- THE DIGITAL TELEVISION TRANSITION

[Senate Hearing 109-1121]
[From the U.S. Government Publishing Office]

S. Hrg. 109-1121

THE DIGITAL TELEVISION TRANSITION

=======================================================================

HEARING

before the

COMMITTEE ON COMMERCE,
SCIENCE, AND TRANSPORTATION
UNITED STATES SENATE

ONE HUNDRED NINTH CONGRESS

FIRST SESSION

__________

JULY 12, 2005

__________

Printed for the use of the Committee on Commerce, Science, and
Transportation

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SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION

ONE HUNDRED NINTH CONGRESS

FIRST SESSION

TED STEVENS, Alaska, Chairman
JOHN McCAIN, Arizona DANIEL K. INOUYE, Hawaii, Co-
CONRAD BURNS, Montana Chairman
TRENT LOTT, Mississippi JOHN D. ROCKEFELLER IV, West
KAY BAILEY HUTCHISON, Texas Virginia
OLYMPIA J. SNOWE, Maine JOHN F. KERRY, Massachusetts
GORDON H. SMITH, Oregon BYRON L. DORGAN, North Dakota
JOHN ENSIGN, Nevada BARBARA BOXER, California
GEORGE ALLEN, Virginia BILL NELSON, Florida
JOHN E. SUNUNU, New Hampshire MARIA CANTWELL, Washington
JIM DeMINT, South Carolina FRANK R. LAUTENBERG, New Jersey
DAVID VITTER, Louisiana E. BENJAMIN NELSON, Nebraska
MARK PRYOR, Arkansas
Lisa J. Sutherland, Republican Staff Director
Christine Drager Kurth, Republican Deputy Staff Director
David Russell, Republican Chief Counsel
Margaret L. Cummisky, Democratic Staff Director and Chief Counsel
Samuel E. Whitehorn, Democratic Deputy Staff Director and General
Counsel
Lila Harper Helms, Democratic Policy Director

C O N T E N T S

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Page
Hearing held on July 12, 2005.................................... 1
Statement of Senator Allen....................................... 58
Statement of Senator Burns....................................... 3
Statement of Senator DeMint...................................... 5
Prepared statement 6
Statement of Senator Ensign...................................... 63
Statement of Senator Inouye...................................... 4
Prepared statement........................................... 4
Statement of Senator Lautenberg.................................. 5
Statement of Senator McCain...................................... 1
Statement of Senator Rockefeller................................. 60
Prepared statement........................................... 61
Statement of Senator Snowe....................................... 65
Statement of Senator Stevens..................................... 1
Statement of Senator Sununu...................................... 6
Statement of Senator Vitter...................................... 67

Witnesses

Abud, Manuel, Vice President/General Manager, KVEA-TV, Los
Angeles, CA; on behalf of Telemundo............................ 16
Prepared statement........................................... 17
Fritts, Edward O., President/CEO, National Association of
Broadcasters (NAB)............................................. 8
Prepared statement........................................... 9
Knorr, Patrick, General Manager, Sunflower Broadband; Vice
Chairman, American Cable Association (ACA)..................... 29
Prepared statement........................................... 31
Lawson, Hon. John, President/CEO, Association of Public
Television Stations (APTS)..................................... 46
Prepared statement........................................... 47
McSlarrow, Kyle, President/CEO, National Cable &
Telecommunications Association (NCTA).......................... 20
Prepared statement........................................... 22
Slenker, Richard, Executive Vice President, Technology and
Engineering Operations, DIRECTV, Inc........................... 40
Prepared statement........................................... 42

C O N T E N T S
The Digital Television Transition--Afternoon Session

----------
Hearing held on July 12, 2005.................................... 73
Statement of Senator Burns....................................... 120
Statement of Senator DeMint...................................... 126
Statement of Senator Ensign...................................... 124
Statement of Senator Inouye...................................... 118
Statement of Senator McCain...................................... 129
Statement of Senator Rockefeller................................. 126
Statement of Senator Stevens..................................... 73

Witnesses

Calabrese, Michael, Vice President/Director, Wireless Future
Program, New America Foundation................................ 107
Prepared statement........................................... 109
Kennedy, Michael D., Senior Vice President, Americas Country
Management; Director, Global Government Relations, Motorola.... 74
Prepared statement........................................... 75
Kimmelman, Gene, Senior Director of Public Policy and Advocacy,
Consumers Union; on behalf of Consumers Union and Consumer
Federation of America.......................................... 91
Prepared statement........................................... 93
McEwen, Harlin R., Chairman, Communications & Technology
Committee, International Association of Chiefs of Police
(IACP); Communications Advisor, Major Cities Chiefs Association
(MCC), National Sheriffs' Association (NSA), Major County
Sheriffs' Association (MCSA)................................... 81
Prepared statement........................................... 83
Shapiro, Gary J., President/CEO, Consumer Electronics Association
(CEA).......................................................... 99
Prepared statement........................................... 101
Townsend, Charles C., President/CEO, Aloha Partners, LP.......... 85
Prepared statement........................................... 86

Appendix

Consumer Electronics Retailers Coalition (CERC), prepared
statement...................................................... 148
Rose, Jerry K., President, Religious Voice in Broadcasting,
prepared statement............................................. 139

THE DIGITAL TELEVISION TRANSITION

----------

TUESDAY, JULY 12, 2005

U.S. Senate,
Committee on Commerce, Science, and Transportation,
Washington, DC.
The Committee met, pursuant to notice, at 10 a.m. in room
SR-253, Russell Senate Office Building, Hon. Ted Stevens,
Chairman of the Committee, presiding.

OPENING STATEMENT OF HON. TED STEVENS,
U.S. SENATOR FROM ALASKA

The Chairman. Good morning. Thank you all for coming.
This hearing is going to examine issues relating to setting
a hard date to complete the DTV transition. We believe a hard
date is necessary. The issue has been in the works since 1996.
Public safety needs spectrum for interoperability for new
services. Consumers need to get better video and audio services
and more over-the-air programming. And consumers will also get
a new series of services recovered from the 700 megahertz
spectrum that will be--such as wireless broadband.
It's the feeling of this committee that we must balance
broadcast cable and satellite interests with regard to digital
and analog carriage after the analog broadcasts cease.
Broadcasters want to ensure that all of their signals are seen
by as many viewers as possible. Cable wants time to proceed
with their own digital transition, and doesn't want to have to
immediately deploy cable converter boxes to all of the analog
subscribers. And satellite is worried about spectrum concerns
related to high definition that could force them to
significantly reduce the number of local-to-local markets that
they can serve due to capacity restraints.
So, we look forward to receiving your testimony. And
there's going to be some coming and going here today, I'm sure.
Senator McCain, do you want to go first, please?

STATEMENT OF HON. JOHN McCAIN,
U.S. SENATOR FROM ARIZONA

Senator McCain. Thank you, Mr. Chairman. And thank you for
holding this hearing.
I believe that retrieving the analog spectrum and
completing the digital television transition is the most
critical communications issue facing the 109th Congress.
For over 20 years, regulators in Washington have been
debating the transition to digital television. It was during
the 1980s that broadcasters first brought forth policy
proposals on high-definition television. Some believe that
broadcasters sought the transition, not to provide clearer
pictures and better sound to their viewers, but, rather, to
prevent competition from the new broadcast stations and
wireless carriers that the FCC had considered licensing on
unused channels.
According to one observer, Tom Hazlett, the history of DTV
reads like a Russian novel. It was born not in the laboratory,
but on K Street, an attempt by broadcasting lobbyists to block
land-mobile services from gaining access to UHF spectrum,
despite pressing demands for more wireless telephone
competition. In an aggressive lobbying campaign, Congress was
to give broadcasters new spectrum for digital broadcasting for
free. I have often referred to this as the Great $70 Billion
Giveaway. And according to the Telecommunications Act of 1996,
this great taxpayer rip-off was to occur by December 31, 2006;
thereby, allowing the broadcasters over 10 years to prepare
viewers and stations for this new age of television. However,
shortly thereafter, broadcasters changed their mind and
persuaded Congress, in 1997, the Balanced Budget Act, to
provide an exception to the December 31, 2006, date by
requiring communities to meet an 85 percent penetration test
before analog broadcasting could end.
Last year, at a Commerce Committee hearing, then-FCC
Chairman Michael Powell testified that this 85 percent
penetration test could result in the DTV transition being put
off for decades, or multiple decades.
I remind my colleagues that it took color television 20
years to hit 85 percent penetration, and VCRs 16 years to reach
that penetration. The problem is, we don't have another 20
years to wait. The spectrum controlled by television
broadcasters is essential to providing our police, fire, and
other emergency-response personnel the necessary tools to
communicate with each other in the event of another--national
emergency.
The use of this spectrum for public safety communications
was one of the key recommendations of the 9/11 Commission,
still attempting to be blocked by the National Association of
Broadcasters. The bombings last week in London reinforced the
immediate need for the spectrum. CNN reported that members of
Scotland Yard were unable to communicate during their response
to the bombings, because they lacked sufficient spectrum.
Scotland Yard had to borrow spectrum from a wireless carrier,
Vodafone; thereby, preventing millions of callers from reaching
loved ones on their cell phones to share news of their safety.
We can act now to prevent a similar problem in the United
States. Our Nation can't wait any longer. Last month, I
introduced S. 1268, the Spectrum Availability for Emergency
Response and Law Enforcement to Improve Vital Emergency
Services Act, which would provide our Nation's first responders
with additional spectrum by January 1, 2009. I wish the date
could have been sooner, but, after talking to public safety
organizations and broadcasters, I thought, and decided, that
December 31, 2008, presents the most reasonable deadline. I
introduced this bill, Mr. Chairman, because I promised police,
firefighters, and other emergency-response personnel I would
continue the fight on their behalf.
I'm proud that Chairman Stevens has announced his intention
to provide the spectrum to public safety organizations by
January 1, 2009. I hope that others will join in ensuring that
public safety personnel have the communications tool necessary
to protect our Nation.
Mr. Chairman, I don't have to repeat again the benefits of
completing this transition. They're not only are related to our
Nation's public safety; the liberation of spectrum will unleash
a multitude of new commercial wireless services, and new
opportunities for more broadband deployment and competition.
Freeing the spectrum would allow us to rely more heavily on the
market, rather than government, to regulate telecommunications.
Mr. Chairman, I hope that we can act, and act quickly, on
this issue. If there is another national emergency, the first
responders are unable to communicate with each other. I think
one of the most disgraceful chapters in the history of this
committee, and Congressional oversight, is the way that the
National Association of Broadcasters has continued to block
this transition, and free up this transition. If there's a
national emergency before our first responders get this
spectrum, they bear a heavy burden.
Mr. Chairman, I thank you.
The Chairman. Senator Burns?

STATEMENT OF HON. CONRAD BURNS,
U.S. SENATOR FROM MONTANA

Senator Burns. I want to reiterate and build off of what
Senator McCain has said. I think he makes a point. But one
thing that we have not done in this whole transition thing is
to make sure that the market works, and that consumers get what
they want. The discussion has been about hard dates, mandates,
new FCC rules, and the like. I wonder whether we should be
listening to consumers, who are our constituents, a great deal
more than we have so far before making any big decisions. But,
at the same time, there is also evidently not much awareness
out there--in fact, I would say pretty close to none at all--
that this is really happening, and that government is getting
ready to take away analog spectrum; and so, make literally
millions of television sets inoperable in every home in
America.
So far, the public education effort seems to have been
inadequate, to say the least. So, I would hope that we would
hear testimony this morning that would give us some indication
in which direction the market wants to go. And our dedication
to the people, not only that are charged with the
responsibility of broadcasting, whether it be cable, or dish,
or over-the-air, that--where the consumers are. And I think we
have to, in order--if we are to fulfill our responsibility in
promoting diverse information, news, and public safety, and
also entertainment, then all of them have to be considered on
that basis.
So, I thank the panel for attending this morning. We look
forward to your hearing. But, I'll tell you right now, I'm
looking at the consumers, their cost, and whether the market
can make the adjustment.
Thank you, Mr. Chairman.
The Chairman. Senator Lautenberg?
Senator Lautenberg. I would defer to Senator Inouye.

STATEMENT OF HON. DANIEL K. INOUYE,
U.S. SENATOR FROM HAWAII

Senator Inouye. I would ask that my statement be made a
part of the record.
[The prepared statement of Senator Inouye follows:]

Prepared Statement of Hon. Daniel K. Inouye, U.S. Senator from Hawaii
I want to thank the Chairman for holding two hearings today on the
many issues raised by the digital television transition. Over the
course of these hearings, I am optimistic that the testimony will not
only help us understand these difficult issues, but provide us with the
tools to address them successfully.
Not a single stakeholder denies that we need to bring the digital
television transition to a successful close. We all benefit by bringing
consumers better quality television service, providing public safety
with the spectrum it needs to protect our communities, and unleashing
new and innovative wireless services using the spectrum that will be
reclaimed.
Only with a realistic ``hard deadline'' will we reap these rewards.
More important that being realistic in terms of timing, any legislation
establishing a hard deadline must include a plan to ensure that all
consumers can transition to digital with relative ease. It also must
establish what carriage requirements should apply to local broadcast
signals during and after the transition. Finally, it must maximize the
benefits to consumers from the return of the analog spectrum.
To be successful, we must address these complex public policy
issues head on. A decision driven purely by budget considerations,
rather than good public policy, will fail to generate the benefits we
all hope to achieve. Moreover, if we fail to tackle the difficult
issues that confront us, we will only create an artificial and illusory
deadline.
First and foremost, our efforts to bring the digital transition to
a close must respond to challenges that consumers will face in meeting
any date certain. Even today, citizens all across this country are
purchasing analog sets with an expectation they would work for the life
of the set. They did not ask for a digital television transition and,
in many cases, are still unaware that the country is in the midst of a
transition. Regardless of the total number of affected television sets,
those citizens reliant on over-the-air television signals face the
prospect of a total loss of television service. The magnitude of this
potential disruption demands that we do more than simply hope for the
best.
This transition will only go smoothly if we help these consumers
acquire the equipment necessary to receive the digital signal, and this
means subsidizing the purchase of digital-to-analog converters. If we
attempt to end analog television service for the cheapest possible cost
and create a meager consumer subsidy based on the study projecting the
lowest number of affected sets, I believe we are inviting problems.
If, instead, we create a robust subsidy program with a
comprehensive consumer education and outreach plan, and all affected
parties come to the table with innovative solutions, the result may
well be that the number of affected consumers will be smaller than
projected and the excess funds can be returned to the Treasury.
We know well that the potential benefits of this transition are
substantial, including economic growth and job opportunities from the
new uses of the returned spectrum. And I am certain that those benefits
will be cited repeatedly today in support of a hard deadline. We will
also hear that the estimate from the Congressional Budget Office that
the auction of the analog spectrum will bring the Treasury $10 billion
is conservative.
In the current budget climate, we face difficult decisions about
how to use our limited funding resources, but we must not be penny-wise
and pound foolish. If we are unwilling to commit up-front the necessary
funds and to create the comprehensive education and outreach plan that
is required to ensure a smooth transition, we risk delaying
unnecessarily the economic and public safety benefits from reclaiming
the analog spectrum.
Thank you, Mr. Chairman. I look forward to the testimony of the
witnesses on these complex issues.

