3 FCC Rcd No. 22
Federal Communications Commission Record FCC 88·323
Before the
Federal Communications Commission
Washington; D.C. 20554
MM Docket No. 87·9
In re
tion's subcarrier, which is used to broadcast the reading
service, is an inherent part of the composite FM baseband
frequency.s A specially equipped receiver is required by
those using the reading service. There are approximately
112 of these services operating in 40 states Reading ser 
vices can provide an alternative form of access to printed
materials like newspapers, magazines, and books for those
with visual or other physical handicaps that will not per 
mit the holding or reading of printed materials.
POLICY STATEMENT
11. BACKGROUND
A~Radio Reading Services
3. A radio reading service is'al1-_:a~ral_s:e_~vi_c~,p~ovided
primarily for the blind and visuaiiy'impaired through the
use of an FM licensee's subcarrier capacity. The FM sta-
Allowable Costs for
Noncommercial FM" Licensees
To Charge Radio Reading
Services
C. The Public Broadcasting Amendments Act of 1981
5. In 1981, Congress passed the Public Broadcasting
Amendments Act which amended the Communications
Act to give public broadcasters, inter alia, the authority to
use their facilities for remunerative purposes so long as
such profit making activities did not interfere with the
station's public telecommunications responsibilities.
tO
An 
ticipating that federal government spending for public
broadcasting would be reduced, Congress wanted to en 
sure that public stations would not be hampered in their
independent efforts to generate funds for their operations
from nongovernmental sources.
I1
D. Report and Order in BC DocketNo. 82·1 .
6. In response to the Public B,roadcastingAm~ndP1ents
Act, we.ree~aminedthe restrictions .imposed-by~ec~ion
73.593 of our rules. In the Report. and Order in BC
Docket No.. 82-1,12 we concluded that the restrictions
limiting public FM stations to noncommercial uses of their
subcarriers were inconsistent with the spirit of the legisla 
tion. Consequently, we amended Section 73.593 to' 'au 
thorize noncommercial FM licensees. to use their
subcarriers ,for the same range of remunerative activities
as commercial radio stations.
13
We ".emphasized in the
Report and Order that pUblic stations are not required to
use their subcarrier capacity. However,. we made it clear
that if a public station chooses to use its subcarrierfor a
commercial purpose, it is obligated to accommodate a
radio reading service on its other subcarrier or ensure the
availability of other subcarrier capacity.14 We also ex 
plained that public stations would not be required lito
bear the fixed or operating costs
ll
'of the reading services,
B. The Previous Rule
4. Historically, Section 73.593 restricted public radio
stations' use of their subcarrier capacity 'to those services
that were consistent with the noncommercial educational
purposes of such stations.
6
This rule specifically identified
what types of programs could be offered on a public radio
station's subcarrier. One of the permitted uses was for
programs intended to serve the special needs and interests
of the handicapped. If a station used its subcarrier for any
noncommercial educational purpose, it was IJermitted to
charge an amount which could not exceed the sum of the
approximate cost of conducting the subcarrier operation
(including purchase·or lease of equipment,cour~ema 
terial, personnel services, etc.), and the general overhead
and operational costs attributable to such operations?
Thus, under the version of Section 73.593 in force prior to
1983, the Commission was careful. to ensure that public
radio stations could be fully reimbursed for the cost in 
curred as a result of the use of their subcarriers. This
meant that public radio stations could recover both their
incremental costs
8
and those portions of their overhead
costs
9
resulting from the noncommercial services they
were allowed to offer.
Released: October 28, 1988
By the Commission:
Adopted: October 13, 1988;
1. INTRODUCTION
1. This Policy Statement is intended to clarify the kinds
of costs that a noncommercial radio station may properly
charge to the operators of a radio reading service to lease
the station's subcarrier capacity pt:trsuant to Section 73.593
of OUf rules.
1
The Policy Statement is the outgrowth of the
Notice of Inquiry 2 issued last year in the above-captioned
proceeding which solicited public comment on the issue of
permissible charges to radio reading services. In that No·
lice" we specifically asked commenters to provide us with
itemized statements of the charges being assessed by sta 
tions for reading service operations. We also asked com 
menters to identify those types of costs that would not be
incurred by the stations but for the provision of the
reading services.
2. In response to the Notice, thirteen parties filed com 
ments; eight parties filed replycomments; and two parties
filed supplemental comments. 3 Commenters included the
Association, of Radio Reading Services (ARRS). which
represents over 70 radio reading services, approximately
three-quarters of the services in operation, the National
Association of Broadcasters (NAB), the Corporation for
Pu1>iic Broadcasting (CPB) and National Public Radio (
(NPR). Addilionaiiy, a number of universities which hold
public FM licenses filed joint cofuments.
