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An overly complex fee program could be   zdifficult for licensees to calculate and for the Commission to enforce and could create uncertainty that might undermine a DTV licensee's efficient planning of what services it will provide.  S-   S-kB. Basis of Fee   S:- EY{k9. Background. In the Notice of Proposed Rule Making we set forth several fee options which we   determined to be consistent with the guidelines of the 1996 Act. The options included a fee akin to the   amount that would have been received in an auction of the spectrum, a fee based upon the net revenues   or incremental profits from the ancillary or supplementary use of a licensee's DTV capacity, a fee assessed   as a percentage of the gross revenues received for the ancillary or supplementary use of this capacity, and a fee based upon a hybrid of a flat rate and a percentage of revenues.  S - EY/k 10. In describing the various fee options in the Notice of Proposed Rule Making, we described what   we determined to be the advantages and disadvantages of each. Briefly, we stated that while net revenues"!~,l(l(,,%"   >or incremental profits could serve as effective proxies for the value of DTV capacity used for feeable  S-  ancillary or supplementary services, the process of ascertaining the costs involved in calculation of net   revenues or incremental profits would involve the burdensome apportionment of expenses between free   television services and feeable ancillary or supplementary services and among ancillary or supplementary   services. Another fee approach suggested was a combination of a flat dollar amount and a percentage of   gross revenues, which would include a uniform means of preventing unjust enrichment but would also   jcreate an upfront cost, which could serve as a disincentive to broadcasters' provision of feeable ancillary or supplementary services. k  S5- EYk 11. In the Notice of Proposed Rule Making, we expressed our inclination to favor a fee program that  S-  incorporates gross revenues. Such a fee, we stated, would "foster our goal of creating a fee structure   !which does not dissuade broadcasters from offering feeable ancillary and supplementary services  S -[and]....would be straightforwardto assess and calculate."[ p {O -ԍ Notice of Proposed Rule Making at  24.[ k  S7 - EYk 12. Comments. Virtually all of the commenters supported a fee based upon gross revenues. The   commenters agreed with our assessment that a fee based upon gross revenues could be the simplest to  S -  calculate and enforce.$ Zp yO-  ԍ Comments of National Association of Broadcasters and Association for Maximum Service Television  {O-  ("NAB"). See also ABC, Inc. ("ABC"), Association of Local Television Stations, Inc., ("ALTV"), National Cable   ,Television Association ("NCTA"), United Church of Christ, Benton Foundation, Center for Media Education, Civil  {O&-Rights Forum, and Media Access Project ("UCC, et al.). Commenters also agreed that a fee based upon gross revenues would satisfy the   statutory criteria of preventing unjust enrichment, recovering for the public a portion of the value of the  Sl-  spectrum, and approximating, without exceeding, the amount which would have been received at auction.lFp {OR-ԍ Comments of UCC, et al. at p. 7, ALTV at p. 3, Information Technology Industry Council ("ITIC") at p.6.   While acknowledging that a fee based upon gross revenues would be the simplest to assess, the only   commenter to propose a fee basis other than gross revenues, ABC argued that a net revenue approach   Lwould more effectively promote entry into provision of new services and proposed that broadcasters be  S-  given the option of basing the fee on net revenues, as calculated by their own methodology.Bp yO-ԍ Comments of ABC at p. 6.B In their  Sm-  reply comments, UCC, et al. argued that a fee based upon net revenues as calculated by broadcasters' own  S;-  methodologies would be susceptible to manipulation.W;h p {OC-ԍ Reply Comments of UCC, et al. at p. 6. W NCTA also opposed a net revenue approach,   pointing out that no other service has the "luxury" of free use of the spectrum until the service becomes  S-profitable.D p yOo!-ԍ Comments of NCTA, at p. 3.D  So- EYMk 13. Decision. We will adopt a fee based upon a percentage of the gross revenues generated by feeable   ancillary or supplementary services. We believe this approach is consistent with the 1996 Act, supported   by sound economic principles, and grounded in simplicity. We also believe it will afford broadcasters   jflexibility in developing new and innovative DTV services. A gross revenues approach is consistent with   the 1996 Act because it enables the Commission to assess a fee that recovers for the public a portion of   the value of the spectrum and prevents the unjust enrichment of broadcasters through the use of the DTV"q ,l(l(,,["   kbitstream for feeable ancillary or supplementary services. While the amount recovered will be more a   result of the percentage rate of the fee than of the nature of revenues on which the fee is based,   commenters overwhelmingly support a fee based upon gross revenues as a means of achieving these  Sg-important statutory goals.Zgp {O-ԍ See Comments of UCC, et al. at p. 7.Z pp  S- EYkk 14. We believe that a fee based upon gross revenues is consistent with the statutory directive that we   assess a fee that "to the extent feasible, equals but does not exceed (over the term of the license) the  S-  amount that would have been recovered had such services been licensed" at auction.FZp yO -ԍ 47 U.S.C.  336(e)(2)(B).F As we stated in  Sh-  the Notice of Proposed Rule Making, and as we saw echoed in many comments,ghp {O -ԍ See Comments of NAB at p. 8, UCC, et al. at p. 8.g it would be difficult  S6-  if not impossible to determine the amount that would have been received at auction.6|p {OR-ԍ Notice of Proposed Rule MakingĠat  15. In the Notice, we stated that:  P,k,spectrum auctions that have been held to date, such as those conducted for licenses to provide  personal communications services, took place in circumstances so different from those in which  a fee is to be assessed for the ancillary or supplementary use of DTV capacity that they are not  $necessarily applicable. Depending upon a variety of technological and regulatory factors,  Oincluding what services are authorized, auctioned spectrum may be usable either for more or fewer  |kinds of services than those authorized on the DTV spectrum. Moreover, the process of assessing  |a fee for feeable ancillary or supplementary use of DTV capacity involves setting a fee for the use  of the assigned spectrum for any number of services at different times. The relative market  1demand among services may change monthtomonth, daytoday, or hourbyhour. In addition,  1different types of services may require different amounts of capacity. For example, at any given  instant HDTV may require the entire 20 Mbps payload capacity while standard definition  television programming requires far less capacity. Moreover, a licensee providing free, advertiser }supported programming on its DTV channel, whether in the form of HDTV or multiple SDTV  streams, is exempt from the statute's fee requirement. Thus, it is difficult to identify market  transactions that involve the transfer of spectrum usage rights equivalent to the capacity which DTV licensees may use to provide feeable ancillary or supplementary services. Ƨ To the extent   possible, however, we believe that a fee based upon gross revenues can function as a proxy for auction value. k  Sj - EYk15. ECON1  The microeconomic theory supporting this determination is laid out in the Notice of Proposed  S8 -  Rule Making.a8 Vp {O.!-ԍ  Notice of Proposed Rule Making at  1720.a Briefly, economic theory indicates that gross revenues received from the ancillary or   supplementary use of DTV capacity are related to the implicit value of that DTV capacity. The postulated   relationship between gross revenues received from ancillary or supplementary services and the value of  S -  jthe bitstream used to provide those services was supported by a number of commenters, who found this  Sm-economic rationale to be "theoretically sound."