STATEMENT OF HON. FRANK R. LAUTENBERG,
U.S. SENATOR FROM NEW JERSEY

Senator Lautenberg. Thank you very much, Mr. Chairman. And
it's good that we're holding this hearing, both hearings today,
on the transition to digital television.
Now, we know from our listening sessions in recent months,
and from the diverse constituencies that are represented here
today, that this transition poses many opportunities, but also
many challenges. However, upon completing the DTV transition,
consumers will enjoy a better television viewing experience.
DTV is going to provide viewers with sharper pictures, wider
screens, CD-quality sound, and better color rendition, all
distinct advantages.
Unfortunately, most Americans have little or no awareness
about the magnitude of this transition that's about to occur.
And, also, they don't really understand what it is that they're
going to get, the benefits that will accompany this change. And
later on we're going to hear from the public safety community,
which will be one of the main beneficiaries of the transition.
The transition to digital television will free up valuable
spectrum, which will improve the safety of the public, as our
Chairman announced this morning, through enhanced
communications and reduced interference for first responders.
This morning's hearing is also important because we need
broadcasters, cable, satellite, and public television to work
together and to make the transition as smooth and as fair as
possible. The transition will ultimately be, as I said, a truly
positive step, not just in terms of what's gained by the return
of the analog spectrum, but also the improvement from digital
programming.
And I take the public-interest obligation of our
broadcasters very seriously. I know that our Nation's public
television stations strive to offer innovative, educational,
and community programs. And there are many examples of that in
the State of New Jersey. WNJN, the New Jersey Network, was
already using its digital signal to transmit job-training data
last year. And I want to hear from those on the panel about
other ways that DTV transition can enhance local content, and
increase civic and educational programming.
So, Mr. Chairman, again, I think you've handled this
extremely well, in terms of the listening sessions, in terms of
having all of the voices that really have something
constructive to say about how we get--where we go and how we
get there. So, I look forward to hearing from all sides as we
review the best approach to the looming DTV transition. It
can't be a spectators' game, as far as we're concerned. We have
to encourage the pace and the quality of the change, and the
cost.
The Chairman. Thank you very much, Senator.
Senator DeMint?

STATEMENT OF HON. JIM DeMINT,
U.S. SENATOR FROM SOUTH CAROLINA

I would like to ask that my complete statement be put in
the record.
Senator DeMint. Thank you, Mr. Chairman.
I would like to just thank you for holding this very
important hearing. I know there are a lot of different
interests that we'll hear from in this panel, and one later on,
from broadcasters, to cable operators, to electronics
producers.
For me, this is a quality-of-life issue for the public.
We've got issues here related to improving education, homeland
security, and, I think, in a large way, American
competitiveness. I think it's time to get on with this
transition. I think the taxpayers have paid dearly for this
transition to occur.
I'm looking forward to hearing from all of the panelists
today on how we can make this happen, as soon as possible, in a
way that would be least disruptive to those in the industry,
but the most beneficial for our consumers and taxpayers.
So, with that, Mr. Chairman, I yield back.
[The prepared statement of Senator DeMint follows:]

Prepared Statement of Hon. Jim DeMint, U.S. Senator from South Carolina
Good afternoon. Thank you, Chairmen Stevens and Inouye for holding
this second DTV hearing of the day, this one focusing on the spectrum
issues and public safety aspects to digital television transition.
The lesson of the 9/11 attacks was clear. Public Safety needs
interoperable communications. Providing public safety with the needed
spectrum will be the start of that.
Unfortunately, public safety cannot start until the digital
transition in complete and the broadcasters vacate the analog spectrum.
One of the short-term risks we face in cutting off the analog
broadcasts is the reliance on free-over-the-air television in the event
of a natural disaster. This is of particular concern to me as a Senator
from a coastal state. I would like to see the various facets of the
telecom industry meet the demand for emergency information, much like
the Amber Alert system. I think this would go a long way to saving
lives in all kinds of emergencies.
I thank the witnesses for coming here this afternoon to share their
expertise and recommendations with us on how best to achieve this goal
as quickly and efficiently as possible.

The Chairman. Thank you very much, Senator.
Senator Sununu?

STATEMENT OF HON. JOHN E. SUNUNU,
U.S. SENATOR FROM NEW HAMPSHIRE

Senator Sununu. Thank you, Mr. Chairman.
This is something that we very much need to get done. And
maybe the good news is that everyone who steps up to this
debate suggests that this is important, this is a transition
we're all committed to. I think there's general consensus that
we need to set a date for the transition. But, unfortunately,
that seems to be about where the agreement ends.
We will not get this done, and we will not--certainly not
get it done successfully--unless we're willing to make some
difficult decisions, unless we're willing to show some
leadership on this issue, and unless we're willing, frankly, to
set aside a lot of the competing interests here and really
focus on what makes the most sense for our public-spectrum
policy, and what makes the most sense for the consumers.
If we want to complete the digital conversion, then we need
to set a date and work to make sure that that date that's set
is successful in its implementation. If we don't want to make
this transition, if we don't actually want to complete this,
then I think people that have a vested interest in slowing down
or opposing the process should be honest and step forward and
say, ``You know, we're not for this. We actually don't want to
go ahead into an all-digital world, because we think it will
hurt our business model,'' or, ``We think we'll lose money,''
or, ``We don't want to return the spectrum.'' Whatever your
issue may be, you need to put it on the table and be honest
about it.
When we go to a fully digital world, there are some
television sets manufactured in the 1970s, and the 1980s, and
the 1990s, and even a few in the 2000 era, that will not
directly receive digital transmissions. We need to deal with
that. We will deal with that.
But one thing we should not have in this debate is
interests using consumers as a scapegoat, as a boogeyman, in
order to further their own interests. I think that's something
that we need to avoid. It's been done across the board.
Congress is doing this because we believe a digital system is
in the consumer's interest and in the public interest. And I
think the consumers will be well served. I think it's
shortsighted at best, disingenuous at worst, to argue a
position that consumers aren't intelligent enough to handle
this transition. That's essentially what we're getting from
some interests--again, across the spectrum.
The broadcasters argue that the consumers won't be well
served and consumers won't be able to handle this transition,
in order to slow it down or to prevent certain frequencies from
going to the public-safety interest. The cable operators argue
that they need down-conversion; otherwise, consumers will be
confused, and they won't be able to get their MTV or whatever
other program it is that they're used to or expecting. The
public interest and consumer groups argue that consumers will
be confused unless we have large government subsidies and new
government mandates. Everyone is using the specter of consumer
confusion to further their own interest. And I think--well, I
think it does the American public a disservice to suggest that
they can't handle this transition.
When we set a date, we will--and, I think, we must, set a
firm date--we're going to have subsidies for the conversion, of
some sort. I think we all recognize that. We shouldn't make it
a cumbersome program. We should target that subsidy, to the
extent that it's needed. But we will have a mechanism in place
for this.
We will have to tackle two new mandates; so the number of
TVs that are sold that will not be able to receive digital TVs
directly will continue to shrink. I hope, and I believe, that
the providers of subscription services, whether it's cable or
satellite, will argue that their number of consumers will
increase, and that will also minimize the dislocation and the
difficulty of consumers. There are a lot of things that will be
put in place in this legislation to minimize the difficulties
of consumers when the transition takes place. But, for those
consumers that might need to go out and buy an $80 or $100, or
even a $200, converter box, I don't think it will cause a
national crisis, when and if we reach that day, when there is a
small percentage that are in that position. To suggest that
there will be some national crisis, in order to defend your
political or financial interests, I don't think serves the
crafting of this legislation very well.
I hope that those are principles or concerns that color
this debate, Mr. Chairman. I hope that members of this
committee show a little bit more leadership on this issue than,
perhaps, we've had in the past, because that's going to
absolutely be required if we're going to get any legislation
done.
Thank you.
The Chairman. Thank you very much.
All statements of the Senators, opening statements, will be
placed in the record as though read.
My intention is to ask each of the witnesses at the table
now to present their comments, not more than 5 minutes, if you
will. And we will print all of your statements in the record
completely, also. And then we'll have a series of questions
from our committee.
So, because of no reason, other than you're over there, Mr.
Fritts, we'll call on you first.

STATEMENT OF EDWARD O. FRITTS, PRESIDENT/CEO, NATIONAL
ASSOCIATION OF BROADCASTERS (NAB)

Mr. Fritts. Thank you, Mr. Chairman and Co-Chairman Inouye,
and members of the Committee.
In 1996, local television broadcasters and Congress entered
into a public/private partnership to bring the future of
television to the American consumer. When we undertook this
endeavor, Congress was seeking to promote a number of goals.
Key among them was ensuring that America's system of
broadcasting remains the most technologically-advanced source
of news, local information, and entertainment.
Local television is as vital a part of America's way of
life today as it was when we started the journey, back in 1996.
This past weekend, with the Florida hurricane, local Florida
television stations kept the public informed, calm, and safe.
Yesterday, the President of the American Red Cross commented on
our stations, and I quote, ``Time and again, Americans rely on
local broadcasters to provide critical information that saves
lives and offers hope in times of need,'' unquote. It's
valuable services like these that will be strengthened and
enhanced when the digital television transition is successfully
completed.
Broadcasters accept--let me underscore--broadcasters accept
that Congress will implement a 2009 hard date for the end of
the analog broadcasts. And we're ready. We've done our part.
We've invested billions to put up more than 1,500 local digital
stations on the air, right now.
As Congress and the affected parties work to end this
transition, one stakeholder must be central, and that's the
consumers. This committee and Congress should ensure that
consumers--our viewers, your constituents--can enjoy the
benefits of a fully developed, free, local digital television
system. For instance, after the transition in 2009, if you're a
cable subscriber with both analog and digital sets in your
home, you'll want the analog sets to work in analog, and you'll
want your digital sets to work in digital. Consumers should be
empowered to make that choice about which signal to receive,
not the cable gatekeeper.
Consumer interest should also drive the debate in the area
of full-signal carriage. Today, some 585 television stations
across the country are using DTV to split their signal into
multiple programming streams. This practice, called
multicasting, holds one of the great promises of the digital
transition; namely, more free local programming options for the
public.
What's taking place in the market right now? An example:
WDBJ, in Roanoke, Virginia, broadcasts CBS programming in HDTV;
and, through multicasting, the station also offers a
programming feed with extended coverage of breaking news, ACC
sports, and Virginia Tech football games. And dozens of market
stations are multicasting to supply network programming that
was previously not there. For example, in Tallahassee, CBS
affiliate WCTV uses multicasting to also supply the UPN Network
to programming viewers.
Multicasting means greater opportunities to serve diverse
demographics. Ninety stations nationwide are multicasting in
foreign-language programming. The languages range widely from
German, to Korean, to Spanish, to Vietnamese. And most
important from the consumer standpoint, these services are
free. Regrettably, in many cases cable operators refuse to
provide these services to their subscribers. If the cable
monopolies strip these free services from broadcaster signals,
it will be difficult for stations to fully develop
multicasting.
The history of the television industry offers some lessons
here. It was only after Congress passed the 1992 Cable Act,
that guaranteed cable carriage, that networks like FOX, UPN,
the WB, Telemundo, and Univision fully matured. Likewise, cable
carriage would be necessary for new multicasting programming to
bloom.
Let's be clear, the multicast issue is not about capacity.
Regardless of whether they multicast or do a single stream of
HDTV programming, a broadcaster's digital signal takes up no
more bandwidth on the cable system. In fact, with new
compression technologies, whether a station multicasts or not,
they will occupy one-half of the cable bandwidth they took up
in the analog world. The cable system will get back the rest.
So, Mr. Chairman, the move to DTV has always been, first
and foremost, about consumers--your constituents and our
viewers. America's local broadcasters share your goal of
successfully completing this DTV transition. We are here to
work with you in moving this legislation that will complete
this transition; that will free the analog spectrum for other
uses, and, ultimately, will bring the full benefits of the
highest digital technology to the American television viewer.
Thank you for the opportunity to participate, and I look
forward to your questions.
[The prepared statement of Mr. Fritts follows:]

Prepared Statement of Edward O. Fritts, President/CEO,
National Association of Broadcasters (NAB)

Thank you, Mr. Chairman, for the opportunity to appear before the
Commerce Committee today. I am Edward O. Fritts, President and Chief
Executive Officer of the National Association of Broadcasters (NAB).
NAB is a nonprofit, incorporated association of radio and television
stations, which serves and represents the American broadcasting
industry.
The television broadcast industry as a whole will spend, by the end
of the transition process, approximately 10-16 billion dollars to
convert from analog technology to digital technology. Today, 1,508
television stations are broadcasting digital signals, which reach over
99.9 percent of the television households in the country. The promise
of this technology for both television broadcasters and viewers is
great. Broadcasters will be better able to serve their audiences by
offering vastly improved picture quality including high definition
(HD), more diverse program offerings on multiple streams, and even
nonprogram services such as data services. The promise of digital
television services for broadcasters and viewers alike will be
curtailed, however, and broadcasters' investment at least partially
stranded, if cable operators are allowed to exercise unchecked their
power to refuse carriage of multiple streams of digital broadcast
material.
Accordingly, my remarks today will address the importance--for both
the broadcast industry and the viewing public--of cable carriage for
local broadcasters' full digital signals, including their multicast
programming streams. Full signal carriage will help ensure a vibrant,
free over-the-air digital broadcasting system, and the development of
diverse programming to even better serve broadcasters' local
communities. It will also advance the digital transition, thereby
speeding the clearing of spectrum for the provision of vital public
safety services. Moreover, the rapid growth of cable capacity in recent
years has rendered negligible any burden that carriage of broadcasters'
full digital signals (including any multicast programming streams)
imposes on cable operators. Particularly in light of this tremendous
growth in cable capacity, a Congressional requirement that cable
operators carry local broadcasters' multicast programming streams
offered free over-the-air will clearly pass Constitutional muster.