4
The'comments
clearly indicate that there is substantial 'confusion as to
what costs can legitimately be charged by a public radio
station to the operators ofa radio reading serviCe. Having
carefully reviewed and -analyzed the comments, we are
issuing this Policy Statement in an attempt to eliminate
any existing confusion on the matter of the appropriate 
ness of certain charges by noncommercial FM stations to
radio reading services.
6323
FCC 88-323 Federal CommullicaHOI\s; l:oIllIlliSSiOIl KecorU
3 FCC Red No. 22
but would be expected to provide such services on a
"not-for-profit basis."
ls
In so doing, we attempted to bal 
ance the needs of the stations to receive reimbursement
for their services with the public benefit of radio reading
services for the handicapped.
7. A year after we issued OUf Reporzand Order, it
became apparent that there was still some confusion Over
what charges public stations were allowed to recover from
radio reading services under OUf amended rule. Mr. John
C. DeWitt wrote a letter on behalf of The American
Foundation for the Blind, Inc. asking the Commission to
clarify. among other things, whether thenot-for~profit
charges that public stations passed on to reading services
had to be based only on demonstrable incremental costs
Of. whether they could also be based on percentages or
proportional bases of the station's operating budget. In
response, the Mas'sMedia Bureau, in a letter datedDe~
cember 3, 1984, stated that a "station should not exceed
the incremental costs of c'onductingthe radio reading
service" but thatltthe applicable portion of the station's
overhead that relates t() providing the r!Idio reading ser-)
vice is included in the incremental costS.,,16 Even after the
Bureau issued this letter, there _was still confusion among
noncommercial radio stations and reading service organi 
zations as to allowable and nonallowable costs.
E. Petition for Rule Making
8. On May 20, 1986, the Association of Radio Reading
Services. Inc, (ARRS) filed a Petition for Rule Making,
requesting that the Commission impose a mandatory ac 
cess requirement on noncommercial educational FM li 
censees to lease their subcarrier capacity to radio reading
services and to require that such stationschar~eonly
nondiscriminatory, incremental cost-justified rates. I ARRS
also urged the Commission to issue guidelines that would
clarify the term "incremental costs
ll
as initially used in the
Bureau letter. In its petition, ARRS stressed that neither
the Report and Order, nor the rule itself, specified what
constituted profit or what costs may be assessed by pUblic
stations in determining rates for reading services.
9. Several commenters filed in response to ARRS' peti 
tion. Only one commenter strongly favored the imposition
of a mandatory access requirement. Other commenters
pointed out that ARRS' proposal did not take into ac·
count other noncommercial public uses of a station's sub 
carrier and that mandatory access by reading services
would raise serious first amendment issues. Evidence was
also presented by coIt).menters which contested ARRS'
assertions that our rule amendment had adverse}y affected
th'e growth of readirig services. The comments also re 
vealed, a great disparity in the amount that public stations
charge radio reading services; .
F. Memorandum Opinion and Order. and Notice of In 
quiry
10. On the basis of the record developed, we issued, on
January 16, 1987, a combination Memorandum Opinion
and Order and Notice of Inquiry in the proceeding.IS In
the MO & 0 portion of the item, we rejected a proposal
to amend Section 73.593 of our rules to require that
noncommercial FM radio licensees accommodate radio
reading services. The record, however, was not adequate
to allow us to respond to ARRS' request for a clearer
definition of incremental costs, and we determined that it
would be inappropriate to attempt to resolve specific cost
issues without a further record. In particular, we recog-
nized the need to clarify what portion of general overhead
costs can be appropriately allocated to a radio reading
service. Accordingly, we issued the companion Notice Of
Inquiry now befo,re us so that we could determine the
actual cost of operating a radio reading service and proffer
guidance concerning which costs could be passed on to the
reading services. The Notice asked commenters to explain
the apparent cost disparities in charges to radio reading
services and to indicate whether our imposition of a par 
ticular method of calculating costs ..'ould be beneficial.
G. Comments
11. The commenters responding to the Notice divided
fairly evenly into two groups--the radio reading services
and the noncommercial FM stations. Generally. the radio
reading services challenged the legitimacy of some or all
of the costs charged by the stations; some services pro 
vided detailed information on costs or attached itemized
bills tosubstantiate~their allegations. On the other hand,
the public stations defended their methods of calculating
costs and asserted that the rates they charge reading ser 
vices do not generate profits. Generally, public stations
urged the Commission to rely on their discretion in deter 
mining costs, asserting that they are in the best position to
determine the actual cost to their stations of operating a
reading service.
12. Reasons Given for Cost Disparities. In our Notice, we
requested an explanation for the wide disparity in the
costs charged to reading services by public radio stations.
