[House Hearing, 107 Congress]
[From the U.S. Government Publishing Office]
DIGITAL TELEVISION: A PRIVATE SECTOR PERSPECTIVE ON THE TRANSITION
=======================================================================
HEARING
before the
SUBCOMMITTEE ON TELECOMMUNICATIONS AND THE INTERNET
of the
COMMITTEE ON ENERGY AND COMMERCE
HOUSE OF REPRESENTATIVES
ONE HUNDRED SEVENTH CONGRESS
FIRST SESSION
__________
MARCH 15, 2001
__________
Serial No. 107-20
__________
Printed for the use of the Committee on Energy and Commerce
Available via the World Wide Web: http://www.access.gpo.gov/congress/
house
__________
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------------------------------
COMMITTEE ON ENERGY AND COMMERCE
W.J. ``BILLY'' TAUZIN, Louisiana, Chairman
MICHAEL BILIRAKIS, Florida JOHN D. DINGELL, Michigan
JOE BARTON, Texas HENRY A. WAXMAN, California
FRED UPTON, Michigan EDWARD J. MARKEY, Massachusetts
CLIFF STEARNS, Florida RALPH M. HALL, Texas
PAUL E. GILLMOR, Ohio RICK BOUCHER, Virginia
JAMES C. GREENWOOD, Pennsylvania EDOLPHUS TOWNS, New York
CHRISTOPHER COX, California FRANK PALLONE, Jr., New Jersey
NATHAN DEAL, Georgia SHERROD BROWN, Ohio
STEVE LARGENT, Oklahoma BART GORDON, Tennessee
RICHARD BURR, North Carolina PETER DEUTSCH, Florida
ED WHITFIELD, Kentucky BOBBY L. RUSH, Illinois
GREG GANSKE, Iowa ANNA G. ESHOO, California
CHARLIE NORWOOD, Georgia BART STUPAK, Michigan
BARBARA CUBIN, Wyoming ELIOT L. ENGEL, New York
JOHN SHIMKUS, Illinois TOM SAWYER, Ohio
HEATHER WILSON, New Mexico ALBERT R. WYNN, Maryland
JOHN B. SHADEGG, Arizona GENE GREEN, Texas
CHARLES ``CHIP'' PICKERING, KAREN McCARTHY, Missouri
Mississippi TED STRICKLAND, Ohio
VITO FOSSELLA, New York DIANA DeGETTE, Colorado
ROY BLUNT, Missouri THOMAS M. BARRETT, Wisconsin
TOM DAVIS, Virginia BILL LUTHER, Minnesota
ED BRYANT, Tennessee LOIS CAPPS, California
ROBERT L. EHRLICH, Jr., Maryland MICHAEL F. DOYLE, Pennsylvania
STEVE BUYER, Indiana CHRISTOPHER JOHN, Louisiana
GEORGE RADANOVICH, California JANE HARMAN, California
CHARLES F. BASS, New Hampshire
JOSEPH R. PITTS, Pennsylvania
MARY BONO, California
GREG WALDEN, Oregon
LEE TERRY, Nebraska
David V. Marventano, Staff Director
James D. Barnette, General Counsel
Reid P.F. Stuntz, Minority Staff Director and Chief Counsel
______
Subcommittee on Telecommunications and the Internet
FRED UPTON, Michigan, Chairman
MICHAEL BILIRAKIS, Florida EDWARD J. MARKEY, Massachusetts
JOE BARTON, Texas BART GORDON, Tennessee
CLIFF STEARNS, Florida BOBBY L. RUSH, Illinois
Vice Chairman ANNA G. ESHOO, California
PAUL E. GILLMOR, Ohio ELIOT L. ENGEL, New York
CHRISTOPHER COX, California GENE GREEN, Texas
NATHAN DEAL, Georgia KAREN McCARTHY, Missouri
STEVE LARGENT, Oklahoma BILL LUTHER, Minnesota
BARBARA CUBIN, Wyoming BART STUPAK, Michigan
JOHN SHIMKUS, Illinois DIANA DeGETTE, Colorado
HEATHER WILSON, New Mexico JANE HARMAN, California
CHARLES ``CHIP'' PICKERING, RICK BOUCHER, Virginia
Mississippi SHERROD BROWN, Ohio
VITO FOSSELLA, New York TOM SAWYER, Ohio
TOM DAVIS, Virginia JOHN D. DINGELL, Michigan,
ROY BLUNT, Missouri (Ex Officio)
ROBERT L. EHRLICH, Jr., Maryland
LEE TERRY, Nebraska
W.J. ``BILLY'' TAUZIN, Louisiana
(Ex Officio)
(ii)
C O N T E N T S
__________
Page
Testimony of:
Arland, David H., Director, Government Relations, Thomson
Multimedia, Inc., on behalf of The Consumer Electronics
Association................................................ 43
Cookson, Chris, Executive Vice President/Chief Technology
Officer, Warner Bros....................................... 24
Courtney, Beth, President and CEO, Louisiana Public
Broadcasting and Chairman, Board of Trustees, Association
of America's Public Television Stations, on behalf of
Association of America's Public Television Stations........ 33
Franks, Martin D., Executive Vice President, CBS............. 17
Parrish, Ronald L., Vice President of Industry & Government
Affairs, Radio Shack Corporation........................... 61
Paxson, Lowell, Chairman, Paxson Communications Corporation.. 21
Tucker, Ben, President, Fisher Broadcasting Company, on
behalf of National Association of Broadcasters............. 65
Weed, Steven B., Chairman, American Cable Association and
President, Northwest Region--Millennium Digital Media, on
behalf of The American Cable Association................... 28
Willner, Michael, President and Chief Executive Officer,
Insight Communications, on behalf of the National Cable
Television Association..................................... 53
(iii)
DIGITAL TELEVISION: A PRIVATE SECTOR PERSPECTIVE ON THE TRANSITION
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THURSDAY, MARCH 15, 2001
House of Representatives,
Committee on Energy and Commerce,
Subcommittee on Telecommunications
and the Internet,
Washington, DC.
The subcommittee met, pursuant to notice, at 10 a.m., in
room 2123, Rayburn House Office Building, Hon. Fred Upton
(chairman) presiding.
Members present: Representatives Upton, Stearns, Deal,
Cubin, Shimkus, Wilson, Terry, Tauzin (ex officio), Markey,
Gordon, Rush, Eshoo, Engel, Green, McCarthy, Luther, Stupak,
DeGette, Harman, Boucher, and Dingell (ex officio).
Also present: Representative Buyer.
Staff present: Jessica Wallace, majority counsel; Hollyn
Kidd, clerk; Andrew Levin, minority counsel; and Brendan
Kelsay, minority professional staff.
Mr. Upton. Good morning, everyone. This is an important
day, and we do know that tip-off time is 12:30. So, Mr. Franks,
we do have you in mind. And I knew Mr. Markey was on the way.
So I thought we would get started.
I would note for the record that we will allow all opening
statements to be a part of the record from both the members as
well as the witnesses before us today but note as well the
House is in session and a number of us serve on multiple
subcommittees. I have a number of them that are meeting today.
So we will probably see members coming in and going out of this
hearing. There is also a lunch with the President today at noon
and tip-off at 12:30. So we will see where things take us.
What we are going to do this morning, first we will have
the opening statements, and we have a brief video. And at that
point, we will hear from the witnesses and subsequently engage
in questions and answers.
Good morning. This is the first in a series of hearings
intended to explore why the television industry's transition
from analog to digital is a little bit off track. And although
I may look a little bit young, I vividly remember some landmark
advancements in TV technology, such as the advent of color TV
and UHF, FM radio maybe on another little band.
Digital TV is yet another amazing technology, which will
significantly enhance the American consumer's viewing pleasure.
Nevertheless, there is a palpable apprehension felt by this
member about what is going to happen to my constituents in
2006, when broadcasters are supposed to return the 6 megahertz
of spectrum which was given to them in order to transition to
digital.
As a member who reads and signs all of my legislative mail,
I can imagine the visual imagery and I don't like what I will
likely see: black or blue screens and constituents red with
anger.
Everyone keeps saying that the problem with the transition
is akin to the chicken and the egg. Well, today we will hear
from a panel of private sector chickens and eggs to get a sense
of what needs to be done. Please know that I do not mean to
belittle neither the complexity of the problems nor the
tremendous burdens facing all of our witnesses as they grapple
with this transition.
I have seen firsthand the enormous costs of the transition
for my local and commercial public broadcasters. I understand
the capacity arguments of my local cable carriers, who opposed
dual must carry during the transition. And I can appreciate the
content providers' need to protect their intellectual property
from Internet piracy.
I know many of my constituents may not be able to replace
their tried and true analog sets right away or be able to
afford the digital ones or set-top boxes at their current
prices, particularly given the lack of HDTV programming, to
convince them to part with their money.
In the final analysis, this is about our constituents, our
consumers. All of our witnesses, all of you serve in that
capacity in some way or another today.
As I mentioned earlier, I remember the advent of UHF. At
the ripe old age of 9, 1962, I must profess that I was not
aware that the Congress had passed the All-Channel Receiver
Act. I suspect my Member of Congress voted against it. I don't
know. He voted ``no'' on everything back then. But I do know
that our family was eventually able to purchase TV capable of
getting UHF channels.
One area which I intend to explore today is whether and to
what extent analogies can be drawn from the UHF experience and
applied to today's digital transition to help move it along.
Along these lines, the FCC, in its January 2001 Report and
Order, in the digital television transition Biennial Review put
out for comment, questions for industries to provide further
comment early next month on the need for a DTV tuner mandate
and its effect on the consumer and the DTV transition.
Moreover, the FCC seeks comment on how to best implement
DTV reception capability requirements. If it were to decide to
adopt a tuner requirement, suggesting one approach would be to
impose any requirement first on percentage of large-screen TVs,
such as 32 inches and larger, because they are typically
higher-priced units where the costs of the components would be
a smaller percentage of the cost of the receiver. The FCC's
query suggests a phase-in of any such requirement over time.
As we focus on this issue, we must explore the cost of such
a requirement to the consumer. I have heard some wildly
different estimates about the cost. I want to try and get to
the bottom of this important question today as well. As a
general rule, I am naturally hesitant to support any government
policy which interferes in the competitive marketplace and
would lead to significant cost increases to the consumer or
significantly limit consumer choice.
Today I hope we will get a better feel for this seemingly
unique market, which is, on the one hand, part of the
wonderfully competitive consumer electronics market but, on the
other hand, inextricably linked to complex and pervasive
government policy. By getting a better feel for the market, I
hope we will be better able to gauge the appropriateness or
need for tuner mandates, like the one floated for comment by
the FCC as a means to speed the transition along.
Having said all of that, the horse is out of the barn on
this transition. All of our witnesses share a responsibility in
turning the old nag into a thoroughbred. We must find
solutions. Today's hearings will assist us in finding them.
I now recognize my good friend from Massachusetts for his
opening statement, Mr. Markey.
Mr. Markey. I thank the Chair very much. This is without
question an historic hearing. The subcommittee has a long
history of working on this issue, which began with a hearing in
1987 on high-definition television and which continued as the
technology evolved into digital television.
The evolution of HDTV from a foreign analog technology into
an American digital technology is one which this subcommittee
closely monitored and at times prodded the Federal
Communications Commission and the various participants toward
progress.
In addition, it became increasingly clear over time that
the DTV standard-setting endeavor at the FCC was more than
about simply creating prettier pictures but, rather,
encompassed a national plan to get the broadcast television
industry into the emerging digital domain in a more robust
multimedia way.
The result of that effort is a standard that is highly
versatile. A broadcaster can use it to show one channel or
several channels of video programming or broadcasters can use a
portion of the bitstream for enhanced data services.
A little over 3 years ago and again last year, the
subcommittee also held oversight hearings on the digital TV
issue. We still have the leftover issues from that last
oversight hearing, which included most of the same issues from
the previous oversight hearing in the previous Congress. While
certain segments of the industry have made some progress and
certain companies merit particular praise, it is quite clear
that we are not remotely close to meeting the transition target
of 2006 at our current pace.
This is not because Congress was irrationally exuberant in
choosing 2006 or about the prospects for the transition to
digital generally. The issues before us are part of a multi-
industry transition that is not marketplace-driven but, rather,
government-mandated.
We may prefer that it be left to the marketplace, but we
must recognize that, whether we like it or not, we are talking
about industrial policy. The broadcasters do not have a choice
about whether they will go digital or not, whether they will
put up new towers or not. They must do so.
The government is also eager to move the transition along
in order to free up spectrum for new services. We will
inevitably have budget proposals for spectrum sales to pay for
tax cuts the House approved last week later this spring. As a
result, the government must offer more than the hortatory
rhetoric in moving things along. The situation we have right
now is unfair to everybody.
The FCC must work with the industry on interoperability
issues and should fulfill the congressional mandate from the
Telecomm Act to assure a competitive marketplace for set-top
boxes. The Commission must also look again at the digital must
carry rules, especially as they affect noncommercial
broadcasters.
Chairman Powell's recent statements were particularly
heartening on this subject. In addition, there is no question
that we need more digital programming so consumers who buy
these expensive TV sets have something to see.
In the 1997 Budget Act, Congress approved a series of very
ill-considered budget-driven spectrum options of the
broadcasters' analog spectrum, as mandated by Congress.
According to that directive, the FCC was supposed to auction
off spectrum in the areas now occupied by Channels 60 to 69.
Obviously stations occupying these channels have yet to leave
and are unlikely to vacate such spectrum any time soon, at
least not unless they are heavily compensated for leaving.
In addition, we are also scheduled to sell the rest of the
analog spectrum, even though there is no longer a soul in the
industry who thinks this transition will be over in 2006.
During those deliberations in 1997, I offered an amendment
based upon the 1962 All-Channel Receiver Act that spurred the
development of the UHF television industry to ensure that
starting next year, all TV sets in the United States had to be
at least capable of displaying a digital signal. Think about
it. Last year we sold over 30 million analog-only TVs.
Now, my amendment wasn't adopted. I lost at something like
33 to 7. Many of the people who are sitting out here today were
sitting out here on that day ensuring that the Markey amendment
would not pass.
It is kind of like an Agatha Christie mystery, and I don't
know exactly how many hands were on it but many out here. And
those that couldn't get their hands on it on the attempt to
kill that amendment were failed in the attempt to do so because
there was no more room left on the knife. But, nonetheless, we
are back here 4 years late, no additional progress made toward
the goal of creating a marketplace of digital TV sets.
So we continue to talk about the national need to recapture
the analog spectrum at the earliest possible date. And
policymakers will be wringing their hands about the slowness of
the transition and the inability to capture all of the tax
revenues from auctioning off the original analog spectrum, even
as consumers continue to purchase analog-only receivers through
the year 2006.
My hope, Mr. Chairman, is that in the near future, we can
recapture in this committee telecommunications, policymaking,
and excise it from the budget cycle. Again, I thank you for
calling this very important hearing. We have an opportunity to
create telecommunications policy, not budget policy, and to
advance the real technology advancement that this country
should have to lead the rest of the world.
Thank you.
Mr. Upton. Thank you, Mr. Markey.
I would recognize now the chairman of the full Committee on
Energy and Commerce, Mr. Tauzin.
Chairman Tauzin. Thank you very much, Chairman Upton. I
want to thank you for calling this hearing because getting the
transition to digital back on track is one of the most
important agenda items of this subcommittee. And this hearing
is critical because we will hear from the private sector their
perspective of why the transition is off track.
Obviously transitioning to digital is just another way of
enabling television to talk the language of computers. The more
important implication is that transitioning to digital is going
to be the way most Americans will experience broadband. It is
going to be the introduction of broadband services to the vast
majority of Americans, who may not otherwise experience it over
the ordinary process of the Internet and a computer. And
catapulting the television into the Internet broadband age is a
critical component of connecting America for the high-tech
future that every American should enjoy. So I want to thank you
all for sharing your perspective with us.
When the industry talks to us about the transition to
digital, every segment explains to us what they are doing and
how they efforts are being hamstrung by the action or inaction
of some other industry. Equipment manufacturers have developed
and shipped an increasing number of displays, set-top boxes and
integrated receivers, but they argue that consumers won't buy
the DTV equipment in sufficiently robust numbers until there is
more and better programming out there for viewers to look at,
something different than the redundant analog programming that
they already see today.
Broadcasters, whom I would like to note have 184 stations
now up running in digital, in turn, say they are developing
exciting new programs, highlighting their industry's new
leader, CBS, whom I would like to commend, by the way, but they
say more won't be developed until there are more receivers in
Americans' homes, until those receivers are fully interoperable
with cable and until adequate copyright protections are in
place.
In addition, broadcasters are concerned that even if they
do develop this exciting, new programming, it won't reach
consumers because cable operators are not obligated to carry
both the analog and digital signals during the transition, nor
are they required to carry more than the single stream of
programming when a programmer does eventually choose to use the
spectrum to multicast.
The cable industry, whom I note has quietly been upgrading
their systems to digital and producing some HDTV programming,
argue that they should enjoy the benefits of their upgrades,
not the broadcasting industry.
The people tell me it is a classic chicken and egg
argument. Well, as a fervent supporter--and I hope we all are--
of this transition to digital television, I think we should be
deeply afraid that every industry will continue to blame the
other and in the end, the proverbial egg is going to be broken
on the heads of consumers.
Let us first recognize the deep commitments all the
industry players are bringing to this table and also recognize
that if we can't somehow fashion a more constructive,
cooperative effort, sooner or later, we are going to have some
real problems on our hands in meeting the deadlines we have
established.
I am interested in hearing from the witnesses how consumers
are going to be required to pay for the new equipment that is
going to let them receive these new signals. I am interested in
learning about the choice of equipment packages that consumers
will be able to enjoy. How many set-top boxes, for example,
will a consumer with multiple television sets in their home be
required to purchase?
One family's approach to digital television may not be the
same as another. I would like to ensure that families enjoy the
same flexibility to embrace these new systems as we have
already provided to the broadcasters in deploying them. It is
for this reason, frankly, that I think a tuner requirement is
wrong. I think it imposes an acceptable high cost on consumers
with little flexibility and no guarantee that they are going to
get additional programming sufficiently exciting and new to
watch that justifies the cost.
I am also concerned about receiver standards. I truly think
we could end up with a race to the bottom in terms of
technology if we are not careful here.
I agree with the FCC that marketplace dynamics are going to
continue to bring improvements in receivers, but we would like
to know if those dynamics are working and how well they are
working. As you are aware, in 1997 Congress designated
broadcast spectrum for pre-high-definition programming.
Obviously we set the year 2006 or until 85 percent of the homes
had digital television at a time when they are supposed to
return the analog spectrum back to the government for other
uses.
I think it is time for us to be concerned about this soft
deadline, and I think we should begin to perhaps consider
hardening that deadline. But if we do so, we have to be assured
that consumers will be able to go out and purchase various
receivers and set-top boxes and HDTVs at reasonable and
declining costs so that consumers will have an easy transition
to more and better programming as part of the deal.
I want to remind everyone that we didn't pluck the amount
of spectrum we loaned to the broadcasters out of thin air
again. The six megahertz was designed to make sure that
Americans got a chance to see HDTV. That means that somebody
ought to carry it to them and broadcast it to them. If they
don't like it, they ought to make that decision, not us. And if
there is going to be multicasting, we need to talk about how
many of those program channels will be carried by what systems
and whether consumers will be getting their dollar's worth in
this process as we have made this spectrum available to people.
I also want to note that there is strong impact here for
public broadcasters who have been busily engaged in developing
genuine DTV business plans that have heavily relied upon
multicasting for educational informational programs. We need to
keep those in mind as we go forward.
I don't want to mention again the importance of urging the
5C companies and the content community to work together to make
sure that not only are digital programs protected when they are
delivered by cable but digital programs are also protected when
they are delivered over the air to homes who receive over-the-
air broadcasting.
The problem is if the best program is protected only on
cable, we all know what Americans are going to receive over the
air. It will not be the best. It will be the worst. It will be
the dregs, the old reruns that we have seen a dozen times.
So this is just the first of a series of hearings to see if
we can get this transition back on track. Mr. Chairman, it is a
critically important series of hearings. It may require the FCC
to make some new decisions, and it may require us to legislate
and to make some new law. But we won't know that until we
understand what is wrong with this process today and how we
might help to fix it.
Mr. Chairman, that issue is in good hands with you, Mr.
Markey, and this committee. I commend it to your charge, and I
wish you well.
Mr. Upton. I would just note for the record that we are
going to make sure that Mr. Markey doesn't offer a flood
amendment, as he did a couple of years ago.
Mr. Boucher?
Mr. Boucher. Thank you very much, Mr. Chairman. I want to
begin this morning by commending you for making the subject of
the digital TV transition an early point of discussion for this
subcommittee.
As we will hear from several of our witnesses this morning,
the difficulty in reaching consensus on copy protection issues
has been a major impediment to the availability for television
broadcasts of high-value digital content. I was pleased to hear
the chairman of the full committee mention that concern. I am
going to devote some more extensive remarks to it this morning.
I realize that the subcommittee is planning to have a
hearing on this precise set of subjects during the course of
the next several months, but given the importance of the copy
protection issues to the digital TV transition, I intend to
offer a few remarks this morning in order to put these concerns
in perspective.
Simply put, consumers want content. They want high-value
television programming. They need a reason to spend large sums
of money on digital television sets. And without access to
original high-value programming, they are going to have little
incentive to purchase these pricey digital television receivers
and monitors. Fortunately, I am pleased to note this morning
that intense efforts are currently underway to resolve the copy
protection challenges and make high-value programming generally
available.
For their efforts to resolve these challenges, I want to
commend the Warner Brothers Studio and Sony Pictures and the
so-called 5C companies comprised of Intel, Hitachi, Panasonic,
Sony, and Toshiba for the agreements that they are now in the
process of forming. That will simultaneously make high-value
programming available and ensure that with the longstanding
expectations of consumers of television programs that they
should be able to make a reasonable number of home recordings
for time shifting and other purposes of personal convenience
are respected.
These companies have signed a memorandum of understanding
to implement the technology that will prohibit copying not
authorized by the agreed-upon home recording rules. And I am
told that the companies are on the verge of a definitive
licensing agreement. Indeed, this is a welcome development.
If a final licensing agreement is signed by these companies
and if the other motion picture studios, in addition to Warner
Brothers and Sony Pictures, follow a similar course, then
approximately 85 percent of the households that receive digital
television programming will receive programming that is copy-
protected under the terms of the licensing agreement.
That 85 percent of homes, as Chairman Tauzin suggested, are
the homes that receive television either by cable or by
satellite. Their signals pass through a set-top box or other
similar device that can implement the agreed-upon 5C copy
protection technology and block copies that are not authorized
under the recording rules.
The remaining 15 percent of homes are those that do not
receive their television by means of cable or by satellite.
They receive television by an outside antenna or by the use of
rabbit ears. They are receiving over-the-air television. And
since their signals do not pass through a set-top box or
similar device, there is no opportunity given current
technology for the agreed-upon 5C copy-blocking mechanism to be
applied to those over-the-air signals. So they wind up being
broadcast in the clear.
This morning I hope that our witnesses will discuss how
much of a barrier to the arrival of high-value content for
over-the-air broadcasts this current inability to implement the
5C technology for those broadcasts poses.
I am also interested in the prospects for the arrival of a
watermarking technology that can be encoded on these over-the-
air television broadcasts and which will then prohibit copying
beyond the agreed-upon copying rules. When that technology is
available, how can it be implemented? Is there the prospect for
an industry-wide agreement among the content providers and the
manufacturers of digital video recorders and computers similar
to the 5C agreement that is now in the process of being formed
or, in the alternative, is Congress going to be called upon to
enact a statutory mandate that the digital video recorders and
the computers respond to the watermarking technology and block
unauthorized copies.
I would note that we have a model for that in Section
1201(k) of the Digital Millennium Copyright Act, which
establishes this kind of regime with regard to analog copies.
Are we going to be called upon to do the same kind of thing
with regard to digital copies with respect to over-the-air
broadcasts?
And, finally, I would appreciate our witnesses responding
to this question: What role, if any, should Members of Congress
be playing today in order to help address the problems
associated with these 15 percent of television households that
receive their broadcast programming over the air?
Mr. Chairman, this is a complex set of issues, well-defined
by you and Mr. Markey and by the full committee chairman. I
once again want to commend you for convening this conversation
as we attempt to play a constructive role in helping to resolve
the difficulties. And I will look forward along with you to the
testimony of our witnesses. Thank you.
Mr. Upton. I appreciate the gentleman's statement.
Mr. Stearns?
Mr. Stearns. Thank you, Mr. Chairman. Again, let me
compliment you for holding this series of hearings. This is
particularly useful because I think this is perhaps the first
time we have had the whole family together here. And hopefully
this won't be the last time that we can hear from all of them
together.
Television has played a critical role in the United States
in the second half of the Twentieth Century. And digital
television and this technology hold great promise for the
consumer, allowing for the delivery of brilliant, high-
definition, multiple, digital, quality programs and ancillary
and supplementary services, such as data transfer. However,
making this new technology a reality does not come without its
sets of challenges and risks, many of which are going to be
explained by our witnesses today.
As it stands now, there is a lot of blame being pointed by
each of the folks in these industries. And, of course, we are
here to try and understand this and understand why the
transition to digital television is not taking place as we
originally envisioned it in the Telcomm Act of 1996.
The FCC just recently released its report and order on
digital must carry and digital television in January. And many
would argue outstanding issues such as must carry, copyright
protection, interoperability, and DTV-set standards still pose
obstacles to a smooth and seamless transition. Furthermore, the
administration's budget blueprint released last month certainly
raises many eyebrows in these halls of Congress in that area.
Mr. Chairman, the transition to digital television is a lot
like getting into heaven. Everyone knows what it takes to get
there, but no one wants to do what it takes and sacrifice. We
all recognize the challenges that cable operators,
broadcasters, and content community manufacturers and retailers
face in making digital television a reality and mainstay.
However, we are late in the game. I ask all of the players in
different industries to work together in order to make this
transition.
This is a family we have before us. And, like any family,
there are folks that don't get along. This is not a
dysfunctional family, Mr. Chairman. So I think we can work it
out. We just need a lot of cooperation, hard work, and patience
to ensure digital TV services become a reality, as we all
envision.
I do not think at this stage of the game it is productive
to blame but to try to explain and try to work through this so
that ultimately the benefit comes to the consumer.
And, Mr. Chairman, I want to thank you again for this
hearing and also to recognize while not a constituent but from
my home State of Florida, Mr. Paxson, who is Chairman of Paxson
Communications Corporation.
Mr. Upton. Thank you, Mr. Stearns.
Recognize the ranking member of the full committee, Mr.
Dingell, for an opening statement.
Mr. Dingell. Thank you, Mr. Chairman, and thank you for
holding the hearing today.
There is no question that the conversion to digital
television is one of the most important issues facing this
committee. It will remain so for a long time.
The outcome of this transition is sure to affect the
economic well-being of a wide cross-section of industry, most
of whom appear to be in this room today. But just as important
are the people who will be affected who are not in the room
today.
Unlike some of the other issues this committee deals with,
the success or failure of digital television literally will be
felt in every living room across the United States. It is an
issue that none of us can afford to mishandle. Unfortunately,
we may be on the verge of doing just that.
We have a fine panel here of distinguished witnesses. And I
salute them, and I greet them. And I know many of them will be
telling the committee that we are in a fine mess. I agree with
them on that statement. But I also believe that the blame for
this mess lies not in any particular segment of the industry.
In fact, I think it is likely that many of you have done the
best to play the bad hand that you have been dealt.
This committee has always strived to craft sound
telecommunications policy that both strikes a balance between
the competing interests of industry players and confers the
greatest benefit on the public at large. Unfortunately in this
case, the budget gains and the politics converged in a way that
may have jeopardized each of these important goals.
For purely political reasons, the Budget Act of 1997
established a wholly arbitrary date, I want to stress that,
wholly arbitrary date, December 31, 2006, for the completion of
the transition to digital television. Despite the protests of
many of the members of this committee, Congress decided to
completely ignore the dictates of the marketplace and, instead,
to impose its own judgment on how quickly consumers would
accept this new technology. That certainly is at variance with
any logic.
As a result, we are here today trying to make the best of a
bad situation, which is largely of the creation of the politics
inside the Congress. It may be that most industry players are
genuinely sincere in their efforts to make this conversion work
and are peddling as fast as they can to beat the clock. The
unhappy truth, though, is that some impediments may be too
great to overcome, at least without substantial help.
There are some who say that government should not impose
itself to help resolve any of the natural problems and
disagreements that are putting this transition at risk. They
argue that the marketplace should drive the outcomes to key
questions that can be discussed today, such as digital program
carriage, cable interoperability, television receiver
standards, and copyright protections. I would simply observe
that the Congress made this mess and probably made that
impossible.
It is possible under proper circumstances that these
arguments for an unfettered marketplace might have then some
merit, but the situation in which we find ourselves is far
different than normal.
The government has chosen a date certain for digital
television conversion, after which existing analog sets just
won't work. By necessity, all of the critical questions that
are key to a successful conversion must be firmly resolved and
in place well in advance of the date.
The hands-off approach is made even more difficult because
the very existence of a date certain in the law creates an
imbalance in the bargaining power between the parties. It is an
imbalance that would not persist if the market were left to its
own devices from the very beginning, but the market was not
permitted to follow its own course and some degree of FCC or
congressional intervention may now be necessary if we are to
meet the deadlines contained in the law.
These are difficult, thorny, and harsh issues, both tightly
technical and politically contentious. Clearly they are not the
kind of issues that government decides best and it would be
better if private negotiations and agreements could be struck
to mitigate the need for the government to intervene.
Whether those events can go forward, then, through
negotiations inside the industry is open to question and
largely is going to be the responsibility of the industry to
decide for us if they cannot, then we must. In fact, I am not
convinced that any of these problems would be resolved by the
government in a way that strikes precisely the right balance.
Some segments of the industry would be sure to leave the
committee room or the FCC with significantly less than they
bargained for.
The time is running out. An action, whether public or
private, needs to be taken with all appropriate haste. I hope
that all parties here today and the industries they represent
will redouble their efforts to reach private consensus on these
major outstanding issues and to do so quickly. Otherwise it
seems inevitable that the government efforts to speed the
transition will be necessary with all of the clumsiness and
possible misfortune that that obtains.
My thanks to the witnesses today for appearing and to you,
Mr. Chairman, for holding this hearing. It is an important one
which I hope will be the first of a series on this important
subject. I yield back the balance of my time.
Mr. Upton. Thank you, Mr. Dingell.
Mr. Shimkus?
Mr. Shimkus. Just briefly, Mr. Chairman.
I want to welcome the panel. I am from a large family.
Large family gatherings can sometimes be contentious. And it
may happen this way again today.
Another thing that we are not really discussing, although I
think my colleague Mr. Boucher highlighted it, was: When will
we fall into the Napster-like approach on broadcast television
signals as we go to digital? I think that is a valid concern
and maybe something we obviously should be addressing now prior
to having to address it; i.e., in the aspects of what we have
to deal with in a Napster continuum.
So that is a brief opening statement, Mr. Chairman. I want
to hear the panel. I yield back my time.
Mr. Upton. Thank you.
Ms. DeGette?
Ms. DeGette. Mr. Chairman, at the request of the Chair, I
will submit my opening statement for the record.
Mr. Upton. Thank you.
Mr. Terry?
Mr. Terry. Waive.
Mr. Upton. Ms. Eshoo?
Ms. Eshoo. Thank you, Mr. Chairman, for holding the
hearing. And welcome to our witnesses that are here today. It
is a distinguished panel, and we look forward to hearing from
you.
During the administration of President Reagan, the FCC
initiated a plan that would allow the television broadcast
industry to make a transition from analog to digital
television. This was in response to the requests of
broadcasters for additional spectrum so that they could bring
the wonders of high-definition television to the viewing
public.
In 1996, the Telecommunications Act, which we wrote,
brought this picture into sharper focus. The act provided the
FCC with guidelines to regulate the additional spectrum that
broadcasters were given for use during the transition period.
Today we are working toward a target date of 2006 before
the broadcasters will hopefully have completed the transition
to digital television in certain markets. Not until then will
the FCC be able to reacquire the analog spectrum and assign it
to the highest bidders at auction.
I recite this time line because even after such a
substantial period of time has been devoted to HDTV, I can see,
we can see, that we are faced with even tougher issues, which
must be resolved before we can get this technology to the
public. As I understand it, with only 185 out of 1,600 stations
transmitting digitally, we have a long way to go.
As has been stated by some of my colleagues, the 2006 date
was an arbitrary one. It was not something that the
broadcasters brought to us, but, rather, we imposed for an
entirely different reason. It was really to plug up the holes
in the Balanced Budget Act so that auction could take place of
spectrum and that the money would be raised to plug up these
holes.
Now, I can't help but observe that the only place I have
ever seen HDTV is in this hearing room or at a national
convention in a booth for us to observe. I understand that
there is some progress on the part of CBS and others, and I
congratulate them for that. But in terms of the history and the
race for this progress, something is not working. I don't have
a relative or a friend, nor do I own one of these sets. So
consumers are not picking up on this. And meanwhile 2006 seems
to be moving closer and closer.
Obviously the manufacturers, the cable operators, the
broadcasters have to work together. I agree with Mr. Dingell. I
don't really know whether it is Congress that is going to
settle this dispute. You may end up getting something that you
really don't like once the Congress steps into it. But it is
important.
We know that Japan was our target. They seemed to be
getting ahead of us. Where is Japan now? Where are other
markets now? Was this a good idea? Is it still a great idea? Is
it a must carry idea in terms of the consumer? And what do
broadcasters want not having gotten to the goal that they set
down at one time? We have to speak very frankly about this
because I think if we don't, that this maybe rush to
legislative judgment is not going to be a great fit of the
people that are players in this.
So I look forward to this discussion. I know that there are
set-top box issues. That is something that makes my ears perk
up since I have a bill that then became an amendment and part
of the Telecommunications Act. It is not exactly what the
industries are talking about now, but it is something that I
have a keen understanding and awareness of. So I hope that the
industries are prepared to tell us whether this is, at least in
my view, still a great idea and why the consumers are not
really running huckledy-buck to get this. Why is it that we are
still seeing the wonders of HDTV in our hearing room and why it
is not in living rooms?
So thank you, Mr. Chairman, for holding this hearing. It is
an important one. And this is quite a sterling past of people
that are before us. I look forward to hearing from them. Thank
you.
Mr. Upton. Thank you.
Ms. Cubin?
Ms. Cubin. I will submit my opening statement.
Mr. Upton. Okay. Ms. Harman?
Ms. Harman. Thank you, Mr. Chairman.
I again as a new member of this committee am delighted to
participate in hearings on this subject. I must say that before
I ever ran for Congress, my predecessor Mel Levine used to
claim he was a leader in the Congress on HDTV. I assume he was
a leader in Congress. That was a long time ago. But the issue
is still here, making the point that we haven't really gotten
very far.
There has been some progress. For example, a witness before
us today, Mr. Franks, a very good friend of mine, represents
CBS. CBS is now broadcasting the U.S. Open Tennis Tournament in
digital for the second year in a row.
I understand that consumer electronics manufacturers
project more than $2 billion worth of HDTV products will be
produced and sold this year and cable operators have invested
billions to upgrade infrastructure and cable content providers,
like HBO, offer a broad selection of high-definition
programming. Nonetheless, as many have said before me, the
progress is uneven, the results are mixed.
I want to associate myself with the comments of the
chairman of the full committee and Mr. Boucher and others about
the retransmission of over-the-air broadcast signals. I think
that Mr. Tauzin is correct that if we don't figure out a system
to protect those signals the way we are protecting the
retransmission of cable signals, there will be a race to the
bottom. And the content offered will be diminished. If the
content is poor, there won't be much interest in embracing the
new technology.