~mp {O%-ԍ Comments of ALTV at p. 3.  See also Comments of ABC at p. 2 and NCTA at p. 5. ~  S- EYk16. In determining the basis of the fee, we sought not only to comply with the criteria set forth in"z,l(l(,,"   the Act, but also to foster the important goal that the fee program be simple to comply with and to   enforce. As discussed above, a fee program based upon net revenues or incremental profits would have   entailed burdensome accounting by the licensees and enforcement and auditing by the Commission. Using   gross revenues as the basis of the fee will minimize the accounting and auditing required, permitting  S4-  licensees to calculate the fee based upon readily available information. z4p {O-  iԍ See Report & Order, In the Matter of Assessment and Collection of Regulatory Fees for Fiscal Year 1995,   -FCC 95-227, MD Docket No. 95-3, 10 FCC Rcd 13512 at  134 (1995). ( "[W]e have decided to adopt a gross   revenues methodology for assessing [fees].... Properly administered, a gross revenues methodology will ease   administrative burdens of carriers in calculating fee payments, provide reliable and verifiable information upon which   ;to calculate the fee and equitably distribute the fee requirement in a competitively neutral manner. A revenue based   methodology avoids the calculation problems inherent in [other methodologies] and permits the assessment of fees without any need to rely upon assumptions and projections."). It will also make the   MCommission's administration of the fee program much more efficient, and impose considerably fewer   paperwork and compliance burdens on licensees. Several commenters supported the Commission's   conclusion that a fee based upon gross revenues would be the most easily calculable and enforceable of  Sh-the options proposed.!h p {O-  ԍ Comments of NAB at p. 12, and UCC, et al. at p. 7. As we seek to minimize the complexity of the fee   program, we decline to adopt ABC's proposal that we permit licensees to choose whether to use a net revenues or   igross revenues approach. Such an approach would make fee collection more burdensome for the Commission, as   ,would permitting the licensee to devise its own methodology to determine net revenues, as it might require casebycase Commission review of such methodologies as part of the fee collection process.  S- EYk17. Finally, a gross revenues approach will serve the public interest goal of giving broadcasters  S-  [flexibility to develop new uses of the DTV bitstream. In the Notice of Proposed Rule Making,we stated   [our intention to establish a fee program which allows broadcasters the flexibility to provide new services   and made clear that it is not our intention to dissuade broadcasters from using the DTV capacity to  S7 -  provide feeable ancillary or supplementary services. Commenters generally supported this goal"7 p {O-ԍ See generally Comments of NAB.  But seeĠReply Comments of UCC, et al., at p. 14, NCTA at p. 4. and,   given the costs of implementing and enforcing a program based on net revenues, agreed that a fee based   jupon a percentage of gross revenues would be the least likely to discourage the development of new uses  S -  ?of broadcast spectrum.q# N p {O-ԍ See, e.g. Comments of Business Software Alliance ("BSA") at p. 3.q Accordingly, we reject the net revenues approach. A fee based upon a   percentage of gross revenues received would not involve upfront costs, such as those that would be   incurred if we adopted a hybrid fee based on a flat fee coupled with a percentage of gross revenues, that   zcould dissuade broadcasters from initiating new services. In addition, the uniform application of a fee   based upon gross revenues to all feeable ancillary or supplementary services (as opposed to a varying fee   mbased on the type of service provided) will minimize the potential of the fee program to affect   =broadcasters' choice of one service over another. Finally, the percentage rate of the fee, not the revenues   on which the fee is based, will ultimately affect broadcasters' decisions as to whether or not to offer feeable ancillary or supplementary services at all. k  S- kC. Percentage of Revenues  S:- EYk18.  Background. As we stated in the Notice of Proposed Rule Making, the percentage rate of the   fee must reflect the statutory requirements that the fee recover a portion of the value of the spectrum used"#,l(l(,,"   for these services, avoid unjust enrichment, and approximate the revenue that would have been received  S-  had these services been licensed through an auction. The Notice of Proposed Rule Making also indicated   our disinclination to set the percentage rate so high that it would dissuade broadcasters from providing feeable ancillary or supplementary services. k  S- EY@k19. Comments. Commenters advocated percentages for the fee that ranged from less than one  S-  [percentR$p yO8-ԍ Comments of ABC at p. 15, ALTV at p. 17.R to more than ten percent.%Xp {O-ԍ Comments of UCC, et al. at p. 8. See also Reply Comments of NCTA at p. 7. Those commenters who proposed a low fee two percent or less  S-  [of gross revenues based their proposal on the declining auction values of the nonbroadcast spectrum,&p {O' -ԍ Comments of NAB at p.15, ABC at p. 12, ALTV at p. 9. See also paragraph VALUES28 infra.  Sj-  and on the possibility that a higher fee would discourage broadcasters from offering innovative services.`'j|p yO -ԍ Comments of NAB at p. 13, ABC at p. 12, ALTV at p. 12.`   kCommenters proposing a high fee ten percent or more argued that such a fee would be consistent with other government licensing fees,d( p {O-ԍ Comments of UCC, et al. at p. 9, NCTA at p. 9.d and would be necessary to prevent unjust enrichment, as required  S-by the 1996 Act.4)p {O-ԍ Id. 4  Sk - EY0k20. Decision. We will set the fee for feeable ancillary or supplementary services provided on the   DTV bitstream at five percent of gross revenues received from these services. We believe that a fee of   kfive percent of gross revenues fulfills our statutory obligations to impose a fee which recovers for the   -public some portion of the value of the spectrum, prevents the unjust enrichment of broadcasters providing   feeable ancillary or supplementary services, and approximates, to the extent possible, the revenues that   would have been received had the spectrum on which these services are provided been licensed through   an auction. We also believe that a five percent fee will not dissuade broadcasters from using their DTV capacity to provide new and innovative services that can greatly benefit consumers.  S- EYk21. As we stated in the Notice of Proposed Rule Making, we must carefully balance potentially   competing requirements and goals in establishing a percentage rate of the fee. On the one hand, a fee   [set too high might dissuade broadcasters from providing feeable ancillary or supplementary services, and  S -  jcould therefore reduce the benefits that consumers receive from efficient deployment of DTV capacity.`* 0 p {O-ԍ Notice of Proposed Rule Making at  27.`   On the other hand, a fee set too low might not prevent the unjust enrichment of DTV licensees as required   by the 1996 Act and might not recover an amount approximating the amount that would have been  Sp-  recovered at auction, although it could recover for the public a "portion of the value" of the spectrum.4+p p {O#-ԍ Id. 4 k  S - EY\k22. We believe that a fee of five percent of gross revenues best serves our goals and the requirements   of the statute. The 1996 Act gives the Commission broad discretion in setting the amount of the fee for" T +,l(l(,,"  S-  .ancillary or supplementary services, relying upon the predictive judgment of the agency in that regard.,Zp {Oh-  ԍ See generally, FCC v. National Citizens Comm. for Broadcasting (NCCB), 436 U.S. 775, 81314 (1978)   (where factual determinations are "primarily of a judgmental or predictive nature," . . . . complete factual support  yO-in the record for the Commission's judgment or prediction is not possible or required."). į   In addition, no commenter has pointed to any obvious or commonly accepted formula for setting a fee   in these circumstances. Therefore, the Commission must use its best judgment in balancing the relevant goals.  