Full Signal Carriage Will Help Preserve Our System of Free, Over-the-
Air Local Broadcast Television in the Digital Age
The Cable Television Consumer Protection and Competition Act of
1992 (Cable Act), was based on the premise that ``must-carry'' would
preserve the benefits of free, over-the-air local broadcast television,
particularly for those viewers who did not subscribe to cable.\1\ The
Supreme Court agreed and recognized that preservation of our system of
broadcasting was ``an important governmental interest.'' \2\ As we
change our system of broadcasting from analog to digital, there is no
reason to divert from this simple truth. Cable carriage of the full
digital signal, whether one HD or multiple program streams, would
similarly help preserve our system of free, over-the-air local
broadcasting, especially for the benefit of viewers solely dependent on
this means of receiving programming.
In the 1992 Cable Act, Congress made ``unusually detailed statutory
findings'' regarding the ability and incentive of cable operators to
refuse carriage of the signals of many broadcasters, as well as the
harm resulting from that refusal. Turner, 512 U.S. at 646. Congress
found that ``because cable systems and broadcast stations compete for
local advertising revenue,'' and ``because cable operators have a
vested financial interest in favoring their affiliated programmers over
broadcast stations,'' cable operators have a ``built-in economic
incentive'' not to ``carry local broadcast signals.'' Id. Congress
concluded that ``absent a requirement that cable systems carry the
signals of local broadcast stations, the continued availability of free
local broadcast television would be threatened.'' Id. Indeed, without
the 1992 Cable Act, ``cable systems would likely carry significantly
fewer over-the-air stations,'' ``station revenues would therefore
decline,'' and the ``quality of over-the-air programming on these
stations would almost inevitably suffer.'' \3\
The Federal Communications Commission's refusal to recognize a
carriage requirement for broadcasters' multicast programming streams
within their digital signals has endangered the vibrant, free over-the-
air service that Congress explicitly sought to protect in the Cable
Act.\4\ Cable operators today compete with local broadcast stations
even more fiercely for advertising revenue, and continue to have ``a
vested financial interest in favoring their affiliated programmers over
broadcast stations,'' thus retaining an ``economic incentive'' to
refuse to ``carry local broadcast signals.'' \5\ The consequences of
the FCC's action giving cable operators the power to refuse carriage of
significant broadcast programming makes effective competition between
broadcasters and cable operators virtually impossible. Cable systems
now have the ability to deny their direct competitors--the
broadcasters--access to their subscribers, totaling two-thirds of the
potential audience, for any innovative digital multicasting services.
Broadcasters deprived of the ability to take advantage of the full
economic opportunity that digital technology offers will be unable to
compete effectively for the critical advertising revenue upon which
broadcasters (unlike cable operators) almost solely depend. The absence
of a multicast carriage requirement therefore threatens to undermine
the viability of local broadcast stations in the digital age, leading
to precisely the decline in the quality and diversity of over-the-air
programming that Congress sought to forestall in the Cable Act. And not
only will television stations and our system of local broadcasting be
injured--viewers who depend on over-the-air broadcasting for their
entertainment and information will be the ultimate losers.
The dangers presented by the FCC's refusal to grant full signal
carriage will be particularly acute for over-the-air viewers served by
broadcasters in small and medium markets. As the Commission itself has
recognized, ``the ability of local stations to compete successfully in
the delivered video market [has been] meaningfully (and negatively)
affected in mid-sized and smaller markets.'' \6\ Given the already
fragile financial condition of many smaller market television
broadcasters, the economic threat posed by cable companies' failure to
carry multicasting streams is real. Lack of full signal carriage will
have a major impact on broadcasters' ability to sustain the very
significant costs associated with the digital transition, including the
costs of developing new and innovative programming for multicast
channels. These costs are proportionally much greater for broadcasters
in small and medium-sized markets. Multicasting would permit
broadcasters to spread the costs of providing this new programming
(including local news and information) over more revenue streams.
Offering multiple programming streams will also enhance broadcasters'
ability to compete with multichannel cable operators for the limited
pool of advertising dollars. Thus, the absence of a full signal
carriage requirement will be especially deleterious for broadcasters in
medium and small markets and for smaller, less profitable broadcasters
in all markets, the very stations that will likely not be carried via
retransmission consent negotiations.
For these reasons, the governmental interest in a vibrant, free
over-the-air local broadcasting system would be directly advanced by
preventing cable operators from blocking the growth of new programming
options, including multicast program streams. Congress has a clear
``interest in preserving a multiplicity of broadcasters to ensure that
all households have access to information and entertainment on an equal
footing with those who subscribe to cable.'' Turner, 520 U.S. at 194. A
full signal carriage requirement is essential to preserving a
competitively healthy local broadcasting system providing a rich mix of
over-the-air programming, especially for viewers solely dependent on
free television.

Full Signal Carriage Will Promote the Development of Diverse
Programming for the Viewing Public as a Whole
Beyond preserving the benefits of free, over-the-air broadcasting,
Congress found in the 1992 Cable Act, that ``must-carry'' promoted the
widespread dissemination of information from a multiplicity of
sources.\7\ When approving the analog must-carry rules, the Supreme
Court agreed that this also is an important governmental interest.
Turner, 512 U.S. at 662-63. A full digital carriage requirement would
similarly promote the development and dissemination of diverse
programming from a variety of sources for all television viewers,
whether they subscribe to cable or not.
Broadcast signals are the only channels on a cable system (except
for local access and PEG channels) that are not under the control of a
single voice, the cable operator. Congress has found that a ``primary
objective and benefit of our Nation's system of regulation of
television broadcasting is the local origination of programming,'' and
that ``[b]roadcast stations continue to be an important source of local
news and public affairs programming and other local broadcast services
critical to an informed electorate.'' \8\ Increasing the opportunity
for local television stations to provide new and innovative digital
services directly advances these Congressional goals, particularly in
light of current concerns over clustering and consolidation in the
cable industry.\9\ Carriage of broadcasters' multicast program streams
will in fact guarantee that additional programming sources not under
the control of a cable operator, are widely accessible and added to the
information mix available to both cable subscribers and over-the-air
viewers alike in communities throughout the country.
A brief sampling of the multicast services that television stations
are currently providing, or plan to offer, is instructive. As shown
below, local broadcasters are using, and plan to use digital
multicasting streams to provide a wide variety of programming that is
currently not available either over-the-air or on most cable systems.
And much of this programming is exactly the type of local and
informational programming that Congress sought in the Cable Act to
promote.
According to Decisionmark, a media technology company, 585
television stations currently offer at least some multicast
programming, and many of these stations offer three or more multicast
channels. This programming includes news, weather, sports, and
religious material. This multicast programming also includes content in
foreign languages ranging from Arabic to Vietnamese, with a number of
stations providing Spanish multicast programming.
Broadcasters have also described their multicast programming and
their plans for multicasting in numerous submissions to the FCC.\10\
For example, NBC affiliated stations want to multicast weather
channels, as well as local alerts, and traffic and travel-related
information. CBS and NBC affiliates are planning local news channels
that would offer local news and extended coverage of local events,
local sports, and AMBER alerts for missing children.\11\ The New York
Times Broadcasting Group is exploring ways to use multicasting to
provide focused local news to viewers in particular towns and
communities. The CBS affiliate in Toledo, Ohio, is exploring
opportunities for multicasting state legislative debates, mayoral press
conferences, city council hearings, and school committee hearings. The
ABC affiliate in Fresno, California, aired full screen election results
on its second channel during the gubernatorial recall election. Beyond
utilizing multicast capabilities to offer increased local news and
other local programming including public affairs, weather and sports,
broadcasters have also indicated their interest in using multicasting
to air minority-oriented, children's, and educational programming.\12\
Broadcast stations are currently offering multicast programming and
hope in the future to offer even greater amounts and types of multicast
services. However, the absence of any assurance of multicast carriage
is a powerful disincentive for broadcasters to invest the considerable
sums needed to develop multiple streams of locally-oriented and other
innovative multicast programming. For example, DIC Entertainment has
stated that its plan to offer nationally a free, advertiser-supported,
over-the-air digital children's television service is practically
infeasible in the absence of mandatory carriage for multicast
streams.\13\ No free, over-the-air service dependent upon advertising
revenue can hope to survive if it is not carried by cable systems, and
can therefore be received only by that relatively small segment of the
viewing public that does not subscribe to cable. Broadcasters will be
reluctant to bring their multicast service plans to fruition in the
absence of a clear full digital signal carriage requirement. Stations
rightly fear that they will be unable to obtain carriage on many cable
systems, and that their substantial investments in multicast services
will be stranded. As a result, cable subscribers and non-subscribers
alike will be deprived of the full benefits that digital technology
enables, including multicast programming selected to reflect the tastes
and needs of their local communities.
Commercial broadcasters have in fact experienced substantial
difficulties in obtaining full signal carriage through negotiations
with cable operators.\14\ The agreement reached between public
television stations and the cable industry pertaining to carriage
rights does not in any way suggest that commercial broadcast stations
will be similarly successful in negotiating carriage for multicast
programming on reasonable terms. Unlike public stations, commercial
stations directly compete with cable for advertising dollars, so cable
operators have greatly increased incentives to deny full signal
carriage to commercial stations.\15\
In light of the multicast services currently offered by
broadcasters and their plans to develop further multicast streams to
serve their local communities with a wide range of programming,
allowing cable operators to exercise unchecked their power to refuse
carriage of this valuable programming does not serve the public
interest. A full signal carriage requirement would ensure that
broadcasters' multicast programming streams can be accessed by that
majority of the viewing public subscribing to cable, and would
therefore serve Congress' interest in promoting the development and
dissemination of a wide variety of programming from a multiplicity of
sources.

Full Signal Carriage Will Advance the Digital Transition
The offering of attractive digital programming, including multicast
programming, by local television stations will provide incentives to
consumers to purchase digital reception capability (such as an HD
receiver or a converter that will allow viewing of digital programs on
analog sets), thereby facilitating the end of the digital
transition.\16\ For example, WDBJ in Roanoke, Virginia, which provides
two locally-originated multicasting services, ``is helping to stimulate
consumer sales of digital tuners in [its] viewing area.'' To accelerate
the digital transition, the station ``has fostered two-way
communication with viewers owning digital receivers and HDTV sets'' by
sending regular e-mail updates about WDBJ's digital HD and multicast
services to customers who have told the station they have digital
sets.\17\
If, however, broadcasters' multicast programming streams are not
carried on cable systems, then viewers subscribing to cable will be
unable to receive those programming streams even if they purchase
digital receivers--which will obviously reduce the incentive of
consumers to obtain digital reception capability. The absence of a full
signal carriage requirement will accordingly retard the pace of the
digital transition, which does not serve the public interest. Beyond
clearing spectrum for auction and, ultimately, the provision of new
wireless and other services for consumers, advancing the digital
transition will, most importantly, clear spectrum for the provision of
vital public safety services.

