Federal Register/Vol. 77, No. 218/Friday, November 9, 2012/Rules and Regulations

67290 Federal Register / Vol. 77, No. 218 / Friday, November 9, 2012 / Rules and Regulations

affected by a disaster to designate those benefits of a grantee’s or subgrantee’s October 10, 2012 and released on areas where the debris is so widespread permanently employed personnel are: October 12, 2012. The full text of this that removal of the debris from private (i) Eligible in calculating the cost of document is available for public property is in the ‘‘public interest’’ eligible permanent repair, restoration, inspection and copying during regular pursuant to 44 CFR 206.224, and thus is and replacement of facilities under business hours in the FCC Reference eligible for FEMA Public Assistance section 406 of the Stafford Act; Center, Federal Communications reimbursement on a case-by-case basis. (ii) Eligible, at the Administrator’s Commission, 445 12th Street SW., CY– This rule will not affect a taking of discretion, in calculating the cost of A257, Washington, DC 20554. This private property or otherwise have eligible debris removal work under document will also be available via taking implications under Executive sections 403(a)(3)(A), 502(a)(5), and 407 ECFS (http://www.fcc.gov/cgb/ecfs/). Order 12630. of the Stafford Act for a period not to (Documents will be available exceed 30 consecutive calendar days, electronically in ASCII, Word 97, and/ K. Congressional Review of Agency provided the grantee’s or subgrantee’s or Adobe Acrobat.) The complete text Rulemaking permanently employed personnel are may be purchased from the FEMA is sending the rule to Congress dedicated solely to eligible debris Commission’s copy contractor, 445 12th and to the Government Accountability removal work for any major disaster or Street SW., Room CY–B402, Office pursuant to the Congressional emergency declared by the President on Washington, DC 20554. To request these Review of Agency Rulemaking Act or after October 27, 2012, in response to documents in accessible formats (Congressional Review Act)(CRA), Hurricane Sandy; and (computer diskettes, large print, audio Public Law 104–121, 110 Stat. 873 (iii) Not eligible in calculating the cost recording, and Braille), send an email to (March 29, 1996) (5 U.S.C. 801 et seq). of other eligible emergency protective [email protected] or call the Commission’s This rule is not a ‘‘major rule’’ within measures under sections 403 and 502 of Consumer and Governmental Affairs the meaning of the CRA. Furthermore, the Stafford Act, except for those costs Bureau at (202) 418–0530 (voice), (202) Section 808 of the CRA allows the associated with host state evacuation 418–0432 (TTY). issuing agency to make a rule effective and sheltering, as established in Summary of the Report and Order sooner than otherwise provided by the § 206.202. 1. With this Report and Order (Order), CRA if the agency makes a good cause * * * * * finding that notice and public procedure we amend our rules to allow cable is impracticable, unnecessary or Janet Napolitano, operators to encrypt the basic service contrary to the public interest. As stated Secretary. tier in all-digital cable systems if they previously, FEMA has made such a [FR Doc. 2012–27382 Filed 11–8–12; 8:45 am] comply with certain consumer- protection measures. As discussed good cause finding, including the BILLING CODE 9111–23–P reasons therefore. below, this rule change will benefit consumers who can have their cable List of Subjects in 44 CFR Part 206 service activated and deactivated from a FEDERAL COMMUNICATIONS remote location. By allowing remote Administrative practice and COMMISSION procedure, Coastal zone, Community activation and deactivation, we expect facilities, Disaster assistance, Fire 47 CFR Part 76 our amended rules will result in prevention, Grant programs-housing and benefits to both cable operators and community development, Housing, [MB Docket No. 11–69; PP Docket No. 00– consumers by significantly reducing the 67; FCC 12–126] Insurance, Intergovernmental relations, number of truck rolls associated with provisioning service and significantly Loan programs-housing and community Basic Service Tier Encryption reducing the need for subscribers to development, Natural resources, Compatibility Between Cable Systems wait for service calls to activate or Penalties, Reporting and recordkeeping and Consumer Electronics Equipment requirements. deactivate cable service. At the same For the reasons discussed in the AGENCY: Federal Communications time, we recognize that this rule change preamble, the Federal Emergency Commission. will adversely affect a small number of Management Agency amends 44 CFR ACTION: Final rule. cable subscribers who currently view part 206 as follows: the digital basic service tier without SUMMARY: In this document, the using a set-top box or other equipment. PART 206—FEDERAL DISASTER Commission adopts new rules to allow If a cable operator decides to encrypt the ASSISTANCE cable operators to encrypt the basic digital basic tier, then these subscribers service tier in all-digital systems, will need equipment to continue ■ 1. The authority citation for part 206 provided that those cable operators viewing the channels on this tier. To is revised to read as follows: undertake certain consumer protection give those consumers time to resolve the Authority: Robert T. Stafford Disaster measures for a limited period of time in incompatibility between consumer Relief and Emergency Assistance Act, 42 order to minimize any potential electronics equipment (such as digital U.S.C. 5121 through 5207; Homeland subscriber disruption. television sets) and newly encrypted Security Act of 2002, 6 U.S.C. 101 et seq.; DATES: Effective December 10, 2012. cable service, we require operators of Department of Homeland Security Delegation cable systems that choose to encrypt the FOR FURTHER INFORMATION CONTACT: 9001.1. For basic service tier to comply with certain additional information on this consumer protection measures for a ■ 2. Revise § 206.228, paragraph (a)(2) to proceeding, contact Brendan Murray, read as follows: period of time. In addition, we note that [email protected], of the Media this rule change may impact the ability § 206.228 Allowable costs. Bureau, Policy Division, (202) 418– of a small number of subscribers that 2120. * * * * * use certain third-party equipment that is (a) * * * SUPPLEMENTARY INFORMATION: This is a not CableCARD compatible to access (2) Force Account Labor Costs. The summary of the Commission’s Report channels on the basic service tier. To straight- or regular-time salaries and and Order, FCC 12–126, adopted on address this issue, we require the six

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largest incumbent cable operators to scramble most of their signals. As cable such systems because they already have comply with additional requirements operators began to transition a set-top box or CableCARD-equipped that are intended to ensure programming on their cable retail device. Furthermore, they compatibility with certain third-party- programming service tier (‘‘CPST’’) to contend, encrypting the basic service provided equipment used to access the digital, many program carriage tier in an all-digital system would basic tier. agreements required cable operators to eliminate the need for many service 2. Background. In the Cable encrypt that programming as a calls because it would allow cable Television Consumer Protection and condition of carriage. In addition, cable operators to enable and disable cable Competition Act of 1992 (‘‘1992 Cable operators use encryption as part of their service remotely, activating and Act’’), Congress sought to make sure that conditional access system to ensure that deactivating the encryption capability of consumer electronics equipment could cable service is available only to those set-top boxes and CableCARDs from the receive cable programming and that who have paid for it. Particular methods headend rather than visiting compatibility issues did not limit the of encryption, however, vary across subscribers’ homes. Today, cable premium features of that equipment. cable systems, which could lead to operators typically must manually Section 17 of that law added section incompatibility between consumer connect and disconnect the cable that 624A to the Communications Act of devices and cable service. In 2003, the runs to a home to activate or deactivate 1934, as amended. Section 624A Commission adopted the CableCARD service and use traps to block access to requires the Commission to issue standard to address this incompatibility particular channels. If the cable operator regulations to assure compatibility problem. The CableCARD, which were allowed to encrypt every signal, between consumer electronics subscribers must lease from their cable the operator could keep every home equipment and cable systems. In 1994, provider either as a part of a leased set- connected to the cable plant regardless the Commission implemented the top box or separately for use in a of whether the home subscribes to cable requirements of section 624A in part by compatible retail television or set-top service. In addition, the operator could adding § 76.630(a) to its rules. Section box, decrypts the cable services. At ensure that only paid subscribers are 76.630(a) prohibits cable operators from present, over 78 percent of all cable able to access the service by authorizing scrambling or encrypting signals carried subscribers have at least one leased set- and deauthorizing CableCARDs, or other on the basic tier of service. Encryption top box or retail CableCARD device in legitimate devices, as people subscribe is an essential component of a their home. Cable operators who offer to or cancel cable service. conditional access system, which cable only digital service indicate that all of 6. In January 2010, the Media Bureau operators use to ensure that subscribers their subscribers have at least one leased granted a conditional waiver of the rule receive only the services that they are set-top box or retail CableCARD device. authorized to receive. Nevertheless, the that prohibits encryption of the basic Some cable subscribers rely on QAM service tier to Cablevision with respect Commission determined that this rule tuners in television sets and consumer would significantly advance to Cablevision’s New York City systems, electronics devices that allow access to which are all-digital. The Bureau based compatibility by ensuring that all unencrypted digital cable service subscribers would be able to receive its decision on the fact that encryption without additional equipment, but, of the basic service tier on Cablevision’s basic tier signals ‘‘in the clear’’ and that based on the record before us, we basic-only subscribers with cable-ready all-digital systems would allow believe that few consumers rely on them Cablevision to enable and disable cable televisions would not need set-top for primary access to cable service. The boxes. The Commission concluded that service remotely. The Bureau also found fact that most cable subscribers already ‘‘[t]his rule also will have minimal that remote activation and deactivation have a cable set-top box or retail impact on the cable industry in view of of cable service would ‘‘reduce[ ] costs CableCARD device significantly reduces the fact that most cable systems now for Cablevision, improve[ ] customer the number of subscribers who benefit generally do not scramble basic tier service, and reduce[ ] fuel consumption from the prohibition on encryption of signals.’’ and CO2 emissions.’’ Remote activation 3. In the mid-1990’s, cable operators the basic service tier in all-digital and deactivation, the Bureau concluded, began to upgrade their systems to offer systems in contrast to systems that carry would reduce installation costs for digital cable service in addition to analog service. Cablevision’s subscribers and also analog cable service (hybrid service). 5. Our rules state that requests for benefit these subscribers by reducing More recently, many cable operators waiver of the encryption prohibition the number of occasions when they have transitioned to more efficient all- ‘‘must demonstrate either a substantial must wait at home for a service call, as digital service, freeing up spectrum to problem with theft of basic tier service compared to unencrypted cable systems. offer new or improved products and or a strong need to scramble basic The Bureau reasoned that Cablevision services like higher-speed Internet signals for other reasons.’’ Prior to 2010, would sufficiently address the problem access and high definition the Commission had waived the rule of incompatibility with consumer programming. After a cable operator based only on theft of service. Recently, electronics ‘‘by providing basic-only transitions to an all-digital system, most the Commission has received several subscribers with set-top boxes or of its subscribers have at least one cable requests for waiver of the rule CableCARDs without charge for set-top box or retail CableCARD device prohibiting encryption of the basic significant periods of time.’’ Finally, the in their homes. We expect that the service tier based on the argument that Bureau also concluded that the waiver percentage of homes with set-top boxes the rule imposes more burdens than would ‘‘provide an experimental benefit or retail CableCARD devices will benefits as cable operators transition to that could be valuable in the continue to increase as more cable all-digital systems. The petitioners argue Commission’s further assessment of the operators eliminate analog service from that there are very few people who utility of the encryption rule,’’ and their systems in favor of more efficient subscribe only to the basic service tier therefore required Cablevision to file digital service. in all-digital systems, and that access to three reports detailing the effect of 4. The percentage of homes with set- the basic tier would therefore be encryption on subscribers. Four cable top boxes or CableCARD devices is high unaffected by encryption for the operators have filed similar petitions for because most cable systems now overwhelming majority of subscribers to waiver with the Commission’s Media