S- EY]k23. The five percent fee satisfies the statutory mandate that the fee be high enough to prevent the   {unjust enrichment of the licensees and to recover compensation for the DTV capacity used by the  S-  =licensees. This statutory mandate was reiterated by several commenters.4-p {O% -ԍ Id. 4 We take seriously the intent   /of the 1996 Act that broadcasters providing feeable ancillary or supplementary services on the DTV   bitstream be required to pay more than a nominal fee. We believe that a five percent fee is appropriate.  S- k  S- EY{k24. A fee set at five percent of gross revenues also satisfies the statutory requirement that the fee   recover "an amount that, to the extent feasible, equals but does not exceed" the amount that would have  Si -  been recovered at auction.E.i |p yO-ԍ 47 U.S.C.  336(e)(2)(B).E Looking at this mandate through the prism of economic theory, the reference   =to auctions invokes a system designed to foster the efficient allocation of resources and suggests that we   yshould set a fee that fosters efficient resource allocation. The efficient allocation of the resource of DTV   Nbitstream will allow the marketplace to provide those feeable ancillary or supplementary services  S -  demanded by consumers.R/ p {OI-ԍ Fifth Report and Order at  28.R A fee based on gross revenues will allow such efficient allocation so that it meets the statutory requirement. k  S- EY!k25. Our goal of not discouraging broadcasters from providing feeable ancillary or supplementary   services is also consistent with the statutory mandate that the fee established recover a portion of the value   of the spectrum. As at least one commenter pointed out, a high fee will not necessarily generate   significant revenue, as licensees are less likely to develop ancillary or supplementary uses of their DTV  S8-capacity if such fees are imposed.g08p yOv-ԍ Comments of ALTV at p. 12, BSA at p. 3, ITIC at p. 6. g k  S- EYk26. In setting the fee at five percent of gross revenues, we are taking account of the costs broadcasters   will incur in the development of digital ancillary or supplementary services. While we note the comments   of NCTA stating that a fee set too low would unfairly subsidize broadcasters, we are conscious of the  S9-  financial burdens faced by digital television broadcasters in the coming years.S19. p {O#-ԍ See Reply Comments of ABC at p. 6. S As will be discussed at  S-  [greater length in paragraphs REEXAMINE51שREEXAMINE252 below, we anticipate that the fee assessment program established here   will be reviewed and possibly adjusted within the five year period prescribed by the 1996 Act, and that   such review will take into account the actual costs of the development of digital ancillary or supplementary services. ": 1,l(l(,,<"Ԍ S- ?k27. Commenters advocating a higher fee have argued that fees for the ancillary or supplementary use   of the DTV bitstream are analogous to mineral and oil royalty rates, which range from 12 to over 17   percent. However, we do not see federal mineral and oil rights as directly analogous to the DTV   bitstream for the purposes of the fee established here. As reflected in the economic rationales outlined  S4-  in the Notice of Proposed Rule Making,a24p {O-ԍ Notice of Proposed Rule Making at  1720.a the policy and economic considerations in setting DTV ancillary   and supplementary fees are quite distinct from the considerations that would be relevant for leasing  S-  Lresources such as minerals or oil. The economic analysis detailed in the NoticeĠspecifically addresses the   efficient allocation of DTV spectrum between free, overtheair television service and feeable ancillary   !services, not the general issue of royalty rates. That economic analysis also addresses the unjust   enrichment which may result from the provision of comparable services by competitors, such as   multichannel video service providers and other competing service providers, which have incurred sunk costs that do not accrue to DTV licensees. k  Sk - EY!k28. VALUES  We also reject the analogy to recent auction rates for nonbroadcast spectrum made by some   commenters. These commenters have argued that we should set the fee at a rate lower than five percent   based upon analyses they have submitted that purport to demonstrate that the value of nonbroadcast  S -  spectrum available at auction has been declining in recent months.^3 Zp yO-ԍ Comments of NAB at p.15, ABC at p. 12, ALTV at p. 9.^ These commenters argue that these   studies demonstrate that the fees for the ancillary or supplementary use of the broadcast spectrum should   be set very low, as the fees should recover approximately the amount which would have been received   at an auction of the spectrum. We disagree with this argument. The auction values realized by the   .Commission in conducting a particular spectrum auction reflect factors that are specific to the particular   spectrum being auctioned. These factors include the anticipated demand for the telecommunications   Mservices provided using the particular spectrum and the technological uncertainty associated with the   application. In contrast to the nonbroadcast spectrum, we believe that the value of broadcast spectrum   jhas been increasing, rather than decreasing. An indication of that trend is that the sale values of broadcast   television and radio properties have increased sharply over the past several years, reflecting the increasing  S-value of their spectrum licenses.4p {O^-  ԍ Broadcasting and Cable, April 6, 1998 at pp 80, 82. (television station values increased about 30% between 1996 and 1997; radio station values increased about 10% during the same period) k  Sn- EYk29. In arguing for very low fees, some commenters have drawn an analogy to copyright royalty rates,  S;-  \which are very low, rather than royalties for mining and oil, which are higher. OO OOAs we stated above, in   the discussion of the comparability of royalty rates for natural resource properties, we believe that the   policy concerns and economic considerations of our analysis here are quite distinct from the considerations of privatelycontracting parties negotiating copyright royalty rates. k  S<- EYk30. Based upon the foregoing, we determine that a fee set at five percent of gross revenues received   from the ancillary or supplementary use of the DTV bitstream will best satisfy the requirements of the 1996 Act and will not discourage the provision of these new services by DTV licensees. k  Sp- D. Services on Which Fee is to be Assessed  k  S - EYk31. In establishing a fee assessment program, we must determine which services are subject to the   fee. The fee program established today applies only to ancillary or supplementary services. While it" D4,l(l(,,6$"   >specifically refers to ancillary or supplementary services, Section 336 does not define these services.   ZConsistent with the 1996 Act and Commission precedent, our rules specify that ancillary or supplementary   services "include, but are not limited to computer software distribution, data transmissions, teletext,  Sg-  Linteractive materials, aural messages, paging services, audio signals, [or] subscription video."C5gp yO-ԍ 47 C.F.R.  73.624(c).C Our rules   also specify that "any video broadcast signal provided at no direct charge to viewers shall not be  S-considered ancillary or supplementary."6Xp {O-  ԍ Id. The definition of what is an 'ancillary or supplementary" service is a matter that also has potential  {O-  consequences for the Commission's cable television mandatory television broadcast signal carriage rules. Notice  {O -  of Proposed Rule Making in CS Docket No. 98120, FCC 98153,  72 (released July 10, 1998). Although the   issues are related, the present proceeding only involves the "feeable" services subcategory. The decisions made herein are not intended to be directly transferable to the mandatory carriage context.   