So we have a challenge here. We have had it before in other
areas. And that is to encourage innovation, new technology, but
at the same time to protect intellectual property rights.
I look forward to today's hearing. I look forward more to
trying to figure out what roles government should play and what
roles it should not play as we move forward. Thank you, Mr.
Chairman.
Mr. Upton. Mr. Gordon?
Mr. Gordon. As has been pointed out a number of times
today, this is a very important meeting. We have an excellent
panel. And I will follow your instructions and submit my
remarks for the record and look forward to hearing from this
panel.
Mr. Upton. We will give you extra credit another day.
Mr. Stupak?
Mr. Stupak. Mr. Chairman, I need the extra credit. So I
will pass.
Mr. Upton. Okay. Doubt extra credit for Michigan.
Mr. Luther?
Mr. Luther. Mr. Chairman, I will submit for the record,
thank you.
Mr. Upton. Same for the Midwest. At this point, again, I
will remind all members they have unanimous consent that all
opening statements be made a part of the record.
I would like to recognize Mr. Arland from Thomson
Multimedia on behalf of CEA to give us a brief demonstration.
Go ahead.
Mr. Arland. Thank you, sir. I am going to step away from
the witness table so that I can describe to you what you are
about to see. We have brought with us today from the Consumer
Electronics Association 4 of the more than 200 digital
television products that are available at retail stores
throughout the country today. And I assure you as the seller of
RCA products, yes, they are available in thousands of
locations. There is a detailed list in the DTV guide that is at
your table that shows you what all of these products are.
Starting here, this is the RCA Regency 100. This is the
industry's most popular and most affordable HDTV receiver set-
top box. We have a set up here that was introduced about 1\1/2\
years ago for $649. We have since dropped the price about 15
percent. So it sells for $549 and is the industry's most
affordable receiver today.
I have got it hooked up to a television that came out of a
Philadelphia home. This is the 1987 RCA 26-inch console TV,
much like my parents had in their house. I am sure many of you
have one of these in your basement. And we wanted to
demonstrate to you today how digital television can be received
and converted and shown in analog. I think you will be very
pleasantly surprised. It is probably the best signal this
television has ever received.
Stepping up one point, come with me over here to this
product. This is a fully integrated wide-screen 38-inch HDTV.
And it is selling now across America in retail stores, also
from my company, from RCA. It has all the technology, not only
for over-the-air broadcasting but also for direct TV service as
well. It works with set-top boxes. It does also work with many
cable systems.
We have two other models: a Panasonic and a television
here. And Mitsubishi is a set-top box. There are other products
as well receiving over-the-air broadcasting as well as direct
TV high-density service. In both of these sets is utilize
random technology called ELTV. Like Panasonic and Mitsubishi,
my company is also working on a new technology. So we see a
wide variety of products.
We are going to show you now a short demonstration, two or
three videos from the CBS network, unquestionably the leader in
the data team. We were very proud of that. We are going to
sponsor some of the programs.
And then Terry Bryant from WETA locally will introduce the
programming as I show you. Enjoy it.
[Video shown.]
Ms. Bryant. Good morning. I am Terry Bryant, Senior Vice
President of Broadcasting for WETA. Take a look.
[Video shown.]
Ms. Bryant. What we are going to show you this morning is a
demonstration of a multicast that we do on WETA. Actually,
today we have been playing back the contents of a server, but I
have been told that there is at least one WETA viewer on the
committee. And that person knows that we multicast every day on
WETA.
There is really no mystery mounted to it, but before I get
to that, I would like to take you back 40 years to when Mrs.
Elizabeth Campbell signed WETA TV on the air for the very first
time. We had one analog black and white program server.
Now fast forward 40 years. And this is Elizabeth Campbell
signing on WETA digital, both color high-definition wide-screen
TV and surround sound plus the ability to offer multiple
broadcast servicing.
So that changed in 4 years, but one thing remained the
same. And that was our mission to serve the interests of the
community where we live. At WETA, we serve northern Virginia,
Maryland, and the District. So we have a unique audience to
serve.
Unlike the analog world with our digital bandwidth, we can
literally slice and dice the bandwidth and come up with
multiple servers. So let us take a look.
The first thing that comes up is our rendition of an
electronic program guide. This will help your data base with
services and the committee will receive a copy of it. This is
how we envision a multicast base in real time.
Of course, the services that are outlined here were
developed with feedback from our digital viewers. I started
doing multicast demos with our retail partners. They were not
shy. They just could not figure out what the best service was.
WETA Kids is pretty self-explanatory. WETA Plus is our
education and our lifelong learning service as a new initiative
of WETA to address the work readiness crisis of northern
Virginia.
The way we walk through this service, all four services are
here all the time. And all I am doing is I am consulting with
this team.
There is a little icon on top of the screen. D stands for
data tasking. WETA recently started data tasking thanks to our
partnership with private trusts. It is a companion program to
Dragon Tales. And when you watch it on your computer, it looks
just like a full-motion television program. At the same time
that I can data task Parent Tales, I can also transmit text.
And that text can be activity pages for the kids to do with
their parents. You can transmit in multiple languages.
These programs at WETA would not be possible without the
support of our members and also our technology partners. None
of those partners are here today. WETA could not have done this
without the help of folks like Dialectric, who loaned us our
very first antenna. And once we found out we could borrow
$50,000 worth of equipment, all bets are off. We went out and
asked for other $10,000 partners. We also have retail partners
here in Washington and northern Virginia. We borrowed display
set-top boxes from them.
But still WETA has made a huge investment and have had
terrific feedback. There are a lot of digital viewers in this
area. They contact me on a regular basis. They keep me honest,
and they keep helping me to take digital development to
everything it can be.
Thank you.
Mr. Upton. Thank you.
Mr. Buyer. Mr. Chairman?
Mr. Upton. Mr. Buyer?
Mr. Buyer. I ask unanimous consent to speak out of order.
Mr. Upton. Without objection.
Mr. Buyer. I would like to thank Mr. Arland for coming. The
high-definition television that you see and the set-top box
digital receiver are manufactured in my district in Indiana. So
I want to thank Thomson for coming today and for giving this
display to the committee. Please extend our compliments to the
workers that, in fact, are leading the way in this multimedia
and whether it is information, data, video. I appreciate it.
I yield back my time, Mr. Chairman. Thank you.
Mr. Upton. Thank you.
Well, we are now ready to hear from our witnesses. This
morning we are going to hear from: Mr. Martin Franks, Executive
VP of CBS; Mr. Lowell Paxson, Chairman of Paxson
Communications; Mr. David Arland, Director of Government and
Public Relations for Thomson Multimedia; Mr. Steve Weed,
President of Millennium Digital Media; Ms. Beth Courtney,
President and CEO of Louisiana Public Broadcasting; Mr. Michael
Willner, President of Insight Communications on behalf of the
National Cable TV; Mr. Chris Cookson, Executive VP of Warner
Brother; Mr. Ben Tucker, Executive VP for Broadcast Operations
from Fisher Broadcasting on behalf of the NAB; and Mr. Ronald
Parrish, VP of Industry and Government Affairs for RadioShack.
Thank you all for coming.
I understand we are going to have a vote in about 10 or 15
minutes. So we are going to go, but it will be our last vote of
the day. We will go as far as we can and adjourn and come back.
Mr. Franks, welcome.
Mr. Franks. Thank you, Mr. Chairman and members of the
committee.
STATEMENTS OF MARTIN D. FRANKS, EXECUTIVE VICE PRESIDENT, CBS;
LOWELL PAXSON, CHAIRMAN, PAXSON COMMUNICATIONS CORPORATION;
CHRIS COOKSON, EXECUTIVE VICE PRESIDENT/CHIEF TECHNOLOGY
OFFICER, WARNER BROS.; STEVEN B. WEED, CHAIRMAN, AMERICAN CABLE
ASSOCIATION AND PRESIDENT, NORTHWEST REGION--MILLENNIUM DIGITAL
MEDIA, ON BEHALF OF THE AMERICAN CABLE ASSOCIATION; BETH
COURTNEY, PRESIDENT AND CEO, LOUISIANA PUBLIC BROADCASTING AND
CHAIRMAN, BOARD OF TRUSTEES, ASSOCIATION OF AMERICA'S PUBLIC
TELEVISION STATIONS, ON BEHALF OF ASSOCIATION OF AMERICA'S
PUBLIC TELEVISION STATIONS; DAVID H. ARLAND, DIRECTOR,
GOVERNMENT RELATIONS, THOMSON MULTIMEDIA, INC., ON BEHALF OF
THE CONSUMER ELECTRONICS ASSOCIATION; MICHAEL WILLNER,
PRESIDENT AND CHIEF EXECUTIVE OFFICER, INSIGHT COMMUNICATIONS,
ON BEHALF OF THE NATIONAL CABLE TELEVISION ASSOCIATION; RONALD
L. PARRISH, VICE PRESIDENT OF INDUSTRY & GOVERNMENT AFFAIRS,
RADIO SHACK CORPORATION; AND BEN TUCKER, PRESIDENT, FISHER
BROADCASTING COMPANY, ON BEHALF OF NATIONAL ASSOCIATION OF
BROADCASTERS
Mr. Franks. My name is Martin Franks.
Mr. Upton. Let me just interrupt just for 1 second. your
statements are made as part of the record in their entirety. We
would like to limit your remarks to no more than 5 minutes.
Extra credit for those who finish early.
Mr. Franks?
Mr. Franks. I need all of the extra credit I can get, Mr.
Chairman.
I am the Executive Vice President of CBS, where one of my
responsibilities is overseeing our transition to digital
television.
Rumors of the demise of digital television are premature.
Great challenges are still before us. But I am absolutely
convinced that if the industry is involved and the government
exercises diligence, cooperation, and patience, we will deliver
to the American people a marvelous improvement on what is
already one of their favorite products: the news, public
affairs, sports and entertainment programming that television
brings into their living rooms each day.
Do those who proclaim the digital transition a failure know
that CBS is halfway into its second season of offering the
preponderance of its prime time entertainment schedule in
digital high-definition? This season 18 of CBS's 22 hours of
weekly prime time network programming are being broadcast in
digital high-definition. Are they simply unaware that we are
also in the second year of offering our viewer high-definition
broadcasts of the U.S. Open tennis championship and the AFC's
football championships, including this year's Super Bowl?
Next month we will return to Augusta for our second HD
broadcast of the Master's. And with the opening today of the
NCAA men's basketball tournament, I am pleased to be able to
remind the naysayers that we will once again broadcast this
year's Final Four in high-definition. And all of CBS' high-
definition programming in transmitted in the 1080I format,
high-definition's highest definition.
As I said at the outset, we do face daunting challenges
that must be addressed and overcome before we can be completely
assured that the transition to digital will be a success. It is
also worth noting at this point that the digital transition is
infinitely more complex than the most recent but inapt
comparison, the conversion to color.
Color was broadcast within the same frequency as black and
white, and sets were compatible with one another. Moreover,
there were many fewer players, no cable industry as we know it
today, no computer industry, just three networks. And the only
piracy seen in the industry starred Errol Flynn.
By comparison, the digital transition must be pulled up
within this viciously competitive industry sector, where the
stakes are enormous, the technology is infinitely more complex,
and where there are many, many more moving parts and there is a
fundamental paradox that must be confronted about the
transition.
The government must decide what approach it wants to adopt
regarding the remainder of the digital transition. At the
moment it has a contradictory stance. On the one hand, former
FCC Chairs Reed Hundt and Bill Kennard established as one
pillar of government policy an oft-stated preference for
leaving most of the messiest details of digital television to
the marketplace. At least so far government has done far less
than it might have to help resolve the issues of cable
carriage, copier protection, interoperability, zoning, and
other local conflicts.
There is nothing wrong with leaving those issues to the
marketplace so long as one remembers that the marketplace is
not necessarily prompt or consumer-friendly in resolving such
issues. At the same time that some policymakers have proclaimed
the virtue of leaving these difficult and contentious issues to
the marketplace, the government has also dealt itself a huge
stake in the rapid completion of the transition so the analog
spectrum can be reclaimed and auctioned in the near term. I am
not sure the government can have it both ways. Left to the
marketplace, digital transition will happen, but it will take
time. And there will be dislocations very likely, including
some from viewer consumers.
On the other hand, if auction revenue in the near term is
paramount, government will have to play some greater role, at
least stepping up its job owning, to help resolve some of the
outstanding issues.
The problems we face can be solved. The affected industries
must redouble their efforts to cooperate. And the government
must strike a better balance between a hands-off policy and
heavy-handed regulation that might stifle innovation or even
kill the whole transition.
But surely that balance can be struck. This committee's
ongoing oversight, along with a slightly more hands-on FCC to
keep the affected industry players focused, may well be enough.
Mr. Chairman, one final point. CBS is doing everything
within our power to advance the transition. We are doing so at
considerable cost. And our current return on investment is
small. But we welcome the chance we have been afforded to
transition to digital.
Over-the-air broadcasting is too important to the culture
of this country to allow it to become a marginalized analog
archipelago in a rapidly advancing digital ocean. That is why I
do not understand the repeated suggestions that loaning
broadcasters six megahertz of digital spectrum to effect this
transition constitutes a giveaway.
Without such a loan, there simply is no way to transition
to digital while still serving the overwhelming number of
American families who will continue to rely on analog
television to deliver their favorite programs for the
foreseeable future.
That is no giveaway. It is responsible and farsighted
public policy that ensures the American people will have the
analog over-the-air broadcasts they have come to know and count
on until they are ready and able to upgrade to the wonderful
new product that is digital television.
Thank you.
[The prepared statement of Martin D. Franks follows:]
Prepared Statement of Martin D. Franks, Executive Vice President, CBS
Mr. Chairman, my name is Martin Franks. I am the Executive Vice
President of CBS where one of my responsibilities is overseeing our
transition to digital television.
Rumors of the demise of digital television are premature. Great
challenges are still before us, but I am absolutely convinced that if
the industries involved, and the government, exercise diligence,
cooperation and patience, we will deliver to the American people a
marvelous improvement on what is already one of their favorite
products: the news, public affairs, sports and entertainment
programming that television brings into their living rooms each day.
Do those who proclaim the digital transition a failure know that
CBS is half way into its second season of offering the preponderance of
its prime time entertainment schedule in digital high definition? This
season, 18 of CBS's 22 hours of weekly prime time network programming
are being broadcast in digital High Definition. Are they simply unaware
that we are also in the second year of offering our viewers High
Definition broadcasts of the U.S. Open Tennis Tournament and the AFC
football championships, including this year's Super Bowl? Next month we
will return to Augusta for our second HD broadcast of the Masters, and
with the opening today of the NCAA men's basketball tournament, I am
pleased to be able to remind the naysayers that we will once again
broadcast this year's Final Four in High Definition. And, all of CBS's
digital high definition programming is transmitted in the 1080I format,
High Definition's highest definition.
Our HD broadcasts are currently offered by thirty-seven of CBS's
owned or affiliated stations covering just under one half of the
nation. By the end of 2001, we expect to be transmitting HD network
programming across more than 75 owned and affiliated stations, reaching
well over two thirds of the country. The response from viewers has been
encouraging, and anecdotal reports suggest that digital sets are
finally beginning to ship and sell in quantity.
I would be remiss if I did not acknowledge our digital partners who
have helped make this success story possible:
First, the digital CBS affiliates who have been fellow
pioneers in our effort to assume digital leadership;
Second, several innovative post production companies in
Hollywood who have pioneered techniques to make the conversion
of entertainment programming to digital High Definition easier
and less costly;
And finally, those who joined CBS in our digital leap of
faith, our HD broadcast sponsor/partners: Mitsubishi, Thompson/
RCA, Panasonic, Sony, Samsung, and Zenith.
As I said at the outset, we do face daunting challenges that must
be addressed and overcome before we can be completely assured that the
transition to digital will be a success. It is also worth noting at
this point that the digital transition is infinitely more complex than
the most recent, but inapt, comparison, the conversion to color. Color
was broadcast within the same frequency as black and white, and sets
were compatible with one another. Moreover, there were many fewer
players--no cable industry as we know it today, no computer industry,
just three networks, and the only piracy seen in the industry starred
Errol Flynn.
By comparison, the digital transition must be pulled off within
this viciously competitive industry sector, where the stakes are
enormous, the technology is infinitely more complex, and where there
are many, many more moving parts.
Let me try to list some of the transition's challenges from CBS's
perspective and, rather than pointing fingers, I will try to offer
suggestions on how the affected industries, and the government, might
play a constructive role in solving the problems.
First, I should address a fundamental paradox that must be
confronted about the transition.
The government must decide what approach it wants to adopt
regarding the remainder of the digital transition. At the moment, it
has a contradictory stance.
On the one hand, former FCC Chairs Reed Hundt and Bill Kennard
established as one pillar of government policy an oft-stated preference
for leaving most of the messiest details of digital television to the
marketplace. At least so far, with the notable exception of
Commissioner Susan Ness's brokering of a broadcast standards agreement,
government has done far less that it might have to help resolve the
issues of cable carriage, copy protection, interoperability, zoning and
other local conflicts. There is nothing wrong with leaving those issues
to the marketplace, so long as one remembers that the marketplace is
not necessarily prompt or consumer friendly in resolving such issues.
At the same time that some policymakers have proclaimed the virtue
of leaving these difficult and contentious issues to the marketplace,
the government has dealt itself a huge stake in the rapid completion of
the transition so the analog spectrum can be reclaimed and auctioned in
the near term.
I am not sure the government can have it both ways. Left to the
marketplace, the digital transition will happen, but it will take time
and there will be dislocations, very likely including some for viewer/
consumers. On the other hand, if auction revenue in the near term is
paramount, government will have to play some greater role, at least
stepping up its jawboning, to help resolve some of the outstanding
issues.
What are some of those issues? Not necessarily in any order:
Tower siting--The transition cannot possibly succeed without major
market stations getting their digital transmissions on the air rapidly.
In Denver, the efforts of the major commercial broadcasters, including
CBS's owned and operated Denver station, to get on the air at anything
like full power have been delayed and frustrated by the local
jurisdiction's refusal to countenance either short or long term options
for the tower improvements necessary for digital broadcasting. Had the
Denver Broncos made this year's Super Bowl, their hometown fans would
have been unable to see their heroes in HD but for a last minute
simulcast deal we were able to strike with another local station that
has a temporary, low power digital antenna atop the office building it
occupies.
Unless the dispute over a permanent tower is resolved locally, and
little in the three year long history of this controversy gives rise
for optimism, the FCC may well have to exercise its authority to
preempt the local government if full scale digital television is to
come to Denver anytime soon.
Another example of a localized transition problem happened to us in
Chicago. When we first turned on our digital transmitter, it
immediately caused massive interference throughout the city on
thousands of older, analog cable boxes that can only output their
signal on channel 3, the same channel the FCC assigned us for digital
broadcasting. Rather than alienate a huge segment of the local
audience, we shut down the transmission. We have worked very well with
AT&T Cable to find a solution, but here is another instance in which
the parties could use more active assistance from the FCC.
Consumer Friendliness--A viewer/consumer wants to know that when
they bring a new digital set home and hook it up that it will work at
least as well as their analog set has. Unfortunately, for too many
reasons, that is not yet the case.
Indoor reception of digital television signals is another potential
viewer/consumer issue. We are all disappointed with the indoor
reception performance of current digital receivers. However, several
points should be noted.
I believe that in the very near term, particularly now that
lingering broadcast standard issues are resolved, set manufacturers
will drastically improve the capability of their receivers with regard
to indoor reception. We should also remember that the current NTSC
analog system is hardly a work of art. After all, if NTSC transmission
were perfect, or even very good, the community antenna industry that we
now call cable might never have been born.
Of course, cable is the other answer to reception problems. With 70
per cent of American viewers accustomed to receiving their broadcast
programming over cable, it is hard to envision a successful transition
to digital without resolution of the issues surrounding cable carriage
of digital over-the-air broadcasts. As you may know, CBS and Time/
Warner Cable forged a groundbreaking, national digital carriage
agreement in which the level of intercompany cooperation, if not every
detail of the agreement itself, should be a model for how broadcasters
and cable approach this issue.
Copy Protection--As over-the-air broadcasters, we are concerned
that the copy protection scheme that is presently being discussed
leaves us behind. We have absolutely no objection to our viewers being
able to record us off air for their own viewing. However, without some
measure of copy protection that makes unlawful piracy, particularly
over the internet, more difficult, we fear that premium content,
whether it is Titanic or Survivor, will not be made available to over
the air broadcasters and will instead migrate to cable and satellite
where its airing is more secure from piracy. In this regard, we welcome
the letter sent by leading members of this Subcommittee and the full
Committee, including the chairmen and ranking members, calling for
inclusion of over the air broadcasting in any copy protection
technology.
The problems we face can be solved. The affected industries must
redouble their efforts to cooperate, and the government must strike a
better balance between a hands off policy and heavy-handed regulation
that might stifle innovation or even kill the whole transition. But
surely that balance can be struck. This committee's ongoing oversight,
along with a slightly more hands on FCC to keep the affected industry
players focused, may well be enough.
Mr. Chairman. I really do believe the American people will come to
love the options digital television will give them. As I noted at the
outset, today is the first day of the Men's NCAA basketball
championship on CBS. The next few days are among the busiest in CBS's
broadcast year. In just the next 80 hours, we will broadcast 48
separate games to get down to the Sweet 16, and of necessity, many
games will be going on at the same time. CBS is permitting several CBS
affiliates to use the remarkable capacity and flexibility of the
digital signal to multicast three or four games simultaneously and
still for free to all who can receive them. Later in the tournament,
that same digital bitstream will make possible extraordinary HD images
when the field is narrowed to the Final Four. As broadcasters go
forward and experiment with various combinations of multiple standard
definition programming streams versus fewer but higher resolution
programs, our viewers will tell us what they prefer, and we will
finally have a tool to give them more than just one option if that is
what they want.
Mr. Chairman, one final point: CBS is doing everything within our
power to advance the transition. We are doing so at considerable cost,
and our current return on investment is small. But we welcome the
chance we have been afforded to transition to digital. Over the air
broadcasting is too important to the culture of this country to allow
it to become a marginalized analog archipelago in a rapidly advancing
digital ocean. That is why I do not understand the repeated suggestions
that loaning broadcasters 6 megahertz of digital spectrum to effect
this transition constitutes a giveaway. Without such a loan, there
simply is no way to transition to digital while still serving the
overwhelming number of American families who will continue to rely on
analog television to deliver their favorite programs for the
foreseeable future. That is no giveaway. It is responsible and
farsighted public policy that ensures that the American people will
have the analog, over-the-air broadcasts they have come to know and
count on until they are ready and able to upgrade to the wonderful new
product that is digital television.
Thank you, and I will be happy to answer your questions.
Mr. Upton. Thank you very much.
Mr. Paxson, welcome.
STATEMENT OF LOWELL PAXSON
Mr. Paxson. Thank you, Mr. Chairman and distinguished
members of the subcommittee for providing me with the
opportunity to appear before your panel today to discuss the
digital television transition.
My name is Lowell, Bud, Paxson, and I am Chairman of Paxson
Communications Corporation, the largest television station
group owner in the United States, 65 television stations
strong, and the creator of the PAX-TV network, which now
reaches 82 percent of all American homes.
All 24/7 of our programming is shot in standard digital
format. All of our network operations are now digital. All
master controls of our 65 TV stations have been converted to
digital. What is left is the transition to digital by our
transmission systems; simply stated, our transmitters, which
will prepare us for multicast programming future.
When we launched 2\1/2\ years ago, we repeatedly heard from
media pundants, ``No sex, no violence, no ratings, no
revenue.'' And, yet, here we are today making a cash-flow
profit and proving the public is looking for and advertisers
will support good, clean, family television.
Many are upset with the broadcasters for the failure of the
digital transition. However, the fault lies with many. And most
of us are here at this table today. We simply have not created
an atmosphere for the consumer to want to step up into the
digital television world. The solution lies with you and the
FCC. The marketplace is not working. We ask you to act quickly
to put the DTV transition back on track.
Our future as an emerging network is tied to the success of
the digital television transition in this country and to the
requirement that cable and satellite must carry our station's
programming. That digital future is potentially a great one.
Some networks, like CBS and others, see a great future of
high-definition television showing great sporting events and
great movies. We at PAX have always maintained that the highest
and best use of our digital spectrum is multiple channels of
high-quality lifestyle news and entertainment centered on the
family, enabling families to be more effective within their
homes and communities.
Statistics show that last year in the United States 33
million analog TV sets were sold, 750,000 digital monitors
sold, but only 26,000 digital TV tuners. We need a digital all-
channel receiver act that would require all television sets
sold to the American public be capable of receiving both analog
and digital. Consumers have a right when they buy a TV set to
be assured that it will not become obsolete.
Undoubtedly, the most important issue for PAX in terms of
digital television transition is the cable and satellite
carriage of all six megahertz of our station's digital signals.
Like us, hundreds of other broadcasters and hundreds of public
television stations believe that the capability to multicast to
several programming services is their key to the use of the
digital spectrum.
We don't feel our digital spectrum is in devoting our
entire digital capacity to a single stream of programming, nor
in using our digital capacity for ancillary services, such as
data casting. But we need the assurance that our multiple,
free, over-the-air programming services will be received by the
70 percent of the homes in this country that are served by
cable and satellite.
The FCC has decided to permit cable operators to carry only
one of the station's multiple channels to free over-the-air
programming, rather than requiring cable systems to carry all
such free programming.
PAX-TV urges this committee to take the opportunity to
reaffirm the congressional commitment to full digital must
carry and to the preservation of free local television by
requiring multicast must carry of all free over-the-air
programming services. If content drives the DTV transition,
then give the consumer access to all free multiple channel
content that we, the local broadcasters, have the ability to
air.
Mr. Chairman, I thank you for allowing me to testify.
[The prepared statement of Lowell Paxson follows:]
Prepared Statement of Lowell ``Bud'' Paxson, Chairman, Paxson
Communications Corporation
Thank you Mr. Chairman and distinguished members of the
Subcommittee for providing me with the opportunity to appear before
your panel today to discuss the Digital Television Transition. My name
is Lowell ``Bud'' Paxson and I am Chairman of Paxson Communications
Corporation, the largest television station group owner in the United
States, 65 stations strong, and the creator of the PAX-TV network,
which reaches 82% of all American Homes.
When we launched 2 years ago we repeatedly heard from media
pundits--no sex, no violence, no ratings. And yet here we are today,
making a profit and proving that the public is looking for and
advertisers will support good, clean family television.
Some have said that giving digital TV allotments to broadcasters
was a $70 billion giveaway. I take strong exception to this charge. It
is actually a governmental initiative to move TV broadcasters who now
occupy channels 2-69 down into channels 2-51 thereby allowing the
government to auction off the 52-69 spectrum to other users. There are
well-respected sources who say that the government will net $70 billion
from the sale of the 52-69 spectrum. Of course to accomplish this, we
have to have a digital transition and clearly the transition is
failing. The benchmark for the transition is the 85% rule. A strict
reading of the rule says that broadcasters have to turn in their analog
spectrum when 85% of all households have at least one digital
television receiver or their analog set is equipped with a digital to
analog converter. Clearly at the present pace of the DTV transition
this is years and years away.
Many are upset with broadcasters for the failure of the digital
transition. However, the fault lies with many. The broadcasters, the
FCC, the cable industry and the set manufacturers, simply have not
created an atmosphere for the consumer to want to step up and into the
digital television world. The solution lies with you and the FCC. The
marketplace is not working. Act quickly to put the DTV transition back
on track.
Our future as an emerging network is tied to the success of the
digital television transition in this country and to the requirement
that cable and satellite must carry our stations' programming. That
digital future is a potentially great one. Some networks see a future
of high definition TV showing great sporting events and movies. We at
PAX have always maintained that the highest and best use of our digital
spectrum is multiple channels of high quality lifestyle news and
entertainment centered on the family; enabling families to be more
effective within their homes and communities.
Statistics show that last year in the United States 33 million
analog TV sets were sold compared to only 26 thousand digital TV
tuners. We need a digital all Channel Receiver Act that would require
that all television sets sold to the American public be capable of
receiving both analog and digital TV signals. Consumers have a right
when they buy a TV set to be assured that it will not become obsolete
shortly.
There are TV set copyright issues and contrary to reports, there
are still cable, satellite and TV set inter-operability issues that
must be promptly resolved once and for all by the FCC. After four
years, it is obvious the marketplace is not solving any problems. The
FCC needs to deal with these issues now.
Undoubtedly, the most important issue for PAX-TV in terms of the
digital transition is cable and satellite carriage of all 6 Mhz of our
stations' digital signals.
Like us, hundreds of other broadcasters and hundreds of public
television stations believe that the capability to multicast several
programming services is the key to their use of the digital spectrum.
We don't feel our digital future is in devoting our entire digital
capacity to a single stream of programming nor in using digital
capacity for ancillary uses such as datacasting. But we need the
assurance that our multiple free, over-the-air programming services
will be received by the 70% of the homes of this country that are
served by cable and satellite.
Our concern is that a divided FCC last month adopted rules that not
only will hurt the DTV transition but undermine hundreds of
broadcasters' efforts to multicast free, over-the-air program services.
First, the FCC said that television stations cannot request cable
carriage of their digital signal until they turn in their analog
channels. That will be years away. We think this is a bad decision that
discourages broadcasters from building their digital stations and
consumers from buying DTV sets and severely damages the chances for
economic viability of digital television and, ultimately, the digital
transition.
The FCC also decided to permit cable operators to carry only one of
a station's multiple channels of free, over-the-air programming rather
than requiring cable systems to carry all such free programming. This
decision was also wrong. It is not content neutral. It is contrary to
the Congressional intent evidenced in 1992 when you adopted the must
carry rules. Anyone reading the recent FCC decision will recognize that
the Commissioners were clearly uneasy with their decision and, in fact,
were reaching out to Congress for guidance. Cable and satellite are the
gatekeepers to the American home. PAX-TV urges this Committee to take
the opportunity to reaffirm the Congressional commitment to full
digital must carry and to the preservation of free, local television by
requiring multi-cast must carry of all free, over-the-air programming
services.
I have submitted a workable digital must carry plan as a
supplemental filing with this committee.
The cable industry will tell you that the carriage of digital
signals is being handled in the marketplace. After four years, let's
look at the record: AT&T has done a retransmission agreement with Fox &
NBC; Time Warner with CBS, and ABC has reportedly finalized a similar
agreement. These agreements only cover their owned and operated
stations. Thus, about 90 stations have solved their digital carriage
issues with cable by retransmission consent agreements; 1560 stations
still await the required full digital must carry, including
broadcasters associated with the emerging networks, and independent,
religious and foreign language broadcasters.
If content drives the DTV transition, then give the consumer access
to all the free multichannel content that we, the local broadcasters,
have the ability to air.
Thank you for allowing me to testify.
Mr. Upton. Thank you very much. The second bell is about
ready to ring for the vote. So at this point we are going to
take about a 15-minute break. And when I come back, we will
reconvene with Mr. Cookson. Thank you.
[Brief recess.]
Mr. Upton. Well, thank you very much. This is the last vote
of the week. So members will be coming back. And the President
is just arriving on the Hill. So we probably will lose a few
members to him, too.
Mr. Cookson, welcome.
Mr. Cookson. Thank you and good morning, Chairman Upton and
members of the subcommittee.
Mr. Upton. If you could just turn, get that mike a little
closer? Make sure the light is on as well.
Mr. Cookson. Okay. Can you hear me okay? Thank you.
STATEMENT OF CHRIS COOKSON
Mr. Cookson. I am Chris Cookson, Executive Vice President
and Chief Technology Officer for Warner Brothers. I am here
today as a representative of Warner Brothers to express my
company's enthusiastic support for the transition to digital
television.
Warner Brothers has been a leader in digital television
innovation and believes that digital TV will be good for both
consumers and the entertainment industry. We look forward to a
future where consumers can access information and entertainment
in the ways that best suit their lifestyles, where music and
movie collections can be served to any room where they are
wanted at the click of a button. This convergence is one of the
driving visions of the AOL-Time Warner merger.
What digital television promises is greater consumer
choice, a much greater range of delivery options and pricing
variations. For example, the consumer could have a choice of
video in demand to watch what movie he wants or a subscription
to a service to watch a collection of movies on demand over a
period of time or an option to own and keep copies of movies.
In a digital world, we also still expect that consumers
will be able to freely make copies and to share many kinds of
programming, much as they do today, and will continue to be
able to do in the analog world.
So, given all the promise, why has the digital transition
been so slow? Certainly the questions that were raised over the
digital transmission standards have made many wary about
investing in technologies that could soon be obsolete.
Also, the need to roll out digital technology with
provisions for rights management and the control of copying has
been more complicated, I think it is fair to say, than was
anticipated. And it has taken considerable effort from three
industries collaborating: The entertainment industry, consumer
electronics, and computer industries. We at Warner are pleased
with the results we are making and look forward to this
proceeding.
Why is digital rights management so important to us? Well,
digital technology offers consumers great advantages in quality
and cost, flexibility and choice. But those advantages carry a
much greater risk of unauthorized copying and redistribution.
In the real world, a video store can offer rent the movie
for $3.99, buy the movie for $19.99, or 30 movies in 30 days
for a fixed fee. But in a digital world with unlimited copying
and retransmission, those choices couldn't exist. Viewing would
need to be priced and sold as if a permanent copy was being
made with every transaction. And that would result in an
increase in cost to many who would be wanting to just watch the
movie.
So one major component that is necessary to bring these
advantages to a digital home is a technology that protects
content as it is transmitted from a set-top box to a recorder,
to a TV, and to other devices in the home, across a whole
network that we expect to see.
Five of the major consumer electronics and information
technology companies, as was mentioned by the subcommittee,
have joined together to create an encryption and authentication
technology that can be used to protect these links in the home
when the conditions under which the content was delivered to
the home require it, as would be the case with conditional
access delivery of satellite or cable programming.
This 5C encryption technology is designed, though, for two-
way networks. And there is some confusion, I think, that some
have because, unfortunately, being designed for two-way
networks means that it doesn't work for transmission over the
air for the actual broadcasts. But we think that this
technology is a key to encouraging the availability of high-
value content in critical release windows. And so we have
designed, as was mentioned, a memorandum of understanding with
the 5C companies and look forward to the roll-out of their
technology soon. And we are very close I think to completing
the final agreement, as was also mentioned.
Now, should broadcast television signals received over the
air be protected? They should be. That is our goal. We are not
as big as some of the other networks, but we are a television
network. We are responsible for the origination of the WB.
WB Network has since the day it signed on been originated
digitally. And we just completed the beginning of this month a
transition to an entire digital distribution system to every
one of our affiliates.
Beyond the WB, we also are a supplier of some of the most
popular programming on television today: ``Friends,'' ``West
Wing,'' and ``ER.'' And we would like to see those programs
protected from unauthorized Internet retransmission.
Television broadcasting has a different problem than
programs delivered over conditional access systems because the
programming itself is delivered in the clear. Now, we wish
there was a silver bullet technology to protect broadcasting,
but we realize that today's technology can do little that is
meaningful to actually prevent signals received off the air
from being transmitted and appearing on the Internet. So we do
not want to delay the roll-out of other types of protectable
programming until we can come up with a solution for what we do
about broadcasting.
Why don't we endorse legislation at this time? Well, first,
we believe that anti-circumvention provisions in the 1998
Digital Millennium Copyright Act are striking the right
balance. It was carefully negotiated as being interpreted
correctly and needs time to work.
Second, there is no straightforward technology that can be
mandated. For example, watermarking has been proposed, but a
great deal more needs to be learned before workable and secure
architecture can be deployed across the broad range of consumer
devices and PCs.
We recognize that we don't live in a perfect world, but the
perfect can be the enemy of the good. Cross-industry efforts
must be given the opportunity to continue developing useful
solutions. The market should be allowed to evolve without
imposing rules that curtail flexibility and innovation.
