Fcc Has Broad Questions, No Answers, On Digital Must-Carry

Television Digest with Consumer Electronics, July 13, 1998

FCC issued its long-expected Notice of Proposed Rulemaking (NPRM) July 9 on digital must-carry during transition from analog, asking many questions without proposing possible solutions. Order seeking comments stresses need for cable-broadcast compatibility in digital era and seeks comments on changes that might be needed in mandatory carriage rules, as well as impact of digital on other FCC rules. Chmn. Kennard said debate has been and will continue to be "intensive and fascinating" in calling request for comments "an important step in focusing debate on how best to bring a digital signal to Americans."

FCC put all possibilities on table. In decision text released unusually quickly on July 10 -- day after meeting -- Commission laid out myriad of choices, including 7 options on how to handle transition years, one of which is to do nothing. Question isn't as simple as whether to apply must-carry rules to digital signals. FCC asked whether many of those provisions must be revisited to apply to new technology. Many other major cable regulations also are up for discussion, with agency asking whether new circumstances will require changes in areas such as rate regulation, subscriber notification, exclusivity agreements. Comments are due Sept. 17, replies Oct. 30.

Commission wouldn't offer more than "tentative conclusion" that it has authority to and should develop rules to facilitate transition to digital TV (DTV). Anticipating constitutional challenge, it asked how precedents set in Supreme Court's upholding of original must-carry rules apply to new rulemaking. That decision found broadcasters to be at serious risk and cable operators to be insignificantly affected, FCC said, conclusions that may not be case in digital proceeding. Although 80% of commercial TV broadcasters use retransmission consent agreements to obtain carriage rather than undertaking must-carry proceedings, FCC said there are "reasons to believe" that pattern won't be repeated with DTV. With so few subscribers having digital receivers at outset, it said, must-carry rules may be only way for broadcasters to gain carriage. But many questions must be answered to implement must-carry, it said, including: (1) Do analog and digital broadcasts constitute separate stations, as broadcasters argue? (2) Should exclusive retransmission agreements remain prohibited?

Commission acknowledged there will be ferocious battle over interim rules between broadcasters and operators for transition period. Choices include immediate carriage, regardless of capacity constraints, of digital signals in addition to analog -- broadcasters' choice. Option would "provide regulatory certainty" to industry and assure investment in digital technology and programming, FCC said, but it also might cause "significant cable channel lineup disruptions" as channel-locked operators drop programming to accommodate duplicate signals, as well as higher rates for subscribers without digital sets, who would see no benefits. Agency asked how option would affect program diversity and when such rule should begin: (1) When first digital station airs in market. (2) When majority of stations in market are digital. (3) Any other timetable.

Other possibilities include: (1) Requiring only higher capacity systems -- agency suggested cutoff of 750 MHz -- to add digital stations. It asked for data on operators' current channel capacity and how quickly they expect to upgrade. (2) Phasing in small number of must-carry digital channels -- possibly 3-5 -- each year, to minimize lineup disruption. (3) Requiring broadcasters to choose one transmission for mandatory carriage, proposal that Commission said "may have an adverse effect on the speed of the transition process." (4) Waiting until certain percentage of public -- 5% and 10% were suggested -- have digital receiving equipment to begin must-carry. (5) Waiting certain period of time, with May 1, 2002 suggested -- when stations not affiliated with networks must initiate digital service. Idea "has certain advantages," FCC said, including allowing operators and broadcasters "to find a successful business model" and have "voluntary negotiations on cable carriage issues." (6) Not applying must-carry to digital signals at all during transition, requiring retransmission consent for carriage -- cable industry's choice. Commission asked how that option "would affect the economic viability of digital television stations as well as the rapid transition to DTV."

Must-carry limit of 1/3 of system's capacity still applies in digital setting, FCC suggested, asking for comment on interpretation. It acknowledged that capacity would be difficult to determine since digital services use varying bandwidth, and suggested 3 definitions: (1) Each service is one channel. (2) Each 6 MHz block is channel. (3) Capacity should be divided by data stream needed.

Commission addressed complaints that digital must-carry would raise rates for all but provide additional services only for those with special equipment, asking whether operators should: (1) Create separate programming tiers for digital and analog channels. (2) Offer converter boxes to all subscribers without digital TVs. Digital carriage may alter rate regulation process, FCC said, especially if new tiers are created. Local franchise authorities can regulate only basic tier, and most operators add digital programming as "new product tier," Commission said. It asked what effect must-carry will have on rates, and whether existing rates will allow operators to recover costs of upgrading to digital.