S- EY/k32. Pursuant to the 1996 Act, not all ancillary or supplementary services are feeable. We determine   that all revenue from subscription services will be subject to a fee. In addition, as required by the statute,   ancillary or supplementary services for which the licensee directly or indirectly receives compensation from a third party in exchange for the transmission of material provided by the third party, other than commercial advertisements used to support broadcasting, will be subject to a fee.  Si - EYMk 33. Commenters provided very little guidance as to what services DTV licensees will provide. With  S6 -  this Report & Order, we resolve several questions raised by commenters regarding particular types of   services, and set out general principles that may be used to determine whether other nonsubscription ancillary or supplementary services are subject to fees.  S -k pp  Sk-kViewerpaid subscription services  S- |k!34. As discussed above, the 1996 Act requires the Commission to establish a fee program for any   ancillary or supplementary services "for which the payment of a subscription fee is required in order to  S-  =receive such services."F7p yON-ԍ 47 U.S.C.  336(e)(1)(A).F The legislative history of the 1996 Act indicates that the statute requires that a   fee be assessed on "any ancillary or supplementary service if subscription fees or any other compensation  S:-fees apart from commercial advertisements are required in order to receive such services."8:p {Ox-  ԍ H.R. Conf. Rep. No. 458, 104th Cong., 2d Sess. 160 (1996). See also Notice of Proposed Rule Making at  8   S- EY[k"35. Commenters did not dispute that services supported entirely by subscription fees should be subject   =to fees, but argued over whether services which received both subscription fees and advertising revenues  should be subject to fees on both revenue streams. In its comments, NAB argued that if advertising is  S;-  lsold on subscription services, the fee should be assessed only on subscription revenues.B9; p yO#-ԍ Comments of NAB at p.7. B This is   [consistent with what NAB calls "the appropriate test" for whether a service should be subject to a fee  S-  whether subscription or other nonadvertising payment is necessary to receive the service.A: p yO&-ԍ Comments of NAB at ii. A Others" :,l(l(,,"   .asserted that fees should be assessed on all revenues for services for which a subscription fee is required  S-to receive the service.\;p {O5-ԍ See Generally Comments of UCC, et al. \  Sg- EYk#36. FREETV  Consistent with the 1996 Act, we will assess fees on all revenue both subscription and   advertising revenue from all ancillary or supplementary services for which viewers must pay   subscription fees to receive. Though some commenters argued that advertising revenues from subscription  S-  services should not be subject to the fee,G<Zp yO-ԍ Comments of NAB at p.7.G we disagree. First, Section 336(e)(1)(A) makes clear that those  S-  services for which "the payment of a subscription fee is required in order to receive such services"F=p yO% -ԍ 47 U.S.C.  336(e)(1)(A).F are   feeable. The exclusion in Section 336(e)(1)(B) for "commercial advertisements used to support  S5-  broadcasting for which a subscription fee is not required"F>5zp yOO-ԍ 47 U.S.C.  336(e)(1)(B).F does not support NAB's position. Advertising   revenues from services that cannot be received without payment of subscription fees do not fit within this   exemption. We therefore decline to allow DTV licensees to exclude from gross revenues subject to a fee   advertising revenues received from services for which a subscription fee is also required.   yWe believe that such an approach would not be consistent with the statute and would unduly complicate the fee program.  S - EYkNonSubscription Ancillary or Supplementary Services for which Licensee Receives Compensation  S -kfrom a ThirdParty   S7- ?k$37.The 1996 Act directs that fees be assessed on ancillary or supplementary services "for which the   ylicensee directly or indirectly receives compensation from a third party in return for transmitting material   furnished by such third party (other than for commercial advertisements used to support broadcasting for  S-  which a subscription fee is not required.)"4? p {OH-ԍ Id.Ġ4 Our rules state that overtheair video programming provided   at no charge to viewers is not an ancillary or supplementary service. This provision therefore applies to   kancillary or supplementary services, consisting of material which does not originate with the licensee,   .which the viewer can receive without payment of a fee. These ancillary or supplementary services may   include data, audio, or any other ancillary or supplementary services that may be established in the future.  Sl- EYk%38. We received very little comment on the types of nonsubscription ancillary or supplementary   services parties contemplate providing, or on the appropriate fee structure for such services. Accordingly,   zin determining whether a nonsubscription ancillary or supplementary service is feeable, until we gain more experience, we will simply be guided by the statutory criteria as questions arise. k  Sm-kHome shopping and other direct marketing programming k  S- EYk&39. In their comments, UCC, et al. argued that the statute requires fees to be imposed when   broadcasters receive payments from sales on home shopping channels, infomercial and direct marketing" ?,l(l(,,"  S-programming.R@p {Oh-ԍ Comments of UCC, et al. at p. 13. R k  S- EYk'40. We will not impose fees on revenues received from home shopping, infomercial or direct   marketing programming. The purpose of this proceeding is not to exact fees from existing broadcasters   "for existing services but, rather, to design a program for the assessment of fees on ancillary or   supplementary services which will be provided on the DTV bitstream. We agree with the commenters   who argued that home shopping and infomercials are commercial advertisements, excluded by statute from   the scope of ancillary and supplementary services as they are video services received by viewers with out  Sh-  a fee.IAhZp yOb -ԍ Reply Comments of ALTV at p. 8.I We therefore find that home shopping channels and infomercials are free, overtheair television services, supported by commercial advertisements, and not subject to a fee.  S-kRetransmission Consent Agreements  Si - EYk(41. Commenters raised the issue of whether inkind consideration, in the form of retransmission   Zconsent agreements, constitutes compensation from a third party for the purposes of the 1996 Act. In their  S -  Lcomments, UCC, et al. argued that "compensation" should include the inkind compensation received by  S -  broadcasters in retransmission consent agreements with cable system operators.RB p {O[-ԍ Comments of UCC, et al. at p. 14. R Several reply   [commenters asserted that retransmission consent agreements are not compensation by cable operators in  Sk-return for carriage of ancillary or supplementary services.dCk|p yO-ԍ Reply Comments of NAB at p. 5, ALTV at p. 9, ABC at p. 8. d   S- EYAk)42. We do not believe that a retransmission consent agreement constitutes the payment of   jcompensation by a third party to a licensee in exchange for the transmission of material provided by that   third party. A retransmission consent agreement involves inkind consideration given to a licensee by a   mcable system operator for carriage of the licensee's programming on the cable system. It is not   0compensation given to the licensee for carriage of programming provided by a third party on that  S-licensee's frequency.FD p yO-ԍ 47 U.S.C.  336(e)(1)(B).F  S-kpp  S-kNoncommercial Licensees  S:- EYk*43. In the Notice of Proposed Rule MakingĠ we sought comment on the question of whether   noncommercial television licensees should be exempt from fees or subject to lower fees. This argument  S-  |was raised initially in the Petition for Reconsideration of the Fifth Report & Order filed by the  S-  Association of America's Public Television Stations and the Public Broadcasting Service.Ep yO#-  ԍ Petition for Reconsideration and Clarification of Association of America's Public Television Stations and Public Broadcasting Service in MM Docket No. 87268 filed June 13, 1997, p. 28, n. 29. Petitioners   further sought a determination as to whether they might offer feeable ancillary or supplementary services   yon their DTV capacity as a source of funding for their public television operations. Because we have not   yet determined whether or to what extent noncommercial licensees may provide revenuegenerating"  E,l(l(,,"   jancillary or supplementary services, it is premature to determine whether such services would be subject   =to a fee and whether that fee should be lower than that paid by commercial broadcasters. We have today   zinitiated a proceeding in which we will build a record on noncommercial licensees' remunerative use of  Sg-  the DTV bitstream and whether and in what circumstances such uses would be subject to fees.