This written testimony presents the positions of the National Association of Broadcasters on the digital television (DTV) transition.  The testimony explains the costs stations incur to convert to digital and outlines the current status of the DTV rollout in the United States.

The testimony also describes existing impediments to the transition and enumerates the legislative remedies necessary to overcome these remaining hurdles in the context of the recently circulated staff discussion draft.  While the draft would tackle several key obstacles to the transition, it also falls perilously short in a number of areas.  Even more concerning, the draft would force cessation of analog broadcasts by 2006.  In 1997, then Subcommittee Chairman Tauzin and the full Committee prudently recognized the need to protect consumers from a premature end to analog broadcasting.   Congress therefore dictated that 85% of consumers in a market must be able to receive all local broadcasters’ signals before analog broadcasting ends in that market.  The draft legislation would do away with this pro-consumer measure--to the detriment of the viewing public.    

Lastly, this testimony explains the Digital TV Zone program, an initiative undertaken by the broadcast industry to expand consumer understanding of and enthusiasm for the DTV transition.

COSTS OF THE TRANSITION

The transition to digital television is the biggest change in the television broadcast industry since television began.  While such a watershed change will ultimately yield great benefits to the viewing public, the costs of undergoing such a transition are enormous for the television stations involved.  The over-the-air television broadcast industry is literally mortgaging its future to bring digital television to the American consumer. 

Putting a new DTV signal on the air involves large capital investments in new towers or construction on previous towers, new transmission lines, antennae, digital transmitters and encoder, consultants, licensing, construction crews, and other capital expenditures.  Together, these expenditures will amount to between $3 and $10 million per station and are incurred without a guarantee of any additional revenue. Even after a station is on the air in digital, it must absorb the increased energy costs associated with simultaneously transmitting both a digital and analog signal.  During the transition, when transmitting in both formats, stations often spend about $6,300 per month in increased energy costs.[1]   

These costs are felt most acutely by stations in smaller, more rural markets.  Although the FCC’s decision allowing small market stations to begin their digital broadcasts with lower wattage has alleviated some of the dual electrical costs described above, the other transition costs such as tower construction, new antennae and new transmission lines remain relatively constant between large and small markets.  While stations in rural markets must make expenditures like these similar to their urban brethren, their revenue sources are also significantly smaller.   As a result, the transition to digital is proportionally a much larger investment for small market stations.   In fact, for many small market stations, the cost of going digital is often significantly more than the value of the analog station itself.  

STATUS OF THE TRANSITION: REASONS FOR OPTIMISM

Despite the costs television broadcasters must endure to make the digital switch, there are reasons to be cautiously optimistic about the transition.  First, while some stations are struggling to convert (particularly those in smaller markets), a vast majority of U.S. television households are now being served by a digital signal.  Currently, 475 stations in 143 markets are broadcasting digital signals (See Appendix A).  This coverage means that 90% of U.S. television households are in a market served by at least one digital signal.  Moreover, 45% of all U.S. TV households are in markets where broadcasters are delivering four or more DTV signals.

An explosion of digital television programming over the past year has further accelerated the transition.  The upcoming television season will feature more than 2000 hours of on-air digital programming.  (See Appendix B for a complete list of DTV primetime programming currently airing or planned for the Fall season).  This represents a doubling in available digital network programming since September of last year.  

Compelling high-definition content has not been limited to primetime.  CBS Television has announced an expanded partnership with Samsung Electronics America and Sears, Roebuck and Co. that will again allow consumers to enjoy a full season of college sports broadcast in HDTV.  Following the success of the very first full season of college football games broadcast in HDTV in 2001, football broadcasts will expand from 12 to 15 games, and, for the first time, two regular season college basketball games will join the lineup.

Samsung and Sears have also partnered to produce the "HDTV Game Day" promotion in which Sears' full-line stores across the U.S. will show a high level game each week during the regular season on a Samsung HDTV. The in-store broadcasts will be shown in a setting that allows consumers to compare an HD broadcast with that of analog television.

In terms of available hours of digital programming, the DTV transition has far outpaced the most recent comparable transition when the industry moved from black and white to color.  During the first year of color television in the 1950s, only 68 hours were offered to viewers.  As the transition moves forward, we can only expect content providers will produce more and more programming in digital and in HDTV. 

Finally, the August 8th decision by the Federal Communications Commission to begin a phased-in mandate of digital tuners into new television sets will build upon this momentum.  Of the 25 million analog-only television sets sold last year, less than one percent are capable of receiving digital signals.  The Commission’s decision recognizes that every analog-only set that is sold only serves to prolong the transition.   The ruling will help correct this problem and will also spare consumers obsolescence problems when the transition to digital is completed.   As Telecommunications Subcommittee Chairman Upton has observed, the transition is ultimately about the consumer.[2]   As we will outline in further detail below, the Commission’s tuner decision is the most consumer friendly of all the available options.

 REMAINING IMPEDIMENTS TO THE TRANSITION AND RECOMMENDED LEGISLATIVE REMEDIES 

Cable Carriage- the Next Piece of the Puzzle

With cable acting as the gatekeeper to 70% of U.S. television households, clearly cable carriage of digital television signals is the next piece of the DTV puzzle that must fall into place to see the transition completed.    As early as 1999, the Congressional Budget Office recognized that cable carriage of digital signals will be necessary for a timely and successful transition, when it stated, “[t]he availability of digital programming on cable systems is a necessary though not sufficient, condition for a timely transition.”[3]  Regardless of any pledges for future action, today only a handful of cable MSOs carry local stations’ free, over-the-air digital signals.  