Intervention at this point we are afraid could inhibit the
creation of new products and services that would benefit
consumers in the converged world.
Thank you. Mr. Chairman, there was a mistake in the written
testimony that was submitted. And I would request an
opportunity to resubmit for the record.
Mr. Upton. Without a problem, without any objection, we
will do that.
[The prepared statement of Chris Cookson follows:]
Prepared Statement of Chris Cookson, Executive Vice President/Chief
Technology Officer, Warner Bros.
Good morning, Chairman Upton and members of the subcommittee. I am
Chris Cookson, Executive Vice President/Chief Technology Officer at
Warner Bros. I am here today as a representative of Warner Bros. to
express my company's enthusiastic support for the transition to digital
television.
Warner Bros has been a leader in digital television innovation and
believes that digital TV will be good for both consumers and the
entertainment industry. With DVD, for example, Warner Bros. worked
actively to bring viewers a much better digital picture than was
available with analog VHS, and we are pleased with the way consumers
have responded.
We are intrigued by the prospect of digital television more
generally--for example, the networked home where consumers can access
information and entertainment in the ways that best suit their
lifestyles; where music and movie collections can be served to any room
whenever they're wanted at the click of a button. This convergence is
one of the driving visions of the AOL Time Warner merger.
What digital television promises is greater consumer choice. All of
this country's media and communications industries--satellite,
telephony, cable, video, broadband and the Internet--already are or
soon will be utilizing digital technology. With the powerful tools of
digital distribution, consumers will enjoy a much greater range of
delivery options and pricing variations. For example, a consumer could
have a choice of:
Video-on-demand to watch a movie once,
A 48-hour ``pass'' with unlimited viewing,
A subscription to a range of on-demand titles,
Or the option to own and keep a copy.
So, given its promise, why has the transition to digital television
been slower than anticipated?
Certainly the speed of technological change and the questions
raised over digital transmission standards have made many wary about
investing in a technology that could be quickly made obsolete. And the
need to roll out digital technology with provision for rights
management and the control of copying has involved conversations across
industry lines. This has been more complicated than was anticipated.
Deploying suitable technologies has taken considerable effort from
three industries in collaboration--the entertainment industry, consumer
electronics manufacturers and the information technology industry. We
are pleased with our progress and agreements we have reached so far.
Why is digital rights management so important to digital TV
deployment?
Digital technology offers consumers numerous advantages--higher
quality, lower costs, greater flexibility and choice--and overall a
better value. But those advantages carry a greater risk of unauthorized
copying and redistribution. In the real world, Blockbuster can
advertise ``Buy for $19.99, Rent for $3.99'' or 30 movies in 30 days
for a set fee. In a digital world with unlimited copying and
retransmission, those choices wouldn't exist. Without a ``rights
management'' capability, every viewing would need to be priced and sold
as if a permanent copy were being made, thereby increasing prices and
limiting investment and creative incentives. To bring consumers the
broadest range of options, it is necessary to permit the consumer to
buy, and to price, each option. In a digital world, we expect consumers
to be able to freely make a copy and share many kinds of programming,
consistent with the rights they choose to buy.
One major component necessary to bring these advantages to the
digital home is a technology that protects content as it is transmitted
from a set top box to a recorder and to other devices across the home
network. Five consumer electronics and information technology
companies--Intel, Matsushita, Toshiba, Sony and Hitachi--have joined
together to create an encryption and authentication technology that can
be used to protect those links. This 5C technology can be turned on
when the conditions under which content was received into the home
require it--as may be the case with cable or satellite video
conditional access delivery. This encryption technology is designed for
a home network; it is not technologically suited for over the air
broadcast television, but it can be used to protect broadcast TV
transmissions delivered by cable or satellite. We think that the 5C
digital rights management technology is key to promoting the rollout of
digital television and to encouraging content owners to make high value
content available in critical release windows. We have signed an MOU
with the 5C companies and look forward to its swift deployment and use.
Can broadcast television signals received over-the-air be protected
under current or foreseeable technology?
We think not, and we believe that would delay the consumer benefits
of what we can do with existing technology. We produce some of the most
popular programming in the industry--West Wing, Friends, and ER--that
we would of course like to see protected from unauthorized
retransmission over the Internet. We wish there was a silver bullet
technology to protect broadcast transmissions--but we haven't been able
to find one to date that doesn't create more problems than it solves.
The challenge here is different because the over-the-air broadcast
transmission is in the clear--today there are no conditions attached to
their receipt by consumers. In our decision to go forward with 5C, we
realized that today's technology could do little that was meaningful to
prevent homes that receive the signals over the air from retransmitting
that programming over the Internet. But we do not want to delay digital
TV until as-yet-undeveloped technology comes into being.
Why don't we endorse legislation at this time?
We believe that the anti-circumvention provisions of the 1998
Digital Millennium Copyright Act are striking the right balance. The
DMCA was carefully negotiated and is being interpreted correctly in the
courts. It needs time to work. The uncertainty of a protracted
legislative debate will likely cause even more delay in the acceptance
of DTV.
There is no straightforward technology that can be mandated.
Watermarking has been proposed but will be extremely complicated to
deploy meaningfully. A great deal more needs to be learned before a
workable and secure architecture can be proposed. For example, since
watermark detectors need to look at specific file types, a mandate
would be meaningless unless the number of file types was controlled and
limited. A detector that works in MPEG 2 wouldn't find a mark in an
MPEG 4 stream or any other compression format. After the product with
the detector is shipped, any new format would be unknown and the system
would fail. New formats couldn't be permitted without risking the
overall integrity of the system. Mandating a standard at this time
would curtail legitimate innovation in compression--one of the most
rapidly changing technologies--while giving pirates a place to hide.
Any simple manipulation of the data format would effectively obscure
the mark.
We recognize that we don't have a perfect world . . . but the
perfect is often the enemy of the good. We think that the cross-
industry negotiations must be given the opportunity to continue to
develop useful solutions. The market should be allowed to evolve
without imposing rules that curtail flexibility and innovation. Given
the fast pace of developments in digital entertainment, government
intervention at this point in time could inhibit the creation of new
products and services that will benefit consumers in the converged
world.
Mr. Cookson. Thank you, Mr. Chairman.
Mr. Upton. Thank you.
Mr. Weed?
STATEMENT OF STEVEN B. WEED
Mr. Weed. Thank you. And thank you for having the
opportunity to speak to you today.
I am the President of Millennium Digital Media, Northwest,
the northwest region. Millennium is an independent cable
company. We serve about 175,000 total customers throughout 5
states, including about 50,000 in Michigan, the rural areas of
Michigan. My division is based in Seattle, in the Northwest,
where we serve about 70,000 customers spread out among 3
states.
I am also the Chairman of the American Cable Association.
The ACA represents about 900 members of small and independent
cable operators. Of those 900 members, we have about 7.5
million subscribers in every State of the union, independent
and small markets.
Millennium, like our members, is focused on digital
deployment and deploying high-speed data as well as digital
products in rural markets.
I am here to talk about digital broadcasts, but first, I
guess, in response to the proverbial chicken and egg, I guess
when we look at independent cable, I would say we are the egg
and we have just hatched. Independent cable is rapidly
deploying digital throughout the United States. We are
deploying it because of customer demand.
Customers love the quality of digital product. It is an
efficient use of bandwidth so we can put more product on our
systems. And right now, in our markets over 30 percent of our
new customers are opting to take digital product. It is an
expensive proposition, but we are funding that with our own
money. And, fortunately, with digital, costs are continuing to
go down. And we project that within 5 years, by far the
majority of our customers will be receiving digital products.
The issue for digital broadcast is really technical, cost,
and bandwidth. From a technical standpoint, to carry broadcast
stations, the digital standards that broadcasters are using are
not compatible with ours. That really folds into the cost. To
force digital carriage before we have resolved the technical
issues would put a huge cost on independent cable and, thus,
passing on to the customers.
On the bandwidth side, Congress granted broadcasters
additional spectrum to carry duplicate digital signals, but
they didn't give me additional bandwidth on my cable system to
carry additional signals. And there simply isn't any extra
bandwidth in independent cable systems to carry duplicate
product. That really leads to our concerns.
Broadcast digital should really not be forced into the
market before the market is ready. We think in order for the
market to be ready for broadcast digital, there needs to be a
standard.
It needs to be compatible with our systems. Customers need
to have the TVs. There needs to be some product out there. We
are not seeing any of that yet. Other than that, it has gone
along great for the broadcasters. That would really look to a
huge cost for us at this time, as I mentioned, to carry digital
broadcasts on the cable systems.
As independent operators, we get our money from Main Street
banks. Any money we would spend on digital cable, converting
digital broadcast cable, would really come from other products
we are trying to deploy like high-speed Internet access in
rural markets.
The other concern is forced carriage would have unintended
consequences on our business as it relates to the bandwidth. It
could delay the deployment of high-speed data, which uses a
portion of our bandwidth, and could cause us to have to drop
other signals that we don't want to drop.
The solutions? The solution, really, is to let the
marketplace guide the transition. Customers want digital.
Digital is being deployed. Broadcasters will respond to this
customer demand, and digital standards will develop.
Any carriage requirements must address the bandwidth
concerns of small operators. No duplication requirements should
be put on cable systems' bandwidth. I guess as a comparison,
cable is not given the extra bandwidth. In order for us to
carry duplicate signals, we would have to be relieved of some
of that bandwidth requirements. Maybe we should consider the
must carry requirements as competition with satellite maybe
makes that no longer relevant.
So let us ensure a reasonable transition. Digital signals
do not require a full six megahertz bandwidth. They only
require a portion of that to stream a duplicate signal. And let
us make sure that large broadcasters can't use their enormous
leverage over independent cable to force carriage of products
that our customers don't want.
In conclusion, I guess we really don't think this is a fine
mess. We think our future of our business is digital. We are
rapidly deploying digital. Our customers are migrating toward
it. It is a superior technology, has a superior efficient use
of bandwidth, and the cost is going to continue to drop. We
will be ready to carry those broadcast signals when the
broadcasters are ready to provide us a signal that works for
us.
Thank you very much.
[The prepared statement of Steven B. Weed follows:]
Prepared Statement of Steven B. Weed, Chairman, American Cable
Association and President, Northwest Region, Millennium Digital Media
INTRODUCTION
Thank you, Mr. Chairman.
My name is Steven B. Weed, and I am the president of the northwest
region for Millennium Digital Media, an independent cable business
serving 175,000 subscribers in several states, including the state of
Michigan.
I also serve as the chairman of the American Cable Association,
which is an association that represents more than 900 independent cable
businesses serving more than 7.5 million subscribers primarily in
smaller markets and rural areas across the United States. In fact, our
American Cable Association members serve customers every state and
every U.S. territory and also in nearly every congressional district
represented by the members of this committee.
Unlike some larger companies you hear about, ACA members are not
affiliated with program suppliers, big telephone companies, major ISPs
or other media conglomerates. We focus on smaller market cable and
communications services, often in markets that the bigger companies
choose not to serve.
Like other ACA members, my company, Millennium Digital Media,
specializes in serving customers in smaller markets and more rural
areas. Our company today is on the forefront of providing advanced
telecommunications services to customers in these markets.
THE ISSUES FACED BY SMALLER MARKET CABLE SYSTEMS IN THE TRANSITION TO
DIGITAL BROADCAST TELEVISION
I am pleased to have the opportunity to speak to you for several
reasons.
First, my company and the members of the American Cable Association
are rapidly deploying digital television. It is a service our customers
want, and it is a service we like.
The transition to digital that is taking place in the cable
industry today is a success story because cable providers and
programmers have, on their own, agreed on and implemented a common
standard for the deployment of digital. And as a result, cable
companies nationwide are moving aggressively to launch digital in every
form, without the need for government action.
In fact, within five years most, if not all, cable subscribers will
be watching digital television.
We like the technology, because it is an efficient use of
bandwidth. It allows us to provide a better service to our customers,
and it helps us to offer a more competitive service in our marketplace.
However, unlike the success story that's taking place in the cable
industry today, the transition to digital broadcast television poses
many significant problems and challenges for both independent cable
companies and our customers in smaller markets and rural areas.
These problems and challenges fall into three specific areas:
(1) important technical and market issues that are not being met first
before the transition to digital.
(2) the effect of mandatory digital carriage on systems with limited
bandwidth, which will result in lost capacity and lost
important services that our customer want;
(3) the substantial costs and adverse effects of paying for a forced
transition to digital, which will stop or hinder the
advancement of other new telecommunications services, like
high-speed Internet.
(1) The Transition to Digital Should Not Be Forced Before the Markets
or Technology are Ready.
As we see the situation in the markets we serve, neither the
marketplace nor technology is ready for an efficient transition to
digital broadcast television.
The key facts about the transition to digital broadcast carriage
are these:
There is no uniform standard between broadcasters and cable
providers for the carriage of digital broadcast signals. Cable has a
plan and a uniform standard for the carriage of digital, but the
broadcasters do not.
In fact, the broadcasters cannot even agree on what the standards
for digital broadcast carriage should be for themselves, let alone for
the rest of us.
Television sets with digital receivers capable of receiving cable
and broadcast digital signals are not widely available and may not be
for a number of years at an affordable cost to the everyday consumer.
Original digital broadcast programming does not exist on the many
digital channels that broadcasters want us to carry.
Broadcasters want us in cable, particularly those of us in smaller
markets and rural areas, to use the scarce bandwidth we have now to
carry not only their analog broadcast signals, but also the same
duplicated programming on digital. What's more, most, if not all, of
our customers do not have television sets or converters that can
process digital broadcast signals. These customers would simply see a
blank, blue screen.
The proscribed timetable for achieving digital broadcast carriage
will not be met by the market or the technology.
In our smaller markets, the transition to digital broadcast
carriage cannot be accomplished until there is a widespread demand for
a product that customers want at an affordable price and with
technology that is readily available. None of these conditions are
present today.
Furthermore neither my company nor my fellow members in the
American Cable Association can achieve the transition to digital
broadcast television until digital head-end equipment, digital boxes
and digital television sets are widely available at an affordable price
and until the bandwidth concerns of cable systems are met.
Cable has already shown that it can meet the challenges of
converting to digital signals. As for digital broadcast television, we
likewise would be happy to carry these signals as soon as the broadcast
industry can deliver a uniform digital signal to us in a format that we
can receive.
But until then, we are all in a definite dilemma between the
proverbial rock and the hard place. The transition to digital broadcast
television is being pushed before the marketplace, consumers, and
companies like mine are ready.
(2) The Unintended Consequences of Mandatory Digital Carriage on Cable
Systems with Limited Bandwidth
Assuming that the numerous issues listed above have been completely
addressed, there are nonetheless several other concerns to note. Most
notably, forced digital broadcast carriage on smaller market cable
systems or the mandatory transition to digital television before the
markets or technology is ready would have significant negative
consequences on the operation of these independent systems due to
limited bandwidth.
Mandating digital carriage would cause the loss of important
existing analog and digital programming, and high-speed Internet
services. It would also create a significant chilling effect on the
development and deployment of new advanced telecommunications services
to these markets.
These new services have been essential to attracting the capital
necessary to upgrade our smaller market systems in response to
marketplace demand.
Mandating digital broadcast on smaller market cable systems would
force other existing important services off our systems in order to
accommodate digital broadcast signals, which few of our customers could
watch now anyway.
An important point is often missed in this debate: the government
has given broadcasters both the analog and new digital spectrum to
transmit both of these signals during the transition period. But the
law has not granted smaller market cable systems additional bandwidth
to carry any of the additional broadcast signals.
We have to pay for our additional bandwidth through costly system
upgrades. We can only pay for these upgrades by carrying services our
customers will pay us for. Currently, our customers are not requesting
digital broadcast signals in our markets.
As I have stated, my company and our industry have aggressively
launched digital television to the point where in five years virtually
all of our customers will carry it. The cost is continuing to come down
on digital carriage, and even the smallest cable television systems are
carrying it.
And as for the carriage of digital broadcast signals, when the
broadcasters are ready we will be happy to switch their old analog
signals to digital signals, but we can't carry both.
From a technical, operational, economic and practical standpoint,
we simply cannot carry all of the digital and analog signals of the
local broadcasters. The reason? Because we are still required to devote
up to fifty percent (50%) of our channel line-ups for other mandated
carriage set-asides, such as must-carry, retransmission consent, non-
commercial educational programming, public, educational and
governmental programming, and leased access programming, not to mention
the current analog, digital and high-speed data services our customers
now demand and expect.
Who will make the choice to tell my customers what they can and can
no longer receive as a result of mandated digital carriage? And is this
the right thing to do? I think not. But one thing is certain. My
company and other ACA members like mine will get blamed for it, while
those dissatisfied customers go to the dish. This result could truly
threaten the viability of smaller market cable systems, which would
certainly be an unintended consequence of this policy.
In smaller markets, the unintended consequences of mandated digital
carriage would include lost important services now and the loss of
future advanced telecommunications services because there will be no
room to carry them.
What do we do in those systems where we have planned to launch
high-speed data Internet services but no longer could if digital
carriage is mandated? Is it appropriate for our subscribers to lose the
ability now to receive high-speed data in return for the possibility of
receiving a digital broadcast signal that they may not receive for
years?
The High ``Cost'' of Converting to Digital
Right now my company is engaged in a competitive race to improve
our systems through the use and deployment of available digital cable
services and high-speed Internet. These services are a reality today.
They are available now. They are helping us improve to our systems and
provide advanced higher quality telecommunications services to our
customers today.
My company is using these services to close the so-called ``Digital
Divide'' in smaller markets now. These services and the required
systems upgrades are costly. For example, on average it costs about
$130,000 to install a digital cable head-end that will enable our
customers to receive significantly more services that they want. But
not all customers take these services right off, and the return on
investment for a digital head-end like this one is lengthy. In
addition, you can understand how difficult it is to economically spread
that cost across a system that may only serve 500 customers.
Similarly, there is a substantial per home cost to my company and
others to make available an advanced high-speed cable modem Internet
service. It's expensive, and the return is a long one.
However, these services are available now. They are not on the
drawing board or potentially available sometime in the future. My
company is doing right now what policymakers appear to want--improving
our service, enhancing competition in the marketplace, and closing the
``Digital Divide'' by providing advanced telecommunications services.
But what if the significant funds that it takes to launch digital
cable or high-speed Internet are forced to cover the costs of mandatory
digital broadcast carriage? Plainly, something would have to give.
This would be more than an unintended consequence of mandating
digital carriage. It would be a direct result.
What can be done, if anything?
POTENTIAL SOLUTIONS
Let the Marketplace Help Guide the Transition to Digital.
First, we must all work within deadlines that are reasonable in the
marketplace.
The transition to digital broadcasting is actually a good thing
that my company and others like mine will want to carry, but not if the
marketplace, our customers and consumers, and technology are not ready
for this transition.
Many of us remember listening to our favorite music on what we
nostalgically refer to as ``albums'' or ``LP's''--long-playing records.
However, we all know that the outdated technology of making recordings
in pressed, wax albums has given way to the superior digital, laser-
embedded technology of the compact disc.
Could this universal transition have occurred before the music
providers perfected their technology in a uniform way and made the
product and players available in the marketplace at an affordable cost
to the consumer? Of course not.
But when the market was ready, consumers embraced CD technology to
the point that today albums and LP's are a thing of the past. And soon,
CD's will probably give way to a newer technology--MPEG3--when the
market is ready.
The transition to digital broadcast television is not really all
that different.
The providers, producers and technical people must work together to
develop a uniform standard and a product that consumers will want and
will be widely available at an affordable price.
Local broadcasters and local cable providers should be encouraged
to seek meaningful ways that will help solve the transition to digital
broadcast carriage.
On behalf of the American Cable Association, we would welcome the
opportunity to participate in this discussion. It would benefit of
everyone if we seek and find a workable solution that benefits all.
The Transition Must Address the Bandwidth Concerns of Smaller Market
Cable Systems.
The transition to digital cannot occur unless smaller market cable
providers receive some relief from the many carriage and bandwidth
requirements that now take up precious channel space.
Our friends in the direct broadcast satellite business are pushing
hard in the federal courts right now to be relieved of broadcast must-
carry burdens for many of the same channel-capacity and bandwidth
reasons that we are discussing today.
As competition increases between cable and satellite, perhaps the
need for these previous carriage requirements no longer exists to the
same degree.
To reiterate, the forced transition to digital broadcasting must
address legitimate capacity and bandwidth issues. Otherwise, smaller
market cable businesses and our customers will suffer because important
existing and available advanced services and programming will be lost.
Period.
Let's Encourage a Reasonable Transition to Digital
Broadcasters should first set reasonable goals that will work in
the marketplace as they transition to digital. Many have requested or
demanded that cable free up an entire six-megahertz (6 MHz) channel for
the carriage of all potential digital signals transmitted by the
broadcaster.
But given the legitimate bandwidth constraints of cable technology
such actions will cause customers to lose important current services.
No one wants that. I believe that broadcasters can and should be
satisfied with the carriage of one digital signal as the market bears
until such time as the marketplace, cost to consumers and available
bandwidth can economically accommodate more.
Moreover, broadcasters should be prevented from using the enormous
leverage they have been given through the analog retransmission consent
rules to force digital broadcast carriage by holding analog
retransmission consent hostage.
The forced tying of digital broadcast carriage to analog
retransmission consent does not help to solve the problem, but only
deepens the wedge between broadcasters and smaller market cable at a
time when they ought to be working together on a new technology that
one day soon will benefit everyone.
CONCLUSION
In conclusion, my company's future and our ACA members' future lies
in the carriage of digital television. We have already embraced it.
However, the transition to digital broadcast television has
significant challenges before it in terms of a uniform standard that
companies like mine can receive, the scarcity of bandwidth on cable
systems to carry both analog and digital broadcast signals, and the
cost of such carriage, both in terms of money and the current important
services that would be forced off of our customer's televisions and
computers. Moreover, the marketplace and technology have not yet
embraced the transition to digital broadcast television.
But like the evolution from LP's to CD's to MPEG3, there is no
doubt that the transition to digital broadcast television will occur,
and my company and the members of the American Cable Association will
be there to receive it as the market and technology allows.
In the meantime, we're committed to working with the Committee and
with the broadcast industry on these issues.
I would like to sincerely thank the Committee again for allowing me
to speak before you today.
Mr. Upton. Thank you.
Ms. Courtney, welcome.
STATEMENT OF BETH COURTNEY
Ms. Courtney. Good morning, Chairman Upton and members of
the subcommittee. I am Beth Courtney, President and CEO of
Louisiana Public Broadcasting and the Chairman of the
Association of America's Public Television Stations Board of
Trustees. I appreciate the opportunity to testify today on
behalf of APTS and its member stations. Thank you, Mr.
Chairman, for having these hearings.
As you know, public broadcasters have been leading, have
been the leaders in using new technologies for education and
public service for more than 30 years. We view digital
technology no differently. We stand ready to harness this new
technology to revolutionize how we fulfill our core mission: to
use this powerful tool to provide educational opportunities to
all Americans.
Public television stations are committed to the digital
transition and have made substantial progress. I testified
earlier here, and I want to give you an update on how we are
doing in our digital transition.
We have, of course, until 2003, 1 more year, to convert.
Today, 2 years before the deadline, we have 28 public
television stations that are broadcasting in digital. We signed
on in Baton Rouge, Louisiana this year, the only digital
station in the State of Louisiana, commercial or public. And we
are looking forward to the services that we can provide.
Stations have raised more than $381 million from State and
local governments. So we have had to roll out our plans before
legislative bodies across the country, suggesting what we are
going to be doing with this capacity. We have also generated
more than $190 million through capital campaigns and private
contributions toward this digital conversion.
Public television stations know how we want to use these
channels. Since receiving our digital channels, public
television has been engaged in system-wide and station-wide
planning. I am pleased to report today there are stations today
that have developed concrete, bold, and exciting services
tailored to their local communities. And I want to thank WETA
certainly for the demonstration today.
You saw what they are doing in Washington. It would look a
little different as we go around the country. And I would like
to thank Sharon Rockefeller, who is here today as the
President, for providing this demonstration.
APTS maintains an interactive clearinghouse of stations'
plans for digital services. I wanted to give you a sense of
what some of these services are. More than 95 percent of public
stations plan to deliver at least one multicast digital channel
of formal educational services, including K-12 instructional
programming, college and university telecourses, workforce
development, and job training or adult continuing education.
Seventy-five percent of stations plan to deliver at least
two formal education channels of those multicasting. Eighty-
five percent of public stations plan to multicast a children's
channel that will offer around-the-clock nonviolent educational
and commercial-free children's programming. Virtually every
station is building new coalitions with old and new partners,
schools, museums, libraries, civics groups, to develop this new
content, everything from teacher training to foreign language
programming.
This is finally sort of the fulfilling of all that we had
potential to do with public television, this new channel
capacity. In Louisiana, for example, we plan to offer four
channels. We are actually multicasting right now. We have high-
definition at night, do multicasting during the day. That is
the good news. But I have no cable agreement in Baton Rouge
right now with Cox. So they are not picking up anything that we
are doing. We are looking at it. We are working on doing this.
We are pleased that in the northern part of my state, I have
two Time Warner cable providers and PBS and APTS is negotiating
an agreement with Time Warner that we are pleased about.
But, you see, interestingly enough, we are so focus on
using this medium to deliver education services that it is a
unique problem because I could have in the northern part of the
State, ``K-12, services on a cable system.'' And I could in
Chairman Tauzin's district no services because they weren't
delivered through the cable system.
So it is a complex problem as we send this out to deal with
the education issue for an entire state. That is true in each
one of our states, I would think, and your local communities.
Our stations are on the cutting edge of using this new
technology. We are not just talking about it. We are all
involved in experiments of enhancing data in the materials. We
have DVD examples of this. We are working with our education
community. We are very excited about digital, but we believe
there are some key elements that we are going to ask for your
help in.
First, public broadcasters is seeking a Federal
contribution of $699 million over 5 years to be matched by the
State and local funding I talked about. This is to help public
television and radio meet the staggering $1.8 billion cost of
digital transition. It is really overwhelming. I had to
strengthen towers, like my colleagues do, put in new
transmitters, new antennas, and do it in this time line.
Included in this request--I know some of you may be
interested in this--is a $33 million Federal contribution to
the cost of converting public television translators throughout
the country. And this conversion of translators to digital will
allow public television to bring the benefits of broadband
digital services even to the most rural areas of the country.
Second, we seek assurance that all the multicast and
interactive services on our digital signals reach American
viewers. On this point, let me use my final minute to suggest
some serious concerns about the FCC's recent must carry
decision. Two elements, in particular, are very disturbing and
will have serious public policy implications for public
television and the American public.
First, the FCC determined based on a narrow interpretation
of a provision in the 1992 Cable Act that cable operators are
required to carry only one multicast digital program stream
from a digital-only station. If allowed to stand, this
interpretation, which we believe is legally incorrect, will
prevent the public from benefiting from the full range of
multicast services that our stations stand ready to provide.
Am I to choose adult education or K-12 education? To which
of those multi streams would I choose to be the primary video?
We suggest that that is not a proper interpretation of it.
Second, the FCC tentatively decided, notwithstanding its
acknowledgement that it needs further information, the dual
analog-digital carriage is unconstitutional. This tentative
decision, which cannot be reviewed in the courts, unnecessarily
and prematurely slants the debate on this very critical issue
in favor of cable operators. This seriously undercuts
broadcasters' ability to engage in discussions with cable
operators to reach voluntary agreements, as both the Commission
and Congress have urged.
Cable carriage of broadcasters' digital signals is the only
viable means for public television stations to get their
digital broadcast services to the public. And that is what we
want, both during and after the transition. Currently cable
serves 70 percent of the American households. And it is
predicted that by 2006, it will reach 42 percent of its
subscriber households with digital cable services.
We plan to give the Commission additional information, but
we suggest you really need to look at this one primary video
signal. It really just blows up our multicast strategy,
frankly. We will keep the subcommittee informed about all of
our efforts involved in this, but we may come to you with
asking for additional help in this arena as it rolls out.
In conclusion, let me say that for more than 30 years,
Congress has invested wisely in public broadcasting. We now
have a strong system of public television stations, and we
reach 99 percent of the American households, giving viewers
tools to improve and enrich their lives.
This public service promise of this new digital technology
is enormous. And public television stands ready to unlock its
potential to serve the public. A renewed Federal investment in
digital facilities and Federal policies that ensures access to
all digital services will allow public television to lead this
transition, rather than be its victim.
We look forward to working with you to reach this goal. I
was listening to your comments. I said, ``But I am not the
chicken or the egg. I hope I am not an old nag.'' I don't think
I am the mother of this dysfunctional family, but I do think we
can get to heaven. And heaven is to have every American citizen
be able to receive these digital services. We are concerned,
really, about that last mile.
[The prepared statement of Beth Courtney follows:]
Prepared Statement of Beth Courtney, President and CEO, Louisiana
Public Broadcasting
Good morning Mr. Chairman and members of the Subcommittee. I am
Beth Courtney, president and CEO of Louisiana Public Broadcasting and
the chairman of the Association of America's Public Televisions (APTS)
Board of Trustees. I testify today on behalf of APTS and its member
stations. Thank you for holding this hearing today, Mr. Chairman, on
the status of the rollout of digital broadcast services.
Public broadcasters historically have been the leaders in using new
technologies for education and public service. We view digital
technology no differently. We stand ready to harness this new
technology to revolutionize how we fulfil our core mission--to use the
media to educate all Americans.
Public television stations are committed to the digital transition
and have made substantial progress toward meeting the May 2003
construction deadline. Today, two years before the deadline:
28 public television stations are broadcasting a digital
signal that potentially reaches 37 percent of U.S. households
with free digital programming.
Stations have raised more than $381 million from state and
local government partners.
Stations have generated more than $190 million through capital
campaigns and individuals in their communities.
Public television stations are committed to using their digital
channels to deliver non-commercial educational programs and services to
their local communities. Virtually every public station:
has developed bold service plans that call for the delivery of
multiple educational services to their local communities;
plans to deliver one if not more multicast digital channels of
formal educational services; and,
is engaging in exciting new partnerships with local community
institutions to develop new digital content.
But public television cannot complete the first step of this
transition or deliver this new educational content without federal
support in two critical areas.
First, public broadcasters are seeking a federal contribution of
$699 million over five years--to be matched by state and local
funding--to help public television and radio meet the staggering $1.8
billion cost of the digital transition.
Second, we seek assurance from the FCC or Congress that all the
multicast and interactive services on our digital signals will actually
reach the American viewers, irrespective of whether they receive their
local television over the air, by satellite or via cable.
HARNESSING DIGITAL TECHNOLOGY TO SERVE THE PUBLIC
With roots going back to the earliest days of radio and television,
America's public broadcasters have played a unique role in a media
industry that is otherwise built on consumer advertising and mass
market entertainment. Into the 1960s, as television evolved into three
major networks and a handful of independent commercial stations,
publicly funded noncommercial television provided the one clear
alternative, focusing on education and culture, public affairs and the
performing arts. In 1967 Congress passed the Public Broadcasting Act as
an amendment to the Communications Act of 1934. With this legislation
Congress laid the cornerstone for the future of noncommercial
educational broadcasting.
Public television's core mission will not change in a digital
world. We will build on our track record of providing the best
programming and services to educate and enlighten audiences. We also
will continue to be leaders in using new technology for the public
interest. From satellite delivery of broadcast signals, to the
development of stereo broadcasting; from closed captioning and
descriptive video services, to video streaming and cutting edge
interactive television trials, public broadcasters have been inventors,
innovators and blenders of technologies to serve the public.
For well over a decade, public television has guided the
development, testing and implementation of digital broadcasting. While
digital broadcasting is still a developing technology, one thing is
clear--it is our future--and we wholeheartedly embrace its
opportunities. In a single digital channel, stations can transmit a
high definition program stream or multicast four or more channels of
standard definition program streams simultaneously along with a
standard definition program stream. Concurrent with these video
streams, stations can broadcast huge amounts of data, text, graphics,
audio and visual information in seconds. The data can be used
interactively to enhance the learning experience of the program,
provide a continuous flow of information (e.g., weather, emergency
warnings, program guides), or be downloaded for other educational
purposes (e.g., course materials, teacher and student guides, and
teacher training materials).
Public television is committed to use digital technologies to
transform the way we learn--by providing the American public with
educational services how they want them, when they want them and where
they want them--in homes, schools, childcare facilities, and workplaces
across America.
MULTICAST DIGITAL SERVICES--UNLOCKING PUBLIC TELEVISION'S PUBLIC
SERVICE MISSION
Since receiving their digital channels, public television stations
have been engaged in systemwide and station level planning. In 1997,
public broadcasting put forward a comprehensive plan for its digital
conversion to the Administration and Congress. We set four broad
systemwide goals for the use of digital technology--goals that are
founded on fully utilizing the multicasting capability of the digital
technology to expand and enhance services.
1. To make the full complement of Ready to Learn services available
to every child, parent and caregiver in America.
The PBS Ready to Learn Service is currently meeting two
national education goals: it teaches basic reading skills and
it helps prepare more children for school success. Its 133
participating stations cover over 94% of the country. In the
past three years, RTL public television stations have trained
370,000 parents and 250,000 teachers and caregivers, affecting
approximately 6 million children.
2. To expand the reach of public television's K-12 educational
programs and services by making them universally available to all
schools.
70% of public television licensees provide K-12 programming in
math, science, arts and humanities. These services are enhanced
by:
PBS TeacherSource, an online K-12 teacher resource with
line lesson plans, teacher guides and activities,
correlated to more than 90 national and state
standards;
and,
PBS Teacherline, online modules to enhance the learning
and teaching of K-12 mathematics.
3. To increase the reach of post secondary telecourses so that they
are universally available to all adult learners.
Collectively, public television stations are the largest source
of post secondary telecourses in the nation. PBS Adult Learning
Service (ALS) supports station-college partnerships that offer
distance learning credit-bearing telecourses, enrolling more
than 500,000 students in 1999-2000. GED on TV has enabled more
than two million adults in five years to earn their high school
equivalency from home. The estimated positive economic impact
of these more productive workers exceeds $12 billion.
4. To expand our commitment to serving the un-served and under-
served populations in our country, those who because of economic,
geographic, physical, cultural or language barriers have been left
behind by the commercial marketplace.
Public Broadcasting has pioneered the development of open and
closed captioning for the deaf and descriptive video services
and reading services for the blind or visually impaired.
Stations like WYBE, Philadelphia and WNVC, Fairfax provide
programming in multiple languages serving a variety of
different ethnic cultures.
I am pleased to report today that our stations throughout the
country have turned those systemwide goals into concrete and very bold
and exciting service plans tailored to their local communities. APTS
maintains an interactive clearinghouse of stations' plans for digital
services. Our data show that virtually every public television station
in the country has developed digital service plans to meet these and
other goals. The centerpiece of virtually every plan is the delivery of
multicast services with a strong focus on education.
More than 95 percent of stations plan on carrying at least one
formal educational multicast service, including, for example,
adult continuing education, K-12 instructional programming,
workforce development & job training, or college/university
telecourses.
Three out of every four PTV stations plan to carry at least
two formal education multicast services.
Approximately 85 percent of PTV stations plan to multicast a
children's channel; 78 percent intend to broadcast university-
level or post-secondary telecourses; and 66 percent plan to
multicast an instructional programming channel for students in
grades K-12.
Others plan to multicast channels that focus on local public
affairs, teacher training, foreign language programming, and
programming aimed at minority and under-served audiences.
As WETA will demonstrate today, some of our digital stations are
already broadcasting multicast program streams. Others are laying the
groundwork for multicast broadcast services by developing digital
content for Internet, cable, satellite, and DVD distribution. Virtually
all stations are aggressively building new coalitions with old and new
partners--schools, colleges, libraries, museums, and cultural,
government, and civic groups--to utilize digital technology to meet
critical community needs.