The comments· indicated that the disparities in costs
charged are, the result of a number of factors. First, non 
commercial radio stations may USe different methods to
determine what to charge a radio, reading service. Stations
can charge flat, monthly, or hourly rates and the stations
often differ in the manner in which these rates are set,
e.g., some stations merely discount the rate charged by
commercial stations for use of their subcarrier. Second,
some stations charge reading services not only for the USe
of the subcarrier capacity, but also for a' variety of other
costs including transmission costs, personnel, maintenance
and rental of space for housing subcarrier equipment.
Third, some disparities can be traced to the fact, that the
equipment and labor costs associated with the implemen 
tation of the reading service vary from station to station.
19
For example, the need for and the cost of capital equip 
ment to activate the subcarrier can vary widely depending
on the state of the existing technical facilities at a given
public radio station. Fourth, cost_ differentials can result
from stations charging less ,than them~ximumallowable
costs under ourrule~.,Finally, stations differ in whether,
and to,whatext~nt,they charge radio reading services
sep'aratel~for the numerous, types ofoptiona~or, ancillary
services
2
that· a station may offer to a reading service, e.g.,
production personnel, studio time, or customer support.
13. Incremental Costs. A review of the comments reveals
that most of the costs which can be potentially passed on
to radio reading services fall into the category of either
incremental costs or overhead costs. Incremental costs are
typically thought to mean the costs that a noncommercial
station would not incur but for the provision of subcarrier
capacity to a reading service. For a definition and discus 
sion of overhead costs, see~14. Most commenters have
agreed that it is appropriate to pass on these incremental
costs to reading services. However, there is some disagree 
ment as to exactly which costs are "incremental..,21
6324
3 FCC Red No. 22
JfeUeral Communications Commission Hecord FCC 88-323
14. The reading services who commented offered vary 
ing descriptions of these costs which perhaps reflect the
different types of services furnished by each station. Most
reading services agree, however, that the following would
be included in the category of incremental costs:
I) The cost of electrical power consumed by the
subcarrier equipment used by that reading service.
22
2) A prorated portion of maintenance and repair
costs of subcarrier equipmentP
3) A prorated portion of purchase and installation
costs of subcarrier equipment. if the station does not
already own this equipment.
24
In addition, there was general agreement among most
commenting reading services that the following should not
be included in a definition of "incremental costs
ll
;
1) The cost of transmitting the subcarrier's signal
from the station's studio to its transmitter.
2s
2) "Interference prevention" costS}6
3) Lost opportunity costs resulting from accommo 
dating a -reading service instead of a fully remunera 
tive lessee.
4) Check processing or similar fees, unless these
same fees have been imposed on the radio stations
by their banks."
15. Overhead Costs. The stations differ with the reading
services on whether they are allowable,28 with most sta 
tions preferring a definition which would allow a propor 
tional charge for such costs. More specifically, they assert
that these overhead costs should be chargeable to the
reading service only to the extent that the reading service
"draws on or shares existing personnel,s~rvicesor facili-
ties of the station.
1I29
. .
16. As indicated above, there was substantial disagree 
ment among the commenters-regarding the treatment of
overhead costs. Overhead costs are generally understood
by the cornmenters to be the basic costs of operating the
public station, which _would include salaries, rent, main 
tenance, etc. In responding to our request for information
about actual charges, most of the commenters focused on
this issue of the allocation of overhead costs between the
stations and reading services. Several reading services con 
test the legitimacy of charging overhead_ costs. For exam 
ple, Written Communications Radio Service (WCRS), an
Ohio radio reading service, disputed the validity of nu 
merous overhead costs charged to it by WKSU, Kent State
University's -noncommercial FM station.
3D
Specifically,
WCRS contested the aUocation by WKSU of a percentage
of the salary of each station employee to their t:eading
service,3! .a20.00 a month charge to process their monthly
reimbursement checks for the telephone bill, 2% of the
station's annuai electric bill, an annuallOO fee for renting
a rack that holds the subcarrier monitoring equipmentand
an annuall,300.00 legal fee."
17. WKSU claimed that complaints of WCRS stemmed
from its basic disagreement with allowing any overhead
costs to be charged to its operations. WKSU and the.Joint
Commenters insist that overhead costs are ·.properly
chargeable to the reading services, but only to the extent
that the reading services draw on or share a station's
existing personnel, services or facilities.