Future DTV policy must remedy several cable carriage issues.  First, and foremost, in light of the FCC’s rejection of so-called “dual” carriage (or more accurately “transitional carriage”), Congress must act to ensure that both digital and analog signals receive carriage during the transition.  We believe that transitional carriage of both signals is, in fact, required by the 1992 Cable Act and would pass any constitutional challenge.  Due to the vast expansion of cable capacity, carriage of both analog and digital signals would occupy far less of an average cable system’s capacity than carriage of analog signals alone took up in 1993.  Secondly, as DTV makes it possible for broadcasters to offer consumers a variety of services, carriage obligations must be applied to all free, over-the-air services that broadcasters transmit.  Lastly, it must be ensured that Program and System Information Protocol (PSIP) data is carried in the digital world so that consumers continue to receive channels, ratings, closed-captioning and other critical information.   Cable systems cannot be permitted to disable consumer features that build upon PSIP information.   

Transitional Cable Carriage

To date, the FCC has yet to complete its proceeding on digital must carry.  After several years of inactivity, the FCC issued a partial Report and Order in early 2001, refusing to require dual carriage of a station’s analog and digital signals. With the Commission ruling against so-called “dual-carriage” it will take Congressional action to require carriage of both the DTV and analog signals through to consumers, both to protect analog viewers and broadcasters and to entice viewers to purchase DTV sets and speed the transition along.   The absence of transitional carriage is slowing the pace of the transition and frustrating the return of analog spectrum.   The decision to not only forego transitional carriage in the draft, but moreover, to also prohibit future transitional carriage mandates could slow consumer purchases of DTV receivers, further slow the transition, and reinstate cable’s bottleneck power over their broadcast DTV competitors.  Section 6 of the draft should be rewritten to include a strong transitional carriage rule. 

Adaptation of Carriage Provisions to the Digital World

As digital television evolves, local broadcasters will be better able to serve their communities with a whole range of new free, over-the-air services.   While High Definition TV promises unparalleled viewing and remains central to most broadcasters’ DTV plans, stations might also use their DTV capabilities in other ways such as time-shifting popular programming to a second or third channel, offering community specific local news programming, and issuing regionally specific weather alerts.  Any meaningful DTV policy must recognize the potential value of these new offerings to consumers and extend to them the carriage rights that will ensure they are accessible by consumers.   

The legislative history of the Communications Act shows that Congress intended to see carriage rights adapted for the digital era.  The statutory must-carry provisions, while applicable to digital, were written during the analog era when digital television was largely viewed as the distant future.  The provision itself recognizes this, directing that certain provisions of the carriage rules will need to be adapted for digital television.[4]  In 1996, when crafting the Telecommunications Act, Congress again showed its support for supplemental digital services in granting what was then referred to as “Broadcast Spectrum Flexibility.”[5]  NAB strongly urges Congress and the Committee to take this legislative history into account and to protect the future growth of these exciting new digital services.  The most straightforward way to do this is by codifying previous Congressional intent in any future legislation and ensuring that all free services in broadcasters’ 6 MHz signals are to be carried. 

The cable industry continues to argue for a narrow and rigid interpretation of the terms “primary video” and “program related” in order to permit cable systems to strip parts of local DTV signals.      Such a restrictive paradigm would allow cable to exercise its monopoly-like powers and thereby deprive consumers of new and free DTV services.   The Commission already uses pay versus non-subscription to define ancillary and supplementary services.[6]  Congress should extend this reasonable, “bright line” test to determine carriage obligations. 

The draft has yet to stake out a position on this critical issue.   Including language to ensure carriage of all free, over-the-air DTV services would help achieve Congress’ clear intention of preserving a robust free, over-the-air broadcasting system for both cable and non-cable homes and would also expand the available DTV services for the benefit of all consumers.   

Program and System Information Protocol (PSIP)

Program and System Information Protocol (PSIP) data that is transmitted along with a station's DTV signal, tells DTV receivers important information about the station and what is being broadcast.  In addition to providing consumer friendly channel numbering and navigation information, PSIP technology is the only standard that can provide consumer purchased receivers with program rating information.  Additionally, digital closed captioning is dependent on PSIP to tell the receiver that captioning is present, how the data is to be formatted for display, and to inform the receiver when more than one caption service is present.  There are no other standards or recommended practices that guide receiver selection among captioning services. 

Cable carriage of broadcast PSIP information is critical for receivers to be able to operate PSIP-based services.  The staff discussion draft is silent on this matter.  NAB strongly urges mandating carriage of PSIP data.  

Cable’s Capacity Arguments are Disingenuous

On all of these issues, the cable industry has repeatedly asserted that it is restrained by capacity and, moreover, that burdening cable systems’ capacities calls into question the constitutionality of certain carriage mandates.   In recent years, as cable’s capacity has exploded, arguments regarding capacity have been rendered moot.  Cable’s cry of limited capacity is a classic red herring argument. 