PTV DIGITAL SERVICE PLANS--CREATING LOCAL SOLUTIONS FOR NATIONAL
PRIORITIES
Realizing National Educational Goals on a Local Level: While
virtually every public television station plans to deliver one or more
formal educational multicast channel, the specific educational services
are tailored to meet local community needs.
Florida public television stations have promised the state
legislature that they will collectively devote a multicasting
stream to the Florida Knowledge Network in return for digital
funding. This statewide educational network will serve as a
teacher training resource, linking Florida's classrooms with
direct access to the highest quality programming, electronic
field trips, and distance learning. Originating from the
Florida State Department of Education and school systems in 17
counties, the network will tailor programming schedules and
curriculum (e.g., GED, math, science, English, art, music, and
foreign language) for localized use.
New York's public television stations plan to dedicate one of
their multicast streams to an educational service called the
Empire State Channel. Developed with the state Department of
Education, the Empire State Channel will feature teacher
training, vocational instruction and public affairs
programming. Among the goals of the Empire Channel are to
support such state initiatives as meeting New York's scholastic
standards and goals, expanding GED on TV and other lifelong
learning programs, and developing job skills for the transition
from welfare to work.
Kansas, Missouri and Illinois public television stations, in
partnership with 350 school districts, have developed
``Chalkwaves,'' an Internet-based educational service designed
to meet three critical needs of the teachers in those states:
high-quality, standards-linked instructional aids, the training
needed to use these aids effectively and the professional
development needed to earn required state credits. Chalkwaves,
which currently serves more than 30,000 teachers and over
350,000 students through the Internet, is laying the foundation
for a digital multicast service.
Providing Unserved and Underserved with Access to Digital
Technology: Today, public television stations, through their nationwide
system of transmitters and translators, serve 99 percent of American
households with an analog signal. Public television stations that serve
rural communities with a network of analog translators are ideally
positioned to bring the benefits of broadband digital services to the
most rural and remote areas of this country. A recent study by Idaho
Public Television shows that one-fourth of the Idaho residents would
not be able to receive high-speed data service even if their current
facilities were DSL enabled. In contrast, Idaho PTV, if its existing
system of transmitters and translators were converted to digital, could
reach two-thirds of these households with broadband digital services.
With requested federal support for the transition of public television
translators to digital, public stations will bring multicast and data
services to those geographically isolated.
KAET in Phoenix plans to partner with KUAT in Tucson to
dedicate one or two multicasting channels to feeding math,
science, geography and other educational programming to 300
schools throughout the geographically diverse state. Directed
by the stations and funded by the state Department of Education
and Arizona State University, programming will include short,
15-minute clips that relate directly to course materials, and
teacher training. Program segments will be accompanied by
curriculum guides, instructional materials, and planning
booklets that can be downloaded to computers in the classrooms.
These services are intended to reach students in the farthest
corners of Arizona, students who are unable to be linked via
telephone and fiber optic lines.
KNME in Albuquerque is considering leasing part of its
digital spectrum to the New Mexico Department of Education to
facilitate the delivery of educational materials to the state's
K-12 schools. The station will position itself as the state's
virtual classroom, providing curricular support and teacher
training opportunities for viewers separated by hundreds of
miles. This arrangement would allow the Department of Education
to help with the costs of digital conversion.
Public television stations also plan to use the multicast
capability to serve populations under-served because of cultural,
language or economic barriers.
KBDI in Denver plans to launch a Latino Initiative Channel.
This channel would feature programming for Denver's Spanish-
speaking and bilingual community and will emphasize news,
public affairs, and social and cultural events. Potential
partners include local community service organizations,
schools, commercial Spanish-language broadcasters, and public
service agencies.
WNYE in Brooklyn and WYBE in Philadelphia plan to provide
multicast foreign language and international channels to serve
the international residents in their respective cities. The
WNYE multicast channel will feature programming in at least 12
different languages, including Japanese, Chinese, Italian,
Greek, Polish, and Eastern European languages. Digital
multicast will allow WYBE, which currently serves more than ten
ethnic communities in Philadelphia, to further expand the reach
of its ethnic language programming. Both stations will offer
public affairs, local news, international news and cultural
programming from countries around the world.
To meet the needs of elderly viewers, WHYY in Philadelphia
plans to create a Home Companion Service aimed at the growing
population of aging Americans. Although designed to appeal to
all members of the senior community, it will be directed
primarily toward the homebound for whom activities and contact
with the outside world are limited.
Partnering with Local Institutions to Solve Local Community
Problems: A key characteristic of public television's digital planning
is localism. In an age of increasing media consolidation, public
television stations remain the only locally owned, locally operated
television service in many communities. Consequently, several PTV
stations are planning ``local'' channels, focusing on specific
community needs.
Vermont Public Television plans a Vermont Public Service
Channel, which would provide regular coverage of the state
legislature, important legislative committee hearings and other
statehouse-related programs, as well as local government town
meetings and debates. Additional programming might include
call-in programs with the Vermont congressional delegation,
travel and tourism information, and other local news and public
affairs programming.
KEET in Eureka, California, plans to partner with local non-
profits, arts organizations and social service agencies to
develop and broadcast programming for a North Coast Channel.
This programming would include documentaries and history
specials specific to that region of the state. The North Coast
Channel will also feature collaborations with hospitals, arts
councils, employment agencies, and the chamber of commerce.
These partnerships would yield shows focusing on health care,
arts performances, employment opportunities, and highlights of
tourist attractions.
realizing the promise of digital: a true public-private partnership
Public television stations can only realize their plans to harness
digital technology to enhance educational opportunity for all Americans
with federal support.
Public broadcasters have been aggressively seeking financial
support from a range of public and private sources, foundations and
corporations, loyal viewers and entrepreneurial endeavors, and state
and local government partners. To date, stations have raised more than
$381 million from state and local government partners; and more than
$190 million through capital campaigns and individuals in their
communities. While this show of support from local sources is vitally
important, it cannot replace federal funding. In most state
legislatures, the DTV funding was provided with an expectation that it
would be matched by federal funds. Some state funding, in fact, is
conditional upon a federal contribution.
Likewise, public broadcasters, since their initial request in 1997,
have sought authorization and annual federal appropriations to support
their digital transition. While there was bipartisan recognition of the
need for federal support, the federal government to date has only made
a modest contribution to fund public television's digital transition.
We acknowledge and appreciate the leadership of Chairman Tauzin in
introducing H.R. 2384, the Public Broadcasting Act of 1999, which
authorized digital funding through PTFP and CPB, and the previous
administration's inclusion of a five-year, $450 million package in its
budget. Yet PTFP grants for digital television equipment totaled only
$19 million in FY 1999 and 2000; and it is yet to be determined what
portion of the FY 2001 PTFP appropriation of $43.5 million will be
allocated for digital transmission equipment. This lack of adequate
support is particularly threatening given the government's mandate to
build DTV facilities by 2003 and to switch from analog to digital by
2006.
The federal government must play its historic leadership role in
underwriting a portion of public broadcasting's digital transition. The
government's failure to make this investment will have direct
consequences. Millions of Americans may be deprived of the enormous
educational promise of digital television. Many of the smaller and
rural stations may be unable to make the transition at all.
The public broadcasting industry has updated its costs for the
digital transition. Balancing reductions for the stations currently on
the air against additions for increased costs, public broadcasters
estimate the total costs of conversion for both television and radio at
$1.8 billion.
Public broadcasters are seeking $699 million over five years in
federal assistance, 48 percent of the total estimated conversion costs.
(This would cover television and radio transmitters and translators,
and minimal production equipment at each station, supplemented by more
fully equipped regional production centers.) We are seeking all of
these digital funds through the Public Telecommunications Facilities
Program (PTFP) at the Department of Commerce.
5 Year Authorization Request
Year-by-Year Request ($ millions, fiscal year)
------------------------------------------------------------------------
2002 2003 2004 2005 2006
------------------------------------------------------------------------
TV Transmission................. 486 324
TV Translators.................. 34 34
TV Production................... 151 151 151
Digital Radio................... 12 35 58 11
Total cost \1\................ 497 359 243 197 151
------------------------------------------------------------------------
Total cost plus contingency... 544 386 253 228 181
------------------------------------------------------------------------
REQUEST......................... 256 183 107 87 66
------------------------------------------------------------------------
Total figures may vary slightly due to rounding.
There is an immediate and urgent need for a significant commitment
of digital funding from Congress this year. A total of $256 million is
needed for FY 2002 and $183 million in FY 2003 to allow stations to
attempt to comply with the FCC's 2003 construction deadline. Even
aggressive front-loading of funds would require the FCC to grant some
waivers from the deadline. The FY 2003 PTFP grants will not be issued
in time to allow stations to meet the 2003 deadline. Moreover,
equipment manufacturers and engineering firms simply cannot handle the
broadcasters' backlogged demand for equipment and tower construction.
Included in the request is $33 million (to be allocated in FY 2004
and 2005) to cover the estimated $68 million cost of converting the
public television translators throughout the country. These translators
are critical vehicles to provide broadband digital services to rural
and under-served communities.
On behalf of our public broadcast stations, we seek quick
authorization of the five-year digital funding request as well as
reauthorization of the stations annual operating funds through CPB.
REALIZING THE PROMISE OF DIGITAL: SUPPORTIVE FEDERAL POLICIES
The Commission's recent must carry decision--rendered in the final
hours of Chairman Kennard's tenure, with little deliberation and
virtually no opportunity for industry input--would, if left intact,
nullify the public's opportunity to benefit from the digital services
that public television stands ready to provide.
We have serious concerns about many elements of the decision, but
two are particularly disturbing: the FCC's determination that cable
operators are required to carry only one multicast digital channel of a
digital-only station; and the FCC's ``tentative decision'' that dual
analog/digital carriage is unconstitutional, notwithstanding its
acknowledgement that it needs further information.
We ask Congress to clarify that the FCC has discretion under the
1992 Cable Act to require carriage of all multicast digital program
streams, and, if necessary, clarify that Congress mandated dual analog/
digital carriage in the 1992 Cable Act.
Clarify Primary Video: If allowed to stand, the FCC's narrow
definition of ``primary video''--that is entitled to carriage--as only
a single multicast digital stream would have broad ranging public
policy consequences:
It would undermine public television stations' plans to
provide a wide range of multicast educational services to their
communities. Although the primary video decision applies only
to stations that are operating in a digital-only mode (which
will generally occur only after the transition), it will have
an immediate crippling effect on public television's plans to
optimize the educational potential of multicast services.
It would undermine local stations' ability to raise funds for
the digital transition. Stations' efforts to raise funds from
state and local government entities and from their local
communities are founded on their commitments to deliver
multiple educational services on a universal basis to their
states and local communities.
It would threaten the viability of free local digital public
television. Local stations depend on viewer support to survive,
therefore carriage of a public station's full range of non-
duplicative digital program services is essential.
It would undermine rather than facilitate public stations'
negotiations with cable MSO's for the voluntary carriage of
digital signals. As such, it is contrary to the Commission's
and Congress' stated goals of facilitating voluntary carriage
agreements.
It would frustrate the delivery of local public affairs
programming, children's programming, programming related to the
political process, programming designed to serve diverse
segments of local communities, and programming fully accessible
to persons with disabilities.
It would prematurely build in a regulatory disincentive to the
development of the fullest and best use of digital technology,
and
It would delay the speedy transition to digital broadcast, and
the return of the analog spectrum, by limiting access to
multiple digital services that will encourage consumer
acceptance of digital technology.
We welcome the support of members of Congress on two alternative
fronts. First, we ask Congress to clarify, in the context of public
television's petition for FCC reconsideration on this issue, that the
FCC has discretion under the statute to interpret the ``primary video''
carriage requirement in the 1992 Cable Act to include all free over the
air multicast digital streams. Second, in the event the FCC declines to
reconsider its decision, we ask Congress for legislation clarifying
that ``primary video,'' as applied to carriage of digital signals,
consists of all free over-the-air multicast digital streams that can be
delivered within a public broadcaster's 6 MHz digital channel.
Clarify Dual/Analog Carriage Requirement: We also believe that the
FCC's ``tentative decision''--that carriage of both a station's analog
and digital signals during the transition is unconstitutional--is
unwarranted and will have serious unintended public policy
consequences. The Commission stated that it needed additional and
updated information in the record before reaching a final decision. Yet
it reached a ``tentative decision'' that cannot be reviewed in the
courts, and that unnecessarily and prematurely slants the debate on the
future of must carry protection in favor of the cable operators.
Cable carriage of broadcasters' digital signals is the only viable
means for public television stations to get their digital broadcast
services to the public during the transition. Cable serves 70% of
American households or about 177 million viewers, and will be the first
to reach any significant penetration of digital services in American
homes. Cable operators predict that by 2006 they will be providing
digital services to approximately 42% of their subscriber households.
In contrast, over-the-air reception of digital signals will not, as
a practical matter, be available to the public for some time into the
transition. As other witnesses will testify, a range of factors can be
cited for the delay in the rollout of digital broadcast services,
including: poor receiver performance; lack of receiver penetration in
the marketplace; lack of digital reception capability in receivers;
lack of compatibility between cable boxes and digital receivers; lack
of industry agreement on copyright protections; and, tower, equipment
and funding issues that have delayed construction of digital broadcast
facilities. The reality is that cable carriage of all free over-the-air
program streams on cable systems during the digital transition is
essential to ensure that millions of Americans have access to the full
range of multicast educational services public television stations plan
provide.
We plan to provide the Commission with the additional information
it requests on cable capacity and other issues. We also plan to show
that a dual analog/digital carriage requirement can be tailored for
public television stations in a manner that serves important government
interests without unduly burdening cable operators' First Amendment
interests. We will keep members of Congress informed as we proceed with
our efforts to secure an appropriate transitional carriage provision
before the FCC. Although we believe that Congress already clearly
mandated dual carriage in the 1992 Cable Act, we may be returning to
Congress to seek legislation requiring cable carriage of digital
broadcast signals during the transition.
Other Digital Policy Issues: In addition to ensuring that cable
subscribers have access to public television digital channels--both
during the transition and beyond--Congress can take other important
steps to speed the transition and to help resolve the outstanding
issues that are impeding its rollout. Our proposed actions on these
issues is outlined in the attached August, 16, 2000, letter to Chairman
Tauzin, which was sent in response the Chairman's question as to what
actions Congress could take to speed up the transition.
CONCLUSION
For more than 30 years Congress has invested wisely in public
broadcasting. We now have a strong system of public television stations
that reaches 99 percent of American households, giving viewers tools to
improve and enrich their lives. The public service promise of new
digital technology is enormous:
for children to provide a dedicated stream of nonviolent,
educational and entertaining programs, commercial-free and
free-of-charge;
for parents and schools to better educate children;
for colleges and universities to reach out beyond their campus
walls;
for students of all ages to have access to lifelong learning;
for under-served audiences whose income, geography, culture or
disability threatens to cut them off from the digital promise;
for citizens who feel alienated from their local, state or
federal governments; and
for public service organizations seeking to build a sense of
civic connection and commitment.
But realizing this potential and remaining a viable service
provider in the digital age is fully dependent on a renewed federal
investment and federal policies that insure access to all digital
services. Public television stands ready with service plans, matching
state and local grants, and community-based content partners to fully
utilize this technology for public service. Investing in public
television's digital conversion and providing for cable carriage of our
nation's public television stations would make digital service
universally available, support models for new and innovative digital
programs and services, boost the quality and quantity of digital
programs, and accelerate the digital transition. Failure to invest in
the public television's digital transition will not only miss this
opportunity to support public television's digital leadership, but will
fundamentally jeopardize public television's future viability.
Mr. Upton. Thank you.
Ms. Courtney. Thank you.
Mr. Upton. Thank you.
Mr. Arland?
STATEMENT OF DAVID H. ARLAND
Mr. Arland. Thank you, Chairman Upton and members of the
subcommittee, for the opportunity to testify today.
Again, my name is Dave Arland. And I am Director of
Government Relations for Thomson Multimedia. You may not know
Thomson, but you certainly know what we make: RCA, GE, and
PROSCAN brand home entertainment products.
We are the leading television manufacturer and marketer in
America. And as RCA, we developed the analog TV technology in
use today. We played a substantial role as well in the creation
of America's digital television systems, including both the
over-the-air standard that we have been talking about today and
the very popular direct TV digital satellite receiving system.
Today, in addition to representing Thomson, I represent the
Consumer Electronics Association.
Now, I come from Indiana in the Midwest, where my
grandfathers worked for the Chesapeake and Ohio and the
Baltimore and Ohio Railroads. The railroads transformed
America. They shortened communication links. They delivered
commerce. They transported people and business. And in many
ways, the transition to digital television is quite similar.
Like a locomotive picking up stream, digital TV in all of
its forms is building momentum as manufacturers of digital TV
products expand their offerings, lower consumer prices, and
enhance the capabilities of home entertainment products. But
the locomotive cannot operate alone. It needs engineers. It
needs cars with passengers. And its enormous engine needs to be
constantly stoked with fuel.
We do need more coal in that boiler; that is, more
programming, to fuel interest in digital TV. And we need to
make sure that we don't leave anyone at the station, especially
consumers who depend on cable for their TV service.
Now, to give members of the subcommittee some idea of how
quickly manufacturers are working to improve affordability of
digital television products, Thomson is quite pleased today to
announce that effective in April, consumers will be able to buy
our wide-screen, fully integrated with over-the-air and
satellite electronics 38-inch RCA HDTV--that is a mouthful;
that is the set that is right here to my left--for just $2,999.
This marks a 21 percent reduction in consumer prices since this
product was first introduced last fall.
We are making a very similar move on our production HDTV,
which is going to drop by 22 percent, and on HDTV monitor
products. This, of course, is in addition to offering the
industry's most popular and most affordable digital set-top,
which you saw in the demonstration.
Let me speak for the industry. Digital TV sales are quite
strong for a new category. Industry sales to dealers of digital
TV monitors and integrated sets reached more than 648,000 units
last year, which represented a more than 400 percent increase
over 1999. Now, that is still a long way from beating sales of
analog TV, but the trend is very positive.
In 2001, our industry predicts sales of 1.1 million units,
representing an investment by retailers, as has been mentioned
this morning, of more than $2 billion in digital TV products.
And so so far in terms of sales, we believe we are right on
target. In fact, in the month of January 2001, retailers bought
more than 80,000 digital TV products.
However, there remain three big obstacles on the tracks
ahead, as has been mentioned: first, more programming; second,
cable compatibility; and, third, protecting digital content.
First, obviously is the need for greater amounts of unique,
high-quality DTV programming and especially HDTV. No amount of
affordable receiver equipment will drive consumer demand for
DTV if there is only a little bit to watch, mostly on CBS, PBS,
and HBO, as well as stations like WETA.
And I understand, Mr. Chairman, you visited WNDU in South
Bend recently. They have made a tremendous investment with not
much to show for it in terms of programming from their network
supplier.
As Chairman Tauzin reminded us today, the availability of
free over-the-air HDTV programming is absolutely part of the
deal. It is time for broadcasters to recommit themselves to
offering Americans abundant amounts of HDTV and, of course,
other unique quality DTV programming services.
We concur with Ms. Courtney. We also would urge Congress to
take a closer look at the primary video issue. It is critical
that public broadcasters especially have multiple streams that
are carried on cable.
Next obviously is cable compatibility. Most people today
get their TV from cable. It is a fact. It is not going to
change as part of this tradition overnight. If we have any
chance of achieving a meaningful penetration of DTV into 70
percent of American households that subscribe to cable, cable
consumers must first be assured that the DTV receiver they
purchase will function as advertised, including reception of
full HDTV when receiving signals over cable. And while we do
have certain baseline agreements with the cable industry, we
have no build-to specification yet.
My mom in Greenfield, Indiana is a prime example of why
this is so important. Under no circumstances she has already
told me is she ever going to go out and buy an ugly antenna.
She said if she expects to see digital television, it has to
work with her cable system.
Another major obstacle to greater availability of quality
DTV content is the need for final resolution on adequate and
reasonable agreements for digital content protection. There is
no question that a major concern of both Hollywood and the
consumer electronics companies is preventing commercial piracy
through large-scale retransmission of content over the
Internet. We do share this objective. However, consumers must
still be able to record programs, keep them, and watch them
later.
Going backwards on this point, Mr. Chairman, will only sour
consumers on the digital TV transition. And there will be new
recording methods, such as hard disks and DVD recorders, but
that does not mean we should lock everything up and treat
consumers as common criminals.
Finally, let me say that some are suggesting the only way
to reach sufficient DTV penetration levels is to force
integration of digital tuning capability into every TV set.
Simply put, forced TV integration of electronics will only
succeed in driving up the price of consumer TV sets in the
short term.
Here is something to consider. About 40 percent of the TV
sets sold in America today have screens that measure 20 inches
or less. They sell for under $220 each. Adding the advanced
digital TV reception capability to these sets for the
foreseeable future would at least double the retail price of
these products. Instead of government imposing a DTV tuner
mandate, the history of our industry suggests that robust
competition matched with widely available content will
effectively drive down consumer hardware prices, frankly, much
faster than I would like.
I thank you for the opportunity to testify. And I look
forward to your questions.
[The prepared statement of David H. Arland follows:]
Prepared Statement of David H. Arland, Director, Government Relations,
Thomson Multimedia, Inc. on Behalf of the Consumer Electronics
Association
INTRODUCTION
Thank you, Chairman Upton, Ranking Member Markey and Members of the
Subcommittee for the opportunity to testify today on issues affecting
the transition to digital television (``DTV''). My name is Dave Arland,
and I am the Director of Government Relations for Thomson Multimedia,
Inc. I am testifying today not only on behalf of Thomson, but also the
Consumer Electronics Association (CEA). CEA represents more than 600
U.S. companies involved in the development, manufacturing and
distribution of audio, video, mobile electronics, communications,
information technology, multimedia and accessory products. Its member
companies, which include Thomson, account for more than $60 billion in
annual sales.
Thomson, which is best known as a manufacturer and marketer of RCA,
PROSCAN and GE brand names, is the leading television and digital
satellite receiver manufacturer and marketer in the United States, each
year selling more than 5 million televisions and 3 million digital
satellite receivers. One out of nearly every five television sets sold
in the United States is a Thomson product. Headquartered in
Indianapolis, Indiana, Thomson employs more than 7,000 Americans
working in facilities across the nation. Thomson helped develop the
U.S. digital television system and has been a leader in the field of
DTV innovation for more than a decade.
THE STATE OF THE DTV TRANSITION TODAY: BUILDING MOMENTUM
Thomson and CEA greatly appreciate the Subcommittee's continuing
oversight of the transition to advanced television services, reflected
in today's hearing. This Subcommittee, under both Republican and
Democratic leadership, going back to the first HDTV hearing chaired by
Congressman Markey in September, 1987, has played a key role at several
critical junctures in the evolution of digital television services.
This Subcommittee has helped to galvanize industry to do the
cooperative work necessary to bring the benefits of DTV to American
consumers, has prodded the FCC to provide regulatory stimulus when
necessary, and has formulated legislation to accelerate and facilitate
the deployment of DTV services.
Today, we stand at yet another pivotal point in the progression
toward deployment of DTV services to all Americans at a price they can
afford. In Thomson's view, the DTV transition is progressing better
than some critics contend but not as well as many had hoped. The
testimony which this Subcommittee will receive today from almost every
witness will contain some good news about what that industry segment is
doing to speed the DTV transition together with an array of concerns
about others not doing enough.
There are two fundamental realities about the DTV transition. The
first is that the science of digital television is revolutionary, the
technical challenges in making all of this work with an open yet
interconnected system, as opposed to a closed system, are daunting, and
technical breakthroughs cannot be decreed by government fiat to occur
by a date certain. The science of digital television requires time and
patience. As this Subcommittee considers how to facilitate the DTV
transition, it also needs to understand the technical difficulty of the
enterprise, the hundreds of millions of dollars invested by industry to
reach where we are today, and the genuine progress we have made to
date.
The second reality is that the business aspects of the DTV
transition are almost as complex as the science and, arguably, more
difficult to resolve. The science of digital video offers enormous
potential market opportunities to industries which compete fiercely
with each other and to companies competing vigorously for market shares
within industries. Yet, the technology is so new and is still evolving
that many of the corporate stakeholders can see only the vague outlines
of viable business plans. The vastness of the business opportunity
combined with the uncertainty about particular business applications
makes the inter-industry struggle for control of key elements of the
DTV infrastructure and technology all the more intense.
While there remain some technical obstacles to a successful
completion of the DTV transition, the more difficult obstacles are
business related. The remainder of this testimony describes the range
and costs of DTV products available to consumers today, endeavors to
identify remaining obstacles to a successful DTV transition, and offers
some solutions to overcome them.
MANUFACTURERS ARE PROVIDING CONSUMERS WITH A GROWING ARRAY OF DTV
PRODUCTS AT RAPIDLY DECREASING PRICES
1. Sales of DTV Products Exceed Many Previously Successful Consumer
Electronics Products At A Comparable Time In Their Product
Launch
The transition to digital television, from the perspective of DTV
manufacturers, is building momentum. Last year, sales of DTV products--
including DTV receivers, high resolution displays and set-top converter
boxes--reached more than 684,500 units and accounted for $1.4 billion
in consumer investment. This year, CEA estimates sales of DTV receivers
and displays will increase as much as 80 percent--to 1.125 million
units--with consumer investment climbing to $2.1 billion.
The successful introduction of DTV products is exceeding initial
industry projections. It compares quite favorably with the introduction
of other popular consumer electronics products. In fact, annual growth
in both unit and dollar sales for DTV products during the first four
years on the market is projected to surpass that of computers, VCRs, CD
players, and color TVs.
A broad array of products is being offered to consumers. To date,
more than two dozen manufacturers have introduced over 200 different
DTV products, which are carried in thousands of retail outlets
nationwide. Indeed, the diversity of DTV products currently available
offers consumers an extraordinary degree of flexibility when choosing--
and I stress the word choosing--how they will make the transition to
DTV, both in terms of functionality and cost--
The sports fan who wants the unparalleled experience of
viewing the Super Bowl or the NCAA Final Four in HD can choose
from among a number of fully integrated, wide-screen HDTV
receivers of various screen sizes and designs.
The parent or educator who desires access, using an existing
analog receiver, to unique educational and children's DTV
programming, can choose from a variety of digital set-top
converter boxes.
And finally, the consumer who believes DTV program offerings
are not sufficient in number and/or quality to merit the
purchase of an integrated DTV receiver at this time, but who,
as an interim step, wants to enhance their enjoyment of
abundant DVD content, may choose from among many different
models of high resolution displays that can be upgraded later
to receive DTV.
The ability of consumers--not the government, not broadcasters, but
consumers--to choose for themselves how, when, and at what cost, they
will make the transition to DTV is an essential ingredient to consumer
acceptance of DTV and ultimately the success of the transition.
2. DTV Prices Are Falling Rapidly
Another essential ingredient to DTV's acceptance by consumers, as
everyone knows, is the need to drive DTV product prices down as quickly
as possible. I am pleased to report that on this front, manufacturers
are succeeding--DTV prices are coming down, and they're coming down
fast. Over the last two years alone, some DTV receiver and display
prices have plummeted by nearly fifty percent. Consistent with the pace
of DTV product sales, the decline in retail prices of DTV receivers is
in line with the affordability curve for DVD players, and much more
rapid than the similar curve for products like CD players, VCRs and
large screen analog TVs. Prices for DTV set-top boxes also are falling,
and CEA expects a strong upsurge in sales of these devices now that
broadcasters and the FCC have finally reaffirmed their support of the
8VSB DTV transmission standard, a very important development in the DTV
transition spurred, in part, by this Subcommittee's July 25, 2000
oversight hearing.
I am very proud to say that in terms of both DTV product variety
and cost reduction, Thomson is a leader. Thomson's Year 2001 DTV
product line includes:
The Lowest Price DTV Receiver/Converter Box. The DTC100 set-
top converter box, priced at $549, is the lowest price and,
with digital satellite capability, the most fully featured DTV
receiver/converter currently available;
A Variety of HDTV Monitor Displays. Thomson's direct-view and
projection high-resolution HDTV monitors range in size from
27'' and 61'' screen sizes, and include the RCA 42'', 3\1/2\-
inch deep, wall-mountable plasma monitor;
Fully Integrated HDTV Sets. Thomson offers direct-view and
projection fully-integrated HDTV sets in three screen sizes,
38'', 61'' and 65''; and
The Innovative ``Liquid Crystal On Silicon'' HDTV. Finally,
one of the most exciting new innovations in HDTV display
technology, RCA's Liquid Crystal on Silicon (``LCOS'') HDTV.
The LCOS, which represents a $25 million investment by Thomson,
will be available later this year and features a flat, 50-inch,
wide-screen display; weighs only 100 pounds, and, with a depth
of only 18-inches, makes having HDTV in the family room
something even my wife would agree to.
And to give the Members of this Subcommittee an idea of how quickly
manufacturers are working to improve affordability of digital
television products, Thomson is pleased to announce today that--
effective on the first of next month--consumers will be able to find
the widescreen, fully integrated with over-the-air and satellite
electronics, 38'' RCA HDTV for $2,999.
This marks a 21% reduction in consumer prices, since this product
was first introduced last fall.
We are also bringing down the prices of widescreen, fully-
integrated, RCA HDTV projection sets out of the stratosphere. The
pricing on our 61'' model will drop from a high of nearly $8,000 two
years ago to $3,999 by April.
Consumers interested in HDTV Monitor products will find similar
savings--with a 32'' RCA HDTV monitor available for $1,599.
This aggressive, affordable pricing is being driven by three
factors: first, growing consumer demand for better displays; second,
the natural competitive pressures of the consumer electronics industry;
and third, the explosion of crisp digital video now available on disc
and via satellite. More over-the-air programming from America's
traditional TV programmers will only do more to fuel the transition.
All of this shows that consumer electronics manufacturers are
investing in the innovation and cost reduction efforts necessary to
ensure consumers have access to a broad array of increasingly
affordable DTV products, and that prices for these products move
downward as swiftly as possible to true mass-market levels. The very
same marketplace forces operating in our intensely competitive consumer
electronics industry that lowered prices so dramatically for VCRs, CD
players and analog television sets will benefit consumers in the DTV
products area. We are, in the words of Chairman Tauzin, more than
keeping our end of the DTV ``deal.''
3. The Availability of Digital-Ready Displays Will Likely Hasten, Not
Delay, Consumers' Transition to DTV.
There is a matter that continues to drive, needlessly, we believe,
a wedge between broadcasters and consumer electronics manufacturers and
that this Committee will likely hear of today. Broadcasters have been
critical of manufacturers' flexible approach to DTV products,
specifically with regard to the availability of high resolution
displays that do not have built in DTV reception capability. They point
to the entirety of DTV products that are available and lament that only
a small percentage, less than 20 percent, can actually receive a
digital television signal.
While it can be stipulated that broadcasters have this one number
right, the conclusions they draw are wrong. They reveal not only a
basic misunderstanding of what is needed to drive consumers to purchase
DTV receivers, but also a failure to recognize what could be an
opportunity to encourage more rapid consumer conversion to DTV receiver
technology.
As I have already noted, in response to strong consumer demand,
manufacturers are making available a wide array of DTV products,
including many digital-ready displays. But the question should not be,
``why are manufacturers making DTV-ready displays?'' That's easy: we
are responding to consumer and retail customer demand. Rather, the
question that should be asked by broadcasters is, ``why is consumer
demand for digital-ready displays disproportionately greater than it is
for DTV receivers or far less expensive DTV converter boxes?''
The answer is simple: readily available content.
Consumers purchasing HDTV monitors know that when they bring their
monitor home they can immediately begin to enjoy the display's higher
quality picture through abundant amounts of programming available on
DVD. In fact, it does not take a great leap of logic to predict that
consumers who are willing to purchase a high-end digital display just
to enjoy the better picture quality afforded by DVDs, will be the same
consumers who will seek to add a DTV tuner device to their display
device to receive the best picture quality once greater amounts of HDTV
are available. In short, we believe broadcasters should take some
measure of comfort in knowing that consumers who otherwise may not buy
any DTV device are at least taking the first step by purchasing an HDTV
monitor that is capable of what will likely be a significantly more
affordable upgrade to full DTV reception capability when broadcasters
begin to provide digital programming in sufficient quality and quantity
to drive consumer purchases of DTV set-top receivers.
there are significant remaining issues affecting the dtv transition
that warrant the attention and action of congress and the fcc
While the consumer electronics industry is optimistic about the
prospects for making digital television an increasingly affordable part
of American consumer life, significant obstacles to a full and more
rapid transition still exist and require Congress's and the FCC's
immediate attention. The consumer electronics industry urges Congress
to address these issues in a comprehensive manner that enables the work
of all DTV stakeholders to move forward as quickly and as smoothly as
possible.
a greater amount of unique, high quality dtv programming, particularly
hdtv, is urgently needed to drive consumer demand for dtv
The importance of abundant, unique, and high quality digital
content to the success of the transition cannot be overstated. It is
truly this simple: consumer demand for DTV receiver products will never
reach mass market levels if there is not enough desirable digital
programming to watch. Today, notwithstanding the efforts of a few, we
are far from having enough desirable digital content to view.
That is not to say there is no good news on programming--there is.
As demonstrated earlier, CBS is carrying substantial prime time and
special events HDTV programming this year, including the Super Bowl and
the NCAA Basketball Championships.1 Public broadcasters also
are taking full advantage of what DTV has to offer, including
specialized HDTV programming and multiple streams of educational and
civic SDTV programming. CBS and America's public broadcasters clearly
``get it'': high quality DTV programming draws in viewers. And CBS's
experience is proof that HDTV-centric business plans can also be money
making--not money losing.
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\1\ Consumer electronics manufacturers, including Thomson,
Mitsubishi, and Panasonic have provided substantial financial support
for CBS's HDTV programming, including production costs and advertising.
---------------------------------------------------------------------------
There is also an increasing amount of HDTV programming offered by
non-broadcast sources.2 Satellite providers DIRECTV and the
Dish Network each are providing HDTV programming to consumers
nationwide; and, in one of the transition's more ironic twists, cable
networks are becoming an increasingly large provider of HDTV
programming. In fact, the HBO, Showtime and MSG cable networks are
offering more HDTV programming than all of the broadcast networks
combined.3
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\2\ Prerecorded media has also become an important part of the DTV
equation. Many consumers are using their DTV sets to enjoy the wide-
screen, high-resolution playback DVDs provide. Similarly, many DTV
consumers are exploiting the high-resolution performance of digital
recorders such as those produced by TiVO. Within a few years, HDTV
quality pre-recorded media will become available and further drive the
demand for DTV products.
\3\ Testimony of Michael S. Willner, President & CEO of Insight
Communications (on behalf of the National Cable Television
Association), before the Senate Committee on Commerce, Science and
Transportation, hearing held March 1, 2001 on the transition to digital
television.
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The bad news, unfortunately, is that, in terms of unique and high
quality DTV programming provided free, over-the-air, what you have seen
today from CBS and the public broadcasters, with the exception of
several local broadcast pioneers (including Capitol Broadcasting's
WRAL), is almost all you can expect to get.
Of course, as broadcasters are quick to point out, many
broadcasters are transmitting a digital signal. However, very few are
transmitting any meaningful amount of unique or high quality digital
programming on that signal. Instead, much of the programming
transmitted on the digital channel is merely an upconverted version of
their analog offering, offering consumers a viewing experience no
better than the original analog programming.
The shortage of free, over-the-air HDTV programming threatens to
significantly dampen consumer interest and investment in DTV, slow DTV
equipment penetration and delay the reclamation of broadcasters' analog
spectrum.
As Chairman Tauzin reminded broadcasters last July, while the law
permits broadcasters to use their digital spectrum for data and other
ancillary and supplementary services, the availability of free, over-
the-air HDTV programming is absolutely ``part of the deal.'' It is time
for broadcasters to follow the lead of CBS, public broadcasters, and
their pay TV rivals and recommit themselves to offering Americans
abundant amounts of HDTV and other unique, quality DTV programming
services.