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Bureau since the release of the burdens. Finally, we discuss the legal encryption disparity on a consumer-by- Cablevision Waiver. basis for the rule changes. consumer basis could lead to consumer 7. In the wake of these petitions as 9. Systems Eligible to Encrypt. In the confusion: Under this proposal, one well as requests from Public Knowledge Encryption NPRM, the Commission subscriber could be subject to and Media Access Project for the proposed to allow encryption of the encryption (and the commensurate Commission to deal with the basic basic service tier only with respect to consumer-protection measures service tier encryption issue by all-digital systems ‘‘because remote described below), while his neighbor launching a rulemaking proceeding, the activation and deactivation of cable could face no encryption and be able to Commission issued a Notice of service, and its attendant benefits, are access channels on the basic service tier. Proposed Rulemaking in October 2011. only feasible in all-digital systems.’’ For The administrative burdens of The Commission proposed to allow this reason, we limit encryption determining the applicability of the rule cable operators to encrypt the basic eligibility of the basic tier to all-digital would also make such a proposal service tier in all-digital systems, subject systems. The Commission proposed to unreasonable. Therefore, we believe that to conditions that would minimize define an ‘‘all-digital’’ system as one in our rule, which determines eligibility disruption for affected subscribers by which ‘‘no television signals are for encryption on a system-wide basis, providing a transition period in which provided using the NTSC system.’’ As is more reasonable and will better serve to make informed choices about explained below, we adopt our the public interest. purchasing or leasing new equipment to proposed definition, finding that it will 12. Benefits of Permitting Basic continue accessing service. Based on the best achieve our goal of facilitating Service Tier Encryption. Remote reports that Cablevision submitted as a remote activation and deactivation of Activation and Deactivation. Based on condition of its waiver, the Commission cable service ‘‘while minimizing examination of the record, we are in the Encryption NPRM predicted that interference with the special functions persuaded that allowing encryption of the rule change would reduce truck rolls of subscribers’ television sets.’’ the basic service tier on all-digital 10. Commenters suggested several and service calls with modest adverse systems will reduce the need for many substantive changes to our proposed effects on few subscribers. We received consumers to schedule a service call rule. Several commenters suggested that comments or reply comments on the and wait for the cable technician to we extend encryption eligibility to cable Encryption NPRM from 34 parties, and arrive before initiating or terminating operators that offer unencrypted analog a number of subsequent ex parte filings. their cable service. ACA states in its ‘‘barker channels.’’ Mikrotec and Inter comments that physical connection and The parties’ positions are described in Mountain Cable suggested that operators disconnection of cable service in all- the ensuing Discussion. should be allowed to encrypt the basic digital systems is ‘‘unnecessary but for 8. Discussion. Because of the public service tier as long as all the existence of the basic service tier benefits associated with allowing all- ‘‘programming’’ on the basic tier is encryption prohibition.’’ Comcast digital cable operators to encrypt the transmitted digitally and ‘‘if that predicts that encrypting the basic basic service tier, we amend our rule to condition is met, then there should be service tier will allow the company to permit this practice as long as the cable no concern that the system otherwise perform nearly half of its activations operator complies with certain uses analog modulation.’’ They also and 90 percent of its deactivations consumer protection measures. suggest that eligibility to encrypt should remotely. Cablevision reports that, since Encryption of all-digital cable service be determined subscriber-by-subscriber, it received waiver of the encryption will allow cable operators to activate not on a system-by-system basis, prohibition, 99.5 percent of its and deactivate cable service remotely, because cable operators may elect to deactivations were performed remotely thus relieving many consumers of the transition portions of systems to all- and a growing number of its new need to schedule appointments when digital piecemeal, and the rule should customers are eligible for remote they sign up for or cancel cable service. not discourage that practice. activation. The result for consumers is In addition, encryption will reduce the 11. We believe the best criterion for that in many cases they will no longer number of truck rolls necessary for eligibility to encrypt the basic service need to rearrange their schedules to wait manual installations and tier is that the system carries only for cable technicians to arrive at their disconnections, reduce service theft, digital signals aside from unencrypted homes in order to activate and and establish regulatory parity between analog barker channels. Encryption on deactivate their cable service, making cable operators and their satellite hybrid systems (that is, systems that activation and deactivation of service competitors, who are not subject to the transmit signals in analog and digital) much more convenient. encryption rule. We find these benefits would not generate the benefits 13. In addition to the projected time offset the increased burdens that may associated with encryption on all-digital savings for subscribers because of result from encryption of the basic systems because the analog portion of remote activation and deactivation, the service tier. Recognizing, as noted the system will still require truck rolls record is replete with secondary benefits above, that some consumers rely on to activate and deactivate service and that cable operators and their customers unencrypted basic tier service, we adopt the Commission does not have a will realize as a result of remote service narrowly tailored consumer protection separated security solution like change. These include savings for cable measures to help ease the transition to CableCARD to ensure that retail devices operators because of a reduction in the encrypted service for those consumers. can access scrambled analog cable need to dispatch service technicians to In the sections below, we first discuss programming. Therefore, permitting customers’ homes. For example, which systems will be allowed to hybrid systems to encrypt would not commenters assert that reduced costs encrypt the basic service tier. Then we result in the type of benefits that justify due to truck rolls and system discuss the benefits associated with easing the encryption requirement for maintenance will save cable operators permitting all-digital cable operators to all-digital systems. We do not believe money that they can use to ‘‘invest in encrypt the basic service tier, as well as that it is practical to adopt Mikrotec and innovative new products that customers the burdens associated with our rule Inter Mountain Cable’s proposal to demand and highly value.’’ In addition, change and consumer protection determine eligibility for encryption on a Comcast states that, with remote measures we adopt to mitigate those consumer-by-consumer basis, because activation and deactivation,