As the responses to the Commission’s survey of MSOs in 2001 showed, 86 percent of cable subscribers will be served by systems with 750 or more MHz capacity by the end of next year.  NAB retained an independent consultant – Merrill Weiss Group (MWG) – to evaluate the data submitted to the FCC by the cable industry.  MWG found that by the end of 2003, the average cable subscriber will have 725.2 MHz of bandwidth delivered (an increase from 622 MHz from year end 1999).  This calculates into a capacity range of 261.8 to 295.7 program services[7] delivered to the average subscriber by the end of 2003.  MWG also concludes that, by year-end 2003, the relative burden of carrying both DTV and analog signals will be less than the initial must carry/retransmission consent burden imposed in 1993.[8] 

This issue of program capacity was acknowledged as early as February 2000 by the General Counsel of AT&T Broadband at a FCC hearing when he professed that “[cable] channel capacity is not only increasing exponentially, but is about to go even beyond that as it [cable] goes digital.”[9]  He went on to say that AT&T’s belief “is that we are going to be crying for content.”[10]

One thing is clear, the cable industry can no longer cry that capacity is a barrier to transitional carriage.  Further, it’s time for a strong must carry rule.  There is minimal digital carriage today, and virtually no agreements for the future.  Smaller stations that need voluntary carriage agreements are the ones in the most need of must carry’s access to the cable audiences to build their DTV futures and preserve our system of free, over-the-air broadcasting. 

Today, a viewer in the Washington, DC market who utilizes over-the-air reception can watch (among others) popular programs like Alias; Push, Nevada; NYPD Blue; The Drew Carey Show; the Practice; Becker; Everybody Loves Raymond; The Agency; Crossing Jordan; and Frasier all in high-definition.  Over-the-air viewers can also receive special events like the U.S. Open (which accounted for more than 40 hours of continuous high-definition programming) and 15 college football games in high-definition.  Clearly, in terms of programming, the DTV transition is on track. Unfortunately, a DTV viewer in this market who relies upon cable would receive absolutely none of this programming.

Cable is the gatekeeper to approximately 70% of all television households.  It is time for the cable industry to stop being the problem and become part of the solution to a successful DTV transition.  Since we know that all cable operators will never carry many, much less all, DTV broadcasters, government intervention through mandated must carry is the only alternative to reach the necessary households to make the transition a success.  

Interoperability and Digital Copy Protection Issues

Despite the best efforts of Chairman Tauzin to resolve interoperability issues and closely related digital-copy protection issues through a series of industry roundtables, questions surrounding interoperability remain largely unanswered today.  There are incomplete, voluntary specifications between consumer electronics and cable industries for DTV/cable interoperability.   

The draft moves decisively to see connectors on all DTV receivers, set-top boxes and other DTV products and “cable-ready” characteristics for direct connection DTV receivers.  

Moreover, the draft would address the closely related goal of protecting content originators’ copyrights by directing the FCC to implement a broadcast-flag standard.  We support efforts to implement the broadcast flag via legislation and FCC regulation.  Full implementation of the broadcast flag will mean that free, over-the-air broadcasts will receive the same level of protection from unauthorized redistribution as cable content and will ensure that consumers continue to receive high quality programming via free, over-the-air broadcasts.  We also support efforts to find a legislative solution to the analog hole, a problem created by the continued presence of analog outputs in digital devices.  Broadcasters also believe that a comprehensive solution to the analog hole must be implemented or else the effectiveness of content protection mechanisms will be compromised. 

In decisively moving to untangle these issues, the draft recognizes that the transition will never gain the needed momentum until consumers can purchase DTV sets from their local retailers, bring them home, plug them into their cable jack, and begin enjoying digital television. 

Codification of the FCC’s Tuner Decision

The FCC’s August decision to begin a phased-in mandate of digital tuners represents the most important action on digital television since adoption of the DTV standard in 1996.  Through this landmark decision, the Commission revived what had otherwise seemed a mired transition.  Chairman Powell and the Commission recognized the Congressional imperative to stimulate the DTV marketplace and deserve enormous credit for taking pro-consumer steps to jump-start the stalled transition.  While the Commission undoubtedly has the statutory authority for the ruling through the All Channel Receiver Act,[11] it is important that Congress signal support for the ruling by codifying the Commission’s decision into statute. 

In its ruling, the FCC prudently decided to phase the mandate in, beginning with larger, more expensive sets, and eventually applying the mandate to smaller sets.  This process will make the mandate affordable to both consumers and manufacturers.   The efficiencies of mass production will further reduce tuner costs.  The economic consulting firm Arthur D. Little, Inc. found that the material cost for integration of a tuner would be reduced from $100 to $9 by 2006, due to the efficiencies of mass production, resulting in a retail price increase of only $16.[12]  Two of the largest TV receiver manufacturers in the U.S., Thomson and Zenith, have seen the wisdom of the FCC’s decision and publicly declared their support for a phased-in universal integration of DTV tuners.[13]

Without the FCC’s tuner ruling, the transition to digital would be horribly slowed.  In 2001, the Consumer Electronics Association estimated that only 12% of the 1.4 million DTV products sold included digital tuners.[14]  These 168,000 fully capable digital television sets would account for only about 0.6% of the 25 million television sets sold annually. 

The Commission’s decision will also ensure greater choice for consumers.  Broadcast digital signals do not have any “snow” or “ghosts,” which will likely make over-the-air reception a more palatable option for many consumers.   The choice to forego cable and enjoy DTV through over-the-air reception must be available to consumers in the digital future. 

NAB commends including codification of the Commission’s tuner decision into statute as a provision in the draft bill.  However, the prescience the draft exhibits in reaffirming the FCC’s tuner decision seems wholly incompatible with the decision to eliminate the 85% threshold—to date the best measurement of consumer acceptance of DTV.    Ultimately, the FCC’s tuner decision recognizes the value of the over-the-air broadcast system and will help to protect it in the digital age.  One of the unique aspects of America’s local broadcast system is that it is free to consumers.  Anyone with a set and an antenna can receive the benefits of local news, weather, and other programming over-the-air.   It seems contradictory that the draft would show such support for the over-the-air system (by codifying the tuner decision) and simultaneously demand an end to over-the-air analog broadcasting, irrespective of the acceptance level of DTV among consumers.      