Finally, it is important to note the importance of cable carriage
of DTV broadcast signals to the development of high quality DTV
programming.4 While CEA's members, including Thomson,
believe that the FCC's recent ruling requiring cable operators
retransmitting signals pursuant to ``must carry'' to carry
broadcasters' HDTV signals in HDTV (and not downconvert to lesser
definition), 5 is consistent with the Congress' view of the
HDTV compact between broadcasters and the American public and will help
push the DTV transition forward, we are very concerned about the
negative impact on digital programming development of the Commission's
so-called ``primary video'' ruling. That is a step backward.
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\4\ In this regard, and as discussed below, final agreement on a
copy protection scheme for cable-delivered DTV programming is essential
to promote wide availability of high quality digital content.
\5\ In the Matter of Carriage of Digital Television Broadcast
Signals, CS Docket No. 98-120, First Report and Order and Further
Notice of Proposed Rulemaking (``Must Carry Order'') (rel. Jan. 23,
2001) at para. 73.
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As Members of the Subcommittee are aware, the FCC, in its recent
Digital Must Carry First Report and Order, adopted rules requiring
cable operators to carry only one of a broadcaster's multiple DTV
programming streams, rather than requiring carriage of all DTV
programming streams that are provided free, over-the-air.6
We believe this decision, which was adopted by a divided and reluctant
Commission, stands as a serious obstacle to the development and
availability of abundant, unique DTV programming. Virtually all
broadcasters committed to the digital transition contemplate some mix
of HDTV and multicasting. The Commission's decision undercuts the
multicasting prong of the DTV programming equation. Particularly hard
hit are public broadcasters, whose DTV plans, as the preceeding demo
clearly shows, rely very heavily on their ability to provide, over-the-
air and via cable, multiple, unique DTV program offerings and who, by
law, are precluded from entering into retransmission consent agreements
with cable operators. We urge Congress either to make clear to the FCC
that the Commission's construction of the statute was flawed and
multicasting can fall safely within a digital must carry regime or, if
necessary, amend the law to require cable carriage of the multicast
programming streams contained in a digital broadcaster's signal to
foster a rich array of programming choices needed to drive and satisfy
consumer interest in DTV.
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\6\ Must Carry Order at para. 54.
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RAPID ADOPTION OF FINAL STANDARDS ENABLING CABLE-DTV COMPATIBILITY IS
ESSENTIAL TO DRIVE DTV EQUIPMENT PENETRATION IN AMERICA'S 70 MILLION
CABLE HOUSEHOLDS
If there is to be any chance of achieving meaningful penetration of
DTV in the 70 percent of American households that subscribe to cable,
cable consumers must first be assured that: (1) the DTV receiver they
purchase will function properly when receiving DTV signals over cable;
and (2) they will be able to exploit and enjoy all of the DTV services,
including interactive services, that broadcasters provide on the
digital channel. Unless both of these requirements are met, the DTV
transition will not be successful. DTV receiver penetration in cable
households will remain extremely low, and certainly not sufficient to
satisfy the DTV receiver penetration requirements triggering
broadcasters' return of their analog spectrum.
The consumer electronics industry, under the leadership of CEA and
working with the National Cable Television Association (``NCTA'') and
other cable entities, has devoted substantial time and resources to
resolving the outstanding technical and business issues needed to
enable complete DTV-cable compatibility. Most recently, CEA and NCTA
have been working to implement a set of agreements reached in February
2000. These agreements consisted of technical agreements on standards:
(1) to allow for direct connection of digital television receivers to
cable systems, which would eliminate the need for the consumer to use a
set-top box; and (2) addressing cable carriage of so-called PSIP
(Program System and Information Protocol) data, which is critical to
the tuning and identification of DTV programming by a DTV receiver. In
addition, building on the negotiations between the consumer electronics
and cable industries, the FCC has adopted rules for the labeling of
``cable-ready'' DTV receivers that will allow consumers to choose from
among three different levels of ``cable-ready'' DTVs, depending on the
level of functionality they wish to have.
Unfortunately, while these baseline agreements have been reached,
the consumer electronics and cable industries have, so far, failed to
agree on final ``build-to'' standards. This failure to adopt ``build
to'' specifications is critical because their final specifications are
indispensable for manufacturers to design and build DTV receivers that
are simply ``plug and play'' with cable, i.e., do not need a cable set
top box just as roughly fifty percent of cable subscribers today who
have ``cable ready'' television sets and receive cable programming
without a set-top box. Similarly, there has been insufficient progress
on so-called ``middleware,'' an essential component for advanced
interactive services which will require a cable set-top box. Genuine
agreements between the parties, not unilateral press releases, are
needed to move these cable compatible DTV receivers off the drawing
boards and into cable consumers' homes. Nor has final agreement been
reached on cable delivery of PSIP data according to established
standards.7 Final agreement on each of these items, in
addition to copy protection, which I will address momentarily, is
essential.
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\7\ Broadcasters transmit PSIP data according to an established
standard (ATSC A/65). Cable carriage of PSIP data according to this
standard is necessary to ensure proper operation of the DTV receiver,
specifically for the purpose of proper tuning of DTV and NTSC signals,
and proper delivery electronic program guide data.
---------------------------------------------------------------------------
CEA believes that the primary reasons for the lack of progress in
reaching final agreement on these DTV/cable compatibility standards are
business related rather than technical. While the FCC has applied
increasing pressure for rapid completion of these industry-led efforts,
more needs to be done by either the Commission or Congress to spur
final inter-industry accords. If a final round of determined jawboning
and more intensive oversight by the FCC and the Congress, especially
this Subcommittee, does not produce the required breakthroughs, then
mandatory standard setting processes may need to be implemented. One
thing is certain, however, there is no DTV transition if cable
subscribers are left in the dark.
DTV COPY PROTECTION CAN AND MUST BE CRAFTED TO BALANCE THE EXISTING
RIGHTS OF BOTH CONTENT OWNERS AND CONSUMERS
A major obstacle to greater availability of quality DTV content is
the need for final resolution on adequate and reasonable standards for
DTV copy protection. CEA and its member companies are committed to
working with other parties to ensure that copyrighted content, when
transmitted in digital formats, is adequately protected against
commercial piracy in a manner that preserves the fair use rights of
American viewers. In addition, the potential for Internet
retransmission of broadcast programming raises legitimate concerns that
the consumer electronics industry is willing to work with broadcasters
and the content community to address.
The idea that the introduction of DTV technology renders mutually
exclusive the rights of content owners to protect their works from
unlawful copying and redistribution, and the right of consumers to make
recordings of digital content for personal, non-commercial use is
clearly wrong. Both of these fundamental and hard-fought rights are as
defensible and desirable in the DTV domain as they are in the analog
environment. It is therefore not a question of whether to protect
either right, but how to protect both.
As a matter of public policy, consumers would balk if the
transition to DTV turns out to be regressive in terms of their ability
to time shift, build a home library of recorded video, and enjoy the
full functionality of the consumer electronics products they purchase,
compared to what they currently experience. In this regard, the cable
industry's proposed PHILA license setting forth terms and conditions
for the operation of consumer electronic devices that can be connected
to cable systems raises serious concerns.8 It should be
published by the FCC immediately for public comment to enable those
concerns to be aired.
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\8\ In particular, we note several disturbing trends that threaten
to erode the normal and customary home recording rights that Americans
have enjoyed for over 20 years. For example, at the behest of content
providers, some broadcast networks have recently proposed encrypting
their DTV broadcast transmissions in a way that could prevent any home
recording of free, over-the-air programming.
Similarly, at Hollywood's urging, the cable industry, has proposed
licensing terms for OpenCable-compliant products (including digital
set-top boxes, PVRs, VCRs and cable-ready DTV receivers) that would
give content owners and cable operators unprecedented authority over
consumers' electronics products that threatens consumers' recording
rights and raises the prospect of third-party control of electronics
devices in the digital domain--not something that will make consumers
run to their local retailer to purchase a DTV.
---------------------------------------------------------------------------
CEA and its member companies believe the following principles
should guide a renewed, cooperative effort among the affected
industries to develop technology and licensing terms required for a
robust, yet consumer friendly, copy protection regime for digital
television:
Consumers should be free to copy and store for their own use,
free, over-the-air DTV broadcasts.
Consumers should be able to enjoy the same reasonable and
customary home recording practices for content received via all
digital delivery systems (i.e., DTV, digital cable and digital
satellite) as they do with analog technologies, to continue
building home video libraries.
Encryption of DTV or HDTV programming should not prevent
viewing on DTV receivers, or storage and viewing on such
devices as personal video recorders, by any consumer who has
paid for the right to do so.
CEA and Thomson commend the Members of this Subcommittee,
particularly Chairman Tauzin and Representative Boucher, who have
recently spoken out on the need to balance the rights of content owners
and the need to protect consumers' fair use rights as the digital
revolution moves forward.
In essence, the affected industries must reach agreement on both
copy protection technology and a fair set of recording rules.
Compromise is needed, and overreaching must be avoided. But consumers'
interests cannot be sacrificed. If consumers discover that their PVRs
or digital video recorders are not working or are erasing after 45
minutes because of unilateral measures taken by content owners, then
consumers will revolt and the DTV transition will be set back
immeasurably. Congress and the FCC should not let that happen.
CONSUMERS MUST HAVE ACCESS TO COMPETITIVE EPG SERVICES
Although electronic program guides (``EPGs'') are rapidly assuming
increased importance in the world of analog television, they will
become virtually indispensable to consumers in the digital environment.
They will play a role functionally equivalent to an analog receiver's
channel dial or remote control and, as such, will be a critical tool to
navigating through a 100+ channel universe simply, accurately and with
a minimum of confusion imposed upon the consumer. It is critical that
no gatekeeper be allowed to limit the extent to which consumers can
choose among competitive EPG services, and have access to the tools
which best facilitate their introduction to and use of DTV services.
Cable operators have an economic incentive to discriminate against
competitive EPGs in favor of those EPG services which they own or in
which they hold a financial interest. This threat is not merely
theoretical. Even in the analog environment, some cable operators
stripped EPG data transmitted by broadcasters in the vertical blanking
interval so as to force consumers to use the cable operator's EPG
service.9
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\9\ The FCC currently is considering a request by Gemstar (a major
provider of electronic program guides and a company in which Thomson
holds a financial interest) to prohibit Time Warner from stripping its
EPG data from analog broadcast signals. See Petition for Special Relief
Seeking Commission Order to Discontinue Stripping Information from
Broadcast VBI, Public Notice DA 00-670 (rel. March 24, 2000).
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Importantly, the availability of EPG data transmitted with the DTV
broadcast signal does not dictate consumer use of or subscription to
any particular program guide, but rather enables the consumer to choose
among a competitive array of such services, including program guides
offered by the cable operator.
Thomson and CEA believe the FCC has authority to require cable
carriage of EPG data, but, in its DTV Must Carry Report and Order,
chose not to exercise this authority. We urge Congress to review the
FCC's narrow interpretation in this matter, with an eye toward ensuring
that no gatekeeper denies consumers the ability to access a competitive
array of EPGs.
CONGRESS SHOULD REJECT GOVERNMENT MANDATES THAT WOULD INCREASE CONSUMER
COSTS AND DAMPEN DTV INNOVATION
1. An Attempt At Economic Engineering With A Digital Tuner Requirement
Will Slow The Process Down.
The FCC has a pending rulemaking proceeding seeking comment on a
proposal to require that digital tuners and reception capability be
added to every television set offered for sale in America above a
certain size. Our experience in the marketplace and our knowledge of
the associated costs convince us that such a mandate would be
counterproductive. Rather than accelerating the DTV transition, it
would likely trigger an angry consumer backlash which could bring the
DTV transition to a screeching halt.
Approximately forty percent of TV sets sold in the U.S. today are
20'' or less. Their retail prices are in the range of $89 to $220.
Adding DTV reception capability to these sets, commencing in 2003 as
some have urged, would double or triple their retail price. Does
anybody on this Subcommittee think consumers will embrace such a new
price structure? I suggest not. It is no wonder that the Consumer
Federation of America and seniors groups have roundly condemned this
proposal as a regressive DTV tax. It would hurt the vast majority of
consumers and slow the transition by removing from the marketplace
today's lower cost TV sets that otherwise are perfectly good candidates
for digital signal reception through set-top converter boxes.
Let's be clear that adding DTV reception capability to analog NTSC
television receivers is not a trivial task. It is NOT adding just one
chip, or even two or three chips. It requires adding a substantial
amount of circuitry, several expensive chips, memory, filters, and
interface devices--not to mention software and switching changes. All
of these components add up in cost. Moreover, digital television
technology is still in its infancy. Unlike analog television receiver
technology with the benefit of more than 50 years of cost reduction,
DTV sets only have been on the market for 2 or 3 years. Even with an
aggressive cost reduction curve, the electronics package required to
receive, decode and display digital television will still command a
$200 per unit cost premium over required analog circuitry for the
foreseeable future. This does NOT include amortization of any design
and development costs, which could be in the tens of millions of
dollars for each manufacturer. Suggestions like that made by one
witness at the March 1, 2001, Senate Commerce Committee hearing that
adding DTV reception capability could be done for $1 per receiver are
completely and utterly baseless and disserve the much needed oversight
processes initiated by the Commerce Committees of the Congress.
There is nobody more interested in selling millions of digital
television receivers than Thomson and other consumer electronics
manufacturers. But we cannot, and we will not cram them down consumers'
throats. We believe fervently that consumers will be willing to pay a
price premium for DTV receivers and other DTV products once there is
exciting and abundant original and innovative digital programming,
including HDTV, available for viewing and once consumers can be certain
that they can receive such programming over cable. Then, nobody will
have to force consumers to buy DTV receivers; they will rush to buy
them just as they did when DBS entered the market. These increased
volumes will drive costs down even further. That is the history of this
industry.
Not only would a DTV tuner mandate likely harm the DTV transition,
but it is a striking example of an inappropriate role for government to
play in the marketplace. Unlike closed captioning or the V-chip which
government required to promote certain social goals and the costs of
which were modest and absorbed by the consumer electronics and
broadcast industries, a DTV tuner mandate would serve no extrinsic
social goal and would be very expensive for consumers. If, indeed,
there is a marketplace failure warranting government intervention,
consumers should not be the ones to pay for it. Would broadcasters'
enthusiasm for a DTV tuner mandate be somewhat diminished if Congress
also required broadcasters to pay for the increased receiver costs
resulting from such a requirement, as Mark Cooper of the Consumer
Federation of America suggested in his recent testimony before the
Senate Commerce Committee? I suspect the proposal would disappear from
the broadcasters' DTV ``to do'' list.
2. Government-Imposed Receiver Standards Serve No Useful Purpose in an
Already-Competitive DTV Marketplace, and Would Stifle
Innovation.
Finally, CEA and its members, including Thomson, strongly oppose
broadcasters' continued calls for government-imposed performance
standards for digital television receivers. The FCC has repeatedly
rejected this notion, most recently in January of this year in its
Biennial Review of the DTV transition. The FCC noted that ``DTV
receiver manufacturers, driven by market forces, are continuing to make
significant improvements in their products, particularly in the area of
indoor reception and multipath signal handling capabilities.''
10 The FCC correctly concluded that government mandated
performance standards would impede innovation and lead to lowest common
denominator solutions. It is a bad idea, and it should be rejected.
---------------------------------------------------------------------------
\10\ Report and Order and Further Notice of Proposed Rulemaking in
MM Docket 00-39, adopted Jan. 18, 2001) (``DTV Biennial Review Order'')
at para. 96.
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CONCLUSION
In closing, I would like to again thank the Members of this
Subcommittee for their longstanding commitment to making digital
television a reality for Americans. America's consumer electronics
manufacturers are delivering to American consumers products that allow
them to exploit and enjoy all of DTV's capabilities, and at
increasingly affordable prices. We urge Congress to continue to play a
constructive role in eliminating what last obstacles remain to
achieving a rapid and smooth transition and welcome the opportunity to
take part in any efforts that will further those goals. And, we
recognize our responsibility as one of the key industry stakeholders to
complete successfully the long journey to the digital television era.
We ask all industry participants to take stock realistically of
where we are today, reach a consensus on the significant obstacles that
are impeding the DTV transition and then work to create market-based
solutions supplemented, if absolutely necessary, by government
regulation where there is market failure. The industry segments need to
be honest with each other and not overreach. Above all we have to
rededicate ourselves to the principle that consumers must be the
beneficiaries of the DTV revolution and cannot become pawns in a high
stakes game for competitive advantage along the way.
Mr. Upton. Thank you.
Mr. Willner?
STATEMENT OF MICHAEL WILLNER
Mr. Willner. Thank you, Mr. Chairman and members of the
committee.
Good afternoon. I am Michael Willner, President and Chief
Executive Officer of Insight Communications. We serve
approximately 1.5 million subscribers. And I am also the Vice
Chairman of the National Cable Television Association.
Thank you for giving me the opportunity also to tell a very
exciting story about how digital television really is working
right now in the marketplace, working not because of
significant amounts of digital broadcast programming but
because the cable industry has voluntarily created innovative
advanced digital services.
Cable, in fact, has moved with supersonic speed into the
digital world, not because anybody told us so but because our
customers wanted us to. In fact, today 10 million households
are enjoying digital cable. Indeed, as the owner of the cable
system in Greenfield, Indiana, I would venture to say maybe
your mother was right.
Let me also say that the key to cable's innovation has
always been twofold: consumer demand for new and diverse
services and the freedom from excessive regulation, a
combination absolutely critical in allowing us to raise the
absolute billions of dollars needed to invest in all of these
new technologies. Our customers have been the ultimate winners
because they now have more choices.
In fact, in the last 2 weeks, my company along with Time
Warner and Comcast reached an agreement with the local CBS
affiliate in Indianapolis to carry their digital signal in
order to deliver multiple feeds of the NCAA basketball games at
no extra charge to our subscribers. The broadcaster came to us,
and we said, ``Great idea. Let us do it.'' The cable industry's
digital transition is happening with our own capital and
without any grants or subsidies from the government. Since the
passage of the 1996 Act, the cable industry has invested $42
billion to upgrade its infrastructure. Contrast this, if you
will, with the less than $1 billion that the entire broadcast
industry has spent to date on its digital transition, that
after receiving $70 billion worth of valuable public spectrum,
whether it becomes a grant or a loan.
Insight has been an industry leader in the development of
new and advanced services. By virtue of our investment, we have
added scores of new video channels, developed interactive
community programming, created a robust video-on-demand service
with full VCR functionality, delivered lightning fast Internet
access, and launched our first facilities-based telephone
service, finally, finally offering to customers a choice in
local phone carriers. To do all of these things, our company
alone has invested almost $500 million since the passage of
your act.
Broadcasters now argue that the government should give them
large blocks of cable's newly expanded channel capacity for
carriage of what is essentially redundant versions of their
analog channels. Double must carry would be at the expense of
new and diverse broadband services that customers want today.
Channel capacity is limited even in newly rebuilt cable
systems.
Broadcasters could create the high-definition television
programs, which is what they promised Congress when they sought
the digital spectrum. But with the exception of CBS,
broadcasters largely have abandoned that promise.
On the other hand, the cable industry is actually doing
something about the digital transition. We have upgraded three-
quarters of our plant and are rapidly completing the rest. HBO
alone is offering three times as much high-definition
programming as all of the broadcast networks combined.
The NCTA has negotiated a technical standards agreement
with the CEA. Programmers are developing a multitude of new
digital cable channels. And to facilitate the broadcasters'
digital transition, our industry has agreed to carry the
digital equivalent of today's analog broadcast stations
whenever the broadcasters return their analog spectrum.
In other words, if Mr. Paxson wants to vacate his analog
frequencies early and in the process reap billions of dollars
from the wireless industry, we still will convert his primary
digital signal to analog and carry it to all of our
subscribers.
There should be no doubt about this. Cable wants to and
will continue to provide consumers complete access to the
broadcast channels they enjoy today, but our customers don't
want redundant versions of broadcast channels at the expense of
new and innovative services, services such as the National
Geographic Channel, Oxygen, and the Biography Channel. If
broadcasters were to create significant amounts of HDTV
programming, consumers would be incented to buy HDTV receivers,
and we will want to carry it.
Must carry originally was about preserving over-the-air
television. Broadcasters now seek double must carry for still-
undefined services. This is a very different proposition. And,
not surprisingly, a bipartisan majority of the FCC has
preliminarily concluded that a double dose of must carry would
be unconstitutional.
Mr. Chairman, there are many differing commercial interests
here, but, most importantly, there is the public interest. The
fact is that cable revenues come directly from our consumers.
That means cable operators must satisfy our customers' desires
or we risk losing them to our competitors. We respectfully
submit that the public interest is best served by allowing
cable the freedom to provide consumers the new digital services
they want today and in the future. Thank you.
[The prepared statement of Michael Willner follows:]
Prepared Statement of Michael Willner, President and Chief Executive
Officer, Insight Communications
A. INTRODUCTION
Mr. Chairman, members of the subcommittee, my name is Michael
Willner. I am President and CEO of Insight Communications, a cable
company with 1.4 million customers in Illinois, Indiana, Kentucky,
Ohio, and Georgia. I also serve as Vice-Chairman of the National Cable
Television Association, the industry's leading trade association which
represents cable companies serving more than 90 percent of the nation's
68 million cable customers and more than 200 cable program networks.
B. THE TRANSITION TO DIGITAL TELEVISION (DTV)
The transition to digital television is moving forward, and the
cable industry is at the leading edge, as I describe below. But there
is a problem: by the broadcasters' own admission, they are not likely
to meet the 2006 deadline for returning the analog TV spectrum. By
itself, this is not of great concern to cable companies like mine,
since we are providing advanced digital services and meeting the needs
of our customers. However, the broadcasters have made it my problem by
blaming everyone but themselves--cable companies, the FCC, TV
manufacturers--for the slow pace of their move from analog to digital.
After receiving two grants of valuable public spectrum for free,
broadcasters are now asking the government to redefine the must carry
laws of 1992 to further regulate the cable industry: they are asking
Congress and the FCC to double the must carry requirements to include
both analog and digital signals, and to require the carriage of
multiple digital signals, not just their primary video feed. Cable
operators and programmers strongly oppose duplicative must carry
requirements.
C. THE FCC'S RULINGS ON DIGITAL MUST CARRY, JANUARY 2001
Broadcasters have been claiming for several years that the 1992
Cable Act mandates the simultaneous carriage of both a television
station's analog signal and its digital signal (dual must
carry).1 On January 18, 2001, the FCC tentatively concluded
that such a dual carriage requirement would be unconstitutional since
it ``appears to burden cable operators' First Amendment interests
substantially more than is necessary to further the government's
substantial interests of preserving the benefits of free over-the-air
local broadcast television; promoting the widespread dissemination of
information from a multiplicity of sources; and promoting fair
competition in the market for television programming.'' 2
The FCC has asked for additional comments on its interim conclusion and
will make a final decision in the months ahead.
---------------------------------------------------------------------------
\1\ See for example page 8 of Written Testimony of Ben Tucker,
Executive Vice President, Fisher Broadcasting [for the National
Association of Broadcasters] before the United States Senate Commerce
Committee on The Transition to Digital Television, March 1, 2001.
\2\ First Report and Order and Further Notice of Proposed
Rulemaking, CS Docket No. 98-120; CS Docket No. 00-96; and CS Docket
No. 00-2; FCC 01-22, paragraph 3.
---------------------------------------------------------------------------
On January 18, 2001, the Commission also ruled that once a TV
broadcaster returns its analog channel and transmits only in digital
format, the 1992 must carry law gives that digital station carriage
rights for only its ``primary video.'' According to the FCC, ``primary
video'' means a single programming stream, along with any program-
related material. Cable operators are ``not required to carry
duplicative signals or video that is not considered to be primary.''
3
---------------------------------------------------------------------------
\3\ Ibid. paragraph 6.
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Some broadcasters like Paxson Communications want to use their HDTV
spectrum to multicast several standard definition digital TV signals--
and to require cable carriage of all those digital broadcasts. Indeed,
Jeff Sagansky of Paxson Communications testified before the Senate
Commerce Committee 4 on March 1 that HDTV was not the
highest or best use of the digital spectrum--multicasting
was.5
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\4\ Before the Senate Commerce, Science and Transportation
Committee: Testimony of Jeff Sagansky, President & CEO, Paxson
Communications Corporation, Thursday, March 1, 2001, page 3.
\5\ Paxson's latest business plan depends not on market forces but
on government mandates, i.e., forced carriage of all its signals--
regardless of their desirability to consumers--by both cable and DBS.
Paxson and the other broadcasters are asking for mandatory carriage of
multiplexed standard definition broadcast signals before they have
figured out what to put on those channels. Indeed, Paxson and other
broadcasters are asking the government to take the risk out of their
business while saddling other industries with new costs and lost
opportunities such as diminished channel capacity, decreased consumer
choice, and lessened opportunity for other programmers to be carried on
cable and satellite systems.
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D. THE PROBLEMS WITH DIGITAL MUST CARRY
``Digital must carry'' includes two related proposals: ``dual must
carry'' (the notion argued by NAB that cable should carry both a
station's analog as well as its digital signal during the transition to
DTV), and ``multi-channel'' or ``multiple must carry'' (the effort led
by Paxson to require cable carriage of all a broadcaster's digital
signals once it has made the transition to DTV and returned its analog
spectrum). Both proposals overreach: they seek a new federal
entitlement program to confiscate an additional 6MHz of cable's scarce
channel capacity for programming services that do not yet exist--or may
never exist. Cable's spectrum could be put to better use depending on
the quality of a broadcaster's digital programming, the availability of
alternative digital services, and the needs of consumers.
All cable systems have finite capacity--whether they are old 350-
450 MHz systems or new 550-860 MHz interactive facilities. As such,
federal mandates to reserve channel capacity for broadcasters
necessitate trade-offs that negatively impact consumers: the more
broadcast channels cable operators are required to carry, the fewer
cable networks or alternative digital services they can offer. In
addition to traditional analog video services, cable operators are
deploying digital video services, which have already attracted 10
million customers. Cable companies are also offering high-speed access
to the Internet, with 4 million customers to date. And cable companies
have begun offering telephone service in competition to local exchange
companies--just as Congress intended when it passed the
Telecommunications Act of 1996 (cable currently has 1 million
residential phone customers). These services--and new ones still in
development--all take bandwidth. Any space allocated to broadcasters
for duplicative digital signals means less bandwidth for other services
that consumers might prefer. The mere availability of cable capacity is
not an adequate rationale for government to favor one set of speakers--
the broadcasters--over another ``cable operators and programmers--by
expropriating more channel capacity for the same broadcasters who are
already carried on cable.
Most commentators agree that what will drive the purchase of HDTV
sets and the transition to digital is the availability of compelling,
high-quality digital programming. By demanding digital must carry, the
broadcasters are in essence asking Congress to take the risk out of
their business and remove their burden of developing innovative digital
programming that cable operators would want to offer to their customers
through voluntary carriage agreements. Broadcast stations are asking
the government to ensure their success by warehousing 6MHz of digital
spectrum on cable systems for their future use.
By demanding 12MHz of cable's spectrum for both their analog and
digital signals, broadcasters will:
Reduce consumer choice by:
Decreasing space for new channels of both analog and
digital video; and
Limiting space for existing digital services like high
speed Internet access and reducing space for new services
like interactive TV, switched telephony, and IP telephony.
Harm cable programmers by limiting their ability to get onto
cable and satellite systems.
There are currently 224 national programming networks, all
of which would like to be carried on any given cable system
in addition to local broadcasters.
Aside from their practical problems, the policy problems with the
broadcasters' demands for digital must carry include:
Broadcasters are offering little high definition programming--
just a standard digital version of their analog programming.
Dual must carry of an analog channel and its standard
definition digital counterpart would give the public nothing
new but would consume valuable cable capacity. This would
reduce the diversity of programming on cable systems and limit
the number of new voices getting onto cable systems in favor of
redundant broadcast voices.
On average, only 200 MHz of an upgraded 750 MHz cable system
is digital--200 MHz for all the new digital services: new cable
programming services, cable modem service, video-on-demand,
cable telephony, and services yet to be created. These new
services are precisely the kind of facilities-based competition
Congress intended when it passed the 1996 Telecommunications
Act.
There is no public policy reason why two signals of every
broadcast station--and all broadcasters as a whole--should get
preferential carriage over each and every cable network. There
certainly is a Constitutional problem under the First Amendment
with a requirement that favors one category of speakers over
another.
A double dose of must carry will bring consumers more of the
same, and less of anything new. Consumers will be unhappy when
their cable operator is forced to drop cable networks in order
to carry duplicate broadcast channels, or if their operator is
unable to provide new services and access to new cable
networks. Every cable channel that is used to carry these
duplicate broadcast services is one that cannot be used for
other purposes like offering high speed access to the Internet,
interactive television, or video-on-demand.
E. CABLE IS LEADING THE TRANSITION TO DIGITAL TELEVISION
Insight Communications has been an industry leader in the
development of new advanced services. By virtue of our investment (more
than $500 million since passage of the 1996 Telecommunications Act), my
company has:
added scores of new channels;
developed interactive community news and information
platforms;
created video-on-demand services which electronically deliver
up to 500 movie titles viewable whenever our customers want,
with full VCR functionality;
made plans to open an electronic mall with 50 retail outlets;
delivered lightening-fast Internet access; and
launched our first facilities-based telephone service, thus
offering consumers a choice of local phone carriers.
Not surprisingly, in less than a year's time, over 20 percent of
Insight's customers have signed up for digital packages. And cable
subscribers nationwide are offering similar services.
The cable industry has been a leader in the transition to digital
and has taken on this role without government mandates or subsidies.
Cable has moved into the digital world with great speed not because
anyone told us to but because our customers want us to. Cable operators
and programmers are working in a number of areas to ensure cable
customers have access to new and unique digital services, such as:
Cable plant upgrades that allow operators to offer new digital
services;
Creation of unique digital and high definition cable
programming;
Negotiation of retransmission consent agreements to make
digital broadcast programming available to cable customers--
including PBS; and
Agreement between the cable industry and the consumer
electronics industry to ensure digital TV sets work with cable
systems.
Each of these areas is discussed in more detail below.
1. Cable Industry Upgrades
Cable operators have invested more than $42 billion since 1996 to
upgrade their facilities in order to offer consumers new services,
including digital cable. Digital video service provides increased
channel capacity through compression of multiple digital video signals
in the same 6 MHz slot previously occupied by a single analog channel.
As a result, cable customers are able to receive dozens of new
programming services.
Consumers are responding by signing up for digital tiers in record
numbers. To date, cable systems have attracted about 10 million digital
customers. A survey released in March 2000 by the Cable and
Telecommunications Association for Marketing (CTAM) showed impressive
positive customer response to their upgraded, digital cable offerings.
Of nearly 2,600 consumers polled, 95 percent expressed satisfaction
with their service.6
---------------------------------------------------------------------------
\6\ CTAM's 1999 Digital Cable TV Customer Satisfaction Study.
---------------------------------------------------------------------------
2. Cable's New Digital and High Definition Programming
Program networks have already launched some 60 new digital channels
offering consumers additional choice and further program diversity.
Examples include the Biography Channel and History Channel
International (from A&E); Science, Civilization, and Kids (from
Discovery); Noggin, Nick Too, and Nickelodeon Games & Sports (from
Nickelodeon); and style. (from E!). There are six new Hispanic channels
from Liberty Canales, new music channels from MTV and BET, and separate
channels targeting Indian, Italian, Arabic, Filipino, French, South
Asian and Chinese viewers from The International Channel. There are
also many new premium offerings from HBO (HBO Family, ActionMAX, and
ThrillerMAX), Showtime (Showtime Extreme, Showtime Beyond) and Starz!
Encore (Starz! Family, Cinema, Movies for the Soul, Adventure Zone).
Cable programmers are also leading the way in the development of
HDTV programming. For example, HBO is offering more HDTV programming in
any given week than all of the broadcast networks combined. Showtime,
Madison Square Garden, A&E, and Discovery are also producing high
definition programming. This is just the kind of high quality
programming that will facilitate the transition to digital by enticing
people to buy DTV sets.
3. Negotiation of Voluntary Retransmission Consent Agreements with
Broadcasters for Carriage of their Digital Signals--Including
PBS
The facts belie the broadcasters' claim that further government
mandates are necessary. The marketplace is working to resolve digital
carriage issues. The cable industry will carry the broadcasters'
primary digital signals at the end of the transition, and will continue
to carry their analog signals during the transition. No broadcaster
will lose its voice, nor will any consumer lose access to his or her
favorite broadcast channels.
In addition, major multiple system operators (MSOs) have entered
into retransmission consent agreements with some broadcast station
owners to carry digital broadcast programming during the transition.
For example, AOL Time Warner has entered into comprehensive agreements
for carriage of the digital signals of the four major broadcast
networks, several station group owners, and a large group of public
broadcasters. AT&T has digital carriage agreements with Fox and NBC,
and continues discussions with other broadcasters. Other negotiations
are underway between broadcast and cable companies and are likely to
yield additional agreements for the carriage of broadcast stations'
digital signals on cable systems.
Like all aspects of the digital transition, these discussions take
time.7 But, the marketplace is working to resolve the
digital carriage issue. A government-imposed digital must carry rule
will in no way provide consumers with an incentive to buy new digital
television sets. Instead of arguing for such a requirement,
broadcasters can provide this incentive by developing distinct and
compelling programming that consumers want to watch. The retransmission
consent agreements that have been reached and the ongoing discussions
between cable and broadcast companies validate the observation that--as
cable companies add channel capacity, and as broadcasters develop
specific digital programming that consumers want--cable companies will
carry such programming.8
---------------------------------------------------------------------------
\7\ Retransmission consent discussions have in some cases been
hampered by the fact that many broadcasters do not have in place
definite business plans for their digital spectrum.
\8\ See e.g., ``Time Warner Adds HDTV in Houston,'' Multichannel
News, November 27, 2000, p. 22; ``High-Definition TV: So Close, and Yet
So Far,'' Newsday, January 10, 2001, p. C5.
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4. Cable Has Reached Agreement with the Consumer Electronics Industry
on Compatibility and Interoperability Issues
Another area where progress has been made to ensure a smooth
transition to digital is the compatibility between cable systems, set-
top boxes, and digital television (DTV) sets. The cable industry has
addressed the issue of compatibility, and solutions are available.
Cable systems deliver high definition digital signals to DTV sets by
using so-called ``component analog'' connectors between a cable set-top
box and a DTV set. In some cases, content providers may require copy
protection before they will make high quality digital programming
available to cable.
There are two approaches by which DTV sets can be connected to
cable with adequate copy protection and security. First, an HDTV-
capable set-top box can be connected to a DTV using a digital interface
or connection, such as a ``1394/5C'' 9 or functionally
equivalent digital link. This digital link will include copy protection
technology to ensure that the digital signals cannot be pirated as they
cross between the set-top box and the DTV set. Second, the
functionality of the set-top box can be incorporated within the digital
television itself. Using this approach, the DTV set connects directly
to the cable system without the need of a set-top box. Since there is
no set-top box and, therefore, no extended connection to the DTV set,
there is no opportunity for the digital signal to be stolen and copied.
---------------------------------------------------------------------------
\9\ Several companies have developed the ``5C'' Digital
Transmission Content Protection (DTCP) technology. Use of DTCP has been
subject to ongoing discussion and the negotiation of terms and
conditions between equipment manufacturers and content providers. The
cable industry supports the proposed 5C technology as an effective way
to provide copy protection.