Particularly in Light of the Rapid Growth in Cable Capacity, the Burden
of Full Signal Carriage on Cable Operators Would Be Negligible
Not only will requiring carriage of multicast digital programming
streams provide myriad benefits to the viewing public and to our system
of free, over-the-air broadcasting, such a carriage requirement will
entail little burden on cable operators, particularly in light of the
tremendous expansion in cable capacity in recent years. In fact,
requiring digital cable carriage of all of the separate free
programming streams of a broadcaster's digital signal imposes no
greater burden than requiring carriage of a broadcaster's single
digital channel (which is clearly already required by the 1992 Cable
Act). A digital broadcast signal will include 19.4 megabits per second
of data within 6 MHz of spectrum whether it contains one program stream
or multiple streams. From the perspective of the cable operators'
capacity to carry the digital broadcast, there is simply no difference
between a broadcaster's decision to broadcast its signal as a single
stream or as multiple streams.
As an absolute matter, moreover, the total cable capacity to be
used by a digital broadcast signal is substantially less than the
capacity used to carry a single analog signal. Because of modulation
techniques available to digital cable operators, carriage of the entire
digital broadcast signal will use only 3 MHz of cable capacity. Indeed,
cable systems, when responding to an FCC survey about cable capacity,
agreed that while cable carriage of one analog broadcast television
signal required a full 6 MHz cable channel, two digital broadcast
television signals could be carried on that same channel.\18\ Thus, at
the end of the digital transition, digital cable systems will use only
half the capacity to transmit local broadcast signals than they needed
for the same stations' analog signals. And, as discussed above, a
broadcaster using its digital channel to air multiple standard
definition streams occupies no more cable capacity for the digital
signal, as a practical matter, than a broadcaster airing a single HD
programming stream, which cable operators will clearly be required to
carry pursuant to existing statutory mandates.
The alleged burden on cable operators of carrying broadcasters'
digital multicast programming streams is further shown to be
insignificant when one considers the remarkable growth in the capacity
of cable systems in recent years. One estimate, drawn from the cable
industry's own responses to an FCC survey, concluded that cable program
capacity increased 83.5 percent from 1999 to 2003, and additional
increases in capacity have and will continue to come online. Weiss
Study at 27. The capacity of the average cable system has grown so
large that, combined with the benefits of digital compression
technology, requiring cable systems to carry all free programming
streams of digital stations would not foreclose cable systems from
carrying other programs of their choice. Likewise, it would not
diminish cable programmers' opportunities to place their programs onto
cable systems.
Indeed, the announced plans of cable operators belie their claims
that capacity is limited. Multichannel News recently reported that
``[a]ll the major MSOs have announced plans to launch digital
simulcast--or are actively launching it--in their systems.'' \19\
Digital simulcasting involves carrying all signals on a cable system--
cable and broadcast--in both analog and digital formats. Although
carrying all programming in both digital and analog formats would
certainly use far more capacity than carriage of local broadcasters'
digital signals (including their multicast program streams), Comcast's
Senior Vice President of Engineering Operations stated, ``[w]e have
plenty of capacity on the network side.'' \20\ As another news reports
concluded, ``[i]t would seem unlikely that [Comcast and Time Warner]
would have a capacity problem with dual carriage'' (i.e., carrying both
broadcasters' analog and digital signals during the digital
transition), if ``voluntary dual carriage is their publicly announced
business plan.'' \21\ This committee, therefore, cannot take seriously
cable operators' claims that carriage of broadcasters' digital
multicast program streams imposes a material capacity burden on cable
systems.

Requiring Cable Operators To Carry Local Stations' Full Digital Signals
Would Clearly Be Constitutional
In the absence of a burden on cable systems from the carriage of
broadcasters' multicast programming streams, a full signal carriage
requirement would pass constitutional muster. Indeed, given the
expansion of cable capacity previously described, carriage of local
broadcast digital signals would not have a material impact on cable
speech, and thus a full signal carriage rule should not even be subject
to a First Amendment question.
As discussed in detail above, the burden imposed by carriage of
multiple broadcast streams of a single digital signal is no more than
the burden imposed by carriage of a single digital broadcast signal.
Further, the burden imposed by carriage of a digital broadcast signal--
whether multiple streams or a single stream--is less as an absolute
matter than the burden imposed by analog must-carry approved by the
Supreme Court in the Turner cases.\22\ In addition, due to the
explosion of cable capacity, and the lack of any significant increase
in the number of full power local television stations, the relative
burden imposed by carriage of these stations' signals is now a fraction
of that approved in the Turner cases. Indeed, even the carriage of both
the analog and digital signals of all local commercial television
stations would occupy a far smaller percentage of cable capacity than
did carriage of only analog stations when the must-carry statute went
into effect.\23\ The Supreme Court in Turner regarded that burden as
minimal and acceptable, particularly in light of the important benefits
afforded by must-carry.\24\ Clearly, the smaller burden presented by
requiring carriage of broadcasters' digital multicast programming
streams should not raise any serious First Amendment questions.
In sum, given the increase in cable capacity in recent years, only
a tiny fraction of that capacity will be devoted to carrying local
broadcasters' digital signals, including their multicast programming
streams. Consequently, a full signal carriage requirement would not
have a remotely significant impact on the programming choices made by
cable systems, or the opportunity of cable programmers to obtain
carriage. Because cable programming choices would not be materially
affected by any digital must-carry obligations, no First Amendment
issue would even be implicated by a full digital signal carriage
requirement.\25\ By upholding the analog must-carry rules, which
represented an absolutely and relatively greater burden on cable
operators than digital must-carry obligations would, the Supreme Court
settled the question of the constitutionality of any full signal
carriage requirement.

Conclusion
Mr. Chairman, NAB and its television stations members are committed
to completing the digital transition expeditiously, and to bringing the
benefits of digital technology to viewers throughout the country.
Digital broadcasting promises both to enhance the competitive viability
of local commercial television stations, and to bring improved video
services to the viewing public. But the full benefits of digital
technology may not be realized if cable operators are allowed to
prevent the vast majority of television viewers from accessing the
multiple streams of digital broadcast material offered by local
television stations. Requiring cable systems to carry broadcasters'
multicast programming streams will help ensure a vibrant, free over-
the-air local broadcasting system, will promote the development of
diverse digital programming, and will advance the digital transition.
These benefits can, moreover, be achieved without burdening cable
systems or infringing the First Amendment rights of cable operators.
Again, NAB wishes to express its appreciation to the members of the
Commerce Committee for the opportunity to testify and for their
attention today.

ENDNOTES
\1\ 47 U.S.C. Sec. 521 note (Cable Act Sec. (2)(a)(12)).
\2\ Turner Broadcasting System, Inc. v. FCC, 512 U.S. 622, 662-63
(1994).
\3\ Turner Broadcasting System, Inc. v. FCC, 520 U.S. 180, 228
(1997) (Breyer, J., concurring).
\4\ The FCC has erroneously concluded that there is no requirement
under the Cable Act for cable systems to either: (i) carry both the
analog and digital signals of local commercial television stations
during the digital transition; or (ii) carry multicast programming even
after the transition is completed. See Second Report and Order and
First Order on Reconsideration, Carriage of Digital Television Signals,
CS Docket 98-120, FCC 05-27 (rel. Feb. 23, 2005). NAB and other
broadcast groups have requested the FCC to reconsider this decision.
\5\ In both percentage and absolute terms, cable's advertising
revenues (for which cable companies compete with broadcasters) have
skyrocketed since 1992. Between 1992 and 2003, cable revenue from local
advertising increased 367 percent, and is estimated to have increased
another 13.5 percent in 2004. See NCTA, Cable Developments 2004 at 15
(2004); Eleventh Annual Report, Annual Assessment of the Status of
Competition in the Market for the Delivery of Video Programming, at
para. 29, MB Docket 04-227, FCC 05-13 (rel. Feb. 4, 2005) (Eleventh
Annual Report).
\6\ Report and Order and Notice of Proposed Rulemaking, 2002
Biennial Regulatory Review, 18 FCC Rcd. 13620, 13698 (2003). NAB has
also demonstrated that the profit margins for network-affiliated
stations in medium and small markets have declined in recent years.
Indeed, low-rated network affiliates in smaller markets are actually
losing money, not earning profits. See id.
\7\ 47 U.S.C. Sec. 521 note (Cable Act Sec. 2(a)(6)).
\8\ 47 U.S.C. Sec. 521 note (Cable Act Sec. 2(a)(10) and (11)).
\9\ In June 2004, the four largest cable operators served about 58
percent of all U.S. cable subscribers. Eleventh Annual Report at para.
15. This consolidation will only increase in the future, as Comcast and
Time Warner are acquiring Adelphia's systems.
\10\ See, e.g., Special Factual Submission by the CBS Television
Network Affiliates Association in Support of Multicast Carriage
Requirement, CS Docket 98-120 (filed Jan. 13, 2004); Special Factual
Submission in Support of Multicast Carriage by the NBC Television
Affiliates Association, CS Docket 98-120 (filed Jan. 8, 2004).
\11\ WRAL-DT, the CBS affiliate in Raleigh, North Carolina, has
been offering its viewers HD programming and a full-time local news
service on its digital channel for several years. Similarly, KTVB-DT,
the NBC affiliate in Boise, Idaho, offers 24-hour local news on a
multicast channel.
\12\ See Special Factual Submissions of the CBS and NBC Television
Affiliates Associations; see also Ex parte submissions of the Minority
Media & Telecommunications Council; Black Education Network; DIC
Entertainment; and the National Medical Association in CS Docket 98-
120.
\13\ See Petition for Reconsideration of DIC Entertainment
Corporation, CS Docket 98-120 at 3 (filed April 21, 2005). DIC stated
that no competitive children's service of the kind it envisioned can
expect to arrange reasonable carriage terms with cable operators ``that
have significant reasons to protect the children's services they are
already carrying.'' Because a number of cable operators now have their
own local or regional news channels, they are also unlikely to carry a
competitive multicasting news stream from a local broadcast station.
\14\ Decisionmark has noted the substantial percentage of
multicasting commercial stations that cannot obtain carriage for even
one multicasting service. Even large television groups, including LIN
Television, Hearst-Argyle Television, and the New York Times
Broadcasting Group, have cited their inability to successfully
negotiate with many cable operators for multicast carriage. And if
these groups cannot obtain carriage for their multicast services, then
smaller broadcast groups or stand-alone stations would very likely
experience even greater difficulties in obtaining carriage. For
instance, Marantha Broadcasting Company in Pennsylvania has reported
that it has been unable to negotiate carriage with large cable
operators for its 24-hour local weather multicast service.
\15\ See 47 U.S.C. Sec. 521 note (Cable Act Sec. 2(a)(15)). And as
discussed above, broadcasters and cable operators compete much more
fiercely today for advertising revenue than they did when the Cable Act
was passed.
\16\ Either purchase would count a household toward the 85 percent
requirement of Section 309(j)(14)(B)(iii)(II), signaling the end of the
digital transition. See 47 U.S.C. Sec. 309(j)(14)(B)(iii)(II).
\17\ Declaration of Robert G. Lee, President and General Manager,
WDBJ(TV)(DT), Roanoke, Virginia, at para. 5 (Jan. 8, 2004), Attached to
Submission of CBS Television Network Affiliates Association, CS Docket
No. 98-120 (Jan. 13, 2004).
\18\ See Merrill Weiss Group, Analysis of Cable Operator Responses
to FCC Survey of Cable MSOs, at 12, Attachment A to Reply Comments of
NAB/MSTV/ALTV, CS Docket 98-120 (filed Aug. 16, 2001) (Weiss Study).
\19\ Multichannel News, May 23, 2005 at 1, 76. According to this
report, Comcast will launch digital simulcast on most of its systems in
2005, and Charter Communications, Cox Communications, Time Warner
Cable, Insight Communications, and Adelphia Communications also said
they would start digital simulcast conversion. These operators serve
over 70 percent of all cable subscribers.
\20\ Multichannel News, May 23, 2005 at 78.
\21\ Multichannel News, May 30, 2005 at 4.
\22\ Turner Broadcasting System, Inc. v. FCC, 512 U.S. 622 (1994);
Turner Broadcasting System, Inc. v. FCC, 520 U.S. 180 (1997). As set
forth above, cable systems can carry two 6 MHz digital broadcast
signals in one 6 MHz cable channel, rather than carrying just one 6 MHz
analog signal in one cable channel.
\23\ According to the Weiss Study, based on the cable industry's
own reports of its capacity, in 1993, when the (analog) must-carry
rules first became effective, carriage of local commercial stations
occupied 13.35 percent of the capacity of the average cable system. By
1999, cable capacity used by local commercial stations fell by more
than half to 6.25 percent. The study estimated that only 8.46 percent
of cable capacity would be needed for transmission of both analog and
digital local commercial signals when all stations were transmitting
two signals during the digital transition. And the study concluded that
when analog broadcasting ceased altogether, carrying all local digital
commercial signals would occupy only 2.63 percent of cable capacity.
Weiss Study at 14.
\24\ Turner, 520 U.S. at 215 (affirming constitutionality of must-
carry because the ``burden imposed'' is ``congruent to the benefits it
affords'').
\25\ The Supreme Court in the first Turner case stressed the
importance of evidence establishing the ``actual effects,'' if any, on
the programming choices of cable systems in analyzing the
constitutionality of the must-carry rules. See Turner, 512 U.S. at 667-
68 (remanding the case to obtain further evidence of the extent the
must-carry rules burdened speech, particularly the extent to which
cable operators would, ``in fact, be forced to make changes in their
current or anticipated programming selections; the degree to which
cable programmers will be dropped from cable systems to make room for
local broadcasters; and the extent to which cable operators can satisfy
their must-carry obligations by devoting previously unused channel
capacity to the carriage of local broadcasters'').

The Chairman. Thank you. I failed to mention Mr. Fritts was
speaking for the National Association of Broadcasters.
And next, Manuel Abud, Vice President and General Manager
of Station KVEA-TV, Telemundo.