THE DIGITAL TELEVISION ZONE

Recognizing that consumers are the key participants to the transition, in January of 2001, NAB launched the Digital Television Zone program.  This multimillion dollar marketing and education initiative was designed to expand consumer understanding of and enthusiasm for digital television.   In deference to past Congressional calls for inter-industry cooperation, the program also established a partnership between the Consumer Electronics Association and NAB.  (A booklet explaining all elements of the Zone program is attached as Appendix C). (Adobe PDF--10,545 Kb)

The project initially targeted three pilot markets (or “Digital TV Zones”).  The first three Zones- Houston, Texas; Indianapolis, Indiana; and Portland, Oregon- are diverse regions where all local network-affiliated stations have made the transition to digital.  Additionally, these three markets exhibited strong retail commitment to selling DTV sets.   

Following the national campaign launch in Las Vegas, NAB and CEA announced the details of the Digital TV Zone program during media events in the three Digital TV Zone cities.  Held at local landmarks in each Zone city, the events featured Mayor Bart Peterson in Indianapolis, Mayor Lee Brown in Houston and Mayor Vera Katz in Portland, each issuing a formal proclamation of support for the Digital TV Zone initiative and recognizing the value of DTV.

To meet the campaign’s objective of introducing consumers to the viewing experience of DTV, NAB and CEA, together with local manufacturers, installed Digital Landmarks in high profile, high traffic areas in each Zone city.  Digital Landmarks featured state-of-the-art HDTV sets, with accompanying signage recognizing the city as a Digital Zone.

Houston Landmarks included the Houston Livestock Show and Rodeo; Space Center Houston; Compaq Center; and Houston Visitors Center.  Indianapolis Landmarks included VisitIndy.Info-City Center; NCAA Hall of Champions; City County Building; Conseco Fieldhouse; and Indianapolis International Airport.  Portland landmarks included Rose Garden Arena; Oregon history Center; and Portland City Hall. 

As the benefits of DTV are best understood when experienced, NAB and CEA sponsored a “Digital TV Family” search contest in each of the three Zone cities.  Families applied for the opportunity by completing a questionnaire and submitting a short essay response on the program’s website, www.digitaltvzone.com.  HDTV sets were installed in the living rooms of the three wining families to use for one month.  After that period, the families documented their experience and endorsed digital television.  These testimonials were then shared with the media to further educate each community about DTV.   Each Zone also benefited from “Watch Parties” where local opinion leaders were invited to experience special HDTV programming events.

In addition to these earned media efforts, NAB commissioned the development of a television advertisement titled “Time Marches On.”  The thirty -second ad highlights the major advantages of DTV and shows that the transition is occurring now.  The ad takes an historical look back at the first broadcast of a TV signal, the innovation of color, and finally the major break through of digital television. 

“Time Marches On” was aired by the local TV stations in all three Zones reaching approximately 1,000 Group Rating Points per market.  Several retailers in local Zones also purchased additional advertising time to further spread the campaign’s message. 

Prior to initiating the Zone project, NAB commissioned the research firm StrategyOne to measure the impact of the campaign among our targeted audiences.  StrategyOne conducted a two-tiered study: a pre-campaign “benchmark” survey of 200 respondents aged 25 and older in two of the Zone markets (Indianapolis and Houston) and a post-campaign “monitor” survey of 200 respondents in the same two markets and also in Portland.  The survey demonstrates quantifiable success in improving consumers’ familiarity with digital television.  The survey reported double-digit increases in the perceived advantages of DTV.

Moving the Zone Program Forward

This morning, NAB will launch our fourth, and perhaps most important local Zone in Washington, DC.  Mayor Anthony Williams will attend the media event, pronouncing the city’s support for DTV.   Tomorrow, NAB will host a “Watch Party” at the newly opened Spy Museum where local opinion leaders have been invited to see the advantages of High-Definition television.  All other elements of the Zone program, which have proven successful in the pilot markets, will also be implemented in Washington.

Equally important, elements of the program are being used nationally.   25 stations nationwide (who were not in the original Zones) have requested copies of the “Time Marches On” advertisement for their own airing.  Stations also regularly contact NAB staff for logistical advice on how to organize Watch Parties, press conferences, and other media events that will build even greater consumer enthusiasm for this exciting technology revolution.   

CONCLUSION

While the transition to digital television faces obstacles, broadcasters remain deeply committed to seeing the promises of the transition fulfilled.  The large percentage of TV households who are served by a digital signal coupled with the rapid expansion of available DTV programming and the FCC’s recent tuner decision have collectively provided needed momentum for the transition.  NAB is building upon this momentum through a multimillion dollar marketing and education campaign that is enhancing consumer understanding of and enthusiasm for DTV.  To capitalize on this inertia, Congress should act to ensure cable carriage of DTV signals, promulgate universal interoperability standards and codify the Commission’s tuner decision.  

NAB has consistently advocated for legislation that will move the transition forward.  As such, we are encouraged by these very first nascent steps.  We look forward to working closely with the Committee on creating pro-consumer legislation that propels the DTV transition forward and preserves the system of free, over-the-air broadcasting in the digital millennium.         

