. 86. We believe that our construction schedule is reasonable. We note that the most aggressive requirements apply to stations that we believe are most able to absorb the costs of conversion and are otherwise situated to make the transition quickly: stations affiliated with the four major networks in the largest markets. We base our decision in this regard on several grounds. First, network affiliates consistently garner the highest percentage of audience share, and thus are likely to have substantial revenues that may be used to fund the conversion. Second, network affiliates are in a stronger position than independent stations because they obtain programming from their network and may also receive economic, technical, and other support that would help with respect to the conversion. Affiliates are consistently the most highly watched and generally the most financially successful, with better ratings and consequent higher advertising revenues. Their greater strength should give them a strong position from which to launch their digital service. Accordingly, we believe that network affiliates in the largest markets will be in the best position to make a rapid transition to DTV. We recognize that in some markets, a network has two affiliates, one of which is much stronger, with a much larger audience share, that the other. We have provided relief to the smaller affiliate in such cases, by granting a longer construction deadline. Finally, our construction schedule also focuses on network affiliates because we believe that the sale of receivers and thus the conversion to DTV will be accelerated by the early availability of network programming in DTV. 87. Thus, the roughly two-year construction requirement that applies to these affiliates will both serve the public and be nonburdensome to these broadcasters. By May 1, 1999, markets including fully 30 percent of television households will have access to multiple streams of digital television. The vast majority of commercial broadcasters will have five years in which to construct, and noncommercial stations will have six years in which to construct their digital facilities. We agree with commenters arguing for a shorter construction schedule, especially for broadcasters in the largest television markets. As these commenters point out, broadcasters have been on notice throughout this proceeding of the impending need to convert to DTV. With their greater population coverage and scope of operations, we agree that broadcasters in the largest markets generally will be better able to afford and support a more rapid construction schedule. 88. Moreover, the construction timetable appears to be consistent with the announced plans of the large networks. CBS has received an experimental authorization from the Commission and plans to transmit a DTV signal from the Empire State Building in the spring of 1997. ABC plans to have stations experimenting with digital transmission in early 1998. Fox ordered digital transmitters for its O & O's fully five years ago from Harris Corporation, and plans to have digital transmission between the network and affiliates in place by third quarter 1998. NBC said it would begin broadcasting digital signals 18 months after licenses are awarded. NBC already has designed and is building a $55 million dollar state-of-the-art digital infrastructure at its headquarters at 30 Rockefeller Plaza that will be commissioned this year. On February 2, 1997, WHD-TV, NBC's owned-and-operated model DTV station in Washington, D.C., broadcast "Meet the Press" in high resolution, using the new DTV standard. NBC has also announced that it intends "to move as aggressively and expeditiously as is technically feasible" to enable all of its owned and operated stations around the country to transmit DTV and is "encouraging and helping" its NBC affiliates across the nation in making the transition to DTV. 89. Our confidence in the willingness of licensees to move rapidly is also supported by a recent survey of broadcasters which shows that 28 percent of respondents plan to convert to DTV within two years and 79 percent of respondents plan to convert to DTV within five years. In fact, some broadcasters have already completed arrangements for their digital transmission facilities. For example, the network affiliates in San Francisco have arranged to place their antennae for digital transmission on Sutro Tower. Similarly, in New York City, the CBS-owned station has already arranged to place an antenna for digital transmission atop the Empire State Building. 90. In addition, two experimental digital television stations are already up and running, and were able to begin transmissions just four months after announcing their plans to do so: WHD-TV in Washington, D.C., the model station sponsored by the broadcast and equipment industries, and WRAL, in Raleigh, North Carolina. We have also already granted eight requests for experimental facilities, at least five of which are now operating, and we expect to grant another five experimental licenses soon. These efforts reflect the ability of broadcasters to set up facilities, and they have given broadcasters experience with digital television equipment that should help speed its introduction elsewhere. Finally, equipment manufacturers' recent statements that they plan to sell digital television sets by Christmas 1998 is a further expression of confidence and expectation that DTV will be widely available by that time so as to ensure consumer demand. 