STATEMENT OF MANUEL ABUD, VICE PRESIDENT/GENERAL MANAGER, KVEA-
TV, LOS ANGELES, CA; ON BEHALF OF TELEMUNDO

Mr. Abud. Thank you, Mr. Chairman, Co-Chairman Inouye,
members of the Committee.
My name is Manuel Abud. I'm Vice President and General
Manager of KVEA Television, Channel 52, which is a Television
Telemundo Station, in Los Angeles. And I thank you for the
opportunity to testify today on behalf of Telemundo regarding
issues surrounding the digital television transition.
My appearance before you today is not simply as a Telemundo
executive, or even as a broadcaster; I'm also testifying in my
capacity as a member of the Hispanic community. My community is
dependent on Spanish-language over-the-air broadcasting as a
primary source of news and local information. My station alone
does 19.5 hours per week of local Spanish-language news to
serve our viewers.
Forty-three percent of Spanish-speaking households watch
over-the-air television, exclusively. Moreover, digital
television technology has failed to make significant inroads
into the Hispanic community. If Congress produces DTV
legislation that fails to extend the benefits of DTV to all
consumers, Spanish-language television viewers will be
disproportionately harmed.
Telemundo supports a hard cutoff date for ending analog
broadcasts, but setting a hard deadline remains only one piece
of the puzzle. Several other components must be addressed in
order to ensure that the transition to digital television is
one that consumers will view as a net gain, and not as a net
loss.
First, a subsidy is needed for consumers to purchase
digital-to-analog converters. We must ensure that households
that rely exclusively on over-the-air broadcasting, such as the
mainly Spanish-speaking households, are not literally left in
the dark once analog television is shut off. Failure to include
a consumer assistance program in DTV legislation will have a
disproportionately negative impact on Spanish-language
households.
Second, MVPD carriage of digital multicast is essential.
The ability to send multiple additional free channels of
programming without using additional spectrum allows
broadcasters to serve their local communities better than ever
before through hyper-local news and community information,
local political coverage, and local weather and traffic.
Multicast channels also permit more rapid, detailed, and
geographically targeted dissemination of local and national
emergency information.
What excites me most about multicasting is that it would
enable Telemundo to greatly expand the amount, breadth, and
quality of free broadcast programming serving Hispanic
communities. This could make a very meaningful, positive
contribution to Spanish-speaking citizens. Absent a meaningful,
must-carry requirement that includes multicast carriage, this
digital dividend will be sacrificed.
Without having assurances that the entire Spanish-language
audience will have access to multicast programming channels, we
cannot create a workable business model with which to fund this
initiative. As a result, ironically, as Congress is requiring
millions of consumers to invest in new digital equipment in
order to watch television, it will simultaneously be depriving
them of one of the most important benefits they will receive
for their purchases.
Third, consumers must have access to DTV signals in un-
degraded form. A conversion to DTV that requires consumers to
purchase new equipment, and yet diminishes or denies consumers
access to HDTV, a paramount benefit of digital television
technology, makes absolutely no sense. Multichannel video-
programming providers must be required to retransmit any and
all broadcast signals, including high-definition programming on
their basic tier in its original format and quality to all
subscribers. Additionally, if a cable operator chooses to down-
convert any digital broadcast signal at the cable headend, it
should be permitted to do so only as long as the cable operator
does the same for all broadcast channels it retransmits. Absent
such a requirement, a cable operator could choose to provide an
analog feed of only the top network affiliates, and leave in
the lurch the analog viewers of smaller religious and foreign-
language broadcast channels, including Telemundo.
Finally, every stakeholder has a responsibility to augment
their efforts to educate Americans about the digital
transition. Telemundo supports mandated point-of-sale consumer
notices by retailers and manufacturers.
Thank you, again, for this opportunity to appear before you
today and share with you concerns of Spanish-speaking Americans
who have much to gain, but also much to lose in this digital
transition.
[The prepared statement of Mr. Abud follows:]

Prepared Statement of Manuel Abud, Vice President/General Manager,
KVEA-TV, Los Angeles, CA; on Behalf of Telemundo

Chairman Stevens, Senator Inouye, and members of the Committee, my
name is Manuel Abud, and I am the Vice President and General Manager of
KVEA-TV, Channel 52, Telemundo's station in Los Angeles, California.
Thank you for the opportunity to testify before you today on behalf of
Telemundo regarding issues surrounding the transition to digital
television.
I testify today not simply as a Telemundo executive, or even just
as a broadcaster, but also as a member of the Hispanic-American
community, and as a Spanish language speaker. Many members of my
community speak Spanish as their primary language, and are dependent on
Spanish language over-the-air broadcasting as their primary source of
news and local information. We are the ``go to'' source for news and
information for the Spanish speaking community. The work of this
committee ultimately will determine to what extent Spanish language
television viewers continue to have critical access to free over-the-
air Spanish language television in the digital era.
Households where Spanish is the primary language are far more
likely to rely on over-the-air television than other households.
Nationally, 43 percent of households where Spanish is the primary
language spoken watch over-the-air television exclusively. At the same
time, analysis of the consumer market reveals that digital television
technology has failed to make significant inroads into the Hispanic
community. Nielsen data indicates that the use of DTV receivers in
Hispanic households nationally is the lowest among all consumer groups.
As a result, if Congress fails to produce a final DTV transition plan
that focuses on extending the benefits of DTV to all consumers, Spanish
language television viewers will be subject to a disproportionate share
of the resulting harm. In short, we really need the Congress to get the
DTV transition RIGHT.
Getting it right means ensuring that Spanish-speaking consumers
have access to the revolutionary benefits that digital television
offers, especially high-definition television programming and
multicasting. It also means that our audiences are not disenfranchised,
whether they rely on over-the-air broadcasting, cable, or satellite for
their television. The disruption and cost accompanying the DTV
transition must be kept to a minimum.
As this committee works to craft digital television transition
legislation, it is critical to strike a balance between the need to
bring the digital television transition to a close, while also
protecting the overwhelming majority of consumers who still only have
analog television sets, and ensuring that the exciting new services
that digital technologies enables are available and enjoyed by all
consumers, especially minority and lower-income consumers.
Telemundo supports a hard cut-off date for ending analog
broadcasts. But setting a hard deadline remains only one piece of the
puzzle. Several other components also must be addressed--
simultaneously--in order to ensure that the transition to digital
television is one that consumers will view as a net gain and not a net
loss. For instance, the millions of consumers who rely exclusively on
over-the-air broadcasting--many of whom are Hispanic and lower-income--
must have some Federal support for their purchase of equipment that
will ensure their sets do not go black the day analog broadcasts cease.
These consumers, as well as those receiving local broadcast signals via
cable or satellite, also cannot be denied the full value and suite of
benefits offered by digital television--this especially includes
additional free digital channels that broadcasters provide, and HDTV
without degradation. Finally, especially if a hard deadline is set,
every stakeholder has a responsibility--actually, I believe it's more
of an opportunity--to educate every American about the transition and
what they need to know to make it themselves. I address each of these
issues briefly below.

A Subsidy Is Needed for Consumers To Purchase Digital-to-Analog
Converters
There has been much discussion of the need for some form of Federal
assistance to consumers--especially those, like many Hispanic and
lower-income citizens, who rely exclusively on over-the-air
broadcasting--who will need to purchase additional equipment to receive
digital television signals. While Telemundo is not suggesting any
particular approach, we do support the inclusion of a consumer
assistance program that, at a minimum, ensures that households
exclusively reliant on over-the-air broadcasting are not literally left
in the dark once analog television is shut off. As I previously noted,
failure to include a consumer assistance program in DTV legislation
will have a disproportionately negative impact on Spanish language
households, who are not currently purchasing DTV products, and who will
be hit hardest when the final cut-off date arrives. A subsidy program
to defray the costs of a digital-to-analog converter box is a necessity
in any mandated end to the digital television transition.
MVPD Carriage of Digital Multicast Programming Is Essential
Digital television enables broadcasters to offer four or more
programming channels in place of their one analog channel without using
any additional spectrum. Multicasting allows broadcasters to serve
their local communities better than ever before by providing multiple
streams of locally-produced or community-oriented programs, including
but not limited to: ``hyper-local'' news, covering smaller parts of
large metropolitan areas, programming that covers local political
issues and candidates; newscasts that serve specific segments of the
local market; local events, including school and amateur sports
activities; and local weather, traffic, and emergency information.
In this time of heightened alert against terrorism, local broadcast
stations are the first providers of emergency news and information to
the public concerning not only actual or potential terror threats to
public safety, but also local emergency incidents such as chemical
spills, dangerous storms, floods, escaped prisoners, and similar
incidents of urgent import. Multicast channels permit the rapid
dissemination of such information in much greater detail by enabling
stations to target information for particular communities on particular
streams.
Beyond emergency or local information, the increasingly diverse
character of American society makes the availability of Spanish
language, local television programming critically important in
permitting Spanish language speaking residents to become better
integrated into, and function more effectively in the communities in
which they reside. Multicasting increases the ability of broadcast
stations to transmit Spanish language programming to Spanish speaking
populations within their service area. Absent a meaningful must-carry
requirement that includes multicast carriage, this digital dividend
will be sacrificed.
Telemundo and other broadcasters cannot avail themselves of the
powerful benefits of multicasting in the marketplace absent cable and
satellite carriage of multicast programming channels. Broadcast
television in any language is advertiser supported, and our ability to
attract advertising dollars is directly tied to the number of viewers
we have the opportunity to attract to our programming. The majority of
all television viewers watch broadcast television via cable or
satellite, and if those services do not carry multicast programming
services the overwhelming majority of television viewers will not have
the opportunity to see them.
As a result, the fundamental basis upon which must-carry has been
traditionally supported by Congress--the preservation of free over-the-
air television--is critical in the context of multicasting. Absent
Congressional support for multicast must-carry, Telemundo and other
Spanish language broadcasters will have no economic model upon which to
rely to offer Spanish language viewers new and innovative multicast
programming services. As Congress is requiring millions of consumers to
invest in new digital equipment in order to watch television, it will
simultaneously be depriving them of one of the most important benefits
they will receive for their purchases. Failure to include multicast
must-carry in a final DTV transition bill strikes at the core of the
critical balance between reward and risk, upon which the success of the
DTV transition rests.

Consumers Must Have Access to DTV Signals in Un-Degraded Form
A conversion to DTV that requires consumers to purchase new
equipment, and yet diminishes or denies consumers' access to HDTV--a
paramount benefit of digital television technology--makes absolutely no
sense at all. Multichannel video programming providers must be required
to retransmit any and all broadcast signals--including high definition
programming--in its original format and quality to all subscribers.
Moreover, any DTV transition legislation should require that digital
broadcast signals be carried on a basic tier of service. Both of these
requirements serve consumers of pay television services well because
they will ensure they can receive one of the principal benefits of DTV
technology--the glorious video and audio quality of high definition--at
affordable rates.

If Cable Operators Are Given Flexibility To ``Down-Convert,'' They Must
Be Required To Do So on a Nondiscriminatory Basis
Should a cable operator wish to downconvert a digital signal at the
cable headend to ensure continued service to analog cable subscribers,
it should be permitted to do so only so long as the cable operator also
provides an undegraded digital signal on the same tier as that down-
converted signal. However, if a cable operator avails itself of this
option, it must be required do so on a nondiscriminatory basis. Absent
such a requirement, a cable operator could choose to provide an analog
feed of only the top network affiliates its carries, and leave in the
lurch the viewers of smaller, religious and foreign-language broadcast
channels, including Telemundo. This would make us unacceptably
vulnerable to losing our analog cable subscribers unless cable
operators decide to give all analog cable subscribers a set top box.
Don't bet on that.
Cable industry leaders have repeatedly stated that they do not want
to disrupt analog cable subscribers as the DTV conversion occurs. All
we are saying, to quote President Reagan, is: ``Trust, but verify.''

Consumer Education
Finally, a hugely important component of any DTV transition
legislation must be consumer education--every stakeholder: retailers,
manufacturers, cable operators, and, of course, local broadcasters and
broadcast networks, must significantly ratchet up their efforts to
inform consumers about the impending shut off of analog television, and
their need to purchase digital tuning equipment in order to continue to
receive free broadcast services.
This must be done as soon as possible. It must be well-coordinated,
understandable to the average citizen, and ubiquitous. In particular,
Telemundo believes it is critical that consumers considering the
purchase of an analog-only television be informed at the point-of-
purchase--by the retailer or other seller, whether in a brick-and-
mortar retail store or a website, and by manufacturers, through a
product label, about the conversion date, the need for digital tuning
capability, and the potential limitations of analog-only equipment.
I appreciate the opportunity to appear before you today, and share
with you concerns of Spanish speaking Americans who have much to gain
but also much to lose in the digital television transition. I stand
ready to work with each Member of this Committee to ensure that final
digital television transition legislation serves the interests of our
Nation and of all television viewers.

The Chairman. Our next witness is Kyle McSlarrow, President
and CEO of the National Cable & Telecommunications Association.