33
18. The controversy concerning the recovery of over 
head costs is specifically illustrated in the area of transmis 
sion costs. Several reading services object to being charged
for transmission of the subcarrier signal between a public
station's studio and its transmitter[s].34 First, _they argue
that the subcarrier sir.:nal is an inherent -part of the FM
signal once the sUbcarrier has been activated. Consequent 
ly, the subcarrier signal is transmitted simultaneously with
the station's main signal. The reading services stress that
the signal delivery system is an integral part of the broad 
casting system and is in operation regardless of whether or
not a radio reading service uses it. The West Virginia
Broadcasting Authority (WVEBA), on the ·other hand,
argues that this proceeding should be strictly confined to
the costs that can be recovered for the use of the subcar 
rier and therefore contends that the question of the
charges that it passes on to the West Virginia Radio
Reading Service (WVRRS) for the use of its microwave
transmission system are outside the scope of the Notice.
35
Never-theless; WVEBA defends its charges as proper.
36
19. In addition to questioning the specific types of over 
head charges being passed on to them, several of the
reading services challenged tJte legitimacy of charging for
these overhead costs on an hourly basis. They contend
that hourly charges were developed on the basis of·fixed
yearly costs for electricity or dedicated telephone lines.
These costs are generally computed on the assumption of
continuous twenty-four. ho"ur a day service or availability.
Those reading services that operated for a .limited number
of hours during the day stated that,. when they wanted to
increase their hours of operation, they were required to
pay a predetermined hourly rate for each additional hour.
Consequently, they assert that they are being charged
twice for service costs which do not vary with the number
of 1).ours that the reading service is operating.
20. Suggestions for Clarifying Recoverable Costs. The
commenters were unanimous in requesting that the .Com 
mission pro'videsome form of guidance to the parties
concerning legitimately allowable charges under Section
73.593. The commenters made a variety of suggestions
aimed at clarifying legitimately recoverable charges. The
Corporation for Public Broadcasting (CPB) and the major 
ity of reading services urged the Commission to delineate
recoverable cost categories. They believet~atsuch illustra 
tive lists will provide a simple reference point for rejecting
or accepting certain types of charges. Additionally, some
of the reading services recommended that the Corr-mission
develop a list of costs- that can not be charged to the radio
reading servjces. A number of reading services suggested
that the Commission require itemization of incremental
costs in order- to document the exact nature of the addi 
tional costs that are attributed to reading service oper 
ations. Other commenters. suggested that stations should
bill reading services separately for transmission related
charges, ancillary services and repairs. Many reading ser 
vices suggested abolishing hourly charging as a method for
calculating appropriate charges in order to preclude sta 
tions from passing on fixed yearly operating costs more
than once. The reading services offered these suggestions
to· encourage precision in ascertaining the actual costs that
are directly attributable to reading services' operations.
6325
FCC 88·323 Federal Commun.iC:Hi6n.s C()tninissiort Record
3 FCC Red No. 22
21. The stations argue that such precision, partiC:1ilarly
with regard to overhead costs, is impossible. Furthermore,
the stations stress that by insisting on such precision,
especially .in calculating a portion of overhead costs, the
reading services are really trying to avoid paying their fair
share of the basic operating costs. The stations urge the
Commission to defer to their discretion and their good
faith estimates of costs that are allowable withinthe Com 
mission'snot-for~profitstandard. They assert that they are
in the best position to make the determination of the
proper charges to the lessees of their subcarriers. Further 
more, they contend that. we· should intervene only where
there is clear evidence of abuse of our standards.
22. Several,stations argue that the Commission should
also defer to their discretion as to how they charge --i.e~,
whether their charges are based on hOUrly, monthly or flat
rates. In contrast,' other stations, as well as the NAB and
CPE, advocate pricing or accounting guidelines to address
the issue of the method used to compute charges.
37
They
believe that such guidelines will provide adequate param 
eters within which they can make their pricing determina 
tions, yet still provide sufficient flexibility to·negotiate
contracts which would be appropriate in different cir 
cumstances. These same parties oppose imposing a univer 
sally applicable formula for calculating costs because they
believe that such a solution would be too rigid to encom 
pass the myriad of unique arrangements between stations
and the reading services.
III. DISCUSSION
23. We are persuaded from the record that there is
confusion regarding allowable and nortaUowable charges
for providing radio reading services' under ournot~
for-profit 'standard. We are issuing this Policy Statement to
provide clarification of allowable costs under the',not~
for-profit standard inherent in Section 73.593. In the fol 
lowing discussion, first, we will define incremental costs.
Second, we will ,'address the difficult issue of 'allocating
general overhead costs between reading services and pub 
lic stations. Third, we will provide examples of nonal 
lowable costs under Section 73.593.