91. While we recognize that conversion to digital will impose some burden on broadcasters, we have taken steps to ease broadcasters' introduction of digital service by requiring them at the outset only to emit a DTV signal strong enough to encompass the community of license, and not requiring them to begin transmission to achieve full replication. Many broadcasters will be able to use existing towers for digital transmission and reduce the costs of constructing a DTV facility. Many commenters who argued in favor of a longer construction schedule did so based on their contention that construction of full-replication facilities would require more than six years due to hardware supply constraints, insufficient personnel resources, or lack of adequate new tower sites. However, our construction requirement is satisfied by the emission of a DTV signal strong enough to encompass the community of license, rather than the more difficult requirement that broadcasters replicate their existing service areas. Therefore, licensees need not initially construct full-replication facilities. We believe that the establishment of a construction requirement that is more easily satisfied, as well as our staggered approach, will alleviate the difficulties raised by some commenters. 92. One of the most significant issues in converting to digital broadcasting is the construction of new towers or the upgrade of existing towers. As explained above, this burden will be eased by our limited build-out requirement. In addition, while we recognize that there may not be sufficient equipment available in the earliest days to allow for a full-fledged DTV operation to be implemented by all 1,600 television licensees, we are confident that minimal facilities for the handful of licensees in the top ten markets can be assembled in a timely fashion. These facilities need only meet our requirements of serving the community of license, which can be accomplished by the use of existing equipment or prototypes certain to be introduced soon. 93. As for noncommercial stations, we allow them until May 1, 2003, to construct DTV facilities. There is strong support in the record for giving noncommercial stations greater leeway in the construction of DTV facilities. As discussed more fully below, noncommercial stations need and warrant special relief to assist them in the transition. And, as noted above, there are some noncommercial stations at the forefront of DTV. However, we are convinced by the record that noncommercial stations, as a group, may have more difficulty with the transition to DTV than commercial stations. Therefore, we permit noncommercial stations a longer period of time to construct DTV facilities than commercial DTV stations. H. Recovery Date 94. Background. Earlier in this proceeding, the Commission made the preliminary decision to establish a recovery date 15 years from the date of the adoption of an ATV system or the date a final Table of ATV Allotments is effective, whichever is later. At the end of this period, all analog broadcast would cease, and the spectrum used for NTSC would be returned to the Commission. The Commission emphasized that, given the uncertainties surrounding the conversion process and the possible changes in the data on which we relied, setting the recovery date at 15 years was necessarily preliminary. In order to avoid making a decision that would be overtaken by events, the Commission adopted a schedule of periodic reviews to make whatever adjustments might be necessary. The Commission made clear that broadcasters who do not convert to ATV will have to cease broadcasting in NTSC at the end of the 15-year transition period. The Commission explained that establishment of a firm date for full transition would be in the public interest because it would keep administration simple, assure progress toward spectrum recovery on a timely basis, and give parties a clearly defined planning horizon. The Fourth Further Notice/Third Inquiry explained that a more rapid conversion to ATV might be possible than previously expected. The broadcast industry, including equipment manufacturers, have been aggressive in developing digital television technology, as have alternative programming providers such as Direct Broadcast Satellite (DBS), cable systems, wireless technology, and others. Because of the developing competition, and the drop in prices resulting from the proliferation of digitally based media, the Fourth Further Notice/Third Inquiry anticipated that conversion might occur more rapidly than originally anticipated. Commenters were asked to address whether some objective benchmark(s) could be used to determine when broadcasters should cease NTSC transmission. 95. Comments. Numerous commenters note that the high degree of uncertainty surrounding the successful establishment of DTV makes it difficult to set an end-point for NTSC service. Many urge us therefore to postpone setting a transition date. Joint Broadcasters argue, for instance, that: "Even the enterprise of setting self-enforcing benchmarks at this point is highly speculative in the absence of market experience. There are simply too many unknowns that will need to be factored into any such decision -- the cost and availability of digital sets, the cost and availability of converters, and ATV penetration levels both in terms of households and sets." Some commenters propose that the Commission set a nominal target date for the cessation of NTSC broadcasts, with periodic reviews to monitor the progress of implementation. Others support a settled "date certain" approach. 