$Fgp {O- xKԍ Notice of Proposed Rule Making, In the Matter of Ancillary and Supplementary Use of Digital Television  yO-Capacity by Noncommercial Licensees, MM Docket No. 98203, FCC No. 98304 (Adopted November 19, 1998). $ We will address the comments received on this issue in that proceeding. k  S-k E. Commencement of Fee Assessment k  Sh- |k+44. Some commenters asked that we delay imposing a fee on ancillary or supplementary services   and proposed several different plans for such delay. NAB argued that a twoyear delay in the imposition   .of the fee would ameliorate any detrimental effect on innovation that might result from a fee based upon  S-  gross revenues.CG"p yO -ԍ Comments of NAB at p. 13.C Cox argued that the Commission should postpone the establishment of a fee program  S -  for five years until additional market information on which the fee might be based is available.H p {O-  wԍ See generally  Comments of Cox Broadcasting, Inc., Paxson Communications Corporation and Media General  {O-("Cox, et al."). In   response, UCC, et al. and NCTA argued that a delay in the imposition of a fee is contrary to  S6 -  Congressional intent to recover a portion of the value of the spectrum and to avoid unjust enrichment.hI6 p {O-ԍ Reply Comments of UCC, et al. at p. 16 and NCTA at p. 2.h  S - ,k(#  S - EYk,45. We will not delay the imposition of fees for ancillary or supplementary services. Even assuming,  S -  arguendo, that we have authority to impose such a delay, a delay in the imposition of a fee would not   yserve the public interest. In addition, a delay in the imposition of a fee would result in unjust enrichment   jduring the time the broadcasters were providing feeable ancillary or supplementary services but were not   paying a fee. A delayed fee would not effectively recover the value of the spectrum. The fee program   established today is designed to minimize any detrimental effect the fee might have on the development   of new and innovative services. A delay in the imposition of a fee would therefore be superfluous.   MIndeed, with a revenue based approach, as opposed to a flat fee, licensees will not have to commence paying a fee until they begin to collect revenues.  S-k  S-kF.Other Issues  S-k   Sm-kCap on the Amount of the Fee   S- EYk-46. Fox argued in its Comments that the Commission should cap the aggregate payments made by  S-  any broadcaster for feeable services.dJp {O#-ԍ See Generally Comments of Fox Television Stations. d Fox maintained that the statute and the legislative history   /demonstrate Congressional intent to establish an upper bound on the amount broadcasters should be   required to pay, limiting the fee to the amount they would have been required to pay in the auction   -process. The statutory provision referenced by Fox is the provision which states that the fee shall recover";2 J,l(l(,,-"  S-an amount that "equals but does not exceed" the amount that would have been recovered at auction.FKp yOh-ԍ 47 U.S.C.  336(e)(2)(B).F k  S- EYk.47. The statutory provision cited by Fox does not require us to establish a cap on the fee amount.   [As discussed in paragraph 15 above, gross revenues from feeable ancillary or supplementary services are   .related to the implicit value of the DTV spectrum used to provide such services. As gross revenues are   a reasonable proxy for the auction value, putting a cap on the fee amount would not make sense. In order   {to fulfill its mandate to capture a portion of the value of the spectrum used for feeable ancillary or   supplementary services, the Commission should collect a percentage fee on the ongoing revenues realized   0by the broadcaster over the useful life of the application. Services that have a longer useful life or   generate higher periodic revenues then have a correspondingly greater economic value, which will then   =be reflected in the higher total fees collected by the Commission. If the Commission were to establish an   upper limit on the total fees that it collected, then the theoretical linkage established in our analysis would no longer hold, and the Commission would fail to satisfy its mandate from Congress.  S6 - k/48. We also decline to adopt Fox's proposal as it would unduly complicate the implementation and   enforcement of the fee assessment program. As we stated in the Notice of Proposed Rule Making, we   aim to establish a program that is simple to comply with and to enforce. Establishing a cap on the   amount of the fee might involve a calculation that takes into account the size of a station, the market it   serves, the amount of feeable ancillary or supplementary services provided, and numerous other factors   which would certainly complicate the establishment and enforcement of the fee assessment program. It   .would be difficult, if not impossible, to determine on a license by license basis what the auction value of   that spectrum should be and thus where a cap should be placed. Thus, ease of administration of the fee program would be compromised by a cap on the total amount of fee payments. k  S8-kVariable Fee Rate Depending Upon the Type of Service  S- Ok049.We sought comment as to whether the percentage rate of the fee should vary with the type of  S-  service provided.ZLXp {O-ԍ Notice of Proposed Rule Making at  28.Z In their comments, NAB argued that the Commission should not take into account   .preferences for one type of service over another in setting the fee. They argued that varying the level of   the fee depending upon the service could discourage new services and would exceed the Commission's authority.  S- ^k150.The percentage rate of the fee will be fixed at five percent, for all services subject to a fee. We   lagree that a varying fee rate could have the effect of dissuading licensees from providing particular   ]services. To the extent that the fee is set lower for one service than for another, it would create an   incentive for a licensee to provide the service with a lower fee rate over a service subject to a higher fee.   LAs we wish to establish a fee program that does not affect broadcasters' decisions to provide one service   over another, other than the mandated free, overtheair television service, we will not establish a fee   =which varies based upon the type of services provided. In addition, a varying fee rate would be difficult   to adhere to and to enforce, in contravention of our goal of a fee program that is simple to comply with and administer.  S -k  S!-kReview of Fee Assessment Program  k  S<#- {k251.REEXAMINEThe 1996 Act requires us to adjust the fee "from time to time in order to continue to comply with"<#L,l(l(,,&"   the requirements of" the statute and to "report to the Congress on the implementation of the program"  S-within five years of the enactment of the 1996 Act.EMp yO5-ԍ 47 U.S.C. 336(e)(1)(B).E  Sg- k352.REEXAMINE2The program established here concerns services which are not yet available to consumers. Once   digital television licensees have implemented ancillary or supplementary services, the Commission and   >the licensees will have a better concept of what these services might include and of the profitmaking   .capacity of these services. We therefore intend to review the fee assessment program established herein   by the time of our mandated report to Congress. Also, we may adjust our fee program as necessary to continue to comply with the requirements of the statute.  