[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

                               __________

                   U.S. GOVERNMENT PRINTING OFFICE
71-486                     WASHINGTON : 2001

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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

                              ----------                              


                        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.
---------------------------------------------------------------------------
    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.
---------------------------------------------------------------------------
    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.
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    \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
---------------------------------------------------------------------------
    \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).
---------------------------------------------------------------------------
    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.
---------------------------------------------------------------------------

                               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.
---------------------------------------------------------------------------
    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
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
                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.
---------------------------------------------------------------------------
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
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    \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
---------------------------------------------------------------------------
    \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.]
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