96. If the Commission were to set objective benchmarks, comments suggest several possible benchmarks: a measurement of the total number of sets and total number of households capable of displaying DTV; a measurement of the number of stations transmitting digital signals and the number of households with digital receivers, including set-top boxes; a "sets-sold" methodology so that once DTV sets reach some percentage, e.g., 70%, of current TV households, NTSC transmissions would cease three years later; or when a certain percentage, e.g., 80%, of television households no longer rely solely on analog broadcasting. 97. Decision. One of our overarching goals in this proceeding is the rapid establishment of successful digital broadcast services that will attract viewers from analog to DTV technology, so that the analog spectrum can be recovered. Accomplishment of this goal requires that the NTSC service be shut down at the end of the transition period and that spectrum be surrendered to the Commission. Indeed, Congress required the Commission to condition the grant of a digital license on the Commission's recovery of 6 MHz from each licensee. The Act provides: "(c) RECOVERY OF LICENSE. --If the Commission grants a license for advanced television services to a person that, as of the date of such issuance, is licensed to operate a television broadcast station or holds a permit to construct such a station (or both), the Commission shall, as a condition of such license, require that either the additional license or the original license held by the licensee be surrendered to the Commission for reallocation or reassignment (or both) pursuant to Commission regulation." The question we face is at what point in time the surrender should occur. 98. We continue to believe that it is desirable to identify a target end-date of NTSC service. Doing so will lend certainty to the introduction of digital by making clear to the public that analog television service will indeed cease on a date certain. A target will provide broadcasters and manufacturers with a defined planning horizon that will help them gauge their business plans to the introduction of DTV. 99. While the Commission has previously considered a 15-year end-point for NTSC service, we now believe that broadcasters should be able to convert to digital broadcast much more rapidly. Specifically, we believe that a target of 2006 for the cessation of analog service is reasonable. As the Fourth Further Notice/Third Inquiry explained, as digital technology has developed, we have had reason to expect that DTV may be adopted more quickly than originally anticipated. Competitors in the video programming market, such as DBS, cable, and wireless cable, have aggressively pursued the potential of digital technology. This competitive pressure has lent urgency to the need for broadcasters to convert rapidly. Furthermore, technological advances have worked to lower the introductory costs to broadcasters; for example, new technology may allow many broadcasters to use existing towers for digital transmission, thus easing the expense of converting to digital equipment. And, due to the introduction of other services, broadcasters who need new towers, will be able to lease space on their new towers to mobile service providers, further lowering the costs of converting. On the viewers' side, technological advances in converter-box technology will lower the consumer costs of the introduction of digital technology. The dramatic drop anticipated in converter-box prices will permit consumers inexpensively to continue to use existing equipment, thus easing the introduction of digital services. Based on our current information, we believe 2006 is a reasonable target. 100. As we discuss below, we will conduct reviews of the progress of DTV every two years. This will allow us to monitor the progress of DTV and to make adjustments to the 2006 target, if necessary. In evaluating the appropriateness of the 2006 target date, key factors for consideration will include viewer acceptance of digital television, penetration of digital receivers and digital-to- analog converter set-top boxes, the availability of digital-to-analog conversion by retransmission media such as cable, DBS, and wireless cable, and generally the number of television households that continue to rely solely on over-the-air analog broadcasting. We emphasize, as we have throughout this proceeding, that at the designated date, broadcasters who do not receive extensions must return one of their two channels. I. Noncommercial Stations 101. Background. In the Fourth Further Notice/Third Inquiry, we noted that noncommercial licensees would face unique problems in their transition to DTV, particularly in the area of funding. Accordingly, we asked for comment on what relief would be appropriate for noncommercial broadcasters. We also noted comments by noncommercial broadcasters that the six- year application/construction period was insufficient, but expressed our preference to establish a firm transition schedule, dealing with unique problems on a case-by-case basis, rather than establishing two sets of broadcasters, each with its own schedule. Finally, we asked what other relief could be afforded to noncommercial broadcasters to assist them in the conversion to DTV, such as by mandating that only the minimum required broadcast programming must be "noncommercial," and to minimize restrictions on their operations and allow them greater flexibility. 