---------------------------------------------------------------------------
Both of these approaches required inter-industry technical
discussions and consensus. The cable and consumer electronics
industries worked diligently to resolve these outstanding technical
issues. In December 1998, the cable industry and the Consumer
Electronics Association (CEA) agreed to the necessary changes in the
IEEE 1394 specification to promote compatibility between digital
television receivers and digital set-top boxes.10
---------------------------------------------------------------------------
\10\ Through the efforts of CableLabs and its OpenCable project,
the cable industry developed specifications for cable set-top boxes
that could be sold at retail stores. The security features of these
boxes would be included in a separate security module--a ``Point-of-
Deployment'' or ``POD'' module--to be obtained from the cable operator.
On December 15, 2000, CableLabs submitted a final ``PHI'' (POD-HOST
Interface) license agreement to the FCC. The technology provided by
this license is used to ensure security and to facilitate copy
protection of high quality digital content as it passes across the
interface between the POD module and the cable set-top box. This
license will allow equipment manufacturers to begin producing digital
set top boxes to be sold at retail.
---------------------------------------------------------------------------
Beginning in July 1999, the cable and consumer electronics
industries conducted a series of joint meetings to address additional
compatibility issues between cable systems and consumer electronics
equipment. As a result of these meetings, three significant agreements
were reached.
On February 23, 2000, CEA and NCTA announced two voluntary
agreements to allow future consumer digital television sets and digital
cable systems to work together. The agreements detail the technical
specifications that will enable consumers to receive DTV programming
and services over cable systems.11
---------------------------------------------------------------------------
\11\ See Letter from Robert Sachs, President and CEO, NCTA, and
Gary Shapiro, President and CEO, CEA, to Chairman Bill Kennard, FCC,
filed February 22, 2000.
---------------------------------------------------------------------------
The first agreement details the technical specifications that will
allow DTV receivers to connect to cable television systems. This
agreement assures a cable customer who buys a DTV set that the set can
be connected directly to his or her cable outlet. The second agreement
spells out how systems will transmit Program and System Information
Protocol (``PSIP'') data--the raw material provided by broadcasters and
cable programmers that is used to make up electronic program guides
created in a TV set.
These two technical agreements allow manufacturers to proceed with
the production of digital TV receivers built to the agreed-upon
technical specifications.12
---------------------------------------------------------------------------
\12\ DTV sets built to these specifications are likely to be
available in retail stores within 14 to 18 months.
---------------------------------------------------------------------------
On May 24, 2000, NCTA and CEA announced a third agreement to aid
consumers in their purchase of new digital television equipment. This
agreement established the labeling to be used to inform consumers about
various digital television sets' capabilities to receive digital and
interactive digital TV services. However, on September 15, 2000, the
FCC, acting on a number of issues regarding cable and the digital
television transition, instead required a different set of labels--
using the term ``cable ready'' 13--for digital television
sets to indicate their capability to operate with cable television
systems.
---------------------------------------------------------------------------
\13\ Report and Order, PP Docket No. 00-67, September 15, 2000. The
Commission ordered that digital television sets that work with cable
but that do not have a 1394 connector--therefore limiting the sets to
one-way capability--will be labeled ``Digital Cable Ready 1.'' DTV sets
with a 1394 connector will be labeled ``Digital Cable Ready 2.'' DTV
sets that have set-top functionality integrated into the sets--and
therefore do not need a 1394 connector to work with two-way cable
services--will be labeled ``Digital Cable Ready 3.''
---------------------------------------------------------------------------
F. CABLE COMPANIES--NOT BROADCASTERS--ARE PROVIDING PUBLIC SERVICE
PROGRAMMING AS BROADCAST NETWORKS AND THEIR AFFILIATES ABANDON
POLITICAL COVERAGE AND CHILDREN'S TELEVISION.
The evidence shows that it is cable, not broadcast television, that
is playing an increasingly prominent role in providing public interest
programming--particularly news and public affairs--and in serving the
needs and interests of children. For example:
Local and regional cable news channels like News 12
Connecticut and News 8 Austin are providing their communities
with up-to-the-minute news and information 24 hours a day. As
reported in Electronic Media, ``[local cable news channels] are
making inroads against the larger and more entrenched news
operations of local television stations.'' 14
---------------------------------------------------------------------------
\14\ TW launching fleet of local news channels: Time Warner's local
news push, September 25, 2000, page 50.
---------------------------------------------------------------------------
Once again last year, cable news and public affairs networks
were the place to turn for in-depth coverage of local and
national elections. According to The Wall Street Journal (9/20/
00), ``Cable television is emerging as the new king of TV-
campaign coverage . . . as the three major broadcast networks
have scaled back news on the presidential race.'' CNN, CNBC,
MSNBC, FOX News, and C-SPAN are the places more and more
Americans now turn for campaign news.
The evidence is undeniable that broadcasters are retreating
from serving the local and public interest. As former New York
Times Executive Editor Max Frankel reported in The Columbia
Journalism Review, commercial broadcast network coverage of
each national political convention was only about 12 hours in
2000 compared with nearly 30 hours in 1996 and almost 50 hours
in 1976. And during the 2000 election cycle, only two out of
the four commercial broadcast networks televised the first
Presidential Debate.
In addition to filling the political news hole left by the
broadcast networks, cable also provides more than three times as much
children's programming as all other programming sources combined.
Nickelodeon, Disney, Noggin, and Discovery Networks are but a few of
the places that consumers today turn for quality children's
programming.
While the broadcasters continue to enjoy free use of the public
spectrum, it is the cable industry--without government protection or
favors--that is fulfilling the public interest obligations which
broadcasters have abdicated.
G. CONCLUSION
Cable opposes the broadcasters' call for digital must carry because
it represents an unwarranted intrusion in the market that would deprive
consumers of broadband services they want. After promising to deploy
HDTV in return for a second 6MHz of free spectrum (which the government
could have auctioned to wireless companies for billions of dollars,
benefiting both competition and the federal treasury), broadcasters
have abandoned, for the most part, their promise to deploy HDTV. While
they wonder what to do with their second 6MHz of public spectrum, they
are asking the government to guarantee the success of their still-to-
be-determined businesses by expropriating a large swath of newly
created bandwidth that cable operators have just spent billions of
dollars to upgrade.
The broadcast industry's demands fly in the face of the
Constitution (especially the First Amendment guaranteeing free speech
for cable programmers and cable operators, and the Fifth Amendment
prohibiting takings) and stand in stark contrast to the broadcasters'
calls for Congress to further deregulate their own industry. How do
broadcasters reconcile their demand for expanded must carry
requirements and passage of a Digital All-Channel Receiver Act with
their advocacy of no public interest obligations for their digital
spectrum, no further children's television requirements, no free time
mandates for political candidates, no return to the Fairness Doctrine,
no EEO obligations, no license renewal requirements, no ownership caps;
no cross-ownership restrictions, and no criticism of their declining
coverage of national elections?
It is time for the broadcast industry to stop blaming others and
start taking responsibility--as the cable industry has done--for making
its own transition to digital successful. If broadcasters want to
hasten this transition, they should commit their energies to developing
compelling digital programming that viewers want to watch.15
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\15\ ``Because of incessant technical and political squabbling,
none of these uses [multiple digital channels, wireless communications
and other applications] has come to pass and precious bandwidth is
going to waste . . . The truth is the broadcasters haven't come up with
something people want.'' ``HDTV: Don't Blame the FCC for Tuning Out,''
Business Week, February 5, 2001.
Mr. Upton. Thank you.
Mr. Parrish?
STATEMENT OF RONALD L. PARRISH
Mr. Parrish. Thank you, Mr. Chairman.
My name is Ron Parrish. I am Vice President of RadioShack
Corporation, headquartered in Fort Worth. With more than 7,200
RadioShack stores throughout the United States, 94 percent of
all Americans live or work within a 5-minute commute of a
RadioShack store. So we think we are closer to the consumer
than any other consumer electronics retailer.
Our mission is to demystify technology for the mass market.
We must confess we are still somewhat mystified ourselves why
the promise of a vibrant and open market for both digital
televisions and set-top boxes have yet to become a reality.
New generation set-top boxes should someday serve as the
primary devices to provide digital home entertainment and
Internet access for the mass market. Today personal computers
are present in nearly half of the homes in American, and the PC
has become the digital engine that drives the information
networks on the Internet. Americans have also embraced digital
age home entertainment, such as DVD and digital satellite
services and digital cable to the extent it is available.
But as fast as these new digital entertainment venues are
growing, it is troubling that video networks have not developed
at equivalent pace. RadioShack knows that new products can be
successful for the mass market only when performance and price
meet expectations of the consumer.
Today in the digital television and set-top box markets,
those expectations are not being achieved. A number of reasons
have been proffered and, as mentioned today, must carry
copyright protection, signal degradation, and other things.
But, in fact, there is significant consumer confusion regarding
what is the definition of digital television and HDTV. And
there is a huge price differential in HDTV sets available.
As the committee saw, digital sets certainly produce
superior video, but high-quality analog TVs with a digital
programming source, such as direct TV or DVD, deliver a pretty
darned good picture. The most important reason why digital
televisions are not a substantial part of the market is because
there is similar not much digital programming for the consumer
to watch. Simply stated, manufacturers and content providers
have failed to demonstrate a compelling reason for consumers to
step up to these pricey products.
Competition for set-top boxes is also developing very
slowly. A competitive market for set-top boxes would bring
consumers a host of new devices and capabilities that provide
both a higher-quality viewing experience and access to new
services. The devices could range from integrated features,
such as combining the set-top box functionality with DVD or
digital recording or broadband Internet access into the digital
television itself.
In other words, the set-top box will ultimately be most
consumers' tool for access, not just to digital television but
potentially to our entire entertainment network; that is, if
vigorous competition develops in the market.
And while Congress took steps in 1996 to ensure competitive
availability, 5 years later the FCC is still working on this
provision. And the industry, cable industry, still continues to
control distribution of boxes. You may hear many technical
reasons why a competitive set-top box market has not developed,
but I will submit to you the most arguments are the same type
of reasons that AT&T used years ago, saying that attaching
foreign devices, which was any telephone device not made by
Bell, would destroy Americans' telephone networks.
You know, in 75 years of retailing, RadioShack has learned
a few things about what makes a successful consumer electronics
market. And we would ask the industry representatives here and
public policymakers to keep certain principles in mind that
consumers have come to expect in the CE market.
You might say that these are CE customers' maybe bill of
rights. First, the consumer has the right to own, rather than
rent, equipment if he so chooses. Cable industry still uses
technical capabilities for its own MSO-provided devices that
are not currently provided to competitive manufacturers of
OpenCable devices.
There is little incentive for a consumer to buy a set-top
box which has inferior capabilities. Likewise, the cable
company uses subsidy arrangements to lower the monthly rental
for its newer digital boxes for high-tier, more affluent
customers at the expense of customers who lease old, obsolete
analog boxes. This destroys the normal financial incentive to
own your own box.
Next, the consumer has the right to purchase equipment
which is compatible to his own equipment and is portable. And
if he moves, he has the right to expect to plug it in at the
new location and to receive all of its capabilities. Consumers
today remain unable to purchase a set-top box which they would
have confidence would work if they moved to another area with a
different cable service provider. Could you imagine that
problem in today's telephone CPE market?
Next, the consumer has the right to record music and
programming for his own personal use and at the highest quality
his equipment is capable of producing. Consumers are accustomed
to recording programs for personal use. They expect to continue
to do so if they step up to a digital television.
And while RadioShack does not question the need for
copyright protection for unlawful copying, the cable industry
and content providers have proposed to draft copyright license
that would impose severe restrictions on recording and would
degrade HDTV signals to DTV-ready receivers and, therefore,
degrade the signal to analog quality. This clearly compromises
consumers' expectations.
Finally, Mr. Chairman, the consumer has the right to expect
an open and competitive market where he or she may shop for
equipment and services which suit his interests and pocketbook
from a wide array of equipment producers and service providers
and through vendors he trusts. All of these issues need to be
refreshed by the parties if the digital entertainment world is
to truly bloom.
Mr. Chairman, we appreciate having the opportunity to give
RadioShack's perspective on this important subject. We are not
in the chicken business, and we are not in the egg business,
but we would just like to be the skillet to help put these
products on the customers' table. Thank you.
[The prepared statement of Ronald L. Parrish follows:]
Prepared Statement of Ronald L. Parrish, Vice President of Industry and
Government Affairs, RadioShack Corporation
Mr. Chairman and Members of the Subcommittee, my name is Ron
Parrish, Vice President of Industry and Government Affairs at
RadioShack. I would like to thank you for inviting me to appear before
the Subcommittee.
RadioShack is one of the largest retailers of consumer electronics
products in the country. There are 7,100 RadioShack stores throughout
the United States--94% of people in the United States live or work
within a five minute commute of a RadioShack store. RadioShack and the
RadioShack stores currently employ 36,000 people and our retail sales
were $4.8 billion in 2000.
RadioShack is pleased that the Subcommittee is holding this first
in a series of oversight hearings on digital television. We are deeply
concerned that the parties involved have not fulfilled their promise of
a vibrant and open market for both digital televisions and set top
boxes--which should someday serve as the primary devices to provide
digital home entertainment and Internet access for the mass market. The
first vision of a flat screen digital television I ever witnessed was
in the movie Roller Ball with Clint Eastwood. That was 1975. In 1975,
most people had never heard of the Internet, electronic mail or even
personal computers. Today the Internet is present in half of American
homes and is the engine that drives information access. It is curious
and troubling that video networks have not developed at an equivalent
pace.
As a representative of the retail industry, I would like to share
with you our perspective on two matters. First, the current status of
the rollout of high definition television service and second, the
current status of the availability of set top boxes. As a retailer,
RadioShack is very sensitive to the needs and desires of consumers of
electronics equipment and services. RadioShack has day-to-day
experience with the products and services that consumers wish to buy
and RadioShack knows that it can be successful only when the
performance and price of the products it has to sell meet the
expectations of consumers. Today in the digital television and set top
box markets, those expectations cannot be fully met and thus both
markets are developing slowly.
RadioShack has a significant interest in the timely roll out of
high definition television. Offering consumers products that provide
cutting edge performance is a priority of RadioShack's, as it is for
other retailers of consumer electronics products. Parties involved in
the introduction of digital television have identified a variety of
reasons for the current pace of the DTV roll out: the absence of must-
carry provisions, concerns over copyright protection, interoperability
problems between cable and the necessary consumer electronics products,
and even the fact that retailers are not ordering, stocking, and
selling the necessary equipment. Retailers of course are eager to stock
products that sell but it is not realistic to expect retailers will be
able to sell products before consumers are prepared to buy them.
There is significant consumer confusion regarding the definition of
digital television and HDTV. In addition, there remains a significant
price-point differential with the genuine HDTV sets available at this
time. Not only does the new technology cost more, but manufacturers are
only including the technology in their higher-end, feature laden
television models, resulting in prices much higher than those for
feature rich analog sets. Finally, perhaps the most important reason
why digital televisions are not a substantial portion of market sales
is that consumers are aware that there is not yet much digital
programming to watch. Simply stated, the average consumer has decided
against making the significant investment in digital television at this
time.
The competitive market for set top boxes is developing slowly as
well. I would like to focus the remainder of my testimony on the sale
of set top boxes and their role in the transition to digital.
With more than two-thirds of American homes receiving television
through cable systems, the cable industry plays a central role in the
transition to DTV. As this transition takes place, Congress and the
Federal Communications Commission have simultaneously taken steps to
foster the competitive availability of navigation devices used on cable
systems. A competitive market for navigation devices would bring to the
consumer a host of new devices and capabilities that provide not only a
higher quality viewing experience, but access to new services as well.
These devices include not only digital set top boxes but also
integrated devices, which combine the set top box functionality, a DVD
player and other capabilities like Internet access into the digital
television itself. In other words, the set top box will ultimately be
the consumer's tool for access not just to digital television, but
potentially to his or her entire electronic entertainment and
information world.
Like any new product or technology, competition in the marketplace
is essential in order for set top boxes to reach their maximum
capabilities. Congress took steps to ensure such competition in the
1996 Act when it included a provision requiring the FCC to assure the
competitive availability of navigation devices. The FCC is still
working to implement this provision, and the cable industry continues
to control the distribution of set top boxes to the consumer.
In 75 years of retailing, RadioShack has learned a few things about
what makes a successful consumer electronics market. As I mentioned at
the outset of my testimony, RadioShack's success, and the success of
the set top box retail market generally, must depend on making sure
consumer expectations are met with regard to the quality and
availability of the product. There will be no competitive market for
set top boxes until these basic consumer expectations are met.
The Consumer has the right to own rather than rent a set top box.
Set top boxes equal in quality to those leased by the cable companies
are not available. The set top boxes leased by the cable industry to
their subscribers support interactivity. Set top boxes supporting
interactivity are not available to retailers. The cable industry uses
technical capabilities and specifications for its own MSO-provided
devices that are different from the specifications provided to
competitive manufacturers of the OpenCable devices. The result is that
there is little incentive for the consumer to consider purchasing a set
top box that has inferior capabilities.
In addition, subsidy arrangements destroy the normal financial
incentive for a consumer to purchase a set top box. Section 629(a) of
the 1996 Act explicitly barred cable operators from subsidizing set top
box rentals with cable service revenues. While the Commission has
permitted cable operators to ``pool'' set top box revenues, it appears
that the cable industry is recovering the cost of the new digital set
top boxes from subscribers who do not lease these boxes. A digital set
top box costs approximately $400 to manufacture, but the cable
companies are leasing them to subscribers for only $3-4 dollars per
month. It appears the industry is spreading the digital set top box
cost between all of their subscribers, even those who lease an old
analog box. As Congress recognized in 1996, retailers simply can not
compete for consumers or meet their expectations in a subsidized
environment.
The Consumer has the right to purchase a set top box, take his box
with him if he moves, and plug it in and have access to all of the
capabilities available. In its initial Navigation Devices Order, the
Commission recognized that true competition for navigation devices
would not result without portability, by stating, ``[a]ny significant
disparity among cable operations . . . undermines the commercial
availability of equipment. Subscribers are more likely to purchase, and
not lease from a provider, if they can use the navigation device when
they move to an area served by a different operator. Geographic
portability will enhance the commercial availability of navigation
devices and should result in wider choice and lower prices to
consumers.'' 1
---------------------------------------------------------------------------
\1\ Navigation Devices Order, 13 FCC Rcd at para. 61. See also
Response of the Consumer Electronics Retailers Coalition to the July 7,
2000 Cable Industry Status Report, at 7-8.
---------------------------------------------------------------------------
Although the Commission did not adopt specific requirements
regarding portability, it did set general parameters and stated that if
the industry does not take steps to achieve portability, further
Commission action may be necessary.2 Consumers today remain
unable to purchase a set top box with an expectation that they would be
able to use it if they moved to an area with a different cable
operator. Competition in the market for set top boxes should follow the
pattern of competition in the market for telephone sets. Competition
was possible in the telephone set market because consumers knew that
they could buy a telephone in one part of the country and use it
anywhere else when they moved. The same must be true with set top
boxes.
---------------------------------------------------------------------------
\2\ Navigation Devices Order, 13 FCC Rcd at para. 132.
---------------------------------------------------------------------------
The Consumer has the right to record music or programming for his
own personal use at the quality he expects from the equipment he owns.
Manufacturers of set top boxes, are required to obtain a license to
provide copyright protection against unlawful copying of content.
RadioShack does not question the need for copyright protection against
unlawful copying and distribution of copyrighted works. However,
consumers are accustomed to recording programs for personal use today
and they expect to be able to continue to do so if they upgrade to
digital televisions and set top boxes. The cable industry and content
providers have proposed a draft copyright license, however, that would
withhold content from cable systems unless set top boxes and other
consumer electronics equipment have the capability to allow them to
impose severe restrictions on recording. The draft license would also
require manufacturers to reduce the quality of the programming for
copying purposes by cutting off or degrading the HDTV signals to DTV-
ready receivers--thereby reducing the quality of the consumers' viewing
to analog quality. This clearly compromises the effort to meet consumer
expectations for digital products.
Finally, the Consumer has the right to expect an open and
competitive market where he may shop for equipment and services which
suit his interests and pocketbook, from a wide array of equipment
producers and service providers and vendors he trusts.
All of the issues affecting the delay of digital television work in
tandem. As important as the broadcasters' ability and willingness to
provide significant digital content is to the roll out of digital
television, maximum potential will still not be met without
simultaneously meeting consumer expectations regarding competitive
marketplace for digital televisions, navigation devices and set top
boxes in particular. Thank you for the opportunity to address your
subcommittee.
Mr. Upton. Thank you.
STATEMENT OF BEN TUCKER
Mr. Tucker. Thank you, Mr. Chairman. I appreciate the
opportunity to appear before your subcommittee today to discuss
the digital transition.
My name is Ben Tucker, and I am the President of Fisher
Broadcasting. We own 12 television stations in the States of
Washington, Oregon, and Idaho, in both large and small markets.
And I am also the Television Board Chairman for the National
Association of Broadcasters.
I would like to congratulate Chairman Upton on continuing
the focus on the digital television transition initiated by Mr.
Markey 14 years ago. When broadcasters last appeared before the
subcommittee in July of this past year, Chairman Tauzin wrapped
up the hearing with four observations or deal breakers.
First, he stated that any broadcasters who would lease or
sell their digital spectrum would run the risk of Congress
revisiting a deal and reclaiming the spectrum. While we believe
in multipurpose in the use of digital spectrum, as provided in
the law, we do not endorse those who seek to sell portions of
our digital spectrum.
Second, he affirmed that not providing the American public
with HDTV would be a mistake. He observed that consumers need a
chance to see it and decide if they want it. Well, we agree.
Today we have more than 1,000 hours of high-definition
programming coming from our networks with CBS providing
virtually all of its prime time programming in HDTV. And we
have encouraged all of the networks to do more. We are eager to
provide HDTV to our viewers. And at my company station, KOMO in
Seattle, we broadcast local news in high-definition.
Third, Mr. Tauzin said, and I quote, ``It would be a very
big mistake for broadcasters, networks, or anyone else, cable
companies, anybody else who kept the digital television signals
from reaching the American consumer. Next,'' he offered, ``I
would hope that part of the deal is that we get all of these
services out to as many people as possible so the prices come
down and more people can afford them and that free television
remains part of the equation.'' And the final part of the deal
is that the analog spectrum has to come back. Chairman Upton,
those last deal breakers form the crux of the problem as we
move forward.
Broadcasters have successfully resolved the transmission
standard dispute that the subcommittee focused on at last
year's hearing. We have reaffirmed our commitment to VSB and
are investing millions of dollars in improving the reach of our
free signals.
Unfortunately, free over-the-air broadcasters continue to
be denied access to cable homes. For the majority of Americans
to see local broadcasters' digital offerings during the
transition, digital cable systems must be required to carry
both the analog and digital channels. Cable cannot be allowed
to continue to act as a digital gatekeeper for 70 percent of
American homes.
The general counsel of AT&T told the FCC last year once
they upgrade to digital cable, they will be crying for content.
The average capacity for cable systems today I think is
somewhere in the neighborhood of 172 channels. So I think there
is some capacity.
The Consumer Electronics Association has endorsed digital
must carry. And the Congressional Budget Office concluded that
a successful prompt transition, and I quote, ``requires a
strong must carry rule from the FCC,'' end quote.
Regarding broadcasters in the analog spectrum, I can assure
you that no one is more eager for the analog spectrum to be
returned than local stations that are essentially running two
stations with no new revenue source.
In Seattle, we broadcast two signals: one digital and one
analog. And it costs about $10,000 a month for additional
electricity. That was last month's rate. With rates doing what
they are doing up there, I am not sure where it is going to go
going forward.
At last July's hearing, the committee asked NAB what
Congress should do to expedite the digital conversion. I would
like to report today that 185 stations that serve approximately
67 percent of the country are operating in digital. We are
ahead of schedule and will continue to work hard to meet the
established goals. But I would be less than candid if I didn't
say that meeting the 2002 deadline will be a challenge,
particularly for smaller stations.
That is the broadcaster report of the transition. The
really important element is the consumer. We believe that there
are three important areas that Congress must address to reach
the 85 percent penetration that is the second half of the
equation when we give back the spectrum.
First, for the hundreds of millions of Americans who want
free over-the-air broadcasting, DTV tuners must be built into
sets alongside analog tuners. We are currently engaged in
productive talks with the consumer electronics manufacturers,
and I am hopeful that more sets will be built now that the
transition standard has bern resolved. In addition, I am
heartened despite today and the fact that the cost of DTV sets
appears to be coming down, but good news and promises won't
solve the problem. We still need Congress to support a DTV
tuner in every set.
Second, DTV sets and set-top boxes must be engineered in a
fashion that enables these sets to be connected to a digital
cable system. This concept is called interoperability. And
while there appears to be some progress, what is needed is for
the FCC to ensure that it happens.
And, finally, cable systems must carry our digital signal
in order to reach the 70 percent of households they serve.
Regrettably, the problem of reaching the American consumer can
only be solved by cable unlocking the door to these homes.
Chairman Upton, Mr. Markey, members of the subcommittee,
broadcasters are making progress in delivering digital
television signals to the consumer, but change is hard,
particularly when it affects Americans' pocketbooks and their
television sets.
Until an American can buy an HDTV set with a built-in
digital tuner, take it home, plug it in, and receive a
station's over-the-air programming through cable, as the
majority of them do today, the transition will not be
successful.
Thank you for having me today.
[The prepared statement of Ben Tucker follows:]
Prepared Statement of Ben Tucker, President, Fisher Broadcasting
Company
Thank you, Mr. Chairman, for the opportunity to appear before your
subcommittee today to discuss the transition to digital television. My
name is Ben Tucker. I am the President of the Fisher Broadcasting
Company. I also am the National Association of Broadcasters (NAB)
Television Board Chairman. I'm pleased to represent the broadcasting
industry at this hearing.
Fisher Broadcasting, Inc. owns twelve television stations, the
majority of which are licensed in the upper northwest states. We
currently have two DTV stations on the air--KATU in Portland, OR and
KOMO in Seattle, WA. DTV equipment is on order for the rest of our
stations. I would like to highlight the fact that KOMO in Seattle
currently provides local HDTV newscasts. As you can see, Fisher
Broadcasting, Inc. is committed to making the DTV transition as quickly
as possible. This commitment is the same for the entire broadcast
industry.
BROADCASTERS COMMITMENT TO DTV
Stations on the air
As of February 26, 2001, 182 DTV stations are on the air in 62
markets reaching 67.18% of all TV households across the
nation.1 Seventy-one of these stations--almost 40 percent--
currently on the air are ahead of their required build-out schedule.
These 182 DTV stations have met--or surpassed--the aggressive build-out
schedule set by the FCC in order to meet the Congressional target date
of 2006 to complete the digital transition.
---------------------------------------------------------------------------
\1\ A list of stations currently on the air is attached as Exhibit
A.
---------------------------------------------------------------------------
Programming
The obvious advantage of DTV is the crisper pictures and enhanced
viewing experience. Stations will be able to offer many more choices to
consumers. Consumers will be the driving force behind the programming
offered by DTV stations.
DTV stations are required to provide at least one free, over-the-
air channel. This could come in the form of one high definition TV
(HDTV) channel, or several streams of standard definition TV (SDTV)
signals. Stations also could choose to offer some HDTV programming and
some SDTV programming depending on the time of day and consumer
demands. DTV stations are allowed to offer ancillary or supplemental
services.2
---------------------------------------------------------------------------
\2\ Stations must pay a 5% fee on any profits earned from
subscription services.
---------------------------------------------------------------------------
The television networks currently offer hundreds of hours of HDTV
programming. For example, CBS offers almost 1,000 hours per year,
including nearly all prime time programming and major sporting events.
ABC provides NYPD Blue and Disney films in HDTV. Locally, several
stations--including Fisher Broadcasting's KOMO--provide local HDTV
newscasts and a consortium of commercial stations exchange locally
produced HDTV programs.
We are far ahead in the programming offerings in the DTV transition
from those offered when the television industry transitioned to color.
In the first year of color television back in the 1950s, only 68 hours
were offered to viewers. With over 1,000 hours of HDTV programming this
year, we are far outpacing the color TV rollout. That's good news
because as the transition moves forward, we can only expect content
providers will produce more and more programming in HDTV.
Even though there is consistent progress regarding programming and
the number of DTV stations currently on the air, the transition still
needs help with some major issues that threaten to throw the transition
off the tracks.
BROADCASTERS CALL FOR ACTION
There are only 13 months left before the May 2002 deadline for all
commercial stations to have a digital signal on the air. They face
numerous obstacles from a regulatory standpoint, including the same
build out hurdles the existing 182 DTV stations faced.
What we have learned in the last few years is that we cannot
accomplish this monumental task on our own. The transition to DTV is
the biggest step for the television industry since the advent of color
TV and represents a multi-million dollar expense for each individual
station. Additionally, during the transition, each broadcast station
will be operating essentially two stations, without any guarantee of
additional revenue. Broadcasters are committed to this transition to
bring DTV service to the American public. However, at this point, the
DTV transition appears to be faltering due to several remaining issues
that have yet to be resolved by all of the parties involved in this
transition.
There are several entities that serve vital roles in this
transition in addition to the broadcasting industry. In order for the
transition to be successful, all parties must be willing do their part
to get the job done.
The first party, the Federal Communications Commission (FCC), is
charged with overseeing the implementation of DTV service to the
American public. While the FCC has accomplished a great deal regarding
the transition--including assigning an additional 1600 new DTV channel
allotments--it has taken a hands off approach with some of the
remaining critical issues such as digital must carry, DTV/cable
interoperability, and DTV set standards. It is time for the FCC to take
a leadership role in this transition and help focus all parties on
getting the remaining pieces put in place so the goal of DTV can be
realized as quickly as possible.
Cable operators, for example, have an important role in the
transition. Nearly 70% of all homes receive over-the-air broadcast
signals through cable providers. This means that cable operators hold
an important key in the transition--access to viewers. A successful
transition, after all, depends on consumers being able to see a
broadcaster's digital product. Cable carriage of all over-the-air DTV
channels and innovative digital services will create more demands for
digital programming, resulting in consumers buying digital sets and
converters at a faster pace, which helps drive the transition along.
Finally, consumers need the proper equipment to experience the
benefits of DTV. This means that new DTV sets or set top converters
must first be manufactured and second, made available to the public.
Consumers must be assured that the new digital products will work with
cable set top boxes and that the equipment can receive and decode DTV
signals. Thus, manufacturers must work with cable companies to ensure
that DTV sets are interoperable with digital cable boxes. Manufacturers
must ensure that more DTV sets will include DTV tuners so consumers can
receive the over-the-air signals.
The FCC has been relying on the marketplace to settle the remaining
issues. We have learned that the marketplace is not driving the
transition fast enough--placing the target date in jeopardy. We need
resolution of the digital must carry, DTV/cable interoperability, and
DTV set reception issues or the transition will continue to falter and
stall. I welcome the opportunity to outline these issues for you.
DTV TRANSMISSION STANDARD
Before discussing the other issues mentioned above, I would like to
take the opportunity to dismiss any questions regarding the
broadcasting industry's commitment to the FCC-approved DTV transmission
standard, 8-VSB.
In the summer of 1999, concerns were raised among some in the
broadcasting industry regarding the 8-VSB standard and its performance
in urban markets and for mobile applications. Some believed that
another transmission standard--COFDM--was more appropriate. When the
issue was raised, most of the other entities involved in the transition
accused the broadcasters of using it as a stalling tactic and
questioned our commitment to DTV. We rose to this challenge and
immediately took steps to resolve the issue.
In 2000, the broadcasting industry conducted a parallel
investigation of VSB improvements and COFDM performance. This joint
initiative included the National Association of Broadcasters (NAB) and
Maximum Service Television (MSTV), with funding from the four networks
(PBS in-kind), group broadcasters, and NAB.
Investigation of VSB included independent evaluations of second
generation products and test performance in the field and improvements
to the 8-VSB standard for possible modification of the standard to
accommodate new applications. The project investigated the COFDM
standard to test the performance of COFDM for existing and new
services.
Upon completion of the testing in 2000, results were reported to
the NAB and MSTV Boards of Directors in January 2001. After reviewing
the results, both Boards passed a joint resolution that stated there is
insufficient evidence to add COFDM as a DTV standard and thus it
reaffirmed the commitment to the VSB standard.3 Soon
thereafter, the FCC affirmed the 8-VSB modulation system as the U.S.
DTV transmission standard.
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\3\ A copy of the Joint Resolution is attached as Exhibit B.
---------------------------------------------------------------------------
While virtually all of the broadcasting industry is now united
behind the 8-VSB standard, DTV set reception must be improved.
Broadcasters and, we hope, our manufacturer brethren are committed to
seeing this happen post haste. Additionally, we are committed in
helping to resolve the rest of the hurdles on this track to the DTV
finish line.
DTV MUST CARRY
Digital must carry is the most important issue still facing the DTV
transition. At this point, not many consumers can receive the currently
available DTV signals via cable because cable, generally, will not talk
to broadcasters about carriage of DTV signals. Must carry of digital
signals during the transition will help fuel the demand for digital
programming, and will entice consumers to buy digital sets. Why should
the 70% of Americans who are cable subscribers join the DTV transition
by purchasing an expensive DTV set if they cannot easily get DTV
broadcasts that are in their market?
The Communications Act of 1934, as amended by the Cable Act of
1992, mandates carriage of both analog and DTV signals.4 The
FCC is required to ensure the carriage of digital television
signals;5 however, it has so far failed to comply with this
mandate. The FCC issued a Notice of Proposed Rulemaking for digital
must carry in July 1998.6 Nearly two and a half years later,
it issued a ``partial'' decision.7 There, the FCC (1)
refused to require dual must carry of both analog and DTV signals; (2)
asked for more information on channel capacity from cable operators;
and (3) established that content to be carried after the transition is
only one programming stream plus program related content.8
---------------------------------------------------------------------------
\4\ Communications Act of 1934, Sec. 614(a).
\5\ Id. at Sec. 614(b)(4)(B).
\6\ Notice of Proposed Rule Making, CS Docket No. 98-120, July 10,
1998.
\7\ First Report and Order and Further Notice of Proposed
Rulemaking, CS Docket No. 98-120, January 18, 2001 [hereinafter First
Report and Order]
\8\ Id. at para.para. 112 & 57.
---------------------------------------------------------------------------
This partial decision does not solve the problems of the DTV
transition--it only exacerbates them. Carriage of DTV signals during
the transition is essential for a successful and timely conversion.
Without must carry, completing the transition even close to 2006 is
impossible. The Congressional Budget Office recognized this in 1999
when it stated:
``The availability of digital programming on cable systems is a
necessary, though not sufficient, condition for a timely
transition. Without it, reaching the 85 percent penetration
rate needed to end analog broadcasts in a market will take much
longer because whenever the transition is completed, the
largest number of households will probably be receiving DTV
programming from cable providers.'' Completing the Transition
to Digital Television, Congressional Budget Office Report,
September 1999.
Even the FCC acknowledges cable carriage likely ``is essential'' to
the DTV transition.9 The question then remains--why does the
FCC fail to take adequate steps to assure carriage on cable systems in
order to facilitate the DTV transition?
---------------------------------------------------------------------------
\9\ See Fourth Further Notice of Proposed Rulemaking/Third Notice
of Inquiry, MM Docket No. 87-268, 10 FCC Rcd. 10540, 10542 (1995).
---------------------------------------------------------------------------
Even after the transition is over, the FCC's decision on must carry
substantially cuts off consumers from realizing all the benefits of
DTV. The FCC indicates it will require carriage of only one channel of
each DTV broadcaster and other material ``related'' to that
channel.10 However, this completely dismisses the desirable
choices broadcasters may offer to consumers by providing several SDTV
signals (i.e., multicasting). If a DTV station offers several free--but
different--over-the-air programming choices, it should not be forced to
choose which is the ``main'' program channel to be carried on the cable
systems. Consumers should be offered all free broadcast programming
through their cable system, regardless of whether that comes in the
form of one HDTV channel or several SDTV channels, or a combination of
both.11 The absence of digital must carry frustrates
Congressional intent in providing flexibility in the use of the
spectrum to give consumers all the benefits of digital technology.