STATEMENT OF KYLE McSLARROW, PRESIDENT/CEO,

NATIONAL CABLE & TELECOMMUNICATIONS ASSOCIATION (NCTA)

Mr. McSlarrow. Mr. Chairman, Mr. Co-Chairman, members of
the Committee, I appreciate your invitation to appear here
today.
I applaud your committee's leadership to address the return
of the analog spectrum from broadcasters, particularly for
public-safety purposes. That is why, Mr. Chairman, when you
asked us for our assistance we committed to provide a
constructive solution for cable customers.
Our proposed solution is to provide cable operators the
flexibility, once the analog spectrum has been returned, to
down-convert the digital signals from must-carry broadcasters.
What this means, as a practical matter, is that the over-40-
million cable customers who can only receive an analog service
will enjoy the same service the day after the transition that
they received the day before. It means that many stations,
including public television stations, network affiliates, and
other stations that have negotiated agreements with the cable
industry, would be carried in digital, just as they are today.
It means that those of our customers who have the capability to
receive high-definition television signals will continue to
receive increasing numbers of high-definition channels from
among the 23 cable networks offering high definition, and many
commercial and public broadcasters, as well. And, though it
will cost the cable industry tens of millions of dollars to re-
engineer our facilities to provide for down-conversion, it
won't cost the government a dime. But, instead of embracing
this solution, the broadcasters continue to ask you for special
favors.
Mr. Chairman, the broadcasters are urging you to impose
requirements on the cable industry that they have repeatedly
failed to convince Congress and the FCC to impose and that
would be unconstitutional under the Turner line of Supreme
Court cases.
The most plausible interpretation is that the broadcasters
hope to goad the cable industry into joining them in their
passive-aggressive opposition to a hard date. Perhaps a more
charitable interpretation is, they view this as one more
opportunity to make a land grab. In any event, they are making
your task harder, not easier.
Broadcasters are not the only ones in America making the
transition to digital, and they should not be given
preferential treatment in a competitive marketplace, especially
by government mandate. However they describe it, what they're
asking for is obvious: government-mandated carriage of both an
analog and a digital version of the same signal, and carriage
of multiple streams of programming.
The broadcasters seem not to understand that cable, in
addition to being a television provider, is also the largest
broadband provider in the United States. We have one pipe,
upgraded with fiberoptic technology, with very robust capacity,
but it is not unlimited. By law, we already have to offer
public access and other public educational and governmental
video programming. We also have to offer carriage to every
broadcaster who chooses must-carry. We offer increasing numbers
of digital and high-definition programming. And that one cable
connection to the home allows us to offer not just linear
channels of video, we plan to offer video-on-demand, including
high-definition video-on-demand. That one cable connection
allows us to offer highspeed Internet services. It allows us to
offer circuit-switch telephone services and, increasingly,
Voice-over-Internet-protocol telephone service. That pipe also
allows us to pass data back and forth for current and new
applications of two-way services.
All of this requires a lot of capacity, but we are in an
incredibly competitive market. We have to continue innovating.
So, for example, in the next few years we plan to offer
Internet speeds of up to 160 megabits per second, compared with
the average of, say, 5 megabits per second today. That is the
kind of broadband deployment that most of the members of this
committee want to see deployed. But to do that means we have to
use from four to eight times the bandwidth, or capacity, as we
do today to deliver this next generation of high-speed Internet
service.
That kind of innovation doesn't just happen; it requires a
regulatory framework that provides certainty and that rewards
investment. And the kind of investment we have made, nearly
$100 billion over the least 10 years, is what it took to put us
in this position. That kind of investment will not happen if
someone can just come off the sidelines and take capacity for
themselves. If that happens, innovation will suffer, because
some services won't stay on our pipe, and some services will
never make it on. That is precisely the kind of choice about
innovation and services that a free market should determine,
not a government mandate.
Mr. Chairman, I would just make one final point. This
committee can discharge its responsibilities and advance public
safety without wading into this morass. Nothing the
broadcasters have proposed has the slightest bearing on how you
can best ensure the return of the spectrum, and how you can do
so with a minimum of inconvenience to consumers.
We have tried to provide you a sensible approach to assist
your efforts, and we look forward, Mr. Chairman, to continuing
to work with you and members of this committee on this
important legislation.
Thank you.
[The prepared statement of Mr. McSlarrow follows:]

Prepared Statement of Kyle McSlarrow, President/CEO,
National Cable & Telecommunications Association (NCTA)

Introduction
Mr. Chairman, Mr. Co-Chairman, members of the Committee, my name is
Kyle McSlarrow. I am the President and CEO of the National Cable &
Telecommunications Association, and it is a privilege to appear before
you today. NCTA is the principal trade association for the cable
television industry in the United States. It represents cable operators
serving more than 90 percent of the Nation's 66 million cable
television households and more than 200 cable program networks, as well
as equipment suppliers and providers of ancillary services to the cable
industry.
I appreciate your invitation to testify on pending Congressional
efforts to speed the transition to digital television. As I have
mentioned during our listening sessions with this committee, cable is
at the forefront of the digital revolution and was the first industry
to deliver on the promises of the 1996 Telecommunications Act,
including high-speed access to the Internet and facilities-based
competition for the telephone companies. Cable was also the first in
2002 to respond to the FCC's calls for assistance in expediting the
broadcasters' transition to digital television.\1\
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\1\ In 2002, the cable industry was the first to embrace then-FCC
Chairman Powell's call for voluntary industry action to speed the
digital television transition. Ten top cable operators--AT&T Broadband,
AOL Time Warner, Comcast, Charter Communications, Cox Communications,
Adelphia Communications, Cablevision Systems, Mediacom Communications,
Insight Communications, and CableOne--pledged to support the DTV
transition by: (1) carrying a complement of commercial and public
television stations and cable program networks that offered HDTV
programming, (2) offering value-added DTV programming that would create
an incentive for consumers to purchase DTV sets, (3) placing orders for
integrated HD set-top boxes with digital connectors, and (4) providing
these boxes to customers who requested them.
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Mr. Chairman, while the cable industry has taken no formal position
on a ``hard date'' for the broadcasters' return of the analog spectrum,
we understand and applaud your committee's leadership in grappling with
the important policies inherent in the return of that spectrum,
particularly for public safety purposes.
That is why when you asked us for our assistance, we committed to
providing a constructive solution for an early return of the spectrum
that would ensure all cable customers would face a seamless transition
at no cost to the government.
Our solution is to provide cable operators the flexibility, once
the analog spectrum has been returned, to ``down-convert'' the digital
signals from must-carry broadcasters at the cable headend.
What this means, as a practical matter, is that the over 40 million
cable customers who can only receive an analog service will not lose
access to must-carry stations, and will enjoy the same service the day
after the transition that they received the day before.
It means that many stations--including public television stations,
network affiliates, and other stations that have negotiated
retransmission consent agreements with the cable industry--would be
carried in digital as well, just as they are today.
It means that those of our customers who have the capability to
receive high definition television signals will continue to receive
increasing numbers of high definition channels from among the 23 cable
networks offering high definition and many commercial and public
broadcasters as well.
And, although it will cost the cable industry tens of millions of
dollars to re-engineer our facilities to provide down-conversion, it
won't cost the government a dime.
Our solution is straightforward. Our solution does not attempt to
make other industries' businesses more difficult. And our solution
allows this committee, and Congress, to concentrate on how to address
those Americans who only receive over-the-air video programming.
But instead of embracing our down-conversion solution, the
broadcasters continue to ask for special favors.
Mr. Chairman, the broadcasters are urging you to impose
requirements on the cable industry that they have repeatedly failed to
convince Congress and the FCC to impose, and that would be
unconstitutional under the Turner line of Supreme Court cases.
Broadcasters are not the only ones in America making the transition
to digital, and they should not be given preferential treatment in a
competitive marketplace--especially by government mandate.
Whether the proposal is called ``either/or,'' or down-conversion
``in addition'' to digital must-carry, what they are asking for is
obvious: carriage of both an analog and a digital version of the same
signal. But dual must-carry--and multicast must-carry, another one of
the broadcasters' proposals--will do nothing to forward the digital
transition and harms consumers, cable operators, and cable programmers
alike.
The broadcasters' attempts to appropriate additional channel
capacity on cable systems through dual and multicast must-carry will
harm consumers by slowing the deployment of broadband and a host of
other new digital services. The reason is simple: these services--such
as 100+ megabits per second Internet access, VoIP telephone service,
and digital programming tiers--all compete for a finite amount of space
on cable systems. The more the broadcasters get, the less capacity
there is for innovative new applications sought by our customers.
Awarding the broadcasters dual or multicast must-carry rights would
do nothing to further ensure the viability of programming from a
multiplicity of sources. It would, however, use valuable capacity on
cable systems that would otherwise be available to cable operators and
non-broadcast cable program networks to offer the array of services
that provides the greatest value to consumers. Both dual must-carry and
multicast must-carry are at odds with fundamental First Amendment and
Fifth Amendment rights, and do not pass muster from either a public
policy or legal standpoint.
However, this committee can discharge its responsibilities and
advance public safety without wading into this morass. Current law,
which gives broadcasters the right to mandatory carriage of their
primary digital video stream after the transition is complete and the
broadcasters are transmitting exclusively in digital, presumes a world
in which the vast majority of consumers have digital televisions. An
early return of the spectrum before most customers have purchased TVs
with digital tuner changes that picture and requires a little
flexibility. If you adopt our down-conversion proposal, you can
guarantee that 66 million cable households will have access to the same
programming the day after the transition as the day before. You will
also allow the cable industry to continue to rollout broadband services
and serve greater numbers of customers with digital and high definition
programming.

The Cable Industry Is Leading the Broader National Transition to the
Digital Age
In the United States, the broadcasters' transition from analog to
digital is only a small part of the larger digital transition that is
occurring in every area of our Nation's economy. Since 1996, when
Congress enabled cable's investment in new technology and programming
by substantially reducing regulation, cable operators have nearly
rebuilt their facilities.\2\ With an investment of almost $100 billion,
operators have replaced coaxial cable with fiber optic technology, and
installed new digital equipment in homes and system headends, thus
enabling the transmission of voice, video, and Internet services in
digital format. As a result, cable customers are already enjoying a
full complement of digital programming and advanced information
services independently of the broadcasters' conversion to digital.
---------------------------------------------------------------------------
\2\ In return for deregulation, the cable industry promised
Congress and American consumers that it would provide: (1) facilities-
based competition to the telephone companies, and (2) a new generation
of advanced information and video services--both of which we have done.
---------------------------------------------------------------------------
For example, cable customers can purchase digital programming tiers
that include a diverse array of video networks and commercial-free
music channels. Digital customers also have access to video-on-demand
programming, digital video recording, and enhanced electronic program
guides. These features allow programs to be viewed at the customer's
convenience and at a time of the customer's choosing. They also allow
cable subscribers to block access to programming they do not want their
children or households to see. All of cable's digital services can be
enjoyed by consumers with analog TV sets who use digital set-top boxes
that convert digital signals to analog. More innovative interactive
video services are on the way, in addition to the Internet and digital
telephone services that are already attracting large numbers of
customers.
Cable customers with high definition TV (HDTV) sets have even more
options.\3\ They can receive a wide selection of programming
transmitted in high definition, including 23 HD cable networks that
transmit much of their programming in high definition.\4\ In addition,
cable operators are now voluntarily carrying the digital channels of a
substantial number of over-the-air broadcast stations in addition to
those stations' analog signals--either through retransmission consent
agreements with individual commercial stations \5\ or voluntary
initiatives such as cable's recent carriage agreement with public
television stations.\6\ Significantly, cable's contractual carriage
agreement with public television stations was reached through private
negotiations--not Federal legislation or FCC regulations.
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\3\ The cable industry is rapidly rolling out high definition
programming. As of January 1, 2005, cable companies had launched high
definition television service on systems passing 92 million homes. At
least one cable operator in all of the top 100 markets now offers HDTV,
and HD over cable is available in 184 of the 210 U.S. television
markets.
\4\ Including Cinemax HDTV, Comcast SportsNet HDTV, Discovery HD
Theater, ESPN HD, ESPN2 HD, FSN HD, HBO HD, HDNet, HDNet Movies, INHD,
INHD2, MSG Networks in HD, NBA TV, NFL Network HD, Outdoor Channel 2
HD, Showtime HD, Spice HD, STARZ! HDTV, The Movie Channel HD, TNT in
HD, Universal HD, and YES-HD.
\5\ As of January 1, 2005, cable operators voluntarily carried 504
digital broadcast signals--a 66 percent increase over the 304 stations
carried in December 2003.
\6\ On January 31, 2005, NCTA reached agreement with the
Association of Public Television Stations (APTS) to ensure that the
digital programming offered by local public TV stations is carried on
systems serving the vast majority of cable subscribers across the
Nation. The boards of NCTA, APTS, and PBS ratified the agreement on
February 4, 2005.
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Cable's Carriage of Broadcast Signals Today
The vast majority of cable customers have analog television sets,
and most of those sets--as in over-the-air households--are not equipped
with digital set-top boxes.\7\ Today, cable operators provide the
analog signals of virtually all local television stations, which can be
viewed by all customers--those with and without digital boxes, and
those with and without digital television sets. In addition, operators
provide the digital signals of some, but not all, broadcast stations--
especially those that provide compelling digital programming that is
likely to enhance the value of cable service for the growing number of
customers with high definition sets.
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\7\ There are approximately 172 million television sets in the 66
million cable households across the country. 26 million cable homes
subscribe to digital service, but not all digital households have
digital boxes on all their TVs. This means that there are approximately
28 million analog TVs in digital homes that will require boxes after
the transition. If one adds these 28 million sets to the approximately
106 million analog TVs in homes with only analog cable service (41
million), there are a total of around 134 million analog TV sets in
cable homes that will require digital boxes in order to get digital
service. The cost of deploying 134 million set-top boxes is $9 billion
for a simple $67 digital-to-analog box and $29 billion for a $200
interactive digital cable box.
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Cable's current carriage practices fully comply with what both the
marketplace and the ``must-carry'' rules dictate. Existing law requires
cable operators to carry the analog signals of all ``must-carry''
broadcast stations during the digital transition, while making carriage
of the digital signals optional and subject to ``retransmission
consent'' agreements with broadcasters. The FCC has recognized that
requiring ``dual carriage'' of the analog and digital signals of all
must-carry stations--regardless of whether the digital programming is
valuable to the cable households capable of viewing it on their TV
sets--would do nothing to further the purposes of the must-carry
requirements, or the digital transition while unduly burdening the
First Amendment rights of cable operators and programmers.
This sensible balance, which serves the interests of must-carry
broadcasters, cable operators, cable programmers, and cable customers
alike, can be preserved without any disruption to cable customers after
broadcasters stop transmitting analog signals--with one key adjustment.
Current law requires cable operators to carry must-carry signals
without ``material degradation.'' The FCC has interpreted this to mean
that--after the transition, when broadcasters are transmitting only in
digital--``a broadcast signal delivered in HDTV must be carried in
HDTV.'' \8\ This ``no material degradation'' requirement makes sense
if--as is the case under current law--the transition to digital-only
broadcasting does not occur until most households are equipped to
receive digital signals on their television sets. However, if Congress
is going to impose a ``hard date'' before most consumers have digital
sets or set-top boxes, then the requirement to transmit the
broadcasters' digital signals in ``un-degraded'' digital format will be
costly and disruptive for cable customers who do not have digital TVs
or set-top boxes, i.e., most of our subscribers. It will require them
to acquire digital sets or set-top boxes to continue watching the same
broadcast programming that they watch today.
---------------------------------------------------------------------------
\8\ In re Carriage of Digital Television Broadcast Signals, First
Report and Order and Further Notice of Proposed Rulemaking, 16 FCC Rcd.
2598, 2629 (2001) (emphasis added).
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To prevent this costly disruption, Congress should allow cable
operators to ``down-convert'' the digital signals of must-carry
broadcasters to analog at the headend and provide the primary video
programming stream of those down-converted signals to cable homes in
lieu of the primary digital video stream. This will ensure that all
cable households can receive the programming provided by those must-
carry broadcasters without having to purchase digital television sets
or digital set-top boxes.
Households with HDTV sets would, of course, be able to watch the
increasing number of HD channels, as they do now. I would note that
cable operators would still have every incentive to voluntarily provide
the digital signal--as they frequently do today--in addition to the
down-converted analog signal if the digital version were uniquely
compelling and attractive to customers with digital and HDTV equipment.
As a result, a ``hard date'' transition to digital broadcasting would
be seamless and non-disruptive for cable customers.
Today, we offer analog to our analog customers, analog and digital
to our digital customers, and increasingly the opportunity for
customers with high definition sets to watch a growing number of
channels in high definition. In addition, many of our operators have
already announced their own plans to simulcast analog channels in
digital. And what is true today will still be true the day after the
transition under our proposal. In the meantime, increasing numbers of
our subscribers will continue to switch to digital services, and many
of them will become high definition subscribers. We believe our
proposal minimizes costs and inconvenience to consumers, and allows you
as policy-makers not to have to worry about disrupting anyone who is a
cable customer--and to do so at no cost to the government.
We are pleased to see that the SAVE LIVES Act (S. 1268), introduced
by Senators McCain and Lieberman, appears to recognize the consumer
benefits of permitting down-conversion in lieu of digital carriage.\9\
While we have concerns about the bill's ``convert one-convert all''
obligation on any operator who chooses to down-convert, the bill
recognizes that this obligation should end when it is no longer
necessary to ensure the continued ability of audiences for foreign-
language and religious television broadcast stations to view the
signals of such stations. Finally, the bill also recognizes that only a
single digital program stream from each broadcaster should be entitled
to carriage on a cable operator's basic service tier. Thus, S. 1268
offers a sound starting point for crafting a digital transition bill
that best serves the interests of consumers and is fair to all of the
affected industries.
---------------------------------------------------------------------------
\9\ While S. 1268 establishes a baseline digital carriage
requirement with respect to any must-carry station that relinquishes
its analog spectrum, it gives cable operators the flexibility to
convert digital signals to analog at the headend ``notwithstanding''
this baseline requirement.
---------------------------------------------------------------------------
Dual and Multicasting Must Carry Are Likely To Be Found
Unconstitutional