38
24. Incremental Costs. If a station decides to charge a
radio reading service for use of its subcarrier capacity, the
station may recover the actual incremental costs of provid 
ing that service. By "incremental costsII (in the context of
this proceeding), we mean those additional out-of-pocket
costs that are caused by the operation of the reading
service. Clear examples of such costs are the capital cost
of the equipment needed for and used in the provision of
the subcarrier signal to the radio reading service and any
modification to a microwave system or a station's trans 
mitter necessitated in order to so deliver the subcarrier
signal. Other examples include the additional cost of the
power necessary to operate the subcarrier and associated
equipment, and any specific repairs related to subcarrier
equipment or operations. Of course, if the station uses a
single subcarrier' during certain hours to provide radio
reading services and during' other hours to provide some
other, profit-making service, then the radio reading service
should be charged a fraction of the total subcarrier equip 
ment and electricity cost and, other related costs. The costs
of ancillary services or products that the station 'may
choose to provide to the reading services may also be
treated as incremental costs and are also recoverable.
39
25~A' similar' iiicremental cost standard was embodied
iii the 'pi-eviou's version 'of the rule. In llsing that standard
in the original'rule, we contemplated that a public station
should be' c'ompensated' for any out-of-pocket expenses
incurred in allowing" oneot the. permitted uses on its
subcarrier.40 In other words, the station should be no
better or: worse off than it was before leasing the subcar 
rier. When we carved0l:lt a priority f,?r reading services in
Section 73.593, we intended that reading services continue
to operal;;; urider this same not-far-profit standard.
41
26. Overhead Costs. We recognize that the question of
apportioning general overhead costs provides the most
troublesome area for the parties to resolve. It should be
clear from our definition of incremental costs that any
costs which are directly attributable to the reading service
are recoverable·.
42
, We do not wish to disallow reimburse 
ment for such costs, since that might create the, incentive
for public radio' stations to decline to provide reading
services altogether, if to do so would cause them to incur
losses. Refusal to offer reading services would force them
to refrain from offering their subcarriers to paying sub 
scribers as well. Overhead costs, such as salaries, rent and
maintenance that are incurred by -the station in the ab 
sence of the radio reading service and that are not in 
creased when the station provides a subcarrier to the radio
reading service. would not be allowed. As previously
noted" some reading services concede that partial reim 
bursement for fixed overhead or .salary costs should be
allowed. Moreover. most stations prefer a definition which
would allow a proportional charge for such costs only to
the extent that the reading service "draws on or shares
existing personnel, services or facilities of the station.II
Paragraph 13, supra. With these views in mind, we will
permit stations to recover only those fixed overhead costs
which are attributable to the provision of a reading service
and can be so justified by the radio station.
43
To mOre
closely determine such attributable costs, we suggest that
both parties attempt to· foresee the nature of those fixed
overhead costs that might appropriately be charged to
radio reading services and that they explore the possibility
of including itemized charges or an explicit provision for
these costs in their contracts. Another option would be to
negotiate a completely separate billing.'
27. Nonallowable Costs. ,Several of the reading services
and ARRS urged us to designate certain costs as honal 
lowable. For example. WCRS suggests that fees for check
processing, rental of space for the subcarrier equipment,
general salaries, legal fees and .transmission links like those
between the station and transmitter charged by Kent State
be included in this category. We consider all but the last"
item to be general overhead costs and therefore the parties
should be guided by our previous discussion of this area.
We note further that it would be improper for the station
to charge any sort of fees such as check processing or
similar fees to the' radio reading 'service unless such fees
are routinely charged to the station by the bank· which
processes those checks or unless those fees can be justified
as related to· the incremental cost of processing payments
made by the radio reading service.
28. With regard to the costs for the transmission links
between the station and the transmitter. we believe that
such costs generally cannot be passed on to the reading
service unless there is evidence that the' reading service
creates an' incremental cost burden' on such links. Techni 
cally, a subcarrier is an inherent part of the FM band 
width used by the public radio station. Once the readip.g
6326
3 FCC Red No. 22
1" eaeral \.....ommuJl1l:auun.s ....-UIIlJll1:!lilSlUIl .l.'\.t:t::uru
serVice has paid for the capital equipment necessary to
activate the subcarrier -- including additional channels for
microwave systems if necessary -- the actual transmission
of the subcarrier signal, in most cases, would not cost the
station any more than it pays to transmit its own signal.
However, to the extent that the existence of the subcarrier
decreases the quality of the station's signal or increases the
possibility of interference to the transmission links, then
any costs which the station incurs to correct those prob 
lems are properly chargeable to the radio reading service.
29. Another type of cost that is generally not recover 
able is lost revenues from an· actual or potential
alternative lessee. Under normal circumstances, a broad 
casting station, whether commercial or noncommercial,
can view the opportunity cost of using a subcarrier for any
particular purpose as the revenue it has given up by not
using the subcarrier for its most profitable alternative use.