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‘‘technicians would need to access drop instances, a CableCARD. As a result, access the basic tier without an lines less frequently, thereby reducing almost all digital subscribers already use additional equipment charge while they ‘wear-and-tear’ on the lines and the set-top boxes or CableCARDs to access consider their options for device need for maintenance.’’ Many cable service. Second, since the 1992 compatibility. In this section, we commenters also highlight the benefits Cable Act, satellite television operators identify the small class of subscribers remote activation and deactivation will have begun to offer video programming that encryption may affect and adopt have on vehicle traffic and the services to tens of millions of two categories of measures to protect environment. Microtek and Inter subscribers, who access these services those subscribers: Transitional Mountain Cable even suggest that these through the use of one or more equipment requirements and notice increased efficiencies could lead to converter boxes. Our rules do not requirements. lower rates for subscribers. prohibit satellite operators from 17. Subscribers That May Be Affected 14. Reduction of Theft and Piracy. encrypting their services, and therefore by Encryption of the BST. The Another benefit of basic tier encryption they are able to make service changes Commission concluded in 1994 that is the likely reduction in theft of cable remotely and in real time. Cable service. In 2004, NCTA estimated that operators argue that this puts them at a adopting the basic service tier five percent of homes passed receive regulatory disadvantage vis-a`-vis their encryption prohibition ‘‘will have unauthorized cable service, which competitors that are not constrained by minimal impact on the cable industry in equates to five billion dollars in the requirements of § 76.630(a). We view of the fact that most cable systems unrealized revenue that cable operators believe that by amending our encryption now generally do not scramble basic tier could dedicate to offering improved rule we will reduce this regulatory signals.’’ Today our examination of the services. The resulting reduction in disparity and enable all-digital cable record reflects that relaxing the cable operator revenues may increase operators to provide a similar level of encryption prohibition for all-digital the rates operators charge their customer service as their MVPD systems will have minimal impact on subscribers. In addition, Comcast competitors. consumers because most subscribers do explains that theft of service reduces the not rely on the clear-QAM tuners in 16. Consumer Protection Measures to quality of cable service because thieves Reduce Burdens on Subscribers. their devices to access basic tier signals. sometimes access the cable system by Although we expect our rule change Nevertheless, we recognize that lifting splitting cables and adding will affect relatively few subscribers, we the encryption prohibition may impact unauthorized taps, which degrade nonetheless adopt consumer protection some cable subscribers who use clear- connections and can lead to signal QAM devices to access the basic tier, leakage and lower broadband speeds. measures to mitigate any resulting harm to subscribers who are impacted by such as subscribers who use second or This unauthorized splicing also can add third television sets to access to wear-and-tear on the cable system encryption of the digital basic tier. This rule change will impact the few digital unencrypted digital basic service tier and increase the need for maintenance. service without set-top boxes or Encryption of the basic service tier will cable subscribers who access the basic service tier without a set-top box or CableCARDs and subscribers that use discourage thieves from splicing cable third-party provided IP-enabled devices lines as it will not enable viewing of the CableCARD: They will need to obtain a set-top box or CableCARD from their that have clear-QAM tuners. Several signals without leasing an authorized cable subscribers and equipment set-top box or CableCARD from the cable operator once the operator encrypts the basic service tier. To give manufacturers filed comments claiming operator. Encryption of the basic service that our rule change would have a tier could also benefit channels that are these consumers time to assess their options to access encrypted cable negative impact on them. These carried on the basic service tier, as subscribers explain that they rely on developers of high-value content may be service, we will require cable operators that choose to encrypt to offer affected clear-QAM tuners in their electronic more willing to make the content devices (such as computers and available to basic service tier channels subscribers equipment necessary to television sets) to access basic tier if they are encrypted and less receive the encrypted programming programming, and that because they susceptible to piracy. without charge for a limited time, and 15. Regulatory Parity. Several to notify their subscribers about have more than two devices on which commenters emphasized that the encryption and the equipment offers. In to view BST programming (e.g., they proposed rule change will increase addition, we require the six largest have multiple televisions in their regulatory parity between cable incumbent cable operators to offer home), their monthly bills will increase operators and satellite providers, which equipment that is compatible with IP- because they will need a greater number are not subject to the encryption rule. enabled clear-QAM devices provided by of converter boxes than afforded under Commenters explain that the technology third parties. We intend that this the free box conditions that the and market landscapes were quite requirement will provide an Commission proposed in the Encryption different when the rule was adopted, opportunity for affected consumers to NPRM. We are concerned about the when consumers had a reasonable make informed choices about whether effect of this rule change on the small expectation that they would be able to to purchase a CableCARD-compatible group of subscribers who access connect their televisions directly to a device, lease a set-top box from their unencrypted basic service tier coaxial cable without the need for a set- cable operator, or use another method to programming through clear-QAM top box. In the years since enactment of access the broadcast and other channels receivers, but, at the same time, the 1992 Cable Act, consumer carried on the basic service tier (for recognize that no consumer protection expectations have changed example, by accessing the signals over- measure could fully satisfy every substantially. First, cable operators have the-air or via another MVPD). As we affected subscriber. Nonetheless, we introduced new and innovative services, explained in the Encryption NPRM, believe that the consumer-protection such as video on demand and pay-per- such an opportunity will minimize the measures outlined below are view services, that cannot be accessed impact of encryption on clear-QAM appropriate and necessary to minimize by digital subscribers without an users by offering a transition period disruption to affected subscribers by authorized set-top box or, in some during which they can continue to providing a reasonable transition period

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to make informed choices about the because some consumers may own (ii) enable IP-enabled clear QAM options available to access the basic tier. third-party provided IP-enabled devices devices to access basic service tier 18. Transitional Equipment that do not have the ability to decrypt channels without any additional Requirements Applicable to All Cable cable signals. Therefore, these hardware through the use of Operators. To limit the costs that commenters call for the Commission to commercially available software affected consumers may face due to reject the proposed rule, or adopt upgrades (‘‘Option 2’’). NCTA proposed encryption, we adopt our proposed special measures to mitigate disruption to sunset these commitments three years consumer-protection measures that to consumers that use those third-party after we adopt this Order unless the require a cable operator that chooses to devices. Specifically, these parties Commission extends them. Boxee and encrypt the basic service tier to: (i) Offer complain that existing cable set-top CEA argue that these commitments do to existing subscribers who subscribe boxes and DTAs are not compatible not sufficiently support the operation of only to the basic service tier and do not with IP-enabled devices because they do IP-enabled clear QAM devices. Instead, use a set-top box or CableCARD, the not output signals in a manner that they advocate that all cable operators subscriber’s choice of a set-top box or third-party-provided IP-enabled devices should be required to make the basic CableCARD on up to two television sets can access. Accordingly, such devices service tier available to IP-enabled without charge for two years from the would not be compatible with the devices without additional hardware. date of encryption; (ii) offer existing operator’s free equipment offering—i.e., CEA further encourages the Commission subscribers who subscribe to a level of there would be no connection by which not to sunset the commitments after service above ‘‘basic only’’ but use an such devices could access the basic tier three years. The AllVid Alliance additional television set to access only channels—thus rendering such devices suggests that the Commission initiate a the basic service tier without the use of useless if a cable operator chooses to Notice of Proposed Rulemaking seeking a set-top box or CableCARD at the time encrypt the basic tier. Commenters comment on ‘‘a nationally-portable of encryption, the subscriber’s choice of assert that such devices were purchased common IP-based interface from MVPD a set-top box or CableCARD on one or manufactured on the expectation that services to consumer devices.’’ television set without charge for one unencrypted basic service tier QAM 21. We believe that the commitments year from the date of encryption; and signals would continue to be available from the six largest incumbent cable (iii) offer existing subscribers who from cable operators. The record operators will be sufficient to address receive Medicaid, subscribe only to the indicates that at least four companies the compatibility issue concerning IP- basic service tier, and do not use a set- have developed products that rely on enabled devices and achieve the top box or CableCARD, the subscriber’s customers’ ability to access clear-QAM objectives of section 624A of the Act— choice of a set-top box or CableCARD on signals, and that a relatively small i.e., to ensure compatibility between up to two television sets without charge number of consumers have purchased cable service and consumer electronics for five years from the date of these devices for this capability. As equipment. We do not extend the encryption. These consumer protections explained above, however, we additional equipment requirement to apply to televisions and devices anticipate the impact of encryption of smaller cable operators because we do connected to the cable system at the the basic tier on the public at large will not believe it is necessary at this time. time of encryption. To ensure that any be minimal because the record indicates As noted above, based on the current subscriber likely to be affected by that only a small number of consumers record, only a small number of consumers rely on IP-enabled devices to encryption has adequate time to rely on clear-QAM devices to access the consider these offers, we will require access the basic tier and thus we expect basic tier. And the record further cable operators to keep the offer open to this particular compatibility problem to indicates that subscribers who use IP- subscribers for at least 30 days before be extremely limited in scope. Because enabled clear-QAM devices that would the date the operator begins encrypting the six largest incumbent cable be incompatible with the free the first basic tier channel on the operators subject to the rule serve 86 equipment offerings by cable operators channel lineup and for at least 120 days percent of all cable subscribers represent an even smaller subset of after that date. NCTA suggested that the nationwide, we expect most consumers clear-QAM users. offer extend for only 30 days after the that use such devices will have ready date that encryption begins. We believe 20. To mitigate any harm to the small access to the necessary equipment. that 30 days after the date of encryption group of consumers that may use such Moreover, large cable operators would not afford affected consumers devices, NCTA’s six largest incumbent generally dictate equipment features to sufficient time to learn about the effect cable members—serving 86 percent of manufacturers and commonly get of encryption and the consumer- all cable subscribers—have committed priority in delivery of that equipment. protection measures available to them to adopt, prior to encrypting, a solution We anticipate that the large operators’ and act on the information. that would provide basic service tier demand for this equipment eventually Furthermore, because encryption will access to third-party provided IP- will lead all equipment to include this affect only a very small number of enabled clear QAM devices. Pursuant to functionality in the marketplace, and subscribers, the consumer protection this commitment, these six cable thus the equipment small cable measures we adopt will not be unduly operators will make basic service tier operators provide will eventually onerous on cable operators. We expect channels available either via connection include the IP functionality as well, these transitional protections will from operator-supplied equipment or by regardless whether they specify this substantially mitigate the costs to providing access to the operator’s particular feature. Nonetheless, we may affected subscribers while they consider security technology. Specifically, these revisit this issue if the equipment alternative means for accessing the basic cable operators have proposed to either market does not develop as expected or service tier. (i) provide a converter box with if we find that small cable operators do 19. Equipment Requirements ‘‘standard home networking capability’’ not make their service compatible with Applicable to Top Six Incumbent Cable that can provide IP-enabled clear QAM these consumer devices. Operators. A few commenters assert that devices access to basic service tier 22. Contrary to Boxee’s argument, the free equipment conditions described channels on the same terms proposed in nothing in section 624A requires that above do not mitigate any disruption the Encryption NPRM (‘‘Option 1’’), or consumer equipment compatibility be