A. Down-Conversion and Dual Carriage
Cable operators seek authority to fulfill their must-carry
obligations in some cases by carrying a down-converted analog signal in
lieu of a broadcaster's digital signal. Some commercial broadcasters
are insisting, however, that cable operators be permitted to carry
down-converted analog versions of their digital signals only in
addition to--not instead of--the original signals. This would
effectively impose a dual carriage obligation if operators wanted to
make broadcast signals readily available to the majority of their
customers who do not have digital equipment--as they would obviously
have to do. Any such dual carriage requirement would impose untenable
burdens on cable operators and programmers alike and should be
rejected.

By preempting an excessive amount of capacity on cable
systems, dual carriage would interfere with the ability of
cable operators to offer consumers the broadest array of
programming, and to deploy broadband and innovative digital
services.

Dual must-carry would be especially unfair to non-broadcast
program networks (such as A&E's Biography Channel, C-SPAN,
Discovery Kids Channel, Hallmark Channel, The Outdoor Channel,
Oxygen, Si TV, and TV One), which have no guarantee that their
programming will be carried in analog or digital format--much
less in both.

As the FCC has determined, imposing such burdens on cable
operators' and programmers' speech would raise serious Constitutional
problems, because it would not advance the governmental interests
identified by the Supreme Court as justifications for ``must-carry''
rules--or any other valid government interest. Specifically,

Dual carriage will do nothing to preserve or enhance the
availability or quality of broadcast signals available to over-
the-air viewers. To the contrary, guaranteed carriage of a
broadcaster's signal in analog and digital format will diminish
the broadcaster's incentive to provide programming that is
uniquely compelling in its digital format, e.g., HDTV.

Dual carriage will do nothing to promote the dissemination
of information from a multiplicity of sources since the two
channels would simply be digital and down-converted analog
versions of the same programming. Indeed, it would have the
opposite effect: it would decrease the multiplicity of voices
by granting preferential treatment to one broadcaster over
different programming from other sources.

Dual carriage will do nothing to promote the purchase of
digital sets by consumers or set-top boxes by cable operators
since cable systems already provide a broad array of digital
and high definition programming (both broadcast and non-
broadcast). In these circumstances, the additional carriage of
must-carry broadcast stations in digital format will provide no
additional incentive to cable customers to purchase digital
equipment.

Not surprisingly, the FCC has voted twice (by a margin of 5-0 in
2005) that dual carriage would raise serious First Amendment problems,
and should not be imposed under the current must-carry statute.
Changing the law to allow cable operators to carry down-converted
analog versions in lieu of digital versions of must-carry signals makes
good sense. But changing the law in a manner that effectively requires
cable operators to carry must-carry signals in both digital and analog
formats would not only be counterproductive and contrary to the public
interest, it would be unconstitutional as well.

B. Multicast Must Carry
If Congress grants cable the authority to fulfill its must-carry
obligations by carrying down-converted analog signals, all cable
customers will be able to watch those signals--the same channels of
programming that we are required to carry today--without having to
acquire additional set-top boxes or new digital television sets.
Meanwhile, cable operators would continue, voluntarily, and pursuant to
retransmission consent, to carry additional digital signals from
broadcasters who provide compelling high definition and multicast
programming that is attractive to cable customers.
But commercial broadcasters are continuing to urge Congress to
force cable operators to carry every digital multicast channel from
every must-carry broadcast station. \10\ Never mind that they failed to
persuade the FCC that such a requirement was in any way necessary to
preserve the viability and availability of over-the-air broadcast
stations, or that it would promote the availability of broadcast
programming from a variety of sources. The broadcasters also failed to
persuade the FCC that such a requirement could be implemented without
burdening cable operators and programmers in a way that raised serious
Constitutional problems. But broadcasters are now hoping that the same
arguments that failed to persuade the Commission will somehow prove
persuasive here.
---------------------------------------------------------------------------
\10\ See, for example, ``Completion of the Digital Television
Transition'' (June 24, 2005), a paper being circulated in Congress by
the National Association of Broadcasters.
---------------------------------------------------------------------------
There is no reason why they should. A multicast must-carry
requirement would force cable operators to use channel capacity that
they spent nearly $100 billion deploying (so that they could offer
compelling programming and advanced broadband services) to carry the
broadcasters' multicast programming instead. While this trade-off would
reduce the value of cable service to cable customers, it would do
nothing to preserve the availability--and would be more likely to
diminish the quality--of over-the-air television from a multiplicity of
sources.
First of all, we should put to rest the notion, which the
broadcasters keep resuscitating, that cable operators have
anticompetitive reasons for refusing to carry the broadcasters'
multicast programming--even if consumers find it attractive. In 1992,
when Congress enacted the current must-carry provisions, it worried
that such discrimination might occur with respect to the broadcasters'
analog signals. But when the Supreme Court narrowly upheld (5-4) the
Constitutionality of analog must-carry, a majority of the Court found
that this was not a supportable justification for the rules.\11\
---------------------------------------------------------------------------
\11\ See Turner Broadcasting System, Inc. v. FCC, 520 U.S. 180, 225
(1997) (Breyer, J., concurring in part) (``I join the opinion of the
Court except insofar as [it] relies on an anticompetitive rationale.'')
---------------------------------------------------------------------------
Whatever fears Congress may have had in 1992, the subsequent launch
of two vigorous and successful national direct broadcast satellite
(DBS) services has removed any likelihood that a cable operator could
profitably refuse to carry a programming service--broadcast or non-
broadcast--that would attract a significant viewership and might be
carried by its competitors. The Supreme Court found no basis for such
fears in 1997, and today, with satellite competition stronger than
ever, the prospect of anticompetitive conduct by cable operators is
even more remote. As an argument for multicast must-carry, it is a red
herring.
In fact, where broadcasters are currently offering compelling
digital content, cable operators are voluntarily agreeing to carry such
programming. At present, cable operators have agreed to carry the
digital signals of over 500 unique broadcast stations, and this
includes not only HDTV signals but also multicast streams. Of course,
operators continue to carry the broadcasters' analog channels as well.

As of May 2005, cable operators were carrying commercial
broadcasters' multicast programming in over 50 markets ranging
from many of the Nation's largest (including at least 7 of the
top 10 markets) \12\ to numerous small to mid-sized markets
across the country. For example, in the Washington metropolitan
area, Comcast is carrying WJLA's local Weather Now channel
(ABC) and WRC's Weather Plus channel (NBC), as well as WETA's
Prime, Kids, and Plus channels (PBS).
---------------------------------------------------------------------------
\12\ In at least one additional top 10 television market, cable
carried the multicast signal of the recent NCAA men college basketball
tournament games.

In January 2005, NCTA and the Association of Public
Television Stations (APTS) entered into an agreement that
ensures that local public television stations' digital
programming--including multicast channels--is carried on cable
systems serving the vast majority of cable customers across the
---------------------------------------------------------------------------
Nation.

Comcast has digital carriage agreements with public
broadcasters in at least 45 markets, and has reached digital
multicast carriage agreements with a growing number of
commercial broadcasters for channels that Comcast believes
bring value to its customers.

During the recent NCAA men's college basketball tournament,
CBS stations in a dozen markets offered--and cable operators
agreed to carry--extra games on multicast channels.

The Supreme Court found that the analog must-carry requirements
were justified as a means for preserving the viability of over-the-air
broadcast stations and the availability of programming from a
multiplicity of sources. It found, after remanding the matter to the
FCC to develop an extensive evidentiary record,\13\ that non-carriage
of a broadcaster's single analog channel would threaten the viability
of a significant number of broadcasters, and therefore, threaten to
reduce the diversity of programming sources available over-the-air. But
there is no reason to believe that mandatory carriage of multiple
program streams provided by every broadcaster is necessary to protect
against such threats.
---------------------------------------------------------------------------
\13\ In remanding the case, the Court made clear that it is not
sufficient merely to assert that must-carry rules are necessary to
prevent some hypothetical harm: ``That the Government's asserted
interests are important in the abstract does not mean, however, that
the must-carry rules will in fact advance those interests. When the
Government defends a regulation on speech as a means to redress past
harms or prevent anticipated harms, it must do more than simply `posit
the existence of the disease sought to be cured.' Quincy Cable TV, Inc.
v. FCC, 768 F. 2d 1434, 1455 (CADC 1985). It must demonstrate that the
recited harms are real, not merely conjectural, and that the regulation
will in fact alleviate these harms in a direct and material way.''
Turner Broadcasting System, Inc. v. FCC, 512 U.S. 622, 664 (1994).
---------------------------------------------------------------------------
Although the broadcasters persistently claim that a multicast must-
carry requirement is essential to maintain their economic viability,
they have not produced a shred of evidence demonstrating that this is
the case. They certainly had ample opportunity to do so throughout the
FCC's lengthy rulemaking proceeding. Yet the Commission found nothing
in the record to support their claim:

Unlike in the analog carriage debate, here broadcasters fail to
substantiate their claim that mandatory multicasting is
essential to ensure station carriage or survival. Broadcasters
argue that carriage of multicast streams is essential to help
them develop and support additional programming streams, but
they have not made the case on the current record that these
additional programming streams are essential to preserve the
benefits of a free, over-the-air television system for viewers.
Broadcasters will continue to be afforded must-carry for their
main video programming stream, which can be in standard
definition or high definition, and any additional material that
is considered program-related. Broadcasters can also rely on
the marketplace working without mandatory carriage in order to
persuade cable systems to carry additional streams of
programming. There is evidence from the record, as well as news
accounts, that cable operators are voluntarily carrying the
multiple streams of programming of some broadcast stations,
including public television stations, that are currently
multicasting. . . . Under these circumstances, the interests of
over-the-air television viewers appear to remain protected.\14\
---------------------------------------------------------------------------
\14\ Carriage of Digital Television Broadcast Signals: Amendments
to Part 76 of the Commission's Rules, Second Report and Order and First
Order on Reconsideration, 20 FCC Rcd. 4516, 4534-35 (2005) (footnotes
omitted) (``Second Report and Order'').

Indeed, while broadcast groups have argued that multicast carriage
is especially vital to the survival of smaller and financially weaker
broadcast stations, one independent broadcaster, Entravision Holdings,
LLC, specifically told the FCC that it and other similarly situated
independent broadcasters have little to gain--and much to lose--from a
---------------------------------------------------------------------------
multicast must-carry requirement. According to Entravision:

Network-affiliated broadcasters have characterized multicast
services as an integral component of the future business plans
of broadcasters, and as indispensable to a successful DTV
transition and the continuing vitality of free over-the-air
television service. However, while digital multicast services
may already be a reality for some network affiliates with the
programming and financial resources to advance and support such
technology, independent stations simply do not have access to
the programming or the capital to invest in such technology at
this time, or in the foreseeable future. \15\
---------------------------------------------------------------------------
\15\ ``Why The Commission Should Not Promulgate A Digital Multicast
Must-Carry Requirement At This Time Given The Harm Such A Decision
Could Inflict On Independent Broadcasters'' Ex Parte Filing of
Entravision Holdings, LLC, CS Docket No. 98-120, March 1, 2004
(emphasis added).