102. Comments. AAPTS/PBS state that their biggest concern is the ability of noncommercial stations to raise sufficient funds to support current operations and the transition to DTV. Toward that end, they assert that they have worked with Congress to propose legislation that would replace the current system of federal funding for public television stations with new sources of funding. In their Comments, AAPTS/PBS seek flexibility in the application and construction period in light of the financial constraints faced by noncommercial broadcasters, including relaxation or elimination of the financial qualifications requirement and establishment of a less demanding construction schedule for noncommercial stations -- requiring only that they construct and begin operating DTV facilities some time prior to the ultimate conversion deadline. Finally, they urge that noncommercial stations that share a channel under their legislative proposal be afforded flexibility to convert to full-time DTV operation on their NTSC channels at any time during the transition period and that the Commission should adopt a waiver policy under which noncommercial stations that operate their own DTV channels would be permitted, on a case-by-case basis to convert to DTV operation on one of the station's 6 MHz channels and cease NTSC operations earlier than the conversion date. 103. MAP also supports relaxing the construction and transition timetables and financial qualifications for public broadcasters. General Instrument notes its general support for government action that would "mitigate financial problems faced by noncommercial stations in converting to ATV technology, and would lead to conversion as early as possible." Further, The Digital Grand Alliance agrees with AAPTS/PBS that the Commission should modify its approach as necessary to promote the conversion of noncommercial stations to DTV. It does not object to affording less demanding construction schedules for noncommercial broadcasters as long as they are operating their DTV channel by the end of the transition period, and it endorses giving them the option to convert to full-time DTV on their NTSC channels at any time during the transition period. 104. Decision. At the outset, we note our commitment to noncommercial educational television service and our recognition of the high quality programming service noncommercial stations have provided to American viewers over the years. We also acknowledge the financial difficulties faced by noncommercial stations and reiterate our view that noncommercial stations will need and warrant special relief measures to assist them in the transition to DTV. Accordingly, we intend to grant such special treatment to noncommercial broadcasters to afford them every opportunity to participate in the transition to digital television, and we will deal with them in a lenient manner. As discussed above, we will not require a financial showing of any broadcaster seeking a construction permit to build a DTV station, and, accordingly, no special treatment will be required of noncommercial broadcasters in this regard. With respect to the construction deadline, discussed above, we will apply a six-year construction period timetable to noncommercial stations, the longest permitted to any category of DTV applicant. We believe, however, that it would be premature to attempt to resolve the issue of what additional special treatment, if any, should be afforded to noncommercial broadcasters at this early date, and we will consider this issue in our periodic reviews. At the same time, however, we wish to note that public broadcasting service was the first to establish a digital satellite transmission system and that public broadcasting licensees are in the forefront of experimenting with digital television. Public broadcasters have taken an innovative approach in experimenting with the capabilities of digital technology. J. Must-Carry and Retransmission Consent 105. In the Fourth Further Notice/Third Inquiry, we requested comment on questions relating to the issues of what must-carry obligations and retransmission consent provisions should apply to DTV stations, both during the transition and as a consequence of DTV having replaced NTSC broadcasting. We received comments on these issues from several entities. Subsequent to the issuance of the Fourth Further Notice/Third Inquiry, Congress, in the 1996 Act, gave the Commission some direction as to the scope of must-carry, indicating that no ancillary or supplementary DTV services should have must-carry rights. 106. On March 31, 1997, the Supreme Court upheld the constitutionality of the must-carry provisions contained in the Cable Television Consumer Protection and Competition Act of 1992, in Turner Broadcasting System, Inc. v. FCC ("Turner II"). In upholding the constitutionality of must-carry, the Court emphasized that preserving the benefits of free, over-the-air broadcast television and promoting the widespread dissemination of information from a multiplicity of sources were important governmental interests. The Turner II case did not expressly address the issue of must-carry of digital television signals. In order to obtain a full and updated record on the applicability of the must-carry and retransmission consent provisions in the digital context, particularly in light of the Turner II decision, we intend to issue a Notice to seek additional comments on these issues. K. All-Channel Receiver Issues 107. Background. Traditionally, we have not regulated broadcast receivers except insofar as they incidentally radiate energy. However, the All Channel Receiver Act authorizes us to require that television receivers "be capable of adequately receiving all frequencies allocated by the Commission to