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achieved by means of a hardware-free devices. Any license terms that cable 26. Public Knowledge and Media solution. Under the equipment measure operators require for the ‘‘standard Access Project also suggest that we tie we adopt today, the vast majority of home networking capability’’ used to the low-income condition to Lifeline/ consumers will be able to access service offer access to the basic service tier in Linkup eligibility because Medicaid that is encrypted using a commercially Option 1 and the ‘‘requirements eligibility can vary from state to state. available security technology or via necessary (including any authentication We reject that suggestion as equipment with standard home- processes)’’ in Option 2 must be made unnecessary. As several commenters networking capability in much the same available on a good faith basis. In point out, Medicaid eligibility presents way they do today. In fact, if this adopting this ‘‘good faith’’ licensing an easily verifiable, bright-line test, and standard home-networking capability is requirement, we intentionally do not is less likely to cause confusion among connected to a wireless home network, specify any particular technology or subscribers and cable customer service the consumer experience could improve technology licensing model (e.g., we do representatives. because consumers will be able to not require or specify ‘‘fair, reasonable, 27. We also reject calls from some access basic service tier channels and non-discriminatory’’ licensing, as commenters to require free equipment without physically connecting a device that term has been interpreted in other in perpetuity for existing subscribers, to a coaxial plug from the wall. Thus, contexts, as urged by Boxee and CEA). and not to limit free boxes to existing mandating a hardware-free solution is Third, we require the operators that subscribers. The consumer protection not necessary to protect consumers in choose to offer access to the basic measures we adopt are intended to the context of the instant proceeding. service tier using Option 1 to ‘‘publicly mitigate the disruption that may be 23. We adopt these commitments as disclose the DLNA profile or other experienced by current cable required preconditions to encrypting by protocol that is being used for the home- subscribers. We do not agree that free the top six incumbent cable operators networking capability on such operator- equipment is necessary for new with slight modifications and supplied equipment.’’ Such a subscribers: Given the movement to clarifications. These conditions will requirement is necessary to ensure that digital services, many subscribers have automatically sunset three years from third-party manufacturers have the become accustomed to leasing set-top the release date of this Order unless the information necessary to build a device devices, and that trend seems likely to Media Bureau (‘‘Bureau’’) determines that works with cable-provided continue. Furthermore, we agree with prior to this date that the IP-enabled equipment. We also remind cable NCTA that unnecessarily burdensome device protections remain necessary to operators that § 76.640(b)(4)(iii) of our conditions such as free devices for all protect consumers. We believe that a rules, which goes into effect in new subscribers could discourage cable future review of these rules is warranted December of this year, requires all high operators from encrypting and prevent because the market for these IP-based definition set-top boxes (except for one- the public from realizing the benefits devices is nascent and it is unclear way, non-recording set-top boxes) to that stem from cable operators’ ability to whether consumer demand for this include an IP-compatible output based remotely activate and deactivate service equipment will flourish. Accordingly, on an open industry standard that which benefits most subscribers. we delegate authority to the Bureau to provides for audiovisual Accordingly, we do not condition this initiate a review two years after the communications including service rule change on cable operators’ release of this Order to decide whether discovery, video transport, and remote supplying free devices in perpetuity to existing subscribers or to new these IP-enabled device protections control command pass-through remain necessary to protect consumers subscribers. standards for home networking. We or whether it is appropriate to sunset 28. Certain commenters express believe that these additional consumer the IP-enabled device protections. If the concern about the impact that basic protection measures will ease the Bureau does not release an order service tier encryption could have on transition to encrypted service for the extending these protections within three institutional subscribers and schools in vast majority of the small subset of years from the release date of this Order, particular. They suggest that the customers that rely on third-party then the consumer protection measures Commission extend the free-device provided IP-enabled devices to access concerning IP-enabled devices detailed consumer protections to institutional the basic service tier. above will no longer apply to the top- subscribers to prevent the rule change six cable operators for purposes of 25. Other Issues. Public Knowledge from placing a financial burden on encryption of the basic service tier. In and Media Access Project state in their them. Cable operators, however, suggest deciding whether the sunset is comments that there have been no that these commenters conflate appropriate, the Bureau shall consider complaints from customers in encryption with digitization, and we the costs to cable operators and the Cablevision’s encrypted systems about agree. As cable operators transition to benefits to consumers, whether ‘‘hidden fees’’ related to the free device all-digital service, these institutional competitive services are available, offers, and they anticipate that cable subscribers will need devices to convert regulatory parity between cable and operators ‘‘intend to act in good faith.’’ digital signals to analog regardless of other MVPDs, the state of technology Out of an abundance of caution, whether the service is encrypted unless and the marketplace, and cable however, they suggest we affirmatively the institutional subscribers use operators’ efforts to meet these state that cable operators may not television sets with clear-QAM tuners commitments and ensure compatibility. impose service fees (such as ‘‘digital and only use those televisions to access The Bureau shall also consider whether access fees’’ or ‘‘outlet fees’’) in lieu of the basic service tier. Furthermore, the IP-enabled device protections rental fees for the free devices. Comcast argues that cable operators should be extended to small cable Consistent with Public Knowledge and establish agreements with local operators. Media Access Project’s suggestion, we institutions on a case-by-case basis, and 24. Second, we add some clarifying clarify that boxes provided by cable that each franchising authority language to address Boxee and CEA’s operators that choose to encrypt the negotiates consumer protection concerns that cable operators could use basic service tier must be provided measures to meet its needs. We are licenses to limit retail device without any additional service charges persuaded that it is unnecessary to manufacturers from building compatible related to the equipment. adopt consumer-protection measures

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with respect to institutional subscribers, when cable operators must notify their end of the free device transitional because we expect that cable operators subscribers about encryption. Therefore, period, a cable operator that encrypts will continue to work with local we will require cable operators to notify must notify subscribers that have taken institutions—and may be required to do their subscribers that they will encrypt advantage of the transitional period that so by franchising authorities—to ensure at least 30 days before the date the period is ending as follows: that the institutions’ needs will be met. encryption of the basic service tier You currently receive equipment We emphasize that our rules are not commences, at which time they must necessary to descramble or decrypt the intended to limit or preempt existing, also include information about the basic service tier signals (either a set-top renegotiated, or future franchise transitional device requirements set box or CableCARD) free of charge. agreements that provide institutional forth in Section 76.630. The notice must Effective with the (MONTH/YEAR) subscribers more equipment on different state: billing cycle, (NAME OF CABLE terms than our rules require for On (DATE), (NAME OF CABLE OPERATOR) will begin charging you for residential subscribers. We expect that OPERATOR) will start encrypting the equipment you received to access cable operators will work closely with (INSERT NAME OF CABLE BASIC (INSERT NAME OF CABLE BASIC local franchising authorities and SERVICE TIER OFFERING) on your SERVICE TIER OFFERING) when institutions to ensure that any cable system. If you have a set-top box, (NAME OF CABLE OPERATOR) started disruption institutional subscribers digital transport adapter (DTA), or a encrypting those channels on your cable experience as a result of encryption will retail CableCARD device connected to system. The monthly charge for the be minimized. each of your TVs, you will be unaffected (TYPE OF DEVICE) will be (AMOUNT 29. ACA and BendBroadband express by this change. However, if you are OF CHARGE). concern about the effect that the currently receiving (INSERT NAME OF 33. While our rule prescribes the conditions will have on small cable CABLE BASIC SERVICE TIER language that cable operators must use operators. We agree with ACA and OFFERING) on any TV without to notify their subscribers about BendBroadband that in some instances equipment supplied by (NAME OF encryption and the device-based the benefits of encryption may be CABLE OPERATOR), you will lose the protection measures, we leave open the outweighed by the burdens of ability to view any channels on that TV. option for cable operators to supplement administrative upgrades to account for If you are affected, you should contact this notice as they see fit. We will not the new billing procedures needed to (NAME OF CABLE OPERATOR) to require the six largest incumbent cable offer free devices for a limited period of arrange for the equipment you need to operators to provide special notice to time. We note, however, that the continue receiving your services. In their subscribers about the availability decision to encrypt the basic service tier such case, you are entitled to receive of IP-enabled device compatibility, will be a voluntary decision made at the equipment at no additional charge or though they must comply with existing sole discretion of the cable operator service fee for a limited period of time. notice requirements. Third-party IP- under the rules we adopt here. Thus, The number and type of devices you are enabled device manufacturers have an each cable operator may use its business entitled to receive and for how long will economic incentive to ensure their judgment to decide whether, and when, vary depending on your situation. If you customers are aware of the functions the benefits of encryption outweigh the are a (INSERT NAME OF CABLE BASIC and features of their devices, e.g., costs of upgrading billing software and SERVICE TIER OFFERING) customer provide notice to their customers in providing equipment to its subscribers and receive the service on your TV marketing materials about the need to to ease the transition to encrypted without (NAME OF CABLE obtain IP-enabled equipment from their service. OPERATOR)-supplied equipment, you cable operator and the special 30. Notification Requirements. Based are entitled to up to two devices for two equipment the six largest incumbent on the record, we believe that years (five years if you also receive cable operators are required to offer notification requirements are also Medicaid). If you subscribe to a higher their subscribers under Commission necessary to protect consumers. level of service and receive (INSERT rules. Therefore, we will require cable NAME OF CABLE BASIC SERVICE 34. Public Knowledge and Media operators to notify their subscribers TIER OFFERING) on a secondary TV Access Project proposed that we require about the planned encryption and the without (NAME OF CABLE operators to notify subscribers when device offers at least 30 days before the OPERATOR)-supplied equipment, you their free device period is ending on date encryption of the basic tier are entitled to one device for one year. each monthly bill for the three months commences. We will also require cable You can learn more about this preceding the end of the transition operators to notify their subscribers at equipment offer and eligibility at period. We agree that preventing ‘‘bill least 30 days, but no more than 60 days, (WEBPAGE ADDRESS) or by calling shock’’ is important, and § 76.1603(d) of before the end of the free device (PHONE NUMBER). To qualify for any our rules requires cable operators to transitional period. These notifications equipment at no additional charge or provide written notice of any increase in are necessary to make the device-based service fee, you must request the price to be charged for equipment consumer protection measures equipment between (DATE THAT IS 30 necessary to access the basic service tier meaningful to consumers; the measures DAYS BEFORE ENCRYPTION) and at least 30 days before the increase is would be meaningless if affected (DATE THAT IS 120 DAYS AFTER effective. We do not believe that the consumers were not made aware of the ENCRYPTION) and satisfy all other three notices that Public Knowledge and offers. eligibility requirements. Media Access Project propose are 31. NCTA proposed that our rules 32. We believe that 30 days’ notice necessary. But we are concerned that require cable operators to notify their will provide a reasonable opportunity cable operators could notify their subscribers about encryption and free for affected consumers to avail subscribers too early in the transition device offers at least 30 days prior to the themselves of free device offers in period to render notification essentially date encryption of the basic service tier advance of basic service tier encryption meaningless. Therefore, we believe it is commences. Several commenters without unduly burdening cable important to define the window for supported NCTA’s proposal, and we operators. In addition, at least 30 days, notices more precisely so that affected agree that it is important to identify but no more than 60 days, before the subscribers are notified no more than 60