---------------------------------------------------------------------------
\10\ First Report and Order at para. 112.
\11\ Carriage of a ``multicast'' channel does not take up any more
space on a cable system than a single HDTV channel. The same amount of
space (19.4 megabits) is required. It makes no practical sense for
cable companies not to allocate--at all times--enough space for a HDTV
signal, which may follow or precede a multicast signal. It simply is
not a space problem for cable to carry all free DTV channels sent from
the broadcaster.
---------------------------------------------------------------------------
Finally, we have all heard the cries from the cable companies that
digital must carry will force them to take existing cable channels off
their systems to make room for the DTV signals. These concerns are
disingenuous. The broadcasting industry is not asking for an increase
in the Cable Act's caps on the number of cable channels that must be
devoted to broadcast channel carriage. Further, we do not ask for
carriage of digital signals on smaller cable companies until they make
their own transition to upgraded facilities and digital cable.
It is clear that cable companies are dramatically increasing their
capacities, and will continue to do so with digital cable systems. In
fact, at the height of the DTV transition when both analog and digital
broadcast channels would be carried by cable systems,12 the
average analog cable system will have the capacity for approximately
130 channels.13 An average digital cable system is predicted
to have a capacity of 172 channels.14 As a point of
reference, the average capacity for cable systems in 1998 (when the FCC
began its digital must carry proceeding) was 75.15
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\12\ In 2002, when all commercial broadcast stations must have a
digital signal on the air, there would be an average of 12 broadcast
channels carried. As the transition progresses, this number decreases
back to the average of 6 broadcast channels at the end of the DTV
transition. See NAB's Reply Comments in CS Docket No. 98-120, at
Exhibit F (Dec. 22, 1998).
\13\ Id.
\14\ Id.
\15\ Id.
---------------------------------------------------------------------------
As a final ``nail in the coffin'' on channel capacity concerns, at
a FCC Cable Bureau hearing last year, the General Counsel of AT&T
unwittingly but proudly professed that ``[cable] channel capacity is
not only increasing exponentially, but is about to go even beyond that
as it [cable] goes digital.'' 16 He went on to say that
AT&T's belief ``is that we are going to be crying for content.''
17 He had no answer when asked if that included digital must
carry signals.18
---------------------------------------------------------------------------
\16\ AT&T/Media One Cable Services Bureau Hearing, February 4,
2000.
\17\ Id.
\18\ Similarly, the Senior Vice President, Engineering and
Technology for Media One cable has been quoted saying that ``This
digital capability--effectively obliterat[es] the must-carry threat.''
Jim Barthold, Bandwidth Debate: Just How Much Will Be Enough (last
modified Aug. 10, 1998) http://www.mediacentrall.com/Magazines/
CableWorld/News98/1998081003.html.
---------------------------------------------------------------------------
Digital must carry is the most important, yet unresolved issue for
the digital transition. The plain text of the must carry statute is
clear, cable operators ``shall carry the signals'' of broadcast
operators.19 We ask that Congress take every action
necessary to ensure must carry status for all digital broadcast
channels during, as well as after, the transition.
---------------------------------------------------------------------------
\19\ Communications Act of 1934, Sec. 614(b)(1)(B).
---------------------------------------------------------------------------
dtv/cable interoperability
At this point, there are not standard DTV sets on the market that
have connections that will work with digital cable set top
boxes.20 Thus, there is no practical way for the 70% of
consumers who view television via cable to get a broadcast DTV signal
over cable today. Nor is there completion of the long promised built-to
specs for cable ready DTV sets. Nor is there an indication that either
will occur in time for the DTV transition to meet the Congressional
deadlines.
---------------------------------------------------------------------------
\20\ See DTV Products Chart, attached as Exhibit C.
---------------------------------------------------------------------------
There are incomplete, voluntary specifications between the consumer
electronics and cable industries for DTV/Cable interoperability.
Additionally, there is a remaining issue regarding copy protection for
programming. All this translates into virtually no incentive for cable
subscribers to purchase DTV receivers.
Agreements on these issues are both close and stalled. Quick
resolution is needed to move the transition forward. This means there
needs to be consumer-friendly IEEE 1394 connectors on all DTV
receivers, set-top boxes and other DTV products and ``cable-ready''
characteristics for direct connection DTV receivers.21
---------------------------------------------------------------------------
\21\ While copy protection issues must be soon settled, 1394
licensors should not be permitted to have a blanket ban on use of this
copy protection technology for particular content, i.e. free broadcast
programming.
---------------------------------------------------------------------------
For years, the broadcasting industry has been urging the FCC to
mandate interoperability standards for DTV and cable products. At a
minimum, it needs to secure strong manufacturer commitments for near-
term provision of such products, or the transition will be further
stalled. Again, Congress should take the necessary action to ensure
resolution of these issues.
DTV RECEIVER STANDARDS
The issue of receiver standards is important to the transition--
this involves (1) mandating DTV tuners in all new TV sets sold, and (2)
setting specific technical requirements regarding reception. Right now,
if a consumer buys a DTV set, it is likely that the consumer will need
to purchase an additional set-top box with a DTV tuner in order to
receive DTV signals. Additionally, there is no guarantee that the DTV
set will properly receive the over-the-air signals sent by
broadcasters.
In the beginning of the DTV transition, the FCC set specific DTV
transmission standards based on technical assumptions about receiver
performance. The consumer electronics manufacturers have resisted any
mandated receiver standards to meet the FCC's assumptions for
reception. The FCC has relied on the marketplace to take care of this
issue and has refused to set performance levels for DTV sets. It
reaffirmed its position in January 2001. However, it turns out--as
broadcasters had predicted--that early receiver performance does not
match the FCC's assumptions. It is inconsistent for the FCC to expect
to achieve certain DTV coverage and service goals, yet be unwilling to
set performance levels for DTV sets. Why should consumers purchase DTV
sets with poor reception performance?
By January 2001, there were approximately 780,000 DTV displays
(with and without integrated tuners) sold to retailers. There are no
breakout figures on sets with DTV tuners (integrated DTVs). At the same
time, only 60,600 set top tuner boxes were sold to retailers. Thus,
there is only a small fraction of the hundreds of thousands of DTV
displays that are able to receive a DTV signal over-the-air. At this
rate, DTV receiver sales (integrated or set top tuners) will not reach
the penetration levels needed to complete the transition by the target
date of 2006 set by Congress.
Broadcasters have urged the FCC to adopt All Channel Television
Receiver Rules that will require that all new television receivers
thirteen inches and greater in screen size be capable of receiving all
frequencies allocated by the FCC to television broadcasting, including
all NTSC and all DTV channels.
While this is a significant step, it is not without precedent. The
All Channel Receiver Act (47 U.S.C. Sec. 303(s)) and the All Channel
Television Receiver Rules,22 provide the authority for such
action by the FCC. These previous actions were taken to promote and
develop the UHF frequencies. Congress, at that time, found that the
lack of receivers capable of receiving UHF signals was the root of the
problem for the faltering UHF service. It determined that ``the only
practical and effective means of insuring that such receivers get into
the hands of the public is to enact legislation requiring that all sets
manufactured are capable of receiving all of the channels allocated for
television use.'' 23 This reasoning from the UHF situation
applies to the current DTV situation--but now, with even more force.
---------------------------------------------------------------------------
\22\ First Report and Order, All Channel Television Receiver Rules
(All Channel Act), Docket No. 14760, 27 Fed. Reg. 11698 (Nov. 28,
1962).
\23\ Senate Report No. 87-1526, 2d Sess. (1962), reprinted in 1962
U.S.C.C.A.N. Vol. 1, 1873.
---------------------------------------------------------------------------
In 1962, Congress determined that the dramatic step of the All
Channel Receiver Act was necessary, even given initially increased
costs (that would diminish with mass production). Congress reasoned
that the small increase in cost was greatly offset by the benefits of
``unlocking'' the valuable UHF channels.24 The same
reasoning applies to the DTV transition today.
---------------------------------------------------------------------------
\24\ Id. at 1876.
---------------------------------------------------------------------------
DTV is a unique transition of the entire television system to
digital technology. Even though the price to consumers for an all-
channel receiver will be higher than analog-only sets, the higher costs
will be a small price to pay for ``unlocking'' the value of DTV
channels for public benefit. Not to mention the fact that it also will
release valuable NTSC channels, to be returned to the public for its
benefit and use as Congress deems fit.
This bold action is necessary to re-vitalize a transition that has
languished far too long. In January 2001, the FCC issued a Further
Notice of Proposed Rulemaking regarding this issue.25
However, it only proposed to require tuners in sets that are 32 inches
or larger, then phase-in tuner requirements for smaller sets. While
this is a first step, it is not the bold action necessary to invigorate
the DTV transition in order to meet Congress' 2006 timeframe. If
necessary, Congress should take appropriate action to resolve these
pending receiver issues.
---------------------------------------------------------------------------
\25\ Report and Order and Further Notice of Proposed Rule Making,
MM Docket No. 00-39, para.para. 103-112 (January 18, 2001).
---------------------------------------------------------------------------
OTHER BUILD OUT PROBLEMS
As mentioned earlier, there are 13 months left before all
commercial broadcasters must have a DTV signal on the air. There are
approximately 1200 stations left to go on-air with DTV. Of the 182 DTV
stations currently on the air, many faced build out problems. These
same problems, and more, will exist for the rest of the stations yet to
make the transition.
Economic Issues
It costs approximately $8 million to $10 million to fully convert a
station to digital operation. To date, the industry has spent hundreds
of millions of dollars. Just to get a digital station on the air costs
roughly $2 million. For many of the remaining stations and markets,
these costs are well above the value of the existing analog station.
And this, when there is no guarantee of any additional revenue from
running two stations.
Tower citing/Zoning Delays
New DTV stations require new DTV transmitting antennas. Stations
must either use existing towers or build new towers. These changes
often require approval from local zoning boards--which historically do
not act quickly on these issues.
As part of the FCC's Biennial Review of the DTV transition, NAB
conducted a survey of all commercial television stations asking
specific questions about implementation problems. A surprising number
of broadcasters (38.4% of respondents) reported that government--local
and federal--was causing delays in their digital rollout.26
Stations cited numerous delays with local zoning or board approvals,
the Federal Aviation Administration (FAA), local and federal
environmental agencies, as well as significant delays in the FCC
approval process.
---------------------------------------------------------------------------
\26\ See 2000 Digital Implementation Survey, May 2000 (attached as
an Exhibit to NAB's Comments in MM Docket No. 00-39, May 17, 2000).
---------------------------------------------------------------------------
Once clearance is approved for any tower changes, the next hurdle
for stations will be to find a tower crew to actually perform the work.
There are limited numbers of tower companies with crews to do this
specialized work. Further, as nearly 1200 stations place orders for the
necessary DTV equipment, delivery delays from manufacturers are likely.
As you can see, merely getting a station on the air on schedule has
its own difficulties, not to mention the larger regulatory issues that
are threatening to hold up the DTV transition. Again, broadcasters are
working towards the end, but there needs to be some help along the way
from all parties involved, as previously discussed.
CONCLUSION
Mr. Chairman, it has been my great privilege to address this
subcommittee on the subject of the digital television transition. I
believe that broadcasters are fully committed to this transition that
is poised to offer huge new benefits to the American public.
I hope that Congress will take a serious look at the issues facing
the DTV transition and urge the cooperation of all parties to get the
transition on a quicker pace towards completion.
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Mr. Upton. Well, thank all of you for your testimony this
morning and into this afternoon. I know the organizations that
you represent must feel very proud about your presentations and
your remarks made this morning.
There has been a lot of discussion about having a mandate
passed along to the consumer to take advantage of the digital
broadcasting. And I want to explore that a little bit this
afternoon.
Mr. Arland, in your remarks, as you talked about
particularly the TVs, we were able to see a demonstration this
morning. Those same arguments were made with regard to the V-
chip, something that the Congress adopted that is now in a
number of sets, obviously every set being sold across the
country. We have it at my house, I know.
One of the arguments against the V-chip was the cost, but,
in fact, because of the mandate that was approved in both the
House and the Senate, as I understand it, the cost came down to
about 25 cents, something along that magnitude.
Wouldn't that same parallel happen with a mandate on TV
sets if you use the proposals that the FCC is taking a look at
along with I think the NAB support as well above 32 inches?
Mr. Arland. Mr. Chairman, I am not going to plead the
Fifth, but I am going to turn to my attorney because I had a
prop I wanted to show you. We suspected this issue might come
up. So I thought I would bring to the attention of the
committee an example of what is required to, quote, ``build in
a digital tuner.'' It is much more than just a tuner. These are
the circuit boards inside the DTC 100, which is the affordable
set-top that you saw earlier, as well as the same circuits that
are inside our integrated HDTV set.
And it is more than just the tuner. The tuner for both
digital and analog television is here in this box. You need a
VSB reception chip, which we have all heard a lot about over
the last year or so. Thankfully, that is put behind us, and I
think it will lead to more integrated sets.
You need an MPEG decoding chip to decode this technology so
that it can be displayed. You need memory for that. You need a
system microprocessor. This is where the V-chip is located. The
V-chip, by the way, was an extension of a chip that already
existed in the television set. You need audio chips. You need
memory. So, again, the expense we think by the end of next
year, we could get down to about a $200 premium over what is
available today in analog.
And the price will come down. I guess it all comes down to:
How long are you talking about? Our next generation of this
product will integrate many of these chips together so that we
can reduce costs and reduce prices. No one is more interested
in selling digital television and selling affordable digital TV
than me and my industry, but we can't do this overnight to
bring the cost to zero.
Mr. Upton. Would anybody else like to comment about what
the cost might be? Mr. Weed?
Mr. Weed. Well, I would just like to comment. Where is the
QAM chip, which is our standard? I didn't see that in there.
Mr. Arland. As soon as I have a build-to specification,
that will be the next thing that goes on the board, sir.
Mr. Weed. Great. Really, in reference to earlier comments,
the last thing, having completed my capital budget, the last
thing I want to do is buy digital boxes for all of my
customers. I would much rather have the customers buy it
themselves as part of their TV set and would love to see the
QAM chip in that module there.
Mr. Upton. Mr. Paxson?
Mr. Paxson. Well, you know, a lot of us have a digital
television set in our home now. It is called the PC. And if we
want to get our analog television stations onto our digital PC
set, we do it by buying a card. And that card has a retail
price now dropping in the $60 range. And I think the
manufacturing cost is somewhere around 15 to 20 dollars.
So I think there are differences of opinion on exactly what
is needed in order to comply with the 85 percent rule that we
are living with under this conversion mandate. In other words,
we have to have in a house able to have a digital television
receiver that receives an analog signal and convert it to
digital or we have to have a box on top of the old analog set
that will take the digital and convert it down into analog.
And I think the example that I use here is a picture of
what can be accomplished in the marketplace. I suspect
RadioShack will have those kinds of products available to its
consumers, which will help us get into this digital conversion.
Mr. Upton. Before I go to NAB, so let me just confirm that.
So what you are suggesting is that the box itself is about 15
or 20 dollars versus built into the set, where it is going to
be considerably more?
Mr. Paxson. In the case of the digital PC that you have in
your home and you want to get an analog picture from an analog
television station onto that PC, you need to buy a card. The
card is under $60 now. I am not sure of the exact price of
manufacturing, but I would suggest that it is probably in the
15 or 20-dollar range.
So we are converting. We can convert an analog signal onto
one of these HDTV sets fairly inexpensively. If we can do it
with the computer, why can't we do it with the television?
I think the opposite is true. We have sold 33 million
analog TV sets in America last year. To state to the consumer
that those are going to be outdated, he can't use them anymore,
he has made a terrible investment, and by 2006, he is going to
have a crowd of people outside here.
Mr. Upton. I know.
Mr. Paxson. And there can be a box that would receive the
digital signal and convert it to analog so his television set
doesn't become outmoded. And those are available products. The
technology I have is going to come out of manufacturers who
supply companies like RadioShack.
Mr. Upton. Mr. Tucker?
Mr. Tucker. Mr. Upton, I am not an expert and I didn't
bring any technologists with me to look at that, but I am
pretty impressed by Mr. Arland's display.
I would say that what we have looked at is that as those
components get introduced, if we can follow any history of what
is happening in consumer electronics, I would anticipate that
any changes will become de minimis over time and as products
roll out. So I don't expect that chip to be so expensive where
it will drive prices up at all.
Mr. Arland. And I would agree with that statement. They
word there is ``over time.'' Mr. Paxson raises the idea of a
tuner. Again, that would be what is in this box. The tuner for
a PC, don't forget, utilizes the memory chips inside the PC to
operate. And that is the other green stickers that you see on
this board.
Mr. Upton. Okay. Thank you.
I guess we go to Ms. Eshoo.
Ms. Eshoo. Thank you, Mr. Chairman.
I want to direct my question to Mr. Paxson and Ms. Courtney
and Mr. Tucker. And thank you, everyone, for your testimony
because it is enlightening.
The deal that was struck with the Telecomm Act, was that
when the penetration was achieved at 85 percent that there
would be an entitlement to only mandatory coverage of your
primary video fe? Is this is the case and we can assure the
public that it gets its benefits of the other megahertz, what
can we do to assure that consumers get this over the air? What
kinds of things do you think that we should be doing to help
achieve this? I mean, are there ways that we can help make sure
the consumers have access over the air to your multicasted
channels, for example, with stronger receiver reception
standards and dual tuning requirement? Would that be effective?
I understand in many ways--and I don't say this
disparagingly--kind of the food fight that is going on because
there are investments that have been made in this. The cable
industry has invested billions, broadcasters obviously not as
much for a whole set of reasons. What is it that we can do to
move this forward?
I said in my opening statement today that something is not
working. Something is not working. You know, I mean, I love
seeing this in the hearing room, but I still don't know who has
it in their living room. I appreciate the $3,000 price tag. I
don't know what the payment plan is and what you throw in, an
additional, maybe a set of knives or whatever.
What is it that we can do? What is it that we can do to
help move this along in a fair way? What are the tools that you
think are needed to be placed in the tool kit that the Congress
can help make happen? We made a commitment along with you, but
enlighten us. What do you think would be fair?
They must be good questions if everybody is pointing to
everybody else. Thank you. No one wants to be first one out of
the box.
Ms. Courtney. Well, first I think that the FCC ruling--and
I am not an attorney, and there are a lot of attorneys----
Ms. Eshoo. neither am I. That is all right.
Ms. Courtney. This primary video service, I think this
really undercuts the whole concept of the multicast service we
were trying to have for education. I mean, if I can only choose
one as that interpretation, our attorneys suggest it may have
been an incorrect interpretation. So we ought to sort that out.
Did Congress mean that? Did the FCC misinterpret it? Do you
want us to multicast? And I think you want public broadcasting.
I would suggest that you want us to. And there needs to be come
direction so that we can both do adult learning and K-12 and a
variety and not just choose.
So we really need some help with that FCC interpretation
that just says primary means one video. We really need help in
that. From our perspective----
Ms. Eshoo. I only have 5 minutes, though, total. So I
appreciate what you are saying. Maybe the others can be
succinct in giving some help.
Mr. Tucker. Ms. Eshoo, I agree, in part, with what was just
said. I don't say that we are dealing with trying to deliver
the whole six megahertz. We are in the business of aggregating
eyeballs. We need as many people watching our television
stations as possible.
So we need an over-the-air as well as an integrated program
service experience to cable viewers as well. We need access to
them. They have received their signals or programming via
cable.
In times of natural disasters,--and we just had an
earthquake in Seattle--there is still a reliance on the
Emergency Broadcast System there. We want to make sure that
those kinds of services continue in the digital realm as well.
Ms. Eshoo. Well, let us assume that the FCC opinion stands.
How can we help make sure that multicasted signals get to
people in their homes over the air?
Mr. Paxson. Well, if I may, I would like to try to answer
your question fairly quickly. Cable and satellite are the
gatekeepers to the American television set. The 1992 Cable Act
requires the full carriage of the station's signal.
What that act also said was that in the area of advanced
television, which now is coming forth, known as digital
television, in advanced television, the FCC was to address the
technical issues but see to it of the full must carriage of the
station's signal.
We had six megahertz in analog. We have six megahertz in
digital; in analog, one program service, the ability to do
multiple channels of programming service in the digital world.
Right now the law says and the FCC has mandated that if the
station broadcasts in HDTV using the entire digital signal that
it has, that signal must be carried by cable. They can compress
it. Well, multicasting should be no different. The cable
operator can compress the digital signal down into three
megahertz of cable spectrums. Therefore, the broadcaster will
be using less cable spectrum in the digital world than he is
now using in the analog world.
And the must carry law must be content-neutral. Free over-
the-air content should not be censored by the cable operator,
the Congress, or the FCC.
And I finally would just draw your attention to the
Congressional Budget Office that said recently: A strong must
carry requirement for cable systems to carry digital television
will be necessary to meet the mandatory transition deadline.
Mr. Willner. Congresswoman, do you mind if I jump in on
this? I know you didn't address the question to me, but----
Ms. Eshoo. You have to ask the Chairman because I see the
red light is on. But if it is in response to a question, I hope
that he will give you the time.
Mr. Upton. You set a good diversion up here for me to talk
to another member.
Ms. Eshoo. That is right.
Mr. Upton. I am sorry. But what is the question?
Ms. Eshoo. He wants to help answer the question, and the
red light is on.
Mr. Upton. Go ahead. No, no. Go ahead.
Mr. Willner. Thank you, Mr. Chairman.
I just wanted to suggest that the concept of must carry, as
suggested by this body and by the FCC, was never a management
of bandwidth that we have invested in. It was the provision to
ensure that important local broadcasting services, like the
Emergency Broadcast Service, would be continued in every
community.
You don't need to do those things over six different
channels. Using six different channels is a commercial
endeavor, one intended to go into competition with people who
invest hundreds of millions of dollars in new programming
networks and then come and ask for carriage to cable operators
to carry.
Ms. Eshoo. Anyone else want to comment on the question?
[No response.]
Ms. Eshoo. Thank you, Mr. Chairman.
Mr. Upton. Thank you.
Mr. Stearns?
Mr. Stearns. Thank you, Mr. Chairman.
You might think there are not a lot of members. You have
all of this heavy brass here. We might want to go for a second
round. I don't know.
Mr. Upton. Yes.
Mr. Stearns. Oh, good. Okay. Mr. Willner, let me just ask
you something concerning the six megahertz. I am a broadcaster,
and I am going to give you a high-definition signal. So you
will take the whole high-definition if it takes a full six
megahertz. Okay?
But then what happens, instead of the six megahertz, I give
you a video stream and it is a primary video. Then I can't send
you any other signals, as your position would be, because you
are saying that is multicasting. But you will take my whole
high-definition, but you won't take my other multicast videos.
So what happens to that other part of the spectrum? How is
that going to be used? And is that yours or what do you do with
it?
Mr. Willner. Well, we have invested nearly $50 billion to
build that spectrum now on our own using our own funds, but
certainly we would expect and hope that the broadcasters would
come to us with a business plan that would reflect what they
would like to do on those multiple channels.
And if it is in the interest of our subscribers, who are
the people who pay us every month, to carry those signals, we
would want to, but to give broadcasters----
Mr. Stearns. Carte blanche.
Mr. Willner. [continuing] an advantage over cable networks
and other people who are developing new programs to deliver
moneymaking multiple services, that would just be inherently
unfair in our view. And that is why we would want to have a
negotiated deal.
I would also add, if I could just say one more thing,
Congressman----
Mr. Stearns. Sure.
Mr. Willner. [continuing] that if you force must carry
multiple signals, it disincents consumer-oriented programming
because they get carriage for nothing. So they don't have to
worry about whether or not we are going to look at that in
terms of viewership and customers wanting that product. It is
the opposite of pushing people into buying digital television
sets.
Mr. Stearns. Yes. So you are trying to encourage the
broadcasters to provide a high-definition. But I think what we
are all on the staff having a little trouble with is: When they
come to you, how do you go back and forth between high-
definition television and the standard one megahertz? I mean,
how do you do that?
Mr. Willner. Do you mean technically?
Mr. Stearns. Yes, technically.
Mr. Willner. I would have to check with how we do that
technically. I am not as----
Mr. Stearns. You know, I was involved with the must carry
debate during the analog. And so when it moves to digital high-
definition, I respect your position.
On the other hand, Paxson Communications would not exist
today if must carry hadn't succeeded under analog. So his
position is saying, ``Well, we have got to have must carry
under today's requirement.'' And so I understand you will take
the six megahertz. Fine. But if he wants to do these primary
videos, you won't. Your argument is let us negotiate it.
Mr. Willner. As I said earlier, must carry was never
intended to be a management tool of ours fully invested in
bandwidth. It was intended to protect the interests of local
broadcasters. And that is fine. I understand the government's
position on that.
Mr. Stearns. Okay. Have you negotiated with any broadcaster
to solve this must carry on a voluntary basis?
Mr. Willner. To solve?
Mr. Stearns. Digital must carry.
Mr. Willner. Yes.
Mr. Stearns. I mean, what you are recommending is we just
let----
Mr. Willner. We just did a deal with Lynn Broadcasting in
Indianapolis to carry the NCAA games, which is multiple
channels.
Mr. Stearns. Right.
Mr. Willner. It is not high-definition. That is compelling
programming. We want to carry that. It is a wonderful idea.
Mr. Stearns. So you have a paradigm with Lynn
Communications that you have worked out or that you think could
be worked out?
Mr. Willner. Absolutely.
Mr. Stearns. Okay. Mr. Paxson, would you want to comment on
this?
Mr. Paxson. Well, I think that if we look back at the 1992
Cable Act, the day before it was enacted, between that period
and now, we have added almost 550 television stations to the
landscape of America. In addition to that, after the Must Carry
Act was enacted, we added a bunch of new television networks:
the Fox; WB; UPN; of course, PAX; Telemundo; Azteca; and
Univision all have come into existence. I think that is good
management.
I think the FCC was mandated in the 1934 Act to see to the
highest and best use of the spectrum. If for some of us the
highest and best use of the spectrum is to create multiple
program channels of family programming, then this whole Must
Carry Act should be content-neutral. And the cable industry
says they will negotiate multicast must carry. To cable,
negotiate means collect from the broadcaster and then turn
around and collect from the subscriber.
And after 4 years, let us look at the record. AT&T has done
every transmission agreement with Fox and NBC. Time Warner with
CBS and ABC just announced a retransmission agreement. These
agreements only cover their own and operated stations.
Thus, about 90 television stations in America have solved
their digital must carry issues with cable by retransmission
consent agreements. One thousand, five hundred and sixty of us
still await the required full digital must carry.
Mr. Stearns. Mr. Arland, I have a few seconds left. All of
my computers I can get a video off television. So it is simply
taking the analog and putting it into my computer. There is a
little thing you just drop in. And, bingo, it is on my screen.
So it seems so easy. Yet, I find we are not getting this sold
in the market.
So my question is, I guess, I mean, I am just puzzled why I
can get television on my computers digitized and I can't get it
at home at an economical? Am I missing something?
Mr. Arland. You are not missing anything. You can get
affordable analog television with the PC card today.
Mr. Stearns. Right.
Mr. Arland. To Mr. Paxson's point, you can do that as well
with digital with a slightly more expensive card. Remember that
you are using all the processing power of your computer to make
that happen, however.
We have to replicate that power because of the complicated
standard that we have which does terrific things, as we saw
today, but is not easy when we do a set-top box or an
integrated television set. As well, you could plug in your
computer monitor to our set-top box. It doesn't have to be
plugged into an old TV. It can be plugged into your computer as
well, either way.
I think costs will come down, but it will take a little bit
of time.
Mr. Stearns. Okay. Thank you, Mr. Chairman.
Mr. Upton. Thank you, Mr. Stearns.
Ms. Harman?
Ms. Harman. Thank you, Mr. Chairman.
I want to note how excellent the short broadcasts we had
were, both of television, the television networks, and their
content but also of public television. It excites me that
public television is able to offer excellent programming in
this new format.
I just want to recognize the presence, as someone else has,
of my good friend Sharon Rockefeller, who has done so much to
lead WETA in the Washington area.
I want to go back to a subject I raised in my opening
remarks. And that is the disparity between the treatment of
cable and satellite signals and the treatment of broadcast
signals. It seems to me that different treatment is wrong. It
also seems to me that different treatment will drive down the
content that is offered on broadcast and could also delay the
acceptance by consumers by this wonderful new technology.
So I would like to ask my good friend Mr. Franks first what
he thinks about what I just said and anyone else in the short
time that I had to also comment.
Mr. Franks. Thank you, Congresswoman.
In my prepared statement, I addressed this briefly. We have
as over-the-air broadcasters a great fear that if the copy
protection scheme is not extended to over-the-air broadcasts,
it is simply inevitable that the high-value program--if last
night's ``Survivor'' can be immediately streamed onto the
Internet, then it loses all of its residual after-market value.
I realize that there are considerable technological hurdles
that have to be resolved, although I think they can be resolved
much sooner, rather than later. And it is only, frankly, since
the letter authored by the Chairman and other notable members
of this committee that drew attention to this issue that we
have been able to draw much interest or cooperation from the
other side on this question. You have certainly done a lovely
job of focusing their attention in the last several weeks. We
have probably made more progress in the last several weeks than
we have made in the previous 5 years.
Ms. Harman. Thank you.
Does someone on the panel have the opposite view? I think
it would be important for the record to hear this. Yes?
Mr. Cookson. I would like to comment that we share the
concern that we would like to see broadcast television
protected. The problem is that the problem faced by broadcast
television is different from the problem faced by cable and
satellite, where there are conditions attached to your ability
to receive it. And those conditions can be used to provide
levels of copy protection or control over copying.
Where something is delivered in the clear, it doesn't have
the opportunity to have that same technical solution. So what
we are concerned about is that when somebody says, ``We want
the same level of protection,'' the way you can do that is
hamstring the one that is protectable to make sure that nobody
has an advantage.
We would prefer not to do that. We would prefer to continue
to work diligently to find the solution for a different problem
while rolling out the solution that is available.
Ms. Harman. I would just like to comment that I think that
is a rational objection, but it doesn't go to the fairness
argument. It only goes to whether the technological fix should
be the same.
I am not arguing that the fix should be the same, but do
you agree with me that if we have intellectual property in one
case and we have it in the other case that both deserve
protection?
Mr. Cookson. I believe that both deserve protection. The
problem is that if we are anxious to get the deployment quickly
in to bring new materials into the marketplace and to get
earlier availability of motion pictures and new programming. We
don't want people to be conscious about putting these things
into distribution because there is no way of protecting them.
Because broadcast doesn't know how to protect it and we
haven't figured it out yet, to tell everybody else ``You can't
protect artificially'' will cause a delay I think that we don't
want to face.
Ms. Harman. Well, I don't think that is what I was arguing.
I am arguing for protection of private property. We have to
figure out ways to do this. This issue is going to come up
again and again on this committee.
You can call it the Napster issue. You can call it anything
you want. But we have to find ways to embrace technology and at
the same time protect private property rights. And I think the
answers are in technology, not building barricades.
So I would just encourage all of us and certainly those who
are testifying who are far more knowledgeable than I to get on
with it so that we can make sure that the content available in
these new formats is as expansive as possible.
We should not shut off a very good source of content by
broadcasters who fear, just as Mr. Franks said, that they will
lose their ability to protect their content.
Thank you, Mr. Chairman. I see my time is up.
Mr. Upton. Thank you.
Mr. Shimkus?
Mr. Shimkus. Thank you, Mr. Chairman.
What I would suggest that our panel do after the hearing is
we kick out all the guests and we kick out all the members and
you all without your lawyers sit down and resolve some of these
conflicts because what you are going to invite, especially
there are some heated differences there. And what you invite is
you invite government intervention. You almost invite some
reregulation.
So I would suggest you be very, very careful in that you do
the work that you all need to do to move forward and not
encourage us to get involved. And that means compromise. And we
are experts at compromise here in Washington, not always
successfully. But that is what you are going to have to get.
I mean, I could throw out a lot of red meat here a la the
former chairman of the subcommittee liked to do, throw
something on the table like the $7 billion giveaway, and have
you guys just fight over that for a little while or the new one
is a QAM chip. Some people raised their arm on the QAM chip. I
don't even know what the QAM chip is.
But, yet, you fight over that for a while or we can do the
issue of the Napster-type debate on who owns what property and
how with digitals. I mean, we can do that, but you all need to
that. I am just throwing that out as a word of caution because
there are diversions used here. But it is one family, and it is
a family fight. Family fights can get reconciled. If they don't
get reconciled, they are almost enemies forever, words of
advice from a very young person. And I understand.
Let me ask some questions that are probably a lot easier
than to let you fight those things out just for my
clarification. I should know these answers, but since I don't
remember them.
Mr. Franks, you are broadcasting in 1080I. I remember
hearing here where we had the different little standards. That
was a couple of years ago. And that is the best picture.
Mr. Franks. It is the best picture that we can fit into six
megahertz.
Mr. Shimkus. Correct. Does that prohibit you from
multicasting because you are doing the best picture that can
fit into six megahertz?
Mr. Franks. In order to multicast, we would have to use
some of the----
Mr. Shimkus. Some of them, right.
Mr. Franks. So yes. I mean, in Indianapolis today, as was
mentioned, instead of showing one basketball game, we have
given our affiliate the permission to show all four that are
going on at the same time. So they are subdividing their 19.2
megabits, which fits into their 6 megahertz into fourths.
Mr. Shimkus. I asked that question because here is an
example. There was some talk years ago about setting a Federal
standard. I think you all said ``We want to market the best,
clearest picture.''
Mr. Franks. No. If I may, I think it would be a mistake. We
like our HD.
Mr. Shimkus. Right.
Mr. Franks. But it would be a mistake necessarily to
mandate a certain level of HD that already had----
Mr. Shimkus. Well, I think we agree with that, but there
was a debate here. And that is why we had the different
standards. And the issue was because we want to move to
education TV, we want to use PBS. And multicasting was
supposedly a critical component, although some people said no.
I think we let the market----
Mr. Franks. I think we are in such an early stage of this
transition for consumers. We are in a situation. CBS' strategy,
we are going to go ahead with HD until the viewers tell us they
don't want us. It may well be that our viewers are going to
say, ``You know what? We don't care as much about 1080I. We
would rather have you rerun 'CBS News' on a subchannel and show
your prime time entertainment in a lesser definition of digital
television'' or we don't----
Mr. Shimkus. And I agree. I am not----
Mr. Franks. CBS only gets rewarded if our viewers tune in.
We don't get paid week in and week out, month in and month out,
if they don't tune in.
Mr. Shimkus. Right. And I agree with that, but I am just
harking back to old days and the cautionary tale about where
government can move. How does the 1080I and the use of the full
spectrum versus the multicasting affect the cable operators?
Does it have any effect on you?
Mr. Weed. Yes. We are using the QAM standard to stream our
video. We would have to convert to a QAM standard to run on our
digital system.
Mr. Shimkus. Tell us what that means in English.
Mr. Weed. We would have to spend a bunch of money at the
head end, which is our main receive point, to convert from
their standard to ours so it would work on our digital boxes.
Mr. Willner. The reason that we do that, Congressman, the
reason that we do that, is it is a much more efficient use of
that very expensive bandwidth.
Mr. Shimkus. I learned something new today. My time has
expired, Mr. Chairman. I thank you and yield back. Thank you.
Mr. Upton. Mr. Markey?
Mr. Markey. Thank you, Mr. Chairman, very much.
Again, I want to get back to this question. I know that you
touched upon it earlier, Mr. Chairman, of what it will take in
order to make it possible for us to telescope the timeframe
that it will take in order to make this transition by ensuring
that any TV set sold in the United States has the capacity to
receive an analog or, for that matter, a digital signal
depending on what set is being sold.