This principle is not applicable here, however, where the
public radio stations are restricted by our rules in the use
of their subcarrier capacity. In the' Report and Order
adopting the current version of Section·.73.593, we deter 
mined that any station that wishes to lease its subcarrier
capacity must first accommodate interested radio reading
services itself or ensure the availability of other subcarrier
capacity.44 Thus, under our rule, there is no allowable
alternative usage for the subcarrier capacity if it is il-eeded
to provide a reading service to its community. Given this
policy, it is not appropriate for the station to charge the
radio reading service the value of the subcarrier in a
profitable alternative usage. If the public station is leasing
another subcarrier for remunerative purposes, it will not
be permitted to charge the reading service the difference
between its remunerative alternative and the reading ser 
vice's incremental costs. Both the Communications Act
and our rules require these stations to fulfill their public
telecommunications responsibilities before profiting from
the use of their facilities.
30. We have provided the general guidelines discussed
above as a framework within which the parties can negoti 
ate private contracts to govern their particular arrange 
ments for services. Such contracts give both parties the
flexibility to account for variations in equipment, facilities,
services and products involved in providing reading ser 
vices. We urge the parties to enter into clear contracts
outlining their respective cost Obligations within the guide 
lines provided here. These contracts should provide the
opportunity to the parties to specify the types of costs that
will be recovered by stations from reading services and the
method by which these costs are to be esti
ll1
ated.
31. We believe that providing general guidelines as to
allowable and nonallowable costs is preferable to establish 
ing cost computation formulas or more rigid cost cate 
gories as requested by numerous commenters. First, it is
unlikely that the Commission could develop formulas or
precise cost categorie's that would contemplate the wide
variety of equipment, facilities, products and services in 
volved in providing reading services. Thus, any fixed for 
mulas or cost categories developed by the Commission
would likely be incomplete or overbroad. Second, stations
and reading services are in the best position to determine
the incremental costs of the reading services in each par 
ticular situation. Imposition of rigid formulas or 'cc;>st cate 
gories would remove this needed. discretio'n .and: force -the
parties to comply with rules that may be arbitrary or
inapplicable to their arrangements'.
6327
32. We also believe that general guidelines discussed
above are more appropriate than the specific accounting
or pricing guidelines recommended by some commenters
for a number of reasons. To account for the variability in
a station's equipment and facilities, as well as variability in
their accounting methods, we would have to devise a
range of accounting guidelines from which the stations
could choose. For example, with regard to the capital cost
of the subcarrier equipment, we would have to devise
accounting guidelines that take into account the alter 
native methods of depreciating capital and amortizing
loans. We believe that the resources that would be re 
quired to develop said guidelines would be unwarranted.
First, it is not clear that the scope of the problemre~uires
such an expenditure of resources. The CPB study4 sug 
gests that most stations and radio reading services are not
disputing allowable costs. For those that are, we believe
that the general guidance offered in this Policy Statement
will provide the parties with a sufficient basis on which to
resolve any disagreements. Finally, we are reluctant to
promulgate detailed accounting regulations because we be 
lieve it is an unnecessary intrusion into the parties' discre 
tion.
33. Authority for this action is contained in Sections
4(i), 303, 307(b) of the Communications Act of 1934 as
amended. In addition, the proposal contained herein has
been analyzed with respect to the Paperwork Reduction
Act of 1980, and found to contain no new or modified
form, information collection and/or record keeping, label 
ing, disclosure. or record retention requirements; and will
not increase or decrease burden hours imposed on the
public.
34. Accordingly, IT IS ORDERED, THAT this proceed 
ing IS TERMINATED.
FEDERAL COMMUNICATIONS COMMISSION
Donna R. Searcy
Secretary
APPENDIX I
Comments
Alaska Information Radio Reading
and Education Services
Association of Radio Reading Services
Bible Broadcasting Network, Inc.
Brown Broadcasting Service, Inc.
Corporation for Public Broadcasting
Joint Comments (Arizona Board of Regents,
Board of Visitors of James Madison
University, Kent State University,
Ohio State University. WSKG
Telecommunications Council)
KJZZlSun Sounds Station
National Public Radio
Ohio Radio Reading Service
West ·Virginia Educational Broadcasting
FCC 88·323 I:' eUeral\...ummUJll\::aL1ull~......UJIlUU:):)J.Ull ft'='-'UJ. U
3 FCC Rcd No. 22
Autho~ity
Written Communications Radio Service
West Virginia Radio Reading Service
(West Virginia Library Commission)
Youngstown Radio Reading Service
Reply Comments
Association of Radio Reading Services
Corporation for Public Broadcasting
WKSU-Kent State University
National Association of Broadcasters
National Public Radio
Summit County Society for the Blind
West Virginia Educational Broadcasting Authority
West Virginia Radio Reading Service
(West Virginia Library Commission)
[filed two replies]
Supplemental Comments
Corporation for Public Broadcasting
Written Communications Radio Service
FOOTNOTES
1 Section 73.593 reads as follows:
-The licensee of a .noncommercialeducational FM station is
not required to use its subcarrier capacity, but if it chooses
to do so,i~is governed by Sections 73.293 through 73.295
of the Commission's Rules regarding the types of permis 
sible subcarrier uses and the manner in which subcarrier
operations shallbe conducted; Provided, however, that re 
munerative use of a station's subcarrier capacity shall not
bed~trimentalto the provision of existing or potential
radio reading services fqr the blind or otherwise inconsis 
tent with its public broadcasting responsibilities.