television broadcasting." While we require that all TV broadcast receivers be capable of adequately receiving all channels allocated by the Commission to the television broadcast service, we previously determined in this proceeding that the All Channel Receiver Act does not mandate the manufacture of dual-mode (DTV and NTSC) receivers. We were concerned that such a requirement might burden consumers, and sought comment on whether there is any need to require that manufacturers produce receivers capable of both NTSC and DTV reception during the transition to DTV. 108. In the Fourth Further Notice of Proposed Rule Making, we noted that DTV would have the capability to deliver both HDTV and SDTV and sought comment on whether permitting the manufacture and sale of receivers that receive and display only NTSC, SDTV, or HDTV signals, or some combination, would be consistent with the All Channel Receiver Act and in the public interest. We also requested comment on whether we should regulate how a signal should be displayed, the need for a labeling requirement for television receivers, and limiting the sale of NTSC receivers. 109. Comments. Most broadcasters support a requirement that all DTV receivers and set-top converters be able to receive and display NTSC signals, and receive all DTV signals included in the DTV transmission standard and display them in the highest quality format which the particular set is designed to accommodate. Golden Orange argues that the Commission should allow market forces to determine receiver design. The Digital Grand Alliance and most equipment manufacturers argue that manufacturers will build digital receivers that receive all DTV formats, including HDTV, along with NTSC broadcasts, without any FCC requirement. The Digital Grand Alliance states that it would support a requirement that all DTV receivers receive all DTV formats including HDTV, if it were coupled with a requirement that broadcasters transmit minimum amounts of HDTV programming. 110. While most broadcasters and Motorola favor regulations governing how DTV signals are displayed on DTV receivers, most equipment manufacturers and other commenters favor a market-driven approach. Comments are also mixed on the need for labeling requirements. Joint Broadcasters state that the Commission should consider a notice requirement on NTSC-only sets warning consumers that NTSC transmissions will end. New World states that the FCC should require every NTSC-only set to come with a prominent warning that the set will not receive broadcasts after a date certain without modifications. MAP argues that the burdens of labeling are far outweighed by the need to protect consumers. Equipment manufacturers maintain that labeling requirements are unnecessary. EIA states that informational programs and consumer education are critical components of the manufacturer-consumer relationship, so manufacturers will be certain to educate consumers regarding their equipment options during the transition to DTV. On the issue of limiting the sale of NTSC receivers, New World and the AAPTS/PBS favor a requirement that all televisions sold after some date be capable of receiving and displaying digital broadcast transmissions. The Digital Grand Alliance and EIA argue that the Commission should not ban or limit the sale of NTSC-only receivers. During the transition to digital, and perhaps even after, the Digital Grand Alliance contends, there is likely to be a demand for NTSC-only sets driven by cable services, wireless cable services, direct broadcast satellite services, digital video disc players, and VCRs. 111. Decision. The digital broadcast transmission standard which we adopted in the Fourth Report and Order differed from the standard we proposed in the Fifth Further Notice. Many of the comments we received in response to the Fifth Further Notice assumed that the Commission would adopt a DTV transmission standard that included specific video formats. However, the standard we adopted in the Fourth Report and Order did not specify video formats. We chose instead to allow video formats to be determined by the market and consumer demand. Because of this important modification, we believe that some of the arguments made by the commenters on specific all- channel receiver issues are no longer applicable. 112. We have decided that, at this time, equipment manufacturers should have maximum latitude to determine which video formats DTV equipment will receive. We believe that it is likely that market forces will provide incentives for broadcasters and equipment manufacturers to work closely together to produce the receiver and converter designs most valued by consumers. 113. We do not believe that our goals would be advanced by mandating that all digital receivers receive and display NTSC signals and DTV signals, regardless of format, aspect ratio, or progressive or interlaced scanning, as broadcasters argue. We expect that equipment manufacturers will make available to consumers digital receivers that receive both NTSC and DTV signals. However, we will not preclude equipment manufacturers from designing digital receivers that do not receive NTSC signals. In addition, we believe that equipment manufacturers should be allowed to offer lower-cost, digital receivers that receive only progressive scan or SDTV formats. Our two-year reviews will give us an opportunity to monitor DTV receiver designs and address any problems that may arise. 