INTRODUCTION

This written testimony presents the positions of the National Association of Broadcasters on the digital television (DTV) transition.  The testimony explains the costs stations incur to convert to digital and outlines the current status of the DTV rollout in the United States.

The testimony also describes existing impediments to the transition and enumerates the legislative remedies necessary to overcome these remaining hurdles in the context of the recently circulated staff discussion draft.  While the draft would tackle several key obstacles to the transition, it also falls perilously short in a number of areas.  Even more concerning, the draft would force cessation of analog broadcasts by 2006.  In 1997, then Subcommittee Chairman Tauzin and the full Committee prudently recognized the need to protect consumers from a premature end to analog broadcasting.   Congress therefore dictated that 85% of consumers in a market must be able to receive all local broadcasters’ signals before analog broadcasting ends in that market.  The draft legislation would do away with this pro-consumer measure--to the detriment of the viewing public.    

Lastly, this testimony explains the Digital TV Zone program, an initiative undertaken by the broadcast industry to expand consumer understanding of and enthusiasm for the DTV transition.

COSTS OF THE TRANSITION

The transition to digital television is the biggest change in the television broadcast industry since television began.  While such a watershed change will ultimately yield great benefits to the viewing public, the costs of undergoing such a transition are enormous for the television stations involved.  The over-the-air television broadcast industry is literally mortgaging its future to bring digital television to the American consumer. 

Putting a new DTV signal on the air involves large capital investments in new towers or construction on previous towers, new transmission lines, antennae, digital transmitters and encoder, consultants, licensing, construction crews, and other capital expenditures.  Together, these expenditures will amount to between $3 and $10 million per station and are incurred without a guarantee of any additional revenue. Even after a station is on the air in digital, it must absorb the increased energy costs associated with simultaneously transmitting both a digital and analog signal.  During the transition, when transmitting in both formats, stations often spend about $6,300 per month in increased energy costs.[1]   

These costs are felt most acutely by stations in smaller, more rural markets.  Although the FCC’s decision allowing small market stations to begin their digital broadcasts with lower wattage has alleviated some of the dual electrical costs described above, the other transition costs such as tower construction, new antennae and new transmission lines remain relatively constant between large and small markets.  While stations in rural markets must make expenditures like these similar to their urban brethren, their revenue sources are also significantly smaller.   As a result, the transition to digital is proportionally a much larger investment for small market stations.   In fact, for many small market stations, the cost of going digital is often significantly more than the value of the analog station itself.  

STATUS OF THE TRANSITION: REASONS FOR OPTIMISM

Despite the costs television broadcasters must endure to make the digital switch, there are reasons to be cautiously optimistic about the transition.  First, while some stations are struggling to convert (particularly those in smaller markets), a vast majority of U.S. television households are now being served by a digital signal.  Currently, 475 stations in 143 markets are broadcasting digital signals (See Appendix A).  This coverage means that 90% of U.S. television households are in a market served by at least one digital signal.  Moreover, 45% of all U.S. TV households are in markets where broadcasters are delivering four or more DTV signals.

An explosion of digital television programming over the past year has further accelerated the transition.  The upcoming television season will feature more than 2000 hours of on-air digital programming.  (See Appendix B for a complete list of DTV primetime programming currently airing or planned for the Fall season).  This represents a doubling in available digital network programming since September of last year.  

Compelling high-definition content has not been limited to primetime.  CBS Television has announced an expanded partnership with Samsung Electronics America and Sears, Roebuck and Co. that will again allow consumers to enjoy a full season of college sports broadcast in HDTV.  Following the success of the very first full season of college football games broadcast in HDTV in 2001, football broadcasts will expand from 12 to 15 games, and, for the first time, two regular season college basketball games will join the lineup.

Samsung and Sears have also partnered to produce the "HDTV Game Day" promotion in which Sears' full-line stores across the U.S. will show a high level game each week during the regular season on a Samsung HDTV. The in-store broadcasts will be shown in a setting that allows consumers to compare an HD broadcast with that of analog television.

In terms of available hours of digital programming, the DTV transition has far outpaced the most recent comparable transition when the industry moved from black and white to color.  During the first year of color television in the 1950s, only 68 hours were offered to viewers.  As the transition moves forward, we can only expect content providers will produce more and more programming in digital and in HDTV. 

Finally, the August 8th decision by the Federal Communications Commission to begin a phased-in mandate of digital tuners into new television sets will build upon this momentum.  Of the 25 million analog-only television sets sold last year, less than one percent are capable of receiving digital signals.  The Commission’s decision recognizes that every analog-only set that is sold only serves to prolong the transition.   The ruling will help correct this problem and will also spare consumers obsolescence problems when the transition to digital is completed.   As Telecommunications Subcommittee Chairman Upton has observed, the transition is ultimately about the consumer.[2]   As we will outline in further detail below, the Commission’s tuner decision is the most consumer friendly of all the available options.

 REMAINING IMPEDIMENTS TO THE TRANSITION AND RECOMMENDED LEGISLATIVE REMEDIES 

Cable Carriage- the Next Piece of the Puzzle

With cable acting as the gatekeeper to 70% of U.S. television households, clearly cable carriage of digital television signals is the next piece of the DTV puzzle that must fall into place to see the transition completed.    As early as 1999, the Congressional Budget Office recognized that cable carriage of digital signals will be necessary for a timely and successful transition, when it stated, “[t]he availability of digital programming on cable systems is a necessary though not sufficient, condition for a timely transition.”[3]  Regardless of any pledges for future action, today only a handful of cable MSOs carry local stations’ free, over-the-air digital signals.  