2 Amendment of Part 73, Subpart C of the Commission?s Rules
to Require Licensees of Noncommercial FM Stations to Accom·
modate Requests by Radio Reading Services co Utilize Their Sub·
carrier Capacity on an Incremental Cost Justified Basis, 2 FCC
Red. 680 (1987)(Memorandum Opinion and Order and Notice of
Inquiry in MM Docket 87-9) [hereinafter either MO & 0 or
Notice ].
3 A list of the parties filing comments may be found in Appen 
dix 1.
4 The Arizona Board of Regents, James Madison University,
Kent State University, Ohio State University and WSKG Tele 
communications Council filed joint comments [hereinafter Joint
Commenters].
s Generally, FM licensees have two subcarrier channels avail 
able for use although it is technically possible to have more.
Commission rules permit an PM licensee to authorize indepen 
dent groups to use the station's subcarrier capacity. Section 73.295
of the rules outlines the conditions for subcarrier use and pro 
vides an illustrative list of permitted services which include spe 
cialized foreign language programming, paging and calling,
telemetry, and traffic control signal switching. In order to use a
station's subcarrier frequency, certain special equipment is neces 
sary, Le., a subcarrier generator, an audio compress'orllimiter, a
dedicated broadcast line, and some type of diagnostic equipment
whichmonitor~,the baseband signal. During monophonic program
transmissions, multiplexsubcarriers and their significant sidebands
must be within the 20 kHz to 99 kHz range; during stereophonic
transmissions, their range is restricted to between 53 kHz and 99
kHz.
647 C.F.R. § 73.593 (a)(I)(iii) (1982).
7 Id.
8 As we explain further below in paiagraph 13', by incremental
costs we mean those additional costs caused by the provision of
the radio reading service's use of the subcarrier.
9 By overhead costs we mean the basic costs of operating the
station, such as salaries, rent and maintenance that would' not be
changed by the existence or nonexistence of the radio reading
service.
10' Omnibus Budget Reconciliation Act of 1981, Pub. Law No.
97-35. § 1231, 95 Stat. 357, 731 (codified at 47 U.S.c. § 399B
(1982)).
1I 127 Congo Rec. S 9037-38 (1981) (colloquy between Sen.
Schmitt and Sen. Packwood); see also S. REP. No. 98, 97th Cong.,
1st Session (1981).
12 See Amendment of Sections 73. 593 of the Commission's
Rules. 48 Fed. Reg. 26608 (June 9. 1983), 54 RR 2d 25, 35
[hereinafter Report and Order J.
13 Id. at 26614.
14 Id.We provided some general guidelines for stations in
accommodating radio reading services but left the implementation
to each station's discretion. [d. n. 31. In addition, "ensuring the
availability of (Jther subcarrier capacity" could mean that the the
non~commereialradio station has assured the availability of an 
other radio station's subcarrier for use by radio reading services.
15Id. n. 32.
16 Letter from Chief, Mass Media Bureau to John C. DeWitt
(December 3, 1984) [hereinafter Bureau letter].
17 The petition was placed on public notice on July 14, 1986
(Report No. 1605).
18 See n. 2, supra.
19 ARRS and o'ther reading services assert that the actual cost
variations, resulting from differing equipment'and operating'costs
in different markets, do not correlate with the variations in the
fees being charged. Reply Comments of ARRS at3.
20 By "ancillary services" we mean services provided by the
stationthat are in addition to the minimumservices necessary to
make a subcarrier available to the radio reading service. Examples
of ancillary services include advertising assistance, the transmis 
sion link from the reading service's separate studio to the station's
facilities, and use of studio space. Some stations provide ancillary
services and some do noL Of those stations that do provide
ancillary services, some explicitly charge' for those services and
some do not. In the main, the commenters agree that because
these services are optional, their procurement should be the
subject of a separate contract between the reading service and the
noncommercial station. See, e.g., Reply Comments of ARRS at 7
n.5.
21 Joint, Comments at 3; Reply Comments of West Virginia
Educational Broadcasting Authority at 1; Reply Comments of
Kent State Universityat 3; Comments of National Public Radio at
2.