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days before the end of the transitional changes in cable systems, television existing rules, manufacturers should not free-device period. At that time, affected receivers, video cassette recorders and have indicated to consumers that subscribers can determine the course similar technology.’’ The record devices could receive digital cable that best suits their circumstances. suggests that to achieve the statutory service unless those devices were, in Some subscribers may opt to continue goals of section 624A a blanket ban on fact, CableCARD-compatible. Therefore, their current level of service and pay for encryption is no longer necessary, and we disagree with Montgomery County’s the additional equipment charges. Other that changes in cable technology justify characterization that encryption will subscribers may choose to reduce their relaxing the rule for all-digital cable lead to an abundance of compatibility level of service or terminate their systems, provided consumer protection problems due to the rule changes existing cable service and pursue a measures are addressed. As explained adopted herein. Section 624A(c)(1)(B) competitive alternative that better meets above, cable technology is markedly expressly directs the Commission to their service needs and budgets. different than it was when the consider ‘‘the costs and benefits to 35. The New York City Department of Commission first adopted the consumers of imposing compatibility Information Technology and encryption prohibition set forth in requirements on cable operators.’’ As Telecommunications (NYC DoITT) § 76.630. For example, the transition to discussed above, the costs associated argues that, because Cablevision’s all-digital systems means that with a blanket encryption prohibition in encryption of its New York City systems encryption of the basic service tier will all-digital systems greatly outweigh the is nascent, the Commission cannot be permit remote activation and anticipated benefits to consumers, sure of the long-term effects that basic deactivation of cable service resulting in particularly in light of the consumer service tier encryption may have. significant savings of time and resources protection measures we are also Therefore, NYC DoITT encourages the for both cable operators and the vast adopting. Furthermore, in 2010, the Commission to make this rule change majority of cable customers. Commission adopted changes to the temporary. We agree that we cannot Furthermore, as discussed below, the CableCARD rules, including streamlined predict how our rule change will affect CableCARD standard provides an device approval procedures, a self- the cable industry and subscribers with avenue for consumers to purchase installation option, and a prohibition on absolute certainty. The information consumer electronics devices that are price discrimination against CableCARD before us indicates, however, that this compatible with digital cable service, devices, that should increase the retail rule change will result in the substantial which achieves Congress’ stated goal in availability and the quality of public interest benefits discussed above section 624A. experience for CableCARD devices and and that any additional burdens further increase compatibility between imposed on a limited number of 37. Relaxing the encryption rule in this manner will not impede section consumer electronics and cable service subscribers will be tempered by the by ensuring that retail devices can consumer protection measures adopted 624A’s goal of compatibility between consumer electronics equipment and access all linear digital cable services. herein. The Commission will keep Given these technological and rule apprised of the consequences of the rule cable systems. The Commission has adopted a standard that allows for ‘‘plug changes, we conclude that a complete change and, if the situation develops prohibition on basic service tier differently than predicted, we can and play’’ compatibility between consumer electronics devices and cable encryption in all-digital systems is no revisit the issue on our own initiative or longer necessary to ensure compatibility in response to a petition for rulemaking. systems. This standard provides a clear path for device manufacturers to follow between consumer electronics devices In the future, we may seek information and cable service, provided certain from the operators that have chosen to if they wish to build devices that are consumer protection measures are encrypt to ensure that the expected compatible with digital cable systems satisfied. benefits are being achieved and any and can access all linear digital cable burdens to consumers are being services. Montgomery County, Maryland 38. We also conclude that the minimized. However, nothing in the argues that the CableCARD standard is requirement in section 623(b)(3)(A) of record persuades us that it is necessary not successful, and that the Commission the Act to base any price or rate to build a sunset into the rule. should endeavor to relieve compatibility standards for equipment installation 36. Legal Basis. Section 624A of the problems, rather than compound them. and leasing on actual cost does not bar Communications Act provides the According to Montgomery County, the Commission from imposing the Commission broad authority to make relaxing the encryption rule will lead to consumer protection measures set forth changes to our encryption rule and to compatibility problems because in § 76.630(a)(1)(ii)–(vi) of our new impose the consumer-protection consumers will no longer be able to use rules. The commenters who addressed measures we adopt today. Congress’s clear-QAM tuners on non-primary our legal authority agree that the objective in enacting section 624A was television sets. However, the consumer protection measures—which to ensure compatibility between cable Commission has already adopted a are adopted as a transitional measure systems and consumer TV (receiving solution for compatibility between and implicate a limited number of and recording) equipment, consistent consumer electronics equipment and affected customers—do not run afoul of with the need to prevent theft of cable digital cable: The CableCARD standard section 623 of the Communications Act, service. Section 624A(b)(2) directs the is intended to allow consumers to buy and we did not receive any comments Commission to ‘‘determine whether compatible retail devices to access all claiming that the consumer protection and, if so, under what circumstances to linear digital cable services as opposed measures, as structured, would violate permit cable systems to scramble or to the basic-only service that clear-QAM section 623. These measures are not encrypt signals or to restrict cable tuners can access without additional being imposed as a regulation of systems in the manner in which they equipment. Indeed, the Commission’s equipment rates under section 623. encrypt or scramble signals.’’ Section cable-ready labeling rules prohibit Rather, the consumer protection 624A(d) directs the Commission to device manufacturers from labeling measures are being adopted pursuant to periodically review and modify their devices as ‘‘digital cable ready’’ section 624A(b)(2)’s broad grant of regulations adopted pursuant to section unless they comply with the authority to the Commission to 624A ‘‘to reflect improvements and CableCARD standards. Thus, under our determine ‘‘under what circumstances