S5- k  S-IV. COLLECTION OF FEES ׃  Si -  k453.The 1996 Act requires that the Commission "establish a program to assess and collect ... an annual   fee or other schedule or method of payment that promotes the objectives described" above and that the   fee "be adjusted by the Commission from time to time in order to continue to comply with [these]  S -  [requirements."GN Xp yO-ԍ 47 U.S.C.  336(e)(2)(C). G The statute requires that "all proceeds obtained pursuant to the regulations required by  S -  this subsection ... be deposited in the Treasury."GO p yO%-ԍ 47 U.S.C.  336(e)(3)(A). G In addition, the 1996 Act requires that "within 5 years   after the date of enactment of the [1996 Act]... the Commission shall report to the Congress on the   implementation of the program required by this subsection, and shall annually thereafter advise the  S-  ]Congress on the amounts collected pursuant to such program."DPxp yO-ԍ 47 U.S.C.  336(e)(4). D Commenters did not address the collection of fees pursuant to this program.  Sk- EYzk554. In order that the Commission fulfill its statutory obligation to report to Congress on the program   established here, and in order that the Commission have the information necessary to adjust the fee  S-  program as appropriate consistent with the use of the spectrum, as discussed in paragraphs REEXAMINE51שREEXAMINE252 above,   we will require all commercial DTV licensees to report to the Commission on their use of the DTV bitstream. Each DTV licensee will be required to file a new FCC form annually on December 1.  S9- EYk655. Pursuant to a Public Notice to be issued as soon as possible, the Mass Media Bureau will issue   a new reporting form, to be filed by each DTV licensee on December 1 of each year. Beginning on   MDecember 1, 1999 all licensees will annually file the new reporting form electronically with the Mass   Media Bureau. For the report filed December 1, 1999 only, licensees are to report on services provided  Sm-from the effective date of this Report & OrderĠthrough September 30, 1999.  S- EYk756. In filing licensees will report whether they provided ancillary or supplementary services in the   {twelvemonth period ending on the preceding September 30. Licensees will further report, for the   applicable period: 1) a brief description of the services provided; 2) which services were feeable ancillary   or supplementary services; 3) whether any ancillary or supplementary services provided were not subject   jto a fee; 4) gross revenues received from all feeable ancillary and supplementary services provided during   the applicable period; and 5) the amount of bitstream used to provide ancillary or supplementary services" P,l(l(,,d#"   during the applicable period. The licensee's signature on the form will certify under penalty of perjury   the accuracy of the information reported. Failure to file the form regardless of revenues from ancillary or supplementary services or provision of such services may result in appropriate sanctions.  S4- EYlk857. If a licensee has provided feeable ancillary or supplementary services at any point during any   twelvemonth period ending on September 30, the licensee must additionally annually file the FCC's   standard remittance form (Form 159) on the subsequent December 1. Licensees will certify the amount   of gross revenues received from feeable ancillary or supplementary services for the applicable twelve  month period and will remit the payment of the required fee. For revenues reported December 1, 1999   only, licensees are to certify revenues received from feeable ancillary or supplementary services provided  S-  zfrom the effective date of this Report & OrderĠthrough September 30, 1999 and remit payment of the required fee for that period.  Sj - EYNk958. The instructions for Form 159 will be amended by Public Notice to require DTV licensees to   specify the amount of gross revenues received from feeable ancillary or supplementary services and the  S -  fees due. Pursuant to this Report & Order, Section 1 of the Commission's rules is amended to specify that   licensees file Form 159 annually. The instructions for Form 159 will be amended to require commercial   {DTV licensees providing feeable ancillary or supplementary services to annually file Form 159 on   December 1 and to specify on line 19A the call sign by which they are registered with the Commission;   on line 20A the payment type code; on line 23A the amount of gross revenues received from feeable   yancillary or supplementary services; on line 22A the fee which they remit with Form 159, in the amount   of five percent of the amount specified on line 23A; and on line 24A the facility identification number   assigned to them by the Commission. The licensee's signature on line 27 certifies under penalty of perjury the accuracy of the information reported on Form 159.  S- EY]k:59. The Mass Media Bureau will issue a Public Notice amending the Advice Reference Guide for   FCC Form 159, and the Mass Media Services Fee Filing Guide. The Commission delegates authority to   Lthe Office of the Managing Director to specify by Public Notice procedures for filing and processing the  Sn-  Lfees required by this Report & Order. The Commission reserves the right to audit each licensee's records   which support the calculation of the amount specified on line 23A of Form 159. Each licensee, therefore,   is required to retain such records for three years from the date of remittance of fees pursuant to this  S-Report & Order.  Sq- EYk;60. While we do not here include automatic confidentiality for information submitted pursuant to this  S>-  zReport & Order, submission of the required reporting form, and/or remittance of fee payment may be accompanied by a request for confidentiality pursuant to 47 C.F.R.  0.459.  k k  Ss- 5V. CONCLUSION ׃  S - EYzk<61. By this Report & Orderand the accompanying rule, we establish a program to assess a fee of five   Lpercent of gross revenues received from the provision of feeable ancillary and supplementary services as defined herein.  Ru"-   S$-   7VI. ADMINISTRATIVE MATTERS ׃  S%- EYk=62. Paperwork Reduction Act of 1995 Analysis. The action contained herein has been analyzed with   krespect to the Paperwork Reduction Act of 1995 and found to impose new or modified reporting and   recordkeeping requirements or burdens on the public. Implementation of these new or modified reporting"D'P,l(l(,,+"   .and recordkeeping requirements will be subject to approval by the Office of Management and Budget as prescribed by the Act.  Sg- EY.k>63. ACCORDINGLY, IT IS ORDERED that, pursuant to the authority contained in Sections 4(i), 303,   z336 and 403 of the Communications Act of 1934, as amended, 47 U.S.C.154(i), 303, 336 and 403, Part 73 of the Commission's Rules IS AMENDED as set forth in Appendix C, below  S- EY k?64. IT IS FURTHER ORDERED that, pursuant to the Contract with America Advancement Act of   1996, the rule amendments set forth in Appendix C SHALL BE EFFECTIVE the later of either thirty days   .after publication in the Federal Register, or upon receipt by Congress of a report in compliance with the   LContract with America Advancement Act of 1996, Pub. L. No. 104121, or as soon thereafter as may be approved by the Office of Management and Budget.  Si - EYk@65. A Final Regulatory Flexibility Analysis (FRFA), seeĠ5 U.S.C.  604, is contained in Appendix   .A. IT IS FURTHER ORDERED that the Commission's Office of Public Affairs, Reference Operations  S -  Division, SHALL SEND a copy of this Report & Order, including the FRFA, to the Chief Counsel for Advocacy of the Small Business Administration. p7  Sl-kA66. IT IS FURTHER ORDERED that this proceeding IS TERMINATED. k77qFEDERAL COMMUNICATIONS COMMISSION k77qMagalie Roman Salas k77qSecretary ":P,l(l(,,"  S-D APPENDIX A ă  S- 5Final Regulatory Flexibility Analysis ׃  S4-  jAs required by the Regulatory Flexibility Act (RFA),[QZ4  {O-ԍ See 5 U.S.C.  603. The RFA, see 5 U.S.C.  601 et. seq., has been amended by the Contract With America Advancement Act of 1996, Pub. L. No. 104121, 110 Stat. 847 (1996) (CWAAA). Title II of the CWAAA is the Small Business Regulatory Enforcement Fairness Act of 1996 (SBREFA).