22 Reply Comments of ARRS at 6; WCRS Complaint Letter at
1, see infra, note 30; Comments of Youngstown Radio Reading
Service at 2 (asserting that "[i]t is estimated that 75 watts of
power is all that is required to completely operate the SCA
programming. On an average figure of tic per kilowatt hour this
totals to an annual electrical charge of approximately75.00").
23 Joint Commenters at 6; Reply Comments of ARRS at 6.
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3 FCC Red No. 22
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24 Reply Comments of ARRS at 6.
25 Reply Comments of ARRS at 7.
26 NPR, in their Comments (at 5) claims that spectrum ana 
lyzers costing 6,000 to15,000 and specially trained personnel are
needed to control subcarrier channel interference with the main
channeL However, ARRS, in its Reply Comments (at 7), disputed
this claim. They assert that:
[s]ubcarrier frequencies do nOlo in fact, cause interference
with main channel signals. A station maintained in accor 
dance with good engineering practices will not experience
interference to either the main or subcarrier signals. Thus.
costs related to monitoring or repairing interference would
be incurred in any event, and are not the fault of the SCA
user.
27 Reply Comment of ARRS at 9.
28 ARRS and other reading services would have the FCC
prohibit stations. from charging for any overhead costs not oc 
casioned exclusively by the reading service's use of their subcar 
rier.
29 Joint Commenters at 6.
30 WCRS filed a complaint against WKSU-FM at Kent State
University concerning these charges. This complaint, which was
filed on April-to, 1985, remained pending, awaiting the resolution
of the .cost issues in this proceeding, until September 6, 1988,
when the Commission received a letter from WCRS stating ·its
intention to withdraw its complaint due to the resolution of
differences between itself and WKSU-FM. In that letter, WCRS
also withdrew its comments of June 16, 1987, and it's council's
reply dated, July 8, 1985.
31 Include'd were'percentages of the salaries of the Director of
Engineering (5% orl,276.00), the Operations Coordinator (3%
or662.00), the Business Manager (1% or197.00), the Secretary
(.5% or86.00). and the Board Operator (33 1/3% or6.552.00).
32 Comments of Written Communications Reading Service
(WCRS) at 4-19.
33 Reply Comments of WKSU-:Kent State at 4.
34 See Comments of the West Virginia Radio Reading Service at
7.
3S Reply Comments of WVEBA at3~4.
36 WVEBA charges WVRRS the same price that it charges
other non-profit groups for the use of its facilities. These charges
are based on fixed charges that it"established for use of its
microwave system. WVEBA argues that WVRRS is not obliged to
use its microwave system but can use telephone company lines to
deliver the reading service's subcarrier signal.
37 Precise guidelines were suggested in the following areas: the
actual cost bases for pricing, the frequency with which such bases
should be recalculated, allowable methods for allocating costs of
jointly and coricurrentlyoperated facilities and allowable methods
for calculating cost overhead rates. See Comments of CPS at 7-.8.
38 A CPB survey conducted in connection with this proceeding
demonstrates that m'any, stations offer their subcarriers to in 
dependent groups at no charge.. Of the 295 public radio stations
that responded to CPB's survey, 83 reported that they use one or
more subcarrier chartnels for reading services. Of these 83 sta 
tions, 32 operate their own reading services, and 21 offer their
facilities to independent groups at no charge. CP:sComments at
4-5. Although we are providing cost guidelines, in this Policy
Statement, we wish to emphaSizet~at·a public . station is not
required to charge a reading service far the use of itS subcarrier
or any ancillaryservices it provides.
39 Ancillary services are not services that must be provided by
the station as a consequence of providing the subcarrier. Rather,
ancillary services are additional services that the station and the
radio reading service agree· will be provided, even though the
radio reading service could use the subcarrier without using these
added services. Given the non-essential nature of these ancillary
services, FCC guidelines in this area are inappropriate and what 
ever steps the parties decide to take to provide such services is
purely within their discretion.
40 In former Section 73.593, several noncammercialeducational
uses were permitted, including programs for the aged, ethnic
minorities,and professional groups. See -l-7 C.F.R. § 73.593 (1981).
41
47 C.F.R. § 73.593.
42 This Policy Statement supercedes the Bureau letter of Decem 
ber 3, 1984.
43 This might include. e.g.. a station engineer who verifies the
reliability of the technical installations, including the subcarrier's
operation. Under these circumstances, a portion of the engineer's
salary may be reasonably.allocated to reading service subcarrier
usage. Similarly, rent, administration, management and other ap 
propriate costs attributable to reading service can be recovered if
justifIed and segregable from other fixed overhead costs.
44 See n. 14, supra.
4S See n. 38 supra.
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