Future DTV policy must remedy several cable carriage issues.  First, and foremost, in light of the FCC’s rejection of so-called “dual” carriage (or more accurately “transitional carriage”), Congress must act to ensure that both digital and analog signals receive carriage during the transition.  We believe that transitional carriage of both signals is, in fact, required by the 1992 Cable Act and would pass any constitutional challenge.  Due to the vast expansion of cable capacity, carriage of both analog and digital signals would occupy far less of an average cable system’s capacity than carriage of analog signals alone took up in 1993.  Secondly, as DTV makes it possible for broadcasters to offer consumers a variety of services, carriage obligations must be applied to all free, over-the-air services that broadcasters transmit.  Lastly, it must be ensured that Program and System Information Protocol (PSIP) data is carried in the digital world so that consumers continue to receive channels, ratings, closed-captioning and other critical information.   Cable systems cannot be permitted to disable consumer features that build upon PSIP information.   

Transitional Cable Carriage

To date, the FCC has yet to complete its proceeding on digital must carry.  After several years of inactivity, the FCC issued a partial Report and Order in early 2001, refusing to require dual carriage of a station’s analog and digital signals. With the Commission ruling against so-called “dual-carriage” it will take Congressional action to require carriage of both the DTV and analog signals through to consumers, both to protect analog viewers and broadcasters and to entice viewers to purchase DTV sets and speed the transition along.   The absence of transitional carriage is slowing the pace of the transition and frustrating the return of analog spectrum.   The decision to not only forego transitional carriage in the draft, but moreover, to also prohibit future transitional carriage mandates could slow consumer purchases of DTV receivers, further slow the transition, and reinstate cable’s bottleneck power over their broadcast DTV competitors.  Section 6 of the draft should be rewritten to include a strong transitional carriage rule. 

Adaptation of Carriage Provisions to the Digital World

As digital television evolves, local broadcasters will be better able to serve their communities with a whole range of new free, over-the-air services.   While High Definition TV promises unparalleled viewing and remains central to most broadcasters’ DTV plans, stations might also use their DTV capabilities in other ways such as time-shifting popular programming to a second or third channel, offering community specific local news programming, and issuing regionally specific weather alerts.  Any meaningful DTV policy must recognize the potential value of these new offerings to consumers and extend to them the carriage rights that will ensure they are accessible by consumers.   

The legislative history of the Communications Act shows that Congress intended to see carriage rights adapted for the digital era.  The statutory must-carry provisions, while applicable to digital, were written during the analog era when digital television was largely viewed as the distant future.  The provision itself recognizes this, directing that certain provisions of the carriage rules will need to be adapted for digital television.[4]  In 1996, when crafting the Telecommunications Act, Congress again showed its support for supplemental digital services in granting what was then referred to as “Broadcast Spectrum Flexibility.”[5]  NAB strongly urges Congress and the Committee to take this legislative history into account and to protect the future growth of these exciting new digital services.  The most straightforward way to do this is by codifying previous Congressional intent in any future legislation and ensuring that all free services in broadcasters’ 6 MHz signals are to be carried. 

The cable industry continues to argue for a narrow and rigid interpretation of the terms “primary video” and “program related” in order to permit cable systems to strip parts of local DTV signals.      Such a restrictive paradigm would allow cable to exercise its monopoly-like powers and thereby deprive consumers of new and free DTV services.   The Commission already uses pay versus non-subscription to define ancillary and supplementary services.[6]  Congress should extend this reasonable, “bright line” test to determine carriage obligations. 

The draft has yet to stake out a position on this critical issue.   Including language to ensure carriage of all free, over-the-air DTV services would help achieve Congress’ clear intention of preserving a robust free, over-the-air broadcasting system for both cable and non-cable homes and would also expand the available DTV services for the benefit of all consumers.   

Program and System Information Protocol (PSIP)

Program and System Information Protocol (PSIP) data that is transmitted along with a station's DTV signal, tells DTV receivers important information about the station and what is being broadcast.  In addition to providing consumer friendly channel numbering and navigation information, PSIP technology is the only standard that can provide consumer purchased receivers with program rating information.  Additionally, digital closed captioning is dependent on PSIP to tell the receiver that captioning is present, how the data is to be formatted for display, and to inform the receiver when more than one caption service is present.  There are no other standards or recommended practices that guide receiver selection among captioning services. 

Cable carriage of broadcast PSIP information is critical for receivers to be able to operate PSIP-based services.  The staff discussion draft is silent on this matter.  NAB strongly urges mandating carriage of PSIP data.  

Cable’s Capacity Arguments are Disingenuous

On all of these issues, the cable industry has repeatedly asserted that it is restrained by capacity and, moreover, that burdening cable systems’ capacities calls into question the constitutionality of certain carriage mandates.   In recent years, as cable’s capacity has exploded, arguments regarding capacity have been rendered moot.  Cable’s cry of limited capacity is a classic red herring argument. 