[ an Initial Regulatory Flexibility Analysis (IRFA)  S-  was incorporated in the Notice of Proposed Rule MakingYR} {O -ԍ Notice of Proposed Rule Making, at p. 16.Yis Report & Order. The Commission sought  S-  .written public comment on the proposals in the Notice of Proposed Rule Making, including comment on  S-the IRFA. This present Final Regulatory Flexibility Analysis (FRFA) conforms to the RFA.HS|  {O -ԍ See 5 U.S.C.  604. H  Sj-  S7-   A. Need for, and Objectives of, the Report and Order: The 1996 Act directed the Commission to   adopt regulations allowing licensees to use a portion of the DTV spectrum to provide feeable ancillary   or supplementary services and to establish a program to assess and collect a fee for these services. In the  S -  OFifth Report & Order we established rules permitting broadcasters to offer feeable ancillary or   supplementary services on the DTV spectrum. As directed by Congress, in this proceeding we adopt a   program for assessing and collecting a fee for the feeable ancillary or supplementary use of the DTV spectrum.  S - B. Summary of Significant Issues Raised by Public Comments In Response to the  Sm-  IRFA : No comments were received specifically in response to the IRFA attached to the Notice of  Q;-Proposed Rule Making.   S-   S- C. Description and Estimate of the Number of Small Entities To Which Rules Will Apply k1. Definition of a "Small Business"  EYkUnder the RFA, small entities may include small organizations, small businesses, and small   governmental jurisdictions. 5 U.S.C.  601(6). The RFA, 5 U.S.C.  601(3), generally defines the term   l"small business" as having the same meaning as the term "small business concern" under the Small   Business Act, 15 U.S.C.  632. A small business concern is one which: (1) is independently owned and   .operated; (2) is not dominant in its field of operation; and (3) satisfies any additional criteria established   by the Small Business Administration ("SBA"). Pursuant to 4 U.S.C.  601(3), the statutory definition   [of a small business applies "unless an agency after consultation with the Office of Advocacy of the SBA   zand after opportunity for public comment, establishes one or more definitions of such term which are   appropriate to the activities of the agency and publishes such definition(s) in the Federal Register." As   discussed below, the SBA defines a television broadcast station that has no more than $10.5 million in  S -annual receipts as a small business.gT   yO$-ԍ 13 C.F.R.  121.201, Standard Industrial Code (SIC) 483. g k"rT,l(l(,,!"Ԍk2. Issues in Applying the Definition of a "Small Business"  EY{k Our estimates, below, reflect our best judgments based on the data available to us. An element of   the definition of "small business" is that the entity not be dominant in its field of operation. We are   unable at this time to define or quantify the criteria that would establish whether a specific radio or   television station is dominant in its field of operation. Accordingly, the following estimates of small   businesses to which the new rules will apply do not exclude any radio or television station from the   definition of a small business on this basis and are therefore overinclusive to that extent. An additional   element of the definition of "small business" is that the entity must be independently owned and operated.  EYkWith respect to applying the revenue cap, the SBA has defined "annual receipts" specifically in 13   C.F.R  121.104, and its calculations include an averaging process. We do not currently require   .submission of financial data from licensees that we could use in applying the SBA's definition of a small   jbusiness. Thus, for purposes of estimating the number of small entities to which the rules apply, we are   Llimited to considering the revenue data that are publicly available, and the revenue data on which we rely may not correspond completely with the SBA definition of annual receipts.  EYkUnder SBA criteria for determining annual receipts, if a concern has acquired an affiliate or been   acquired as an affiliate during the applicable averaging period for determining annual receipts, the annual   receipts in determining size status include the receipts of both firms. 13 C.F.R.  121.104(d)(1). The   ?SBA defines affiliation in 13 C.F.R.  121.103. In this context, the SBA's definition of affiliate is   analogous to our attribution rules. Generally, under the SBA's definition, concerns are affiliates of each   other when one concern controls or has the power to control the other, or a third party or parties controls   ?or has the power to control both. 13 C.F.R.  121.103(a)(1). The SBA considers factors such as   ownership, management, previous relationships with or ties to another concern, and contractual   .relationships, in determining whether affiliation exists. 13 C.F.R.  121.103(a)(2). Instead of making an   independent determination of whether television stations were affiliated based on SBA's definitions, we relied on the databases available to us to provide us with that information. k3. Estimates Based on Census Data  S- EYkThe rules adopted in this Report and Order will apply to commercial DTV licensees. The Small   Business Administration defines a television broadcasting station that has no more than $10.5 million in  Sn-  annual receipts as a small business.[Un  {O-#X\  P6G;/P#э Id. [ Television broadcasting stations consist of establishments primarily   yengaged in broadcasting visual programs by television to the public, except cable and other pay television  S-  services.VXZ  yO -ԍ Economics and Statistics Administration, Bureau of Census, U.S. Department of Commerce, 1992 Census of Transportation, Communications and Utilities, Establishment and Firm Size, Series UC92S1, Appendix A9 (1995). Included in this industry are commercial, religious, educational, and other television stations.Wz  {O"#-#X\  P6G;/P#э Id. See Executive Office of the President, Office of Management and Budget, Standard Industrial Classification Manual (1987), at 283, which describes "Television Broadcasting Stations (SIC Code 4833) as: ,kEstablishments primarily engaged in broadcasting visual programs by television to the public, except cable and other pay television services. Included in this industry are commercial, religious, educational and other television stations. Also included here are establishments primarily engaged in television" 'V,l(l(K'" broadcasting and which produce taped television program materials.! "XW,l(l(,,"   Also included are establishments primarily engaged in television broadcasting and which produce taped  S-  television program materials.)XXX  yO-#X\  P6G;/P#э Economics and Statistics Administration, Bureau of Census, U.S. Department of Commerce, 1992 Census of Transportation, Communications and Utilities, Establishment and Firm Size, Series UC92S1, Appendix A9 (1995).) Separate establishments primarily engaged in producing taped television  S-program materials are classified under another SIC number.Yx  {O-ԍ Id.; SIC 7812 (Motion Picture and Video Tape Production); SIC 7922 (Theatrical Producers and Miscellaneous Theatrical Services (producers of live radio and television programs).  S4- EYlkThere were 1,509 television stations operating in the nation in 1992. Z4  yO -#X\  P6G;/P#э FCC News Release No. 31327, Jan. 13, 1993; Economics and Statistics Administration, Bureau of  {On -Census, U.S. Department of Commerce, supra note 53, Appendix A9.  That number has remained   fairly constant as indicated by the approximately 1,583 operating television broadcasting stations in the  S-  nation as of September 1998.[,  yO-#X\  P6G;/P#э FCC News Release, Broadcast Station Totals as of September 30, 1998 (released October 19, 1998). For 1992, the (approximately 77%) number of television stations that   produced less than $10.0 million in revenue, and we estimate that was approximately 1,155  Sh-  establishments.