114. We have decided to postpone any decision concerning a labeling requirement. We are providing broadcasters flexibility in their choice of video formats and equipment manufacturers flexibility in their choice of receiver designs and we are hopeful that this will result in products and services that draw consumers to DTV. At this early stage of the transition process, we will rely on consumer electronics manufacturers and retailers to provide the information necessary for consumers to make informed choices. Should problems arise, and consumers become confused, as the transition moves forward, we will have opportunity to revisit labeling requirement issues through our review process. Finally, we recognize that there is an enormous embedded base of video cassette recorders, cable decoder boxes, laser disc players, and other video equipment that use NTSC receivers for non-broadcast purposes. This suggests that there may be a continuing market for the sale of NTSC display devices, even after the conversion to DTV. Therefore, we decline to limit the sale of NTSC-only display devices. L. Review Issues 115. In the Third Report/Further Notice, the Commission set deadlines for the application and construction period, the simulcast requirements, and the transition end-date. The Commission also adopted a timetable, with specific years, for the review of information relating to these time periods, under the assumption that the ATV standard and a table of ATV allotments would be adopted by late 1993. The Commission emphasized that the adoption of certain dates would give parties a measure of certainty, while a schedule for review would permit government and industry to adapt, if necessary, to unforeseen circumstances. 116. While the specific dates established in the Third Report/Further Notice have been overtaken by events and are no longer applicable, we continue to believe that regular reviews of the progress of DTV are highly desirable. Given the importance of digital television's introduction, we conclude that a periodic review every two years until the cessation of analog service is necessary to allow the Commission the opportunity to ensure that the introduction of digital television and the recovery of spectrum at the end of the transition fully serves the public interest. During these reviews, we will address any new issues raised by technological developments, necessary alterations in our rules, or other changes necessitated by unforeseen circumstances. The Commission will address such issues as the appropriateness of 2006 as a target recovery date, the proper application of the simulcast requirement, the special needs of noncommercial stations, issues related to DTV receiver designs and set labelling, and any other issue that requires examination. Our decisions today, at the very outset of the introduction of digital television, are in some respects necessarily preliminary. A periodic review will permit us to make whatever adjustments will be required. III. CONCLUSION 117. Digital television will enter a highly competitive, challenging telecommunications marketplace. Our decisions in this Report and Order, designed to foster technological innovation and competition, while minimizing government regulation, will, we hope, increase the likelihood that we will see a digital television service that provides a host of new and beneficial services to the American public, while preserving free universal television service that serves the "public interest, convenience, and necessity." IV. ADMINISTRATIVE MATTERS 118. Paperwork Reduction Act of 1995 Analysis. This R&O contains either new or modified information collections. The Commission has submitted to OMB an emergency request for approval of: 1) an information collection regarding the cancellation of the Initial DTV License and 2) the form attached to this R&O to be used to apply for a DTV construction permit. The first request will be used only once and the Commission will not seek extension of the approval for this collection. The second will continue to be used by the public. OMB approved this emergency request and assigned 3060-0766 as the control number. Additionally, this R&O contains a requirement that those stations that voluntarily committed to building DTV facilities within 18 months are required to submit progress reports on construction of facilities. Therefore, the Commission, as part of its continuing effort to reduce paperwork burdens, invites the general public to comment on the revisions to the applicable form and the progress reports contained in this R&O as required by the Paperwork Reduction Act of 1995, Pub. L. No. 104-13. Public and agency comments are due 60 days from date of publication of this R&O in the Federal Register. Comments should address: (a) whether the new or modified collection of information is necessary for the proper performance of the functions of the Commission, including whether the information shall have practical utility; (b) the accuracy of the Commission's burden estimates; (c) ways to enhance the quality, utility, and clarity of the information collected; and (d) ways to minimize the burden of the collection of information on the respondents, including the use of automated collection techniques or other forms of information technology. In addition to filing comments with the Secretary, a copy of any comments on the information collections contained herein should be submitted to Dorothy Conway, Federal Communications Commission, Room 234, 1919 M Street, N.W., Washington, DC 20554, or via the Internet to dconway@fcc.gov. 119. For additional information concerning the information collections contained in this R&O contact Dorothy Conway at 202-418-0217. 