As the responses to the Commission’s survey of MSOs in 2001 showed, 86 percent of cable subscribers will be served by systems with 750 or more MHz capacity by the end of next year.  NAB retained an independent consultant – Merrill Weiss Group (MWG) – to evaluate the data submitted to the FCC by the cable industry.  MWG found that by the end of 2003, the average cable subscriber will have 725.2 MHz of bandwidth delivered (an increase from 622 MHz from year end 1999).  This calculates into a capacity range of 261.8 to 295.7 program services[7] delivered to the average subscriber by the end of 2003.  MWG also concludes that, by year-end 2003, the relative burden of carrying both DTV and analog signals will be less than the initial must carry/retransmission consent burden imposed in 1993.[8] 

This issue of program capacity was acknowledged as early as February 2000 by the General Counsel of AT&T Broadband at a FCC hearing when he professed that “[cable] channel capacity is not only increasing exponentially, but is about to go even beyond that as it [cable] goes digital.”[9]  He went on to say that AT&T’s belief “is that we are going to be crying for content.”[10]

One thing is clear, the cable industry can no longer cry that capacity is a barrier to transitional carriage.  Further, it’s time for a strong must carry rule.  There is minimal digital carriage today, and virtually no agreements for the future.  Smaller stations that need voluntary carriage agreements are the ones in the most need of must carry’s access to the cable audiences to build their DTV futures and preserve our system of free, over-the-air broadcasting. 

Today, a viewer in the Washington, DC market who utilizes over-the-air reception can watch (among others) popular programs like Alias; Push, Nevada; NYPD Blue; The Drew Carey Show; the Practice; Becker; Everybody Loves Raymond; The Agency; Crossing Jordan; and Frasier all in high-definition.  Over-the-air viewers can also receive special events like the U.S. Open (which accounted for more than 40 hours of continuous high-definition programming) and 15 college football games in high-definition.  Clearly, in terms of programming, the DTV transition is on track. Unfortunately, a DTV viewer in this market who relies upon cable would receive absolutely none of this programming.

Cable is the gatekeeper to approximately 70% of all television households.  It is time for the cable industry to stop being the problem and become part of the solution to a successful DTV transition.  Since we know that all cable operators will never carry many, much less all, DTV broadcasters, government intervention through mandated must carry is the only alternative to reach the necessary households to make the transition a success.  

Interoperability and Digital Copy Protection Issues

Despite the best efforts of Chairman Tauzin to resolve interoperability issues and closely related digital-copy protection issues through a series of industry roundtables, questions surrounding interoperability remain largely unanswered today.  There are incomplete, voluntary specifications between consumer electronics and cable industries for DTV/cable interoperability.   

The draft moves decisively to see connectors on all DTV receivers, set-top boxes and other DTV products and “cable-ready” characteristics for direct connection DTV receivers.  

Moreover, the draft would address the closely related goal of protecting content originators’ copyrights by directing the FCC to implement a broadcast-flag standard.  We support efforts to implement the broadcast flag via legislation and FCC regulation.  Full implementation of the broadcast flag will mean that free, over-the-air broadcasts will receive the same level of protection from unauthorized redistribution as cable content and will ensure that consumers continue to receive high quality programming via free, over-the-air broadcasts.  We also support efforts to find a legislative solution to the analog hole, a problem created by the continued presence of analog outputs in digital devices.  Broadcasters also believe that a comprehensive solution to the analog hole must be implemented or else the effectiveness of content protection mechanisms will be compromised. 

In decisively moving to untangle these issues, the draft recognizes that the transition will never gain the needed momentum until consumers can purchase DTV sets from their local retailers, bring them home, plug them into their cable jack, and begin enjoying digital television. 

Codification of the FCC’s Tuner Decision

The FCC’s August decision to begin a phased-in mandate of digital tuners represents the most important action on digital television since adoption of the DTV standard in 1996.  Through this landmark decision, the Commission revived what had otherwise seemed a mired transition.  Chairman Powell and the Commission recognized the Congressional imperative to stimulate the DTV marketplace and deserve enormous credit for taking pro-consumer steps to jump-start the stalled transition.  While the Commission undoubtedly has the statutory authority for the ruling through the All Channel Receiver Act,[11] it is important that Congress signal support for the ruling by codifying the Commission’s decision into statute. 

In its ruling, the FCC prudently decided to phase the mandate in, beginning with larger, more expensive sets, and eventually applying the mandate to smaller sets.  This process will make the mandate affordable to both consumers and manufacturers.   The efficiencies of mass production will further reduce tuner costs.  The economic consulting firm Arthur D. Little, Inc. found that the material cost for integration of a tuner would be reduced from $100 to $9 by 2006, due to the efficiencies of mass production, resulting in a retail price increase of only $16.[12]  Two of the largest TV receiver manufacturers in the U.S., Thomson and Zenith, have seen the wisdom of the FCC’s decision and publicly declared their support for a phased-in universal integration of DTV tuners.[13]

Without the FCC’s tuner ruling, the transition to digital would be horribly slowed.  In 2001, the Consumer Electronics Association estimated that only 12% of the 1.4 million DTV products sold included digital tuners.[14]  These 168,000 fully capable digital television sets would account for only about 0.6% of the 25 million television sets sold annually. 

The Commission’s decision will also ensure greater choice for consumers.  Broadcast digital signals do not have any “snow” or “ghosts,” which will likely make over-the-air reception a more palatable option for many consumers.   The choice to forego cable and enjoy DTV through over-the-air reception must be available to consumers in the digital future. 

NAB commends including codification of the Commission’s tuner decision into statute as a provision in the draft bill.  However, the prescience the draft exhibits in reaffirming the FCC’s tuner decision seems wholly incompatible with the decision to eliminate the 85% threshold—to date the best measurement of consumer acceptance of DTV.    Ultimately, the FCC’s tuner decision recognizes the value of the over-the-air broadcast system and will help to protect it in the digital age.  One of the unique aspects of America’s local broadcast system is that it is free to consumers.  Anyone with a set and an antenna can receive the benefits of local news, weather, and other programming over-the-air.   It seems contradictory that the draft would show such support for the over-the-air system (by codifying the tuner decision) and simultaneously demand an end to over-the-air analog broadcasting, irrespective of the acceptance level of DTV among consumers.      