\Xh  yO-#X\  P6G;/P#э The amount of $10 million was used to estimate the number of small business establishments because the relevant Census categories stopped at $9,999,999 and began at $10,000,000. No category for $10.5 million existed. Thus, the number is as accurate as it is possible to calculate with the available information. Thus, the rules adopted here may affect approximately 1,583 television stations;  S5-  approximately 77%, or 1,219 of those stations are considered small businesses.]5  yO-#X\  P6G;/P#э We use the 77 percent figure of TV stations operating at less than $10 million for 1992 and apply it to the 1998 total of 1583 TV stations to arrive at stations categorized as small businesses. These estimates may   yoverstate the number of small entities because the revenue figures on which they are based do not include or aggregate revenues from nontelevision affiliated companies.  S -k  Si -D.kDescription of Projected Reporting, Recordkeeping, and Other Compliance  S6 -  \Requirements : The Report & Order adopts modifications to existing reporting and recordkeeping  S -  requirements. The fee program established here will require licensees annually to file a new reporting form   to be issued later. Licensees will be required to report whether they provided ancillary or supplementary   services, the ancillary or supplementary services provided, the services provided which are subject to a   >fee, gross revenues received from all feeable ancillary and supplementary services, and the amount of   Lbitstream used to provide ancillary or supplementary services. Licensees providing services subject to a   fee will additionally be required annually to file FCC Form 159 in remittance of the fee. So that the  Commission may audit licensees' records supporting the calculation of the fees due, each licensee will be  S-required to retain such records for three years from the date of remittance of fees.   S9- E.kSteps Taken to Minimize Significant Economic Impact on Small Entities,  S-  and Significant Alternatives Considered: This Report and Order establishes a program for assessing and   =collecting fees for the ancillary or supplementary use of the digital television spectrum. In the Notice of   =Proposed Rule Making, a variety of alternatives were proposed and we additionally sought comment on"4],l(l(,,"   ywhether any of the proposed approaches would have a significant economic impact on any class of small   .licensee or permittee. We considered all alternatives presented in the comments. The rules adopted here   are required to implement provisions of the 1996 Act. These proposed rules and policies may affect   broadcast television licensees, some of which are small businesses. The Commission believes that the rules   adopted here are necessary to the recovery of a portion of the value of the public spectrum and to promote the development of innovative uses of the DTV capacity.  S-  S-F.kFederal Rules that May Duplicate, Overlap, or Conflict With the Proposed  Sh-  Rules: Adoption of this Report and OrderĠwill necessitate the revision of section 47 C.F.R.  73.624 to  S6-add a new section 73.624(g).  S-   Report to Congress : The Commission will send a copy of the  Report & Order, including this FRFA,   in a report to be sent to Congress pursuant to the Small Business Regulatory Enforcement Fairness Act  Sk of 1996, see 5 U.S.C.  801(a)(1)(A). In addition, the Commission will send a copy of the  Report &  S9 -  Order, including FRFA, to the Chief Counsel for Advocacy of the Small Business Administration. A  S -  copy of the  Report & Order and FRFA (or summaries thereof) will also be published in the Federal Register. See 5 U.S.C.  604(b) " ],l(l(,,"  S-D APPENDIX B l  S- LIST OF COMMENTERS  lU  ABC, Inc. Association of America's Public Television Stations, et al. Association of Local Television Stations, Inc. Cox Broadcasting, Inc., Paxson Communications Corporation and Media General Fox Television Stations, Inc. Information Technology Industry Council National Association of Broadcasters and Association for Maximum Service Television National Cable Television Association National Datacast, Inc. Thomas C. Smith United Church of Christ, Benton Foundation, Center for Media Education, Civil Rights Forum, and Media Access Project  S-f LIST OF REPLY COMMENTERS  S-lU ABC, Inc. Association of America's Public Television Stations and The Public Broadcasting Service Association of Local Television Stations, Inc. Business Software Alliance National Association of Broadcasters, et al. National Cable Television Association United Church of Christ, Benton Foundation, Center for Media Education, Civil Rights Forum and Media Access Project Curators of the University of Missouri Valuevision International, Inc. and Home Shopping Network, Inc."],l(l(,,?" k  S- CAPPENDIX C ׃  S- l  Sg-ARule Changes ĐlU Part 73 of Title 47 of the U.S. Code of Federal Regulations is amended to read as follows: 1. Section 73.624 is revised by adding a new section 73.624(g) as follows:  S- 73.624 Digital Television Broadcast Stations77q * * * * * (g) (1) Commercial DTV licensees must annually remit a fee of five percent of the gross revenues derived from all ancillary or supplementary services, as defined by paragraph (b) hereof, which are  S -feeable, as defined in paragraphs (i) (ii) hereof. k(i) All ancillary or supplementary services for which payment of a subscription fee or charge is required in order to receive the service are feeable. The fee required by this provision shall be imposed on any and all revenues from such services, including revenues derived from subscription fees and from any commercial advertisements transmitted on the service. k(ii) Any ancillary or supplementary service for which no payment is required from consumers in order to receive the service is feeable if the DTV licensee directly or indirectly receives compensation from a third party in return for the transmission of material provided by that third party (other than commercial advertisements used to support broadcasting for which a subscription fee is not required). The fee required by this provision shall be imposed on any and all revenues from such services, other than revenues received from a third party in return for the transmission of commercial advertisements used to support broadcasting for which a subscription fee is not required. k (g)(2) Payment of Fees k(i) Each December 1, all commercial DTV licensees will electronically report whether they provided ancillary or supplementary services in the twelvemonth period ending on the preceding September 30. Licensees will further report, for the applicable period: 1) a brief description of the services provided; 2) which services were feeable ancillary or supplementary services; 3) whether any ancillary or supplementary services provided were not subject to a fee; 4) gross revenues received from all feeable ancillary and supplementary services provided during the applicable period; and 5) the amount of bitstream used to provide ancillary or supplementary services during the applicable period. Licensees will certify under penalty of perjury the accuracy of the information reported. Failure to file regardless of revenues from ancillary or supplementary services or provision of such services may result in appropriate sanctions.  S=#-k(ii) If a commercial DTV licensee has provided feeable ancillary or supplementary services at any point during a twelvemonth period ending on September 30, the licensee must additionally file the FCC's standard remittance form (Form 159) on the subsequent December 1. Licensees will certify the amount of gross revenues received from feeable ancillary or supplementary services for the applicable twelvemonth period and will remit the payment of the required fee. ">'],l(l(,,+"Ԍk(iii) The Commission reserves the right to audit each licensee's records which support the calculation of the amount specified on line 23A of Form 159. Each licensee, therefore, is required to retain such records for three years from the date of remittance of fees. * * * * * k