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to permit cable systems to scramble or prepared a Final Regulatory Flexibility This present Final Regulatory Flexibility encrypt signals or to restrict cable Analysis (‘‘FRFA’’) relating to this Analysis (FRFA) conforms to the RFA. systems in the manner in which they Report and Order. The FRFA is set forth The Commission will send a copy of the encrypt or scramble signals.’’ We have below. R&O, including this FRFA, to the Chief determined that relaxing the encryption 43. Congressional Review Act. The Counsel for Advocacy of the Small prohibition should be permitted for all- Commission will send a copy of this Business Administration. In addition, digital systems, provided the potential Third Report and Order in a report to be the R&O and FRFA (or summaries harm to affected consumers is send to Congress and the Government thereof) will be published in the Federal minimized. Our new rule permits a Accountability Office pursuant to the Register. cable operator to elect to abide by the Congressional Review Act, see 5 U.S.C. 50. Need for, and Objectives of the encryption prohibition without having 801(a)(1)(A). Proposed Rules. With this Report and any obligation to offer subscribers 44. Ordering Clauses. Accordingly, it Order, the Commission amends its rules is ordered that, pursuant to the authority equipment for a transitional period. It is to allow cable operators to encrypt the contained in sections 1, 4(i), 4(j), 303(r), only when a cable operator chooses to basic service tier in all-digital cable 601, and 624A of the Communications encrypt the basic service tier that it is systems if they comply with certain Act of 1934, as amended, 47 U.S.C. 151, required to comply with the requisite consumer-protection measures. This 154(i), 154(j), 303(r), 521, and 544a, this regulatory conditions (by providing set- rule change will benefit consumers who top boxes at no cost to affected Report and Order is adopted. 45. It is further ordered that, pursuant can have their cable service activated subscribers for a limited transitional and deactivated from a remote location. period). Thus, this requirement is to the authority contained in sections 1, 4(i), 4(j), 303(r), 601, and 624A of the By allowing remote activation and imposed as a condition of a cable deactivation, we expect our amended operator’s voluntary election to encrypt Communications Act of 1934, as amended, 47 U.S.C. 151, 154(i), 154(j), rules will result in benefits to both cable the basic service tier, and not as a rate operators and consumers by regulation imposed under section 303(r), 521, and 544a, Part 76 of the Commission’s rules is amended as set significantly reducing the number of 623(b)(3)(A). service calls associated with 39. Waiver Requests. As mentioned forth in the rules and is effective provisioning service and significantly above, the Commission has pending December 10, 2012. It is our intention reducing the need for subscribers to before it four petitions for waiver of the that all of the rule changes adopted in wait for service calls to activate or encryption ban. These petitions have this order are interdependent and deactivate cable service. At the same been pending for more than a year. inseparable and that if any provision of Petitioners seek immediate relief, the rules, or the application thereof to time, we recognize that this rule change claiming that they face extraordinary any person or circumstance, are held to will adversely affect a small number of theft of service. We find good cause to be unlawful or invalid, the remaining cable subscribers who currently view grant these waiver requests effective rule changes adopted herein shall not be the digital basic service tier without upon release of this Order to prevent effective. using a set-top box or other equipment. further delay. For the reasons set forth 46. It is further ordered that, pursuant If a cable operator decides to encrypt the above, these waivers are conditioned to § 1.3 of the Commission’s rules, 47 digital basic tier, then these subscribers upon the petitioners’ complying with CFR 1.3, the requests for waiver of will need equipment to continue the consumer protection requirements § 76.630(a) of the Commission’s rules, viewing the channels on this tier. To discussed in this Order. 47 CFR 76.630(a), filed by RCN give those consumers time to resolve the 40. Conclusion. We conclude that Corporation, Mikrotec CATV, LLC, Inter incompatibility between consumer allowing cable operators to encrypt the Mountain Cable, Inc., and Coaxial Cable electronics equipment (such as digital basic service tier in all-digital systems TV are granted, to the extent described television sets) and newly encrypted will result in substantial, tangible herein and conditioned as set forth cable service, we require operators of benefits to both consumers and cable above. cable systems that choose to encrypt the operators with minimal countervailing 47. It is further ordered that the basic service tier to comply with certain burdens on affected subscribers. We Commission’s Consumer and consumer protection measures for a believe that the consumer-protection Governmental Affairs Bureau, Reference period of time. The Commission measures that we adopt will mitigate Information Center, shall send a copy of concludes that allowing cable operators any burdens that encryption will have this Report and Order, including the to encrypt the basic service tier in all- on the limited number of consumers Final Regulatory Flexibility Analysis, to digital systems will lead to benefits like that may be affected by the instant rule the Chief Counsel for Advocacy of the decreased service calls and theft of change. Small Business Administration. service, with few associated burdens on 41. Paperwork Reduction Act 48. It is further ordered that the consumers. Therefore the Commission Analysis. The Report and Order in this Commission shall send a copy of this believes that this rule change will document does not contain proposed Report and Order in a report to be sent reduce burdens on small entities. The information collection(s) subject to the to Congress and the General Accounting Commission predicts that encryption of Paperwork Reduction Act of 1995 Office pursuant to the Congressional the basic service tier will not (PRA), Public Law 104–13. In addition, Review Act, see 5 U.S.C. 801(a)(1)(A). substantially affect compatibility therefore, it does not contain any new 49. As required by the Regulatory between cable service and consumer or modified information collection Flexibility Act of 1980, as amended electronics equipment for most burden for small business concerns with (RFA), an Initial Regulatory Flexibility subscribers because over 75 percent of fewer than 25 employees, pursuant to Analysis (IRFA) was incorporated in the subscribers already have set-top boxes the Small Business Paperwork Relief Notice of Proposed Rule Making to decrypt the signals. Because the rule Act of 2002, Public Law 107–198, see 44 (NPRM). The Commission sought is voluntary—a cable operator with an U.S.C. 3506(c)(4). written public comment on the all-digital system may choose whether 42. Final Regulatory Flexibility proposals in the NPRM, including to encrypt that system—each cable Analysis. As required by the Regulatory comment on the IRFA. No commenting operator may decide whether the Flexibility Act, the Commission has parties specifically addressed the IRFA. benefits of encryption (which include

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reduced service calls and reduced theft) amended, 47 U.S.C. 151, 154(i) and (j), Current Commission records show 6,000 outweigh the cost of providing its 303(r), 521, and 544a. cable systems. Of these, 726 have 20,000 subscribers with the equipment they 55. Description and Estimate of the subscribers or more, based on the same will need to continue viewing the Number of Small Entities to Which the records. We estimate that there are 5,000 channels on the basic service tier. Proposed Rules Will Apply. The RFA small systems based upon this standard. 51. The need for FCC regulation in directs the Commission to provide a 58. Cable System Operators (Telecom this area derives from changing description of and, where feasible, an Act Standard). The Communications technology in the cable services market. estimate of the number of small entities Act of 1934, as amended, also contains When the Commission adopted that will be affected by the proposed a size standard for small cable system technical rules in the 1990s, digital rules. The RFA generally defines the operators, which is ‘‘a cable operator cable service was in its infancy, and term ‘‘small entity’’ as having the same that, directly or through an affiliate, therefore the rules were adopted with meaning as the terms ‘‘small business,’’ serves in the aggregate fewer than 1 analog cable service in mind. Today, ‘‘small organization,’’ and ‘‘small percent of all subscribers in the United digital cable service is common, and the governmental entity’’ under Section 3 of States and is not affiliated with any encryption rule does not translate well the Small Business Act. In addition, the entity or entities whose gross annual in systems that offer all-digital service. term ‘‘small business’’ has the same revenues in the aggregate exceed Therefore, the Commission will allow meaning as the term ‘‘small business $250,000,000.’’ There are approximately all-digital cable operators to encrypt the concern’’ under the Small Business Act. 63.7 million cable subscribers in the basic service tier. A small business concern is one which: United States today. Accordingly, an 52. We recognize that some (1) Is independently owned and operator serving fewer than 637,000 consumers subscribe only to a cable operated; (2) is not dominant in its field subscribers shall be deemed a small operator’s digital basic service tier and of operation; and (3) satisfies any operator, if its annual revenues, when currently are able to do so without using additional criteria established by the combined with the total annual a set-top box or other equipment. Small Business Administration revenues of all its affiliates, do not Similarly, there are consumers that may (‘‘SBA’’). exceed $250 million in the aggregate. 56. Cable and Other Program have a set-top box on a primary Based on available data, we find that the Distribution. Since 2007, these services television but access the unencrypted number of cable operators serving have been defined within the broad digital basic service tier on second or 637,000 subscribers or less is also 804. economic census category of Wired We note that the Commission neither third televisions in their home without Telecommunications Carriers; that requests nor collects information on using a set-top box or other equipment. category is defined as follows: ‘‘This whether cable system operators are Although we expect the number of industry comprises establishments affiliated with entities whose gross subscribers in these situations to be primarily engaged in operating and/or annual revenues exceed $250 million. extremely small, these consumers may providing access to transmission Although it seems certain that some of be affected by lifting the encryption facilities and infrastructure that they these cable system operators are prohibition for all-digital cable systems. own and/or lease for the transmission of affiliated with entities whose gross To address this problem, we conclude voice, data, text, sound, and video using annual revenues exceed $250,000,000, that operators of all-digital cable wired telecommunications networks. we are unable at this time to estimate systems that choose to encrypt the basic Transmission facilities may be based on with greater precision the number of service tier must comply with certain a single technology or a combination of cable system operators that would consumer protection measures for a technologies.’’ The SBA has developed qualify as small cable operators under limited period of time in order to a small business size standard for this the definition in the Communications minimize any potential subscriber category, which is: All such firms Act. disruption, including a requirement that having 1,500 or fewer employees. 59. Direct Broadcast Satellite (‘‘DBS’’) the six largest cable operators offer IP- According to Census Bureau data for Service. DBS service is a nationally enabled set-top boxes to subscribers as 2007, there were a total of 955 firms in distributed subscription service that part of these protections. this previous category that operated for delivers video and audio programming 53. The Commission believes that the the entire year. Of this total, 939 firms via satellite to a small parabolic ‘‘dish’’ rule will save small entities money. The had employment of 999 or fewer antenna at the subscriber’s location. consumer protection element of the employees, and 16 firms had DBS, by exception, is now included in rule—the requirement that cable employment of 1000 employees or the SBA’s broad economic census operators offer existing basic tier more. Thus, under this size standard, category, ‘‘Wired Telecommunications customers set-top boxes without charge the majority of firms can be considered Carriers,’’ which was developed for for certain lengths of time—does small and may be affected by rules small wireline firms. Under this associate a cost with the rule. But the adopted pursuant to the NPRM. category, the SBA deems a wireline Commission believes that the financial 57. Cable Companies and Systems business to be small if it has 1,500 or benefit to small cable operators in (Rate Regulation Standard). The fewer employees. However, the data we reduced truck rolls and theft of services Commission has also developed its own have available as a basis for estimating will far outweigh that cost. Furthermore, small business size standards for the the number of such small entities were because the decision of whether to purpose of cable rate regulation. Under gathered under a superseded SBA small encrypt the basic tier is voluntary, small the Commission’s rules, a ‘‘small cable business size standard formerly titled businesses will be able to make a company’’ is one serving 400,000 or ‘‘Cable and Other Program business decision about whether to fewer subscribers nationwide. As of Distribution.’’ The definition of Cable encrypt. 2008, out of 814 cable operators, all but and Other Program Distribution 54. Legal Basis. The authority for the 10 (that is, 804) qualify as small cable provided that a small entity is one with action proposed in this rulemaking is companies under this standard. In $12.5 million or less in annual receipts. contained in sections 1, 4(i) and (j), addition, under the Commission’s rules, Currently, only two entities provide 303(r), 601, and 624A of the a ‘‘small system’’ is a cable system DBS service, which requires a great Communications Act of 1934, as serving 15,000 or fewer subscribers. investment of capital for operation:

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DIRECTV and EchoStar number of units served by the largest 10 manufacturing; that size standard is Communications Corporation PCOs, we believe that a substantial 1,000 or fewer employees. According to (‘‘EchoStar’’) (marketed as the DISH number of PCOs may have been 2007 Census Bureau data, there were Network). Each currently offer categorized as small entities under the 647 establishments in this category that subscription services. DIRECTV and now superseded SBA small business operated in 2007. Of these, only 62 had EchoStar each report annual revenues size standard for Cable and Other more than 100 employees. that are in excess of the threshold for a Program Distribution. Consequently, we estimate that the small business. Because DBS service 61. Open Video Services. The open majority of these establishments are requires significant capital, we believe it video system (‘‘OVS’’) framework was small entities. is unlikely that a small entity as defined established in 1996, and is one of four 64. Audio and Video Equipment by the SBA would have the financial statutorily recognized options for the Manufacturing. The SBA has classified wherewithal to become a DBS service provision of video programming the manufacturing of audio and video provider. We seek comments that have services by local exchange carriers. The equipment under in NAICS Codes data on the annual revenues and OVS framework provides opportunities classification scheme as an industry in number of employees of DBS service for the distribution of video which a manufacturer is small if it has providers. programming other than through cable less than 750 employees. Data contained 60. Satellite Master Antenna systems. Because OVS operators provide in the 2007 U.S. Census indicate that Television (SMATV) Systems, also subscription services, OVS falls within 491 establishments operated in that the SBA small business size standard industry for all or part of that year. In known as Private Cable Operators covering cable services, which is that year, 376 establishments had (PCOs). SMATV systems or PCOs are ‘‘Wired Telecommunications Carriers.’’ between 1 and 19 employees; 80 had video distribution facilities that use The SBA has developed a small between 20 and 99 employees; and 35 closed transmission paths without using business size standard for this category, had more than 100 employees. Thus, any public right-of-way. They acquire which is: All such firms having 1,500 or under the applicable size standard, a video programming and distribute it via fewer employees. According to Census majority of manufacturers of audio and terrestrial wiring in urban and suburban Bureau data for 2007, there were a total video equipment may be considered multiple dwelling units such as of 3,188 firms in this previous category small. apartments and condominiums, and that operated for the entire year. Of this 65. Description of Reporting, commercial multiple tenant units such total, 3,144 firms had employment of Recordkeeping and Other Compliance as hotels and office buildings. SMATV 999 or fewer employees, and 44 firms Requirements. The rules adopted in the systems or PCOs are now included in had employment of 1000 employees or Order will require cable operators to the SBA’s broad economic census more. Thus, under this size standard, notify their subscribers about offers of category, ‘‘Wired Telecommunications most cable systems are small and may free equipment associated with Carriers,’’ which was developed for be affected by rules adopted pursuant to encryption. The rule also requires a small wireline firms. Under this the NPRM. In addition, we note that the cable operator to notify its subscribers category, the SBA deems a wireline Commission has certified some OVS when those subscribers are subject to business to be small if it has 1,500 or operators, with some now providing charges at the end of the free equipment fewer employees. However, the data we service. Broadband service providers period. have available as a basis for estimating (‘‘BSPs’’) are currently the only 66. Steps Taken To Minimize the number of such small entities were significant holders of OVS certifications Significant Impact on Small Entities, gathered under a superseded SBA small or local OVS franchises. The and Significant Alternatives Considered. business size standard formerly titled Commission does not have financial or The RFA requires an agency to describe ‘‘Cable and Other Program employment information regarding the any significant alternatives that it has Distribution.’’ The definition of Cable entities authorized to provide OVS, considered in reaching its proposed and Other Program Distribution some of which may not yet be approach, which may include the provided that a small entity is one with operational. Thus, again, at least some following four alternatives (among $12.5 million or less in annual receipts. of the OVS operators may qualify as others): (1) The establishment of As of June 2004, there were small entities. differing compliance or reporting approximately 135 members in the 62. Computer Terminal requirements or timetables that take into Independent Multi-Family Manufacturing. ‘‘Computer terminals account the resources available to small Communications Council (IMCC), the are input/output devices that connect entities; (2) the clarification, trade association that represents PCOs. with a central computer for processing.’’ consolidation, or simplification of The IMCC indicates that, as of June The SBA has developed a small compliance or reporting requirements 2006, PCOs serve about 1 to 2 percent business size standard for this category under the rule for small entities; (3) the of the multichannel video programming of manufacturing; that size standard is use of performance, rather than design, distributors (MVPD) marketplace. 1,000 or fewer employees. According to standards; and (4) an exemption from Individual PCOs often serve 2007 Census Bureau data, there were 42 coverage of the rule, or any part thereof, approximately 3,000–4,000 subscribers, establishments in this category that for small entities. but the larger operations serve as many operated during 2007. Only 3 had more 67. As an alternative to the rules the as 15,000–55,000 subscribers. In total, as than 100 employees. Consequently, we Commission adopted, the Commission of June 2006, PCOs serve approximately estimate that all of these establishments considered leaving the current rule in 900,000 subscribers. Because these are small entities. place—with the result that no cable operators are not rate regulated, they are 63. Other Computer Peripheral operator would realize the benefits of not required to file financial data with Equipment Manufacturing. Examples of encryption—or exempting small cable the Commission. Furthermore, we are peripheral equipment in this category companies from the consumer not aware of any privately published include keyboards, mouse devices, protection rules that require encrypting financial information regarding these monitors, and scanners. The SBA has cable operators to provide certain operators. Based on the estimated developed a small business size subscribers with free set-top boxes for a number of operators and the estimated standard for this category of limited time. The Commission rejected