THE DIGITAL TELEVISION ZONE

Recognizing that consumers are the key participants to the transition, in January of 2001, NAB launched the Digital Television Zone program.  This multimillion dollar marketing and education initiative was designed to expand consumer understanding of and enthusiasm for digital television.   In deference to past Congressional calls for inter-industry cooperation, the program also established a partnership between the Consumer Electronics Association and NAB.  (A booklet explaining all elements of the Zone program is attached as Appendix C). (Adobe PDF--10,545 Kb)

The project initially targeted three pilot markets (or “Digital TV Zones”).  The first three Zones- Houston, Texas; Indianapolis, Indiana; and Portland, Oregon- are diverse regions where all local network-affiliated stations have made the transition to digital.  Additionally, these three markets exhibited strong retail commitment to selling DTV sets.   

Following the national campaign launch in Las Vegas, NAB and CEA announced the details of the Digital TV Zone program during media events in the three Digital TV Zone cities.  Held at local landmarks in each Zone city, the events featured Mayor Bart Peterson in Indianapolis, Mayor Lee Brown in Houston and Mayor Vera Katz in Portland, each issuing a formal proclamation of support for the Digital TV Zone initiative and recognizing the value of DTV.

To meet the campaign’s objective of introducing consumers to the viewing experience of DTV, NAB and CEA, together with local manufacturers, installed Digital Landmarks in high profile, high traffic areas in each Zone city.  Digital Landmarks featured state-of-the-art HDTV sets, with accompanying signage recognizing the city as a Digital Zone.

Houston Landmarks included the Houston Livestock Show and Rodeo; Space Center Houston; Compaq Center; and Houston Visitors Center.  Indianapolis Landmarks included VisitIndy.Info-City Center; NCAA Hall of Champions; City County Building; Conseco Fieldhouse; and Indianapolis International Airport.  Portland landmarks included Rose Garden Arena; Oregon history Center; and Portland City Hall. 

As the benefits of DTV are best understood when experienced, NAB and CEA sponsored a “Digital TV Family” search contest in each of the three Zone cities.  Families applied for the opportunity by completing a questionnaire and submitting a short essay response on the program’s website, www.digitaltvzone.com.  HDTV sets were installed in the living rooms of the three wining families to use for one month.  After that period, the families documented their experience and endorsed digital television.  These testimonials were then shared with the media to further educate each community about DTV.   Each Zone also benefited from “Watch Parties” where local opinion leaders were invited to experience special HDTV programming events.

In addition to these earned media efforts, NAB commissioned the development of a television advertisement titled “Time Marches On.”  The thirty -second ad highlights the major advantages of DTV and shows that the transition is occurring now.  The ad takes an historical look back at the first broadcast of a TV signal, the innovation of color, and finally the major break through of digital television. 

“Time Marches On” was aired by the local TV stations in all three Zones reaching approximately 1,000 Group Rating Points per market.  Several retailers in local Zones also purchased additional advertising time to further spread the campaign’s message. 

Prior to initiating the Zone project, NAB commissioned the research firm StrategyOne to measure the impact of the campaign among our targeted audiences.  StrategyOne conducted a two-tiered study: a pre-campaign “benchmark” survey of 200 respondents aged 25 and older in two of the Zone markets (Indianapolis and Houston) and a post-campaign “monitor” survey of 200 respondents in the same two markets and also in Portland.  The survey demonstrates quantifiable success in improving consumers’ familiarity with digital television.  The survey reported double-digit increases in the perceived advantages of DTV.

Moving the Zone Program Forward

This morning, NAB will launch our fourth, and perhaps most important local Zone in Washington, DC.  Mayor Anthony Williams will attend the media event, pronouncing the city’s support for DTV.   Tomorrow, NAB will host a “Watch Party” at the newly opened Spy Museum where local opinion leaders have been invited to see the advantages of High-Definition television.  All other elements of the Zone program, which have proven successful in the pilot markets, will also be implemented in Washington.

Equally important, elements of the program are being used nationally.   25 stations nationwide (who were not in the original Zones) have requested copies of the “Time Marches On” advertisement for their own airing.  Stations also regularly contact NAB staff for logistical advice on how to organize Watch Parties, press conferences, and other media events that will build even greater consumer enthusiasm for this exciting technology revolution.   

CONCLUSION

While the transition to digital television faces obstacles, broadcasters remain deeply committed to seeing the promises of the transition fulfilled.  The large percentage of TV households who are served by a digital signal coupled with the rapid expansion of available DTV programming and the FCC’s recent tuner decision have collectively provided needed momentum for the transition.  NAB is building upon this momentum through a multimillion dollar marketing and education campaign that is enhancing consumer understanding of and enthusiasm for DTV.  To capitalize on this inertia, Congress should act to ensure cable carriage of DTV signals, promulgate universal interoperability standards and codify the Commission’s tuner decision.  

NAB has consistently advocated for legislation that will move the transition forward.  As such, we are encouraged by these very first nascent steps.  We look forward to working closely with the Committee on creating pro-consumer legislation that propels the DTV transition forward and preserves the system of free, over-the-air broadcasting in the digital millennium.