120. Pursuant to the Regulatory Flexibility Act of 1980, as amended, 5 U.S.C. ' 601 et seq., the Commission's final analysis in this Fifth Report and Order is attached as Appendix B. Ordering Clauses 121. Accordingly, IT IS ORDERED that, pursuant to Sections 4(i) & (j), 303(r), 307, 309, and 336 of the Communications Act of 1934 as amended, 47 U.S.C. '' 154(i), (j) 303(r), 307, 309, and 336, Part 73 of the Commission's Rules is amended as set forth in Appendix A, below. 122. IT IS FURTHER ORDERED that, pursuant to the Contract with America Advancement Act of 1996, the rule amendments set forth in Appendix A SHALL BE EFFECTIVE either thirty days after publication in the Federal Register or upon receipt by Congress of a report in compliance with the Contract with America Advancement Act of 1996, Pub. L. No. 104-121, whichever is later. 123. IT IS FURTHER ORDERED that the new or modified paperwork requirements contained in this Report and Order (which are subject to approval by the Office of Management and Budget) will go into effect upon OMB approval. 124. IT IS FURTHER ORDERED that, upon release of this Fifth Report and Order, concurrently released with the Sixth Report and Order, this proceeding is hereby terminated. 125. For additional information concerning this proceeding, contact Saul Shapiro, Mass Media Bureau, (202) 418-2600, Gretchen Rubin, Mass Media Bureau, Policy and Rules Division, (202) 418-2120; Mania K. Baghdadi, Mass Media Bureau, Policy and Rules Division, Legal Branch, (202) 418-2130; Dan Bring, Mass Media Bureau, Policy and Rules Division, Policy Analysis Branch, (202) 418-2170, or Gordon Godfrey, Mass Media Bureau, Policy and Rules Division, Engineering Policy Branch, (202) 418-2190. FEDERAL COMMUNICATIONS COMMISSION William F. Caton Acting Secretary APPENDIX A Rule Changes Part 73 of Title 47 of the U.S. Code of Federal regulations is amended to read as follows: PART 73 -- RADIO BROADCAST SERVICES 1. The authority citation for Part 73 is revised to read as follows: AUTHORITY: 47 U.S.C. 154, 303, 334, 336. 2. Section 73.624 is added to Subpart E to read as follows: ' 73.624 Digital Television Broadcast Stations (a) Digital television ("DTV") broadcast stations are assigned channels 6 MHz wide. Initial eligibility for licenses for DTV broadcast stations is limited to persons that, as of April 3, 1997, are licensed to operate a full power television broadcast station or hold a permit to construct such a station (or both). (b) At any time that a DTV broadcast station permittee or licensee transmits a video program signal on its analog television channel, it must also transmit at least one over-the-air video program signal at no direct charge to viewers on the DTV channel that is licensed with the analog channel. The DTV program service provided pursuant to this paragraph must be at least comparable in resolution to the analog television station programming transmitted to viewers on the analog channel but, subject to paragraph 73.624(f), DTV broadcast stations are not required to simulcast the analog programming. (c) Provided that DTV broadcast stations comply with paragraph (b) of this section, DTV broadcast stations are permitted to offer telecommunications services of any nature, consistent with the public interest, convenience, and necessity, on an ancillary or supplementary basis. The kinds of services that may be provided include, but are not limited to computer software distribution, data transmissions, teletext, interactive materials, aural messages, paging services, audio signals, subscription video, and any other services that do not derogate DTV broadcast stations' obligations under paragraph (b) of this section. Such services may be provided on a broadcast, point-to-point or point-to-multipoint basis, provided, however, that no video broadcast signal provided at no direct charge to viewers shall be considered ancillary or supplementary. (1) DTV licensees that provide ancillary or supplementary services that are analogous to other telecommunications services subject to regulation by the Commission must comply with the Commission regulations that apply to those services, provided, however, that no ancillary or supplementary service shall have any rights to carriage under Sections 614 or 615 of the Communications Act of 1934, as amended, or be deemed a multichannel video programming distributor for purposes of Section 628 of the Communications Act of 1934, as amended. (2) In all arrangements entered into with outside parties affecting telecommunications service operation, the DTV licensee or permittee must retain control over all material transmitted in a broadcast mode via the station's facilities, with the right to reject any material that it deems inappropriate or undesirable. The license or permittee is also responsible for all aspects of technical operation involving such telecommunications services. (3) In any application for renewal of a broadcast license for a television station that provides ancillary or supplementary services, a licensee shall establish that all of its program services on the analog and the DTV spectrum are in the public interest. Any violation of the Commission's rules applicable to ancillary or supplementary services will reflect on the licensee's qualifications for renewal of its license. (d) Digital television broadcast facilities that comply with the FCC DTV Standard (Section 73.682(d)), shall be constructed in the following markets by the following dates: (1)(i) May 1, 1999: all network-affiliated television stations in the top ten television markets