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leaving the rule in place because that only to the basic service tier without use equipment at no additional charge or alternative would not lead to the of a set-top box or CableCARD at the service fee for a limited period of time. benefits of reduced service calls and time of encryption the equipment The number and type of devices you are reduced cable theft. The Commission necessary to descramble or decrypt the entitled to receive and for how long will rejected exempting small cable basic service tier signals (the vary depending on your situation. If you companies from the consumer subscriber’s choice of a set-top box or are a (INSERT NAME OF CABLE BASIC protection rules because it concluded CableCARD) on up to two television sets SERVICE TIER OFFERING) customer that the protections are necessary to give without charge or service fee for two and receive the service on your TV affected consumers time to consider years from the date encryption of the without (NAME OF CABLE how to make consumer electronics basic service tier commences; and OPERATOR)-supplied equipment, you equipment (such as digital television (iii) The cable system operator offers are entitled to up to two devices for two sets) compatible with newly encrypted to its existing subscribers who subscribe years (five years if you also receive cable service. For these reasons, the to a level of service above ‘‘basic only’’ Medicaid). If you subscribe to a higher Commission concluded that basic but use a digital television or other level of service and receive (INSERT service tier encryption prohibition device with a clear-QAM tuner to NAME OF CABLE BASIC SERVICE should be relaxed. The Commission also receive only the basic service tier TIER OFFERING) on a secondary TV concluded that transitional consumer without use of a set-top box or without (NAME OF CABLE protection measures are necessary to CableCARD at the time of encryption, OPERATOR)-supplied equipment, you serve the limited number of consumers the equipment necessary to descramble are entitled to one device for one year. who currently access unencrypted cable or decrypt the basic service tier signals You can learn more about this service without the use of a set-top box. (the subscriber’s choice of a set-top box equipment offer and eligibility at 68. Federal Rules Which Duplicate, or CableCARD) on one television set (WEBPAGE ADDRESS) or by calling Overlap, or Conflict With the without charge or service fee for one (PHONE NUMBER). To qualify for any Commission’s Proposals. None. year from the date encryption of the equipment at no additional charge or basic service tier commences; and List of Subjects in 47 CFR Part 76 service fee, you must request the (iv) The cable system operator offers equipment between (DATE THAT IS 30 Administrative practice and to its existing subscribers who receive DAYS BEFORE ENCRYPTION) and Medicaid and also subscribe only to the procedure, Cable television, Equal (DATE THAT IS 120 DAYS AFTER basic service tier without use of a set- employment opportunity, Political ENCRYPTION) and satisfy all other top box or CableCARD at the time of candidates, Reporting and eligibility requirements. encryption the equipment necessary to recordkeeping requirements. (vi) The cable system operator notifies descramble or decrypt the basic service Federal Communications Commission. tier signals (the subscriber’s choice of a its subscribers who have received Marlene H. Dortch, set-top box or CableCARD) on up to two equipment described in paragraphs Secretary. television sets without charge or service (a)(1)(ii) through (iv) of this section at least 30 days, but no more than 60 days, Rule Changes fee for five years from the date encryption of the basic service tier before the end of the free device For the reasons discussed in the commences; transitional period that the transitional preamble, the Federal Communications (v) The cable system operator notifies period will end. This notification must Commission amends 47 CFR part 76 as its existing subscribers of the state: follows: availability of the offers described in You currently receive equipment paragraphs (ii) through (iv) of this necessary to descramble or decrypt the PART 76—MULTICHANNEL VIDEO section at least 30 days prior to the date basic service tier signals (either a set-top AND CABLE TELEVISION SERVICE encryption of the basic service tier box or CableCARD) free of charge. Effective with the (MONTH/YEAR) ■ 1. The authority citation for part 76 commences and makes the offers billing cycle, (NAME OF CABLE continues to read as follows: available for at least 30 days prior to and 120 days after the date encryption of the OPERATOR) will begin charging you for Authority: 47 U.S.C. 151, 152, 153, 154, basic service tier commences. The the equipment you received to access 301, 302, 302a, 303, 303a, 307, 308, 309, 312, notification to subscribers must state: (INSERT NAME OF CABLE BASIC 315, 317, 325, 339, 340, 341, 503, 521, 522, SERVICE TIER OFFERING) when 531, 532, 534, 535, 536, 537, 543, 544, 544a, On (DATE), (NAME OF CABLE 545, 548, 549, 552, 554, 556, 558, 560, 561, OPERATOR) will start encrypting (NAME OF CABLE OPERATOR) started 571, 572, 573. (INSERT NAME OF CABLE BASIC encrypting those channels on your cable SERVICE TIER OFFERING) on your system. The monthly charge for the ■ 2. Amend § 76.630 by revising cable system. If you have a set-top box, (TYPE OF DEVICE) will be (AMOUNT paragraph (a) and revising section notes digital transport adapter (DTA), or a OF CHARGE). 1 and 2 and removing notes 3 and 4. retail CableCARD device connected to (2) Requests for waivers of this The revisions read as follows: each of your TVs, you will be unaffected prohibition must demonstrate either a § 76.630 Compatibility with consumer by this change. However, if you are substantial problem with theft of basic electronics equipment. currently receiving (INSERT NAME OF tier service or a strong need to scramble (a) Cable system operators shall not CABLE BASIC SERVICE TIER basic signals for other reasons. As part scramble or otherwise encrypt signals OFFERING) on any TV without of this showing, cable operators are delivered to a subscriber on the basic equipment supplied by (NAME OF required to notify subscribers by mail of service tier. CABLE OPERATOR), you will lose the waiver requests. The notice to (1) This prohibition shall not apply in ability to view any channels on that TV. subscribers must be mailed no later than systems in which: If you are affected, you should contact 30 calendar days from the date the (i) No encrypted signals are carried (NAME OF CABLE OPERATOR) to request for waiver was filed with the using the NTSC system; and arrange for the equipment you need to Commission, and cable operators must (ii) The cable system operator offers to continue receiving your services. In inform the Commission in writing, as its existing subscribers who subscribe such case, you are entitled to receive soon as possible, of that notification

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date. The notification to subscribers and address of the local franchising • Agency Web site: You can view must state: authority. supporting documents on our Web site * * * * * at http://www.fws.gov/ventura/. On (date of waiver request was filed • with the Commission), (cable operator’s [FR Doc. 2012–27350 Filed 11–8–12; 8:45 am] Our office: Call 805–644–1766 to name) filed with the Federal BILLING CODE 6712–01–P make an appointment, during normal Communications Commission a request business hours, to view the documents, for waiver of the rule prohibiting comments, and materials in person at scrambling of channels on the basic tier the U.S. Fish and Wildlife Service, DEPARTMENT OF THE INTERIOR of service. 47 CFR 76.630(a). The Ventura Fish and Wildlife Office, 2493 Portola Road, Suite B, Ventura, CA request for waiver states (a brief Fish and Wildlife Service summary of the waiver request). A copy 93003–7726. Alternatively, a limited number of of the request for waiver shall be 50 CFR Part 17 available for public inspection at (the CD–ROMs and hard copies of the final address of the cable operator’s local SEIS are available from the U.S. Fish [FWS–R8–FHC–2011–0046]; [FF08E00000– and Wildlife Service, Ventura Fish and place of business). FXES11130800000D2–123] Wildlife Office, 2493 Portola Road, Individuals who wish to comment on Suite B, Ventura, CA 93003–7726. this request for waiver should mail RIN 1018–AX51 FOR FURTHER INFORMATION CONTACT: comments to the Federal Lilian Carswell, at the above Ventura Communications Commission by no Endangered and Threatened Wildlife street address, by telephone (805–612– later than 30 days from (the date the and Plants; Termination of the 2793), or by electronic mail notification was mailed to subscribers). Southern Sea Otter Translocation ([email protected]). Persons who Those comments should be addressed to Program; Final Supplemental use a telecommunications device for the the: Federal Communications Environmental Impact Statement on deaf may call the Federal Information Commission, Media Bureau, the Translocation of Southern Sea Relay Services at 800–877–8339. Washington, DC 20554, and should Otters SUPPLEMENTARY INFORMATION: We include the name of the cable operator AGENCY: Fish and Wildlife Service, announce the availability of our final to whom the comments are applicable. Interior. Individuals should also send a copy of Supplemental Environmental Impact ACTION: Notice of availability. their comments to (the cable operator at Statement on the Translocation of Southern Sea Otters (final SEIS). The its local place of business). SUMMARY: We, the U.S. Fish and final SEIS evaluates options for Wildlife Service (Service), announce the Cable operators may file comments in continuing, revising, or terminating the availability of our final Supplemental reply no later than 7 days from the date southern sea otter translocation program Environmental Impact Statement on the subscriber comments must be filed. (52 FR 29754, Aug. 11, 1987). The Translocation of Southern Sea Otters * * * * * document describes the proposed action (final SEIS). The final SEIS evaluates and alternatives under consideration Note 1 to § 76.630: 47 CFR 76.1621 options for continuing, revising, or and discloses the direct, indirect, and contains certain requirements pertaining to a terminating the southern sea otter cumulative environmental effects of cable operator’s offer to supply subscribers translocation program, which was each of the alternatives. with special equipment that will enable the initiated in 1987. The purpose of the simultaneous reception of multiple signals. program was to achieve a primary Background recovery action for the southern sea Note 2 to § 76.630: 47 CFR 76.1622 The final SEIS reevaluates the effects contains certain requirements pertaining to otter: to create an established of the southern sea otter translocation the provision of a consumer education population at San Nicolas Island plan, as described in the U.S. Fish and program on compatibility matters to sufficient to repopulate other areas of Wildlife Service’s 1987 environmental subscribers. the range should a catastrophic event impact statement on our program for affect the mainland population. The translocation of southern sea otters (May ■ 3. Section 76.1603 is amended by document describes the proposed action 8, 1987, 52 FR 17486). Using revising paragraph (d) to read as and alternatives under consideration information obtained over the decades follows: and discloses the direct, indirect, and since the program’s implementation, we cumulative environmental effects of evaluate the impacts of alternatives to § 76.1603 Customer service—rate and each of the alternatives. service changes. the current translocation program, DATES: We will execute a Record of including termination or revisions to the * * * * * Decision no sooner than 30 days after program. The need for action stems from (d) A cable operator shall provide the date the Environmental Protection our inability to meet the goals of the written notice to a subscriber of any Agency publishes its notice of southern sea otter translocation increase in the price to be charged for availability of the final SEIS in the program. Contrary to the primary the basic service tier or associated Federal Register. recovery objective of the program, the equipment at least 30 days before any ADDRESSES: The final SEIS and other translocation of sea otters to San Nicolas proposed increase is effective. If the documents are available in electronic Island has not resulted in an established equipment is provided to the consumer format at the following places: population sufficient to repopulate without charge pursuant to § 76.630, the • Federal eRulemaking Portal: Go to other areas of the range should a cable operator shall provide written http://www.regulations.gov. In the catastrophic event affect the mainland notice to the subscriber no more than 60 search field, enter FWS–R8–FHC–2011– population. Additionally, maintenance days before the increase is effective. The 0046, which is the docket number. Then of a management zone has proven to be notice should include the price to be click on the Search button. On the more difficult than anticipated and charged, and the date that the new resulting screen, you may view hinders or may prevent recovery of the charge will be effective, and the name documents associated with the docket. southern sea otter.

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