I would just like a little bit of insight from the people
who are here because obviously back in 1990, when we were
having hearings here on closed captioning, I was told it was
going to cost $30 a TV set and on the V-chip, I was told it was
going to cots $25 per TV set. And by the time I was finished,
it all came down to a single chip and maybe $1 for both of the
services to be provided, $1.50.
So in every other area of this industry, we have Moore's
law applying, where every technology becomes more powerful and
less expensive as each 18-month period goes by.
Testimony doesn't quite reflect that when we come to
television, although I do always find that Markey's law does
apply, which is notwithstanding what the testimony says, to
some kid in Osaka or Beijing who realizes that at 30 million TV
sets apiece and there is $5 a set. That is $150 million a year.
That is a good business, you know? And so we are in my opinion
going to find some way of accomplishing this goal.
So if we can just go quickly down, maybe just a show of
hands. How many of you believe that we can find an inexpensive
way compared to the $200 number, an inexpensive way of building
a converter into TV sets? You can just raise your hands. How
many of you believe that? One, two, three, four, five, six,
seven, eight. You, Mr. Franks, are the outlier?
Mr. Franks. You know, Gerry Levin thought he was going to
come up with an inexpensive box in Orlando, spent a fortune
doing it, and never got there. I mean, I hope it happens, but I
can't guarantee it.
Mr. Markey. If you knew that 33 million television sets
were going to be produced each year----
Mr. Franks. At the moment they are analog sets.
Mr. Markey. [continuing] you would think the economies of
scale would hit rather quickly in terms of the decrease of the
overall price of this converter capacity.
Mr. Franks. I have a different take, with all due respect.
I am sorry Mr. Shimkus left in one sense. I don't think that
the solution is for all of the rest of you to leave and leave
us to resolve this problem.
One of the worst problems that I see is still the copy
protection scheme. I have only been working on it for a little
over a year. We have made more progress since the letter you
sent 2 weeks ago than we made in the preceding 12 months. I am
not sure we need more legislation, at least not yet, as much as
we may need your job owning.
And, Mr. Markey, may I remind you you are one of the most
effective job owners I have ever had to endure.
Mr. Markey. Thank you. With all due respect.
Mr. Franks. With all due respect.
Mr. Markey. Yes, yes.
Mr. Franks. I think I am on record as having told this
committee that it would be impossible to come up with a rating
system for the V-chip that would work across the industry. And
you somehow managed to induce us without legislating it. It was
miraculous how we came up with it at 6 months.
Mr. Markey. Here is the thing. Here is the thing. In 1962,
when this all-channel legislation passed, I am grown up as a
complete consumer of contemporary American television culture,
which my mother has always pleaded is limited. I have total----
Mr. Franks. She is wrong about that.
Mr. Markey. She said that they would donate my brain to
Harvard Medical School as a completely unused human organ. So
that was her observation.
And you know what was really great? You had the UHF, and
there was nothing there on Channel 38-56. But once 38 and 56
were there and it was mandated, guess what happened. In 1963,
38 buys the rights to the Bruins. Now I can see every Bruins
game. And then they buy the rights to every Red Sox game. I
have been seeing a half a dozen of them a year. And so the
programming follows, in other words, the technology.
Once the technology is there, it is going to get filled up.
But the programming doesn't get created beforehand. You don't
say, ``Well, I am going to pay for'' this or that or the other
thing if you don't have anybody who is going to watch it
because obviously we live in a capitalist society; right? And
you have got to make a buck out of what you are doing.
So I just think that at the end of the day, we have to
mandate that 30 million TV sets. By the second year, you have
60 million home sets. We have 100 million homes in America. By
the third year,--and this is what typically happens in my
opinion--is that the new TV set becomes the important new
appliance in the house. So after 3 years, you get 90 million TV
sets sold in America. If you do it for just 6 years, you have
got 180 million TV sets.
We only have 200 million homes in the United States. So you
are going to have on average about two new TV sets within 5 or
6 years. So at least you are moving to a point where you can
start to discuss it, but he programming will start to come.
Mr. Franks. But, again----
Mr. Markey. With all due respect. I hear you.
Mr. Franks. Yes, and you know it is true. I mean, these are
lovely sets that we brought in today and they were fun toys to
play with. The most important equipment in this room are those
little black boxes that were on top because they make an analog
set able to receive a digital signal.
Mr. Markey. Let me go to Mr. Parrish for a second because
this week Forbes says that we basically have reached a point
where Scientific Atlanta and Motorola have a duopoly when it
comes to set-top boxes. I am just wondering, Mr. Parrish, what
do you think should happen here to make sure that we have got
set-top box competition that makes it more affordable and
basically transparent in terms of the ability for any
programming to be carried over it.
Mr. Parrish. Well, Mr. Markey, RadioShack has participated
with a group called the Consumer Electronics Retailers
Coalition that has been working on this issue since the 1996
Act. And we are encouraged that the Commission continues to try
to develop some rules out of this. But, again, 5 years has
passed, and not much progress has been made, although there is
a lot of work going on apparently.
I would think that what our feelings would be are: first,
that the Commission should advance to January 2002, the date by
which the MSOs would rely on the same set of specifications
used by competing providers.
We would like to see the FCC perhaps intervene. This
license that has been discussed and then advanced by cable and
copyright interests, I am not aware of any manufacturers that
have currently come comfortable enough to be able to sign it. I
am afraid the Commission may have to more or less arbitrate and
see if we can't get some resolution on some of these.
And, third, I think the Commission should look at what they
did in the telecommunications industry or in the telephone
industry and look at the subsidization patterns and say,
``Aren't the same principles the same for developing a
competitive video market that were present when we deregulated
telephone?''
Mr. Markey. Thank you. If you would just indulge me for 30
seconds, Mr. Chairman? You have been very generous to me. I
appreciate that.
Mr. Arland, it is $200 a set-top box right now. What do you
see it in 2 years?
Mr. Arland. Well, we have already cut retail prices for the
set-top 15 percent year over year. The $200 figure, as I
mentioned earlier, is a premium over analog. I think it will
come down. The rub here is----
Mr. Markey. Just give us a price, though, just so we have
in our mind some idea of where you see it 2 years and 4 years
from now.
Mr. Arland. You know, I have my competitors in the room.
And I don't want to divulge what my plans are, but----
Mr. Markey. We will give you amnesty from any antitrust
violation you might be making.
Mr. Arland. We are No. 1 in those set-top receivers. I
might point out with direct TV systems, we sell thousands of
those every day. So it depends on the network. I think the
prices are going to come down. The rub is the timing. The rub
is the timing. And I would contend that----
Mr. Markey. Even if, even if, we mandate 4 years, can you
integrate in 4 years?
Mr. Arland. I already integrate. This set over here is
already integrated.
Mr. Markey. Can you integrate for $50 in 4 years?
Mr. Arland. I don't think I can do it for $50, no.
Mr. Markey. Okay.
Mr. Franks. Even if you can't, say you could do $50.
Mr. Arland. Marty, let me answer that. Even if I can and
there is nothing to watch and if there is no cable carriage,
there is no point in building in this electronic set of $200
for over-the-air reception.
Mr. Markey. Okay. If I may, I will just summarize. There is
a chicken and egg quandary here: Does the programming come
first or the technology? My own humble opinion, my father
passed away last year, and I found the receipt for the
television set he bought in 1950 for our house, and I was 3 or
4. So obviously I had been lying in front of it the whole way.
And while I did enjoy those test patterns on 12 of the 13
stations and I did lie there, my interest did improve.
And, in fact, the programming came very quickly after the
market ramped up from 1 million people in 1950, which I now
realize, in retrospect, we were ahead of the curve, to about 30
million people just about 3 or 4 years later. It was great when
``The Mickey Mouse Club,'' et cetera, showed up, but I don't
think it would have if there weren't 30 or 40 million kids
watching, rather than 1 million.
And so I guess the way I view it, Marty, is this, that I
understand your concern about copyright. And I think we can
work with you on that, but I don't think that has to precede
the other work. In other words, I think that it is possible for
us to work to give an incentive to ensure that you have the
integration, you have the dual capability, and you have a
marketplace out there where 35 million TV sets are being sold
with it. So you have got a comprehensive policy that is moving
it forward. Otherwise we will be in the chicken and egg circle
forever, never breaking out. So that is my personal
observation, and I hope that we can work together, Mr.
Chairman.
Mr. Upton. And you yield back the balance of your time, I
know. Thank you.
Mr. Engel?
Mr. Engel. Thank you, Mr. Chairman. I apologize for
bouncing back and forth. We have two subcommittee hearings
going on at the same time in our committee. So I do apologize.
You know, when the Federal Government embarked upon moving
the country to digital television services, one of the choices
we had to make was the timing, a 2006 date when digital is
supposed to be fully implemented. We are getting there. We are
on our way there. But from what I have heard, we are probably
going to miss that deadline as well.
When we made a decision, many other decisions were left to
the marketplace to decide. And some of the people now seem to
actually be asking for government to get more involved, rather
than less involved. So I just want to say, as an aside, I would
remind my friends in the private sector that the Democrats are
close to retaking the majority and will remember such requests
if we do.
I want to ask Ms. Courtney because I have been one of
Congress' leading voices in support of public television, but I
am one of its biggest fans in or out of Congress. I have three
children who have benefited immensely from public television.
And I am very pleased to know that New York's public television
stations will dedicate one of their multicast streams to an
educational service called the Empire State Channel. It will
provide teacher training, GED courses, and other lifelong
learning programming. To me, this is what television should be
about or at least an option for people to watch.
To do this, obviously it is going to take a lot of time and
a lot of money. I am wondering if you can comment. And if you
have already, I apologize. Could you comment on the importance
of the Federal Government assisting public broadcasting and
converting to digital?
Ms. Courtney. Thank you, Mr. Engel. Indeed, it really is a
terrific challenge for public broadcasters because the
equipment costs the same, whether you are a noncommercial
broadcaster or a commercial broadcaster.
We are hard at work. We have 28 stations on the air right
now, public television stations. And we have a commitment from
State and local governments I said of about 351 million. Many
of us have promised we are going to have some sort of Federal
match, even though it hasn't arrived yet in many instances. And
we are also raising private funds out there.
But it is a daunting prospect because certainly in New York
I know just the towers, the transmitters, the transmission
lines, my colleague from the NAB, it is just an expensive
proposition. We are committed, though, because we think it is a
right thing to be doing. We are committed to the services that
you were speaking about. But we are concerned about, one, that
tremendous cost. We are concerned about reaching the deadline.
We are concerned about some of the FCC rules that say one
channel, rather than multicasting. We are concerned about
showing up.
And I have testified before legislators in saying, ``Here.
We are ready to deliver these educational services,'' but
nobody can receive them because they don't have a television
that can pick them up. In a school, what are they going to do?
Put a new master antenna? How many boxes will they need to
convert? Will it be QAM-compatible if I negotiate a deal with
Time Warner or my cable operator? Maybe yes, maybe no.
All of this is terribly expensive. And we want to realize
the promise of this digital. And that is where the parents
really want these services. I know our educators want it. We
are talking about technology and education all over the place
in every venue we are in, but I am concerned about ultimately
delivering those services with those caveats that I mentioned.
It is a concern.
Mr. Engel. Right. Well, I believe that the Federal
Government really needs to continue to help public
broadcasting. Five, 6 years ago, when the move was afoot in
this Congress to eliminate government help for public
broadcasting, one of the things I said then,--and I think it is
even more true now--public broadcasting is public broadcasting.
We don't want it to be commercial broadcasting when people
suggested, ``Well, the funds can be raised in the private
sector. Why does government have to put the funds forth?'' I
said then, as did others, that if we wanted it to be
commercial, it would be commercial and not public. But I think
that public broadcasting has a unique niche cut out. And I
think the points you raise are very, very valid.
Ms. Courtney. Thank you. Mr. Engel, I was talking to my
colleague over here. I was saying, you know, for cable
operators who have access to all of the byways in their
communities, they can dig up the rights-of-way and have access
to things to do things. They also have obligations in those
communities for public service and education in many instances.
I think public broadcasters are natural partners to help them
with some of those obligations in a digital environment. We
ought to have dialog about that as well.
Mr. Engel. Thank you. I have a question for Mr. Willner. I
know that the cable operators have a limited amount of spectrum
as well. Could you explain how much on average spectrum a cable
company has and how it splits it up for TV, Internet, and
telephone services?
Mr. Willner. Sure, I would be happy to. And, again, I am
not a technologist but to the extent that I am familiar with
the asset of the bandwidth. Most cable systems are being
rebuilt today to a 750-megahertz bandwidth capacity, which
sounds like an awful lot of television channels when each one
of them is only 6 megahertz. What is actually happening,
though, so that we don't force customers into paying more money
for digital services, we are maintaining the analog broadcasts
and cable signals on the first 550 megahertz of that plant.
So all that is left after we have rebuilt our plant is
really 200 megahertz, from 550 to 750, in which we can deliver
all of our video-on-demand services, all of our digital
services, all of our interactive high-speed Internet access
services, and all of our competitive voice telephony services,
the last piece of the Telecommunications Act of 1996 that is
still left without widespread competition. And we are going
into that business right now.
Mr. Weed. If I may?
Mr. Engel. Yes, please.
Mr. Weed. It is a good opportunity to point out the
difference between smaller market cable systems. I would say
the average smaller market system is 450 megahertz. We just
rebuilt our system in Port Townsend, which is 2,000 customers,
to 450 megahertz. We used up to 330 for analog, which includes
all the must carry. The remaining 80 megahertz is used with
digital.
And, with all due respect to Mr. Markey, to his point, I
would suggest that we are at the early edge of solving this
chicken and egg problem. In that system, we are selling new
customers--30 percent of them are taking digital. We just
launched 20 new digital basic channels. The product is there.
The customers are taking it. I am sure Mr. Arland is going to
want to build some equipment for those millions of customers
that are watching digital product.
Mr. Engel. Well, thank you. I am wondering if I could just
get one more question in and go back to Ms. Courtney. If
everyone had a TV set that picked up the digital signals and it
was equipped with a strong enough tuner to get your signals
over the air, would you still need must carry for every video
stream?
Ms. Courtney. You are talking about simply over the air?
Mr. Engel. Yes.
Ms. Courtney. I am not his mother, but I, too, don't
believe people are going to put up 30-foot antennas on their
houses. I mean, that is what my chief engineer thinks. He told
me that. That was our plan. I said, ``Nobody is going to do
that.''
So, consequently, I think we have to have acknowledgement
that people are receiving it on direct TV or EchoStar or cable.
I think we have to have both strategies going.
Mr. Engel. What if you had a strong enough tuner, though,
where you didn't need that?
Ms. Courtney. A tuner in your computer?
Mr. Engel. In your TV set.
Ms. Courtney. Well, right now we have every technology on
demand. I can't operate all of the various remotes. I would say
you still require putting up a new antenna. That is kind of
part of the problem. And I don't think people are going to do
it.
And also schools. We were developing strategy over here. I
am trying to network with everyone to how we would do that with
schools as well. Many of them have cable going into them, but
we are going to have to figure out how, then, they pick up that
digital signal and their compatibility.
I am very confused about the QAM versus the over-the-air,
too. We don't have an interoperable system here right now. We
really do have confusion in the marketplace right now.
Mr. Markey. Eliott, will you yield for just 30 seconds?
Mr. Engel. Yes, absolutely.
Mr. Markey. See, we have another public policy question up
here, which is: How do we get back the 6 megahertz so we can
auction it off for 3G or for whatever? Well, you are right.
This might stop moving along. We still will be in a situation
where you have all of the non-cable subscribers.
In other words, we have to get everybody pretty much moved
over. And so it just can't be this system here and that set of
subscribers over there or, else, we will never see this
spectrum to auction it off so we can have another piece of this
industrial plan where we auction it off so we can give the
other entrepreneurs a chance to use it.
Mr. Parrish. Excuse me. With all respect, Ms. Courtney and
Mr. Arland, RadioShack thinks off-air antennas are beautiful.
Mr. Upton. Mr. Stearns?
Mr. Stearns. Thank you, Mr. Chairman.
Mr. Franks, earlier you said one of the stumbling blocks
for this transition is the protection of intellectual property
rights. So I just want to touch on this area again. Is there a
way to assure the consumers are protected of their content and
at the same time that the broadcasters are protected, too, so
that there is not this illegal copying with all of this digital
age?
Is there some way to develop or ensure that the digital
content and equipment, such as set-top boxes, recorders, and
television are speaking the same language? Maybe that is a
question for----
Mr. Franks. Well, technology is not exactly my strong point
either.
Mr. Stearns. Yes.
Mr. Franks. My friend and former colleague Mr. Cookson
would probably disagree, but, again, since the letter of the
last several weeks, we have heard from a number of the
manufacturing companies that they think that there may well be
a way to fully protect the home recording rights of viewers.
You go on the message boards, and they think that we are all
trying to turn broadcast television into a pay-per-view
enterprise. That is not what CBS is about. We want to protect
our intellectual property while we allow time shifting, home
recording. So let us try and put that one to bed.
We think perhaps the answer is watermarking. There are
technological solutions. But I would say to Chris, as I have
said to the other studios, they won't guarantee to me that 10
years from now if we don't have a secure environment they will
still license to CBS for over-the-air broadcasts their premium
product. And that is the dilemma we face, that if, in fact, it
drives further migration of ``Titanic'' or ``Survivor'' or the
``Super Bowl'' to a protected environment; whereas, we are
unprotected, we are cooked, no pun intended.
And, frankly, part of the issue here is yes, we certainly
want to move forward expeditiously, but if we go so
expeditiously that we get another 5 million legacy units out in
the marketplace and we come up with a solution that won't work
with those 5 million boxes, then we are also going to have a
little bit of consumer-viewer unhappiness that we would very
much like to avoid.
I guess the point I would like to come back to, though,
Congressman, and to Mr. Engel's point, I am not asking for
government intervention. I am asking for the government to make
up its mind to do something about this dichotomy that we have,
on the one hand, if leaving it to the marketplace and then
being unhappy that there is a prospect of not getting the
revenue in 2006.
That is one point. But the other thing, to the point of you
all leaving the room and leaving it to us, that isn't going to
work either. I am not sure that actual legislation or
regulation is necessary as much as staying on our backs and not
saying, ``Well, gee, we will be back in 6 months to see how
things are going.''
I wish that there were perhaps through the Commission some
better job owning. Government is very effective at making the
people at this table do a lot of things that we don't
necessarily want to do in a timely fashion, but it is amazing
how you are able to get our attention when you choose to. I
guess my biggest surprise over the last several years of
working on this is how passive the Congress and the FCC have
been over something that is supposedly such a key national
issue.
Mr. Stearns. Mr. Chairman, I think Mr. Franks probably
touches on the question, that we probably should just go down
the panel and ask each of them: What, if any, do you see as the
role of the United States or the Federal Government in ensuring
that the transition to digital television occurs? And if you
don't mind, Mr. Chairman, Mr. Franks has given his sort of
answer, but I would just like, if I could, to just go down and
ask each of them in a short amount of time just to give us what
they think the role of the Federal Government is. What would
you do if you were us?
Mr. Paxson. Well, I think you would have to come to the
conclusion that if we have a difficult digital transition, the
fact that 33 million sets were sold in America last year that
can't get a digital picture is a serious problem. And I think
you have got to go back and resurrect the 1962 Act and have an
all-channel set, one that is capable of receiving analog and
one that is capable of receiving the digital signal.
Without it, I don't think you have a transition. If you
don't include the broadcaster, you don't include the
broadcaster in the world of copyright protection, you will not
have a digital television set and you will not have a digital
transition.
If we can't uphold the Congressional Act of 1992 as
regarding must carry, I don't think you are going to have a
digital transition. And that has been made very clear by a
number of governmental agencies saying that must carry, full
digital must carry, is required to have the spectrum turned in.
Mr. Stearns. Okay. Mr. Cookson, maybe we will just go right
down here. Hopefully we can just get sort of a nutshell answer.
Mr. Cookson. Yes, sir. Continued oversight, I think not too
differently from what Marty has suggested keeping people
focused on the problem. We share the concern that CBS voices
about the content that is on broadcast. Our disagreement, I
guess, is only in the practicality of some of the steps in
trying to get the technologies deployed in a reasonably prompt
way. I think keeping people focused and continued oversight.
Mr. Stearns. Mr. Weed?
Mr. Weed. I think it is very likely that by 2006, the huge
majority of our customers, if not all of them, will have
switched to digital, either by a box we have provided or by one
they have purchased from RCA or RadioShack. And at that time,
the broadcasters will want to switch from analog to digital on
our systems and, therefore, the problem is going to solve
itself.
Mr. Stearns. Ms. Courtney?
Ms. Courtney. I think must carry of multiple signals, not
just one primary video, is essential for public broadcasting. I
also urge you for your Federal appropriation to allow us to
match the money we are already raising or we won't make it.
Mr. Arland. I think in a nutshell two things. Cable
compatibility is very important. Probably more important than
over-the-air reception is cable compatibility. And I would
agree with Chris and with Marty that simply keeping this issue
at the top of everyone's mind is most important.
Obviously, as you have heard, I obviously feel that there
should be no requirement to build all of these electronics into
every set. After all, there was no mandate that created direct
TV. There was no mandate that created the success of DVD. It
was great technology and terrifically compelling programming.
Putting those two things together is what leads to a successful
marketplace.
Mr. Willner. Well, Congressman, I share the view that I
think that the marketplace is actually going to solve this
problem. And as more and more cable customers convert to
digital on their own without having to buy a digital tuner,
without having to buy a digital television set, the
broadcasters are going to out of self-preservation convert to
digital themselves as well.
I would remind Mr. Paxson, my colleague here, whom I have
known for many, many years that 20 years ago, he walked into my
office in New York with nothing more than an idea in his head
and he wanted to get on the cable system that we were building
in Clearwater, Florida at the time. And in 15 minutes, he
walked out with a carriage agreement that started the Home
Shopping Network because it was a good idea that we carried.
So I think that the market really is working. It will work.
And I think the conversion will actually occur.
Mr. Stearns. Mr. Parrish?
Mr. Parrish. Congressman, I don't believe that the majority
of television sets will be replaced in a short-term period of
time. I think that these products have to be backwards-
compatible to the millions and millions of high-quality analog
sets.
I think the set-top box is more of a key, and I am ready
for it. I am ready for an array of boxes from a basic box to a
high-value box that may include Internet access through
broadband. The FCC needs to complete the set-top box provision.
Mr. Stearns. Mr. Tucker?
Mr. Tucker. Yes, Mr. Stearns. I think many of my colleagues
have already said some of the same things. One of the things we
need access to is the 70 million cable homes right now because
broadcasters are up and broadcasting in digital at this point
in time and we are missing access to 70 percent of the homes
that might want to have an experience with our high-definition
television. We need sets that receive both digital and analog
and we need interruptability standards.
Mr. Stearns. Mr. Chairman, I have just got one 30-second.
Mr. Tucker, Washington, DC is I guess in the top ten
markets. How is high-definition television? Is it carried on
the cable in Washington, DC? I don't live in Washington.
Mr. Tucker. In Seattle, Washington. In Washington, DC?
Mr. Stearns. In Washington, DC.
Mr. Tucker. Not that I am aware of, sir.
Mr. Franks. It is not.
Ms. Courtney. It is not.
Mr. Franks. It is not.
Mr. Stearns. On any of the systems in the metropolitan
area?
Mr. Franks. The CBS affiliate, WUSA, owned by Gannett
passes through all of our HD programming. And I am not aware
that any of that HD programming is carried on cable.
Ms. Courtney. WETA is not carried.
Mr. Stearns. Thank you, Mr. Chairman.
Mr. Upton. Mr. Engel, do you have additional questions?
Mr. Engel. No, Mr. Chairman.
Mr. Upton. Okay. I do. I have a couple of more, and then we
will get to a close. A couple of things. Mr. Franks, CBS has
done a pretty good job, darned good job, at broadcasting
digital, particularly in prime time. Where do you think your
competitors, ABC, NBC, Fox, are?
Mr. Franks. Well, I wish they were here to answer that
question.
Mr. Upton. They probably are.
Mr. Franks. I would be happy to yield. I would be happy to
yield to them, Mr. Chairman.
Mr. Upton. Are you next to them?
Mr. Franks. Yes, and I feel their support for me.
In all honesty, I mean, I have enough trouble overseeing
CBS's digital transition. I am not sure I want to take on
overseeing theirs. And, on the other hand, I am kind of
enjoying this competitive advantage that they are ceding to me
at the moment. And so I am not terribly interested from one
standpoint in them rushing along to compete.
I do think they are coming. ABC has put on ``NYPD Blues''
this year and a lot of movies. Fox has experimented with a fair
amount of wide-screen standard-definition programming. It is
not what I wish. It is not what I think would be best for the
transition, although I am not sure that it has to be HD as much
as if it is compelling multiplexing.
Part of I guess what I am recommending to you is I am very
surprised that I am the only network witness this morning, with
all due respect to the WB. I mean, if you want this transition
to work and you want to do it through job owning and keeping
our attention focused, I guess it might be wise for you to ask
that question directly of my competitors.
Mr. Upton. Do you think that they are within 2 years, 2 or
3 years of being where you are today? I mean, I think about the
1906 deadline that is out there.
Mr. Franks. The problem, of course, let me try and defend
them, which is hard for me to do. There is no incremental
revenue in that. To do the Super Bowl costs an extra half a
million dollars. Luckily, thankfully, we had a lot of support
from RCA, but we made not one more dime from our primary
advertising business because we did the game in HD.
And until there is some return on that investment, we are
probably going to spend this year an incremental $7 or $8
million converting programming to high-definition. The return
on that investment is de minimis.
Mr. Upton. See, that goes back to the question with the
broadcasters to a degree. You have got the same advertisers
that are out there to run your programming. Whether you are a
sizable station and broadcasting from the Sears Tower or you
are a smaller station and broadcasting in South Bend, Indiana
or Grand Rapids, Kalamazoo, Battle Creek, your costs still are
in the millions of dollars.
You have only the same pool of advertising to get your
programming out there. And when you are a public broadcaster,
again, you are relying on the viewers calling in and ringing
the phones wondering when that little segment is going to be
over so that the Big Ten basketball or whatever the program is,
your costs are there.
And now from the broadcasters' point of view, again, I have
seen remarkable efforts to move the ball down the field,
certainly the big stations. As I look at my district, the
smaller stations, too, the plans are in the works.
As you mentioned in your testimony, I think the WNDU or I
guess it was Mr. Arland, they are there. They spent the money.
They have got the cameras. I have kicked the tires. They are
there.
Mr. Arland. They call me about every other week saying,
``Won't you please sponsor something on our station?'' because
their network supplies one program a night, and that is it.
Mr. Upton. Right. But when I visited them and when I heard
from some of my local broadcasters again from Michigan, even
this week, there are not a lot of sets out there for them to
receive. But do you feel pretty good that, in fact, the
timetable that was laid out is going to be hit by the
broadcasters in terms of being able and spent the money to get
on the digital?
Mr. Tucker. Mr. Chairman, I think the broadcasters will
spend the money to get on. There might be some delays in the
smaller markets and requests for delays because of economic
hardships. But I can give you a clear example.
In Seattle, where all four of the major affiliates are
broadcasting, all of the local stations are broadcasting in HD,
we are doing a full HD newscast, there are only 10,000 HD sets
in the marketplace. About 1,500 of those receive over-the-air
broadcasting.
There is no revenue stream there. We are using that as a
learning experience so that we can take some of that
information that we learned and some of what we learned
technologically to pass down to our smaller market stations.
There is an awful lot of that going on. There is no revenue.
And the $70 billion myth, none of us have put any extra
money in our bank accounts or have improved our balance sheets
at all. There is no $70 billion benefit to broadcasting. It is
an expense. We are trying to transition the American public to
our service. We need them to view us to be able to gain any
money from that.
Mr. Upton. Mr. Weed, I am one of those 26,000 Americans
last year that bought a digital TV. And I like it a lot. I
recommended it to my dad, who lives across the street from me.
We have a small cable company. My guess is they may be a
member of your organization. I don't know. I will find out
later, I am sure.
Mr. Weed. They probably are.
Mr. Upton. Probably not? All right. Well, it is a really
small one.
Mr. Weed. I said, ``They probably are.''
Mr. Upton. Probably are. Okay. But I know that having
bought that digital set, my local Michigan cable company
doesn't have the capability to send me a digital signal. They
have about 40 stations that they offer, one HBO if I decide. So
it is a pretty small company.
Where are your members? What percent of your members are
able to upgrade up to a digital signal if somebody has got one
at the end of the line?
Mr. Weed. Most of our members are deploying digital now.
The cost for small operators, when you are spreading $100,000
head in----
Mr. Upton. Do they have to rewire all of the neighborhoods
as well? Do they have to put different cable in, different
fiber?
Mr. Weed. The primary cost to adding digital is fixed costs
for the head-in. And we are spreading that over a much smaller
customer base. So our average system is----
Mr. Upton. So it is just a----
Mr. Weed. [continuing] 1,000 customers. You have got to
spread the head-in cost of $100,000.
Mr. Upton. But they can leave the existing cable in place?
Mr. Weed. Yes. Then you have got to buy a box to convert
the signal because we don't have a common standard. But that is
digital. I know my uncle just bought a real fancy TV. I was
there in Seattle last week. He was showing me his--I don't
know--$10,000 plasma screen HDTV. He had the same issue with
that big cable system. We are providing a digital stream.
Mr. Upton. Did he go with a satellite, then, instead of a
cable?
Mr. Weed. What is that?
Mr. Upton. He bought a $10,000 TV.
Mr. Weed. No. He put one of those ugly antennas up so he
can get Channel 4 in Seattle and watch HDTV.
Mr. Tucker. We do a very good job, sir.
Mr. Weed. But the cable companies, our members, are
providing digital. The cost is coming down, and it is being
deployed rapidly. But it is a digital signal. It may not be
compatible with the HDC set you buy.
Mr. Upton. Right. And what is your guesstimate in terms of
when is that time table going to be finished when all of your
members are able, in fact, send out a digital signal? Two
years? One year? Three years?
Mr. Weed. The marketplace right now is such that if a small
operator doesn't switch and launch digital, they are going to
be in a competitive hardship. DBS is forcing our members to
launch digital. I can't give you an exact prediction, but I
would say within a couple of years, small operators that don't
carry a digital signal of some kind will be at a high
competitive disadvantage.
Mr. Willner. Mr. Chairman, if I could just ask, I just want
to point out that at this table with all of these industries
represented, there is one industry that has spent nearly $50
billion in the interest of converting to digital television. It
is the cable industry. So it kind of gets my juices going.
When we hear about the taking of additional capacity out of
these networks that is really being reserved for competitive
high-speed access and competitive telephony and digital
television, it just doesn't sit right with me that the one
industry that has gone and done what you folks have asked us to
do should be penalized for doing that.
Mr. Paxson. Mr. Chairman?
Mr. Upton. Yes?
Mr. Paxson. If I might? Thank you. I think it is well to
remember that with all of this cable digital roll-out and all
of these digital boxes, the HDTV, the standard high-definition
television is going to be converted down into those 33 million
analog sets who aren't going to see a difference.
We have to sell digital television sets in America to have
it transition to digital. And without that all-channel set, we
are not going to see it because yes, we are going to have a
digital box, but all of the digital boxes they brought out
today, which were about 14 million, most of which are sitting
on top of an analog TV set converting whatever comes in
digitally down into analog. And, therefore, you have no
transition.
Mr. Willner. I am sorry, but when you are multicasting over
digital and delivering six different signals, it will look no
different to the consumer than a standard television signal
does today. Every one of the 30 percent of our customers in
Columbus, Ohio who have purchased digital cable service from us
are doing it because they want the product, not because they
have to.
Mr. Upton. Okay.
Mr. Markey. Mr. Chairman?
Mr. Upton. Mr. Markey?
Mr. Markey. Thank you, Mr. Chairman.
I think there is nothing more satisfying to any human being
than quoting himself. I am going to read you from my July 2000
testimony, ``A little over 2 years ago''--that would have been
April 1998 I am reading. Now we are back in July of 2000.
``A little over 2 years ago, this subcommittee also held an
oversight hearing on the digital TV issue. We still have the
leftover issues from that last oversight hearing in the
previous Congress. Those issues implementing cable must carry
rules, the lack of sufficient digital programming from content
produces, the lack of progress on competitive set-top box
marketplace, the public interest obligations of digital
broadcasters, and where the broadcasters can have any
obligation to offer HDTV at all can simply blast data services
to the public remain as issues for today as well.''
Now I can read you my 1998 statement in this hearing on
this same subject, but since I haven't changed anything from
the 1998, 2000, or 2001 because it really saves us a lot of
time in the morning because all we do is just pull up our
statements, I can go back right to my 1997 amendment. It is all
the same. You don't change anything. We have the oversight
hearings every year: the competitive set-top box, and then it
was the Bliley amendment of 1996. It has been the law for 5
years now, 5 years.
So we need to come together on this. Okay? We need a way in
which we resolve these issues. HDTV, deadline 2006, ``HD''
might as well stand for highly doubtful. That is not going to
happen; right? It is like HDTV deadline is an oxymoron as far
as I am concerned. You know, it is like Red Sox World Series
champion. And we want a----
Mr. Upton. BC.
Mr. Markey. Yes, NCAA champion. Yes. Thank you. I have got
us playing Michigan State in the final.
Marty?
Mr. Franks. In high-definition.
Mr. Markey. In high-definition, I hope.
And I just really genuinely believe that we are going to
have to do something about this all-channel capacity, this
ability to be able to jump-start the marketplace. This is an
industrial policy. You know, I was approached in 1987 to have
hearings so that we would take the spectrum and give it to
broadcasters, give it to them, not make them pay.
So that is a government program now. That is not free
market because we had an objective. I agree with the objective.
I still do. But I do know it is also wrong to allow for any
additional time to transpire before we reclaim the six
megahertz.
And I am just afraid that if we just allow it for the free
market, that although I had the first hearing 15 years ago, I
was a relatively young man at the time. Right now I face the
prospects of being a relatively old man before I ever actually
see in this hearing room the prospects of that technology being
available on a ubiquitous basis to consumers.
And so in my own family, I gate the television era by the
day my father bought the first black and white TV set, which is
1950; the day my father walked in with the first color TV set
on 2 days before the first Super Bowl in January, 1967, which
was a big moment in our neighborhood, my father did that; and
then the first day the equivalent that my father could buy that
HDTV set and know that it was affordable for him. And I don't
think we are close to that day at this point. I think that is a
shame for the American consumer because we have been holding
out this promise with them for a long, long time.
And I think we are going to have to take the action, Mr.
Chairman, to get this thing started because while I do agree
with you, Marty, that job owning does help, I am afraid that my
own experience has, unfortunately, demonstrated that it is just
not working in a timeframe that is compatible with the assets
that the American people have handed over and with the promise
that they would derive some benefit from it during their
lifetime. We could literally have gone 30 years, and I don't
think that is really fair to them.
So I thank you, Mr. Chairman, and I hope that when we have
this hearing next year, it will be overseeing policies working
in conjunction with voluntary action by the industries to get
this day advanced so that the public are the beneficiaries.
Thank you.
Mr. Upton. Mr. Engel, do you have anything else to add?
Mr. Engel. No, Mr. Chairman.
Mr. Upton. Well, again, I want to thank all members for
their time today. There may be some questions coming your way.
A couple of members since we are done voting went back to their
districts. They have asked some questions that I am sure are
going to be coming.
I want to thank you again for the time that you spent. This
is an issue that is before us. It is an issue that we need to
deal with that we need to get our mitts on as we begin to see
this ball go down the field. I look forward to working with all
of you as we try to craft the proper solution so that, in fact,
we don't end up going over the waterfall in 1906 and ask what
happened. Thank you very much.
[Whereupon, at 1:43 p.m., the subcommittee was adjourned.]