As a result, Entravision noted that ``. . . multicasting will
simply increase the power of network-affiliated stations and further
diminish the ability of independent broadcasters to make their voices
heard.'' \16\
---------------------------------------------------------------------------
\16\ Id.
---------------------------------------------------------------------------
As this broadcaster suggests, a multicast carriage requirement will
not serve--and may actually disserve--the purpose of promoting the
availability of programming from a variety of sources. The FCC itself
found it hard to see how carriage of multiple streams from the same
broadcast station could serve such a purpose:

[B]ased on the current record, there is little to suggest that
requiring cable operators to carry more than one programming
stream of a digital television station would contribute to
promoting ``the widespread dissemination of information from a
multiplicity of sources.'' Under a single-channel must-carry
requirement, broadcasters will have a presence on cable
systems. Adding additional channels of the same broadcaster
would not enhance source diversity. Furthermore, programming
shifted from a broadcaster's main channel to the same
broadcaster's multicast channel would not promote diversity of
information sources. Indeed, mandatory multicast carriage would
arguably diminish the ability of other, independent voices to
be carried on the cable system. \17\
---------------------------------------------------------------------------
\17\ Second Report and Order, supra, 20 FCC Rcd. at 4535 (footnote
omitted).

Nor would a multicast carriage requirement do anything to promote
the digital transition by accelerating the acquisition and use of
digital equipment--television sets or set-top boxes--by cable
customers. Cable customers already have access to hundreds of channels
of programming, including many channels of high definition programming.
It is unlikely that the availability of additional digital multicast
programming will persuade any additional customers to acquire digital
sets or set-top boxes.
Since a multicast carriage requirement would not serve the purposes
that justified the analog must-carry provisions--or any other important
government policy--there is no basis, Constitutional or otherwise, for
imposing the burdens of such a requirement on cable operators and
programmers.
But that does not deter the NAB, which asserts that mandatory
carriage of multicast streams would not require any more capacity than
is required of cable operators under current law, and would pose no
Constitutional problems. The broadcasters' claim is wrong, both as a
matter of fact and as a matter of law.
First, if Congress adopts a hard date that ends the transition
before most cable customers have purchased digital television sets or
digital set-top boxes, a multicast requirement almost certainly will
take up more capacity than is currently used to carry broadcast
stations. This is because cable operators will need to down-convert and
carry each broadcaster's primary video signal in analog format, using
the same 6 MHz they use today to carry such stations. Any requirement
to carry additional digital multicast signals will add to this burden
on cable's capacity.
Second, ``current law'' contemplates that broadcasters must return
their free analog spectrum and that they are entitled to carriage of
their one ``primary'' digital video signal after the transition. Adding
a multicast carriage requirement to this obligation obviously increases
the burden on a cable system's capacity, and restricts an operator's
ability to deploy significant new services and applications that
enhance the value of cable service to local consumers.
In any event, the burden of a must-carry requirement, for
Constitutional purposes, is not simply the physical amount of channel
capacity an operator is required to devote to must-carry, but the
extent to which must-carry obligations: (1) intrude on a cable
operator's editorial discretion to use his system's capacity in a
manner that best serves viewers, and (2) discriminate against cable
programmers who do not have the broadcasters' preferential, guaranteed
access to channels on a cable system.
As I have mentioned, cable operators have invested nearly $100
billion in facility upgrades to bring a variety of new digital
broadband services to their customers. Each channel that would have to
be used to carry a must-carry stream of broadcast programming in lieu
of some other service imposes an incremental burden that can only be
justified if it advances an important government interest.
Any multicast programming that is likely to be attractive to
viewers will be--and is already being--carried by cable operators. But
requiring cable operators to carry every multicast stream of every
broadcast station would impose significant burdens on the speech rights
of cable operators and cable program networks, and would disserve the
interests of cable customers. Imposing a multicast requirement would
raise serious Constitutional problems under the First Amendment. A
multicast carriage requirement, like dual must-carry, would also raise
serious Fifth Amendment problems. It would result in the permanent,
physical occupation of a substantial portion of a cable operator's
system without just compensation--indeed, without any compensation at
all.

Conclusion
Congress should reject the broadcasters' renewed calls for digital
must-carry, including dual must-carry and multicast must-carry. When
the broadcasters suggest that they are not asking for dual must-carry
but want ``either/or'' carriage or carriage of ``just'' their digital
signal, policymakers should realize that these proposals are tantamount
to dual must-carry. In what is still primarily an analog television
world, cable companies cannot plausibly be expected to cutoff the bulk
of their video customers by carrying only digital signals during the
broadcasters' transition to DTV.
If Congress decides that the analog spectrum needs to be returned
before most television viewers are equipped to receive digital signals,
there is a way of minimizing consumer costs and service disruptions.
Instead of permitting operators to carry down-converted signals in
addition to mandated carriage of the digital signals transmitted by
must-carry broadcasters, one need only to allow carriage of down-
converted signals in lieu of the digital signals, while giving
operators the discretion to carry both the down-converted and digital
versions of the signal. Mandating dual carriage or multicast carriage
would do nothing further to advance any legitimate public policy
objective, and would only impose Constitutionally impermissible burdens
on cable operators and cable program networks.
I am grateful for this opportunity to discuss the transition to
digital television with you. We look forward to continuing to work with
this Committee on these important issues.

The Chairman. Thank you very much.
Our next witness is Mr. Patrick Knorr, Vice Chairman of the
American Cable Association.
Mr. Knorr?

STATEMENT OF PATRICK KNORR, GENERAL MANAGER,
SUNFLOWER BROADBAND; VICE CHAIRMAN, AMERICAN CABLE ASSOCIATION
(ACA)

Mr. Knorr. Thank you, Mr. Chairman, and members of the
Committee.
My name is Patrick Knorr, and I am General Manager of
Sunflower Broadband, an independent cable business based in
Lawrence, Kansas, currently serving 35,000 customers.
Senator Burns. Do you want to pull that microphone up?
There you go.
Mr. Knorr. Is that better?
Senator Burns. Pull it up closer to you. Is it on?
Mr. Knorr. We provide cable television, digital cable,
highspeed Internet, local phone service, digital video
recorders, and other advanced services in eight smaller
communities and rural areas throughout Northeast Kansas.
I'm also Vice Chairman of the American Cable Association,
whose member companies provide cable and broadband service in
rural areas in every state represented on the Committee.
I believe you stand at a historic moment when we shift from
the analog world to the exciting digital future. As you
consider how best to address the DTV transition, there are two
separate, but intertwined, sets of issues: first, the cost and
the technical challenges with completing the transition, and,
second, the problems with retransmission consent and
programming practices.
For the transition to be a success, it must work for all
Americans, including those in more rural areas. The cost of the
transition will have a disproportionate impact on rural
customers and systems. ACA has some ideas on how to deal with
this, and I'd like to highlight two.
First, that cable operators need to have the flexibility to
down-convert digital signals without the burden of mandated
dual carriage. Smaller systems need this flexibility, because
they cannot support the costly infrastructure necessary to
provide these redundant channels. What may be more compelling
for you is that, by facilitating down-conversion, it will
minimize the cost of the transition by ensuring that the
government will not have to put a box in every TV in every
customer's home.
And, second, satellite-delivered local-to-local signals
need to be available to rural cable operators on a
nondiscriminatory basis. In some markets, digital signals will
not be strong enough to reach the headend, meaning that viewers
who previously could receive an analog signal are now left
without a picture, a situation known as the ``digital cliff.''
The price of not fixing this problem is that many consumers in
compliant systems will find themselves staring at blank TV
screens.
As for the second set of issues, outdated retransmission
consent and programming rules must be addressed during this
transition. Many of us are already seeing abusive behavior by
big broadcasters as they exploit government-granted powers for
their benefit. My company, like many ACA member companies, have
invested millions of dollars to do its part to embrace the
transition by upgrading systems to launch DTV, only to have
some broadcasters use their market power to hold up
retransmission consent. Some are demanding unreasonably high
fees just to grant access to DTV signals, and, incredibly,
others will not even have the courtesy to return our calls as
we seek to carry those signals.
And it gets worse, some broadcasters are now demanding
substantial cash payments from smaller cable operators.
Typically, I'm hearing demands of 50 cents to a dollar more per
channel, which adds up to rate increases of two to five dollars
per month for each subscriber for the same broadcast signals
they receive today. In some markets, these demands are only
made of the small operators. Big cable companies are paying
nothing, while rural customers are being gouged for cash. The
sole reason this can occur, broadcasters have market power
granted to them by the laws and regulations of the analog era.
I believe the intent of the retransmission consent laws were to
protect localism, not to promote profiteering. This situation
occurs for many reasons, but, most importantly, broadcasters
use exclusivity to block cable operators from obtaining network
signals at a lower cost.
Fortunately, there are solutions to this problem, and I
will suggest three here. One, eliminate exclusivity when a
broadcaster elects retransmission consent and seeks additional
consideration for carriage. Two, prohibit any party, including
a network, from preventing a broadcast station from granting
retransmission consent. And, three, to codify the
retransmission consent conditions imposed on the NewsCorp/
DIRECTV merger to apply to all retransmission consent
agreements.
In summary, the retransmission consent and broadcast
exclusivity regulations have been used by the networks and
stations to raise rates and force unwanted programming onto
consumers. This must stop. But it won't, unless Congress acts.
Finally, I would encourage you to at least pierce the
programming veil of secrecy by authorizing the FCC to obtain
specific programming contracts and rate information in order to
develop a programming price index. The PPI would be a simple,
yet effective, way to gauge how programming rates rise and
fall, while still protecting the proprietary elements of
individual contracts.
Mr. Chairman, this committee stands today at the threshold
of a new digital world, but the challenges are many and the
risks are great. Clearly, rural America and its service
providers have unique financial and geographic challenges to
face when making this conversion. Additionally, outdated
regulatory structures that raise rates and force programming on
our constituents must be abandoned.
I hope that you will be able to address both of these
problems, and I appreciate the opportunity to testify on ACA's
views.
[The prepared statement of Mr. Knorr follows:]

Prepared Statement of Patrick Knorr, General Manager, Sunflower
Broadband; Vice Chairman, American Cable Association (ACA)

Introduction
Thank you, Mr. Chairman and members of the Committee.
My name is Patrick Knorr, and I am General Manager of Sunflower
Broadband, an independent cable business based in Lawrence, Kansas,
currently serving 35,000 customers. My company provides cable
television, digital cable, high-speed Internet, local phone service,
digital video recorders, and other advanced services in eight smaller
systems and rural areas throughout Northeast Kansas.
I am also the Vice Chairman of the American Cable Association. ACA
represents nearly 1,100 smaller and medium-sized independent cable
businesses. These companies do one thing--serve our customers, who are
found in areas the bigger companies don't serve. ACA members don't own
programming or content; nor are they run by the large media companies.
Collectively, ACA members serve nearly 8 million customers, mostly in
smaller markets. Our members serve customers in every state,
particularly those of this committee.
I believe you stand at an historic moment, when we shift from the
1970s-era policies of the analog world to the exciting and enticing
future that the digital revolution can provide. All of us here today
want our constituents and customers to receive the best in advanced,
high-speed, digital services. The transition to digital television is
an important step in the right direction. But at the same time, all of
us here today want to ensure that no one is left behind as we actually
move from analog to digital.
As we look today at ideas and proposals concerning the transition
to digital television, there are two realities this Committee must take
into account.
The first reality is that the transition to digital television is
both a question of technology and of public policy--a reality
recognized by the existence of this hearing and the very necessity of a
DTV bill. Many very important and relevant public policy issues exist
today concerning the digital pipe and the content that flows through
it. Issues such as ``rising cable and satellite rates,'' ``media
consolidation,'' ``indecency,'' ``retransmission consent abuse,''
``family programming tiers'' and the ``Digital Divide,'' cannot be
viewed as separate from the DTV transition. In fact, these policy
issues are the central focus of your constituents and our customers.
Moving a limited DTV bill will only postpone and exacerbate
marketplace, media, programming, and pricing problems that already
exist back home in your districts. The transition from analog to
digital, and the underlying need for legislation to facilitate that
shift, provides you with the first appropriate opportunity to address
these germane issues in a comprehensive manner, and I encourage you to
take advantage of this moment.
Digital platforms can provide consumers with a wondrous world of
new and valuable programming. But if you allow the old rules to stay in
place, it will just be more of the same. To move forward on just one
technological aspect of the digital revolution without moving forward
on the broader content and programming issues would be the equivalent
of putting a fancy new engine in a rusty old car, thus severely
limiting how far and how fast you can really go. To provide consumers
with the greatest benefit, it is imperative that you break with the
past and recognize that some old ideas no longer serve the greater
good.
I strongly urge this committee to seize this moment to restore the
balance of power between programmers, operators, media consortiums, and
broadcasters. In short, it's time to recalibrate for the digital world
so that each is subject to the creative power of competitive market
forces and to the consumers they serve.
Moving on to the second reality, DTV transition proposals that
require dual carriage of broadcast signals will threaten ACA members'
very survival and ability to provide advanced services such as high-
speed Internet, VoIP and VOD. Unless the specific financial realities
of smaller, independent providers are addressed in any DTV bill,
consumers and communities across America will lose access to signals
and services they rely on today. In fact, what worries me is that
without efforts to help these systems make the transition, many of the
small businesses that provide video and broadband services in rural
America will cease to exist, and the digital divide will actually grow.
Out in the smaller communities ACA members serve, literally from
Alaska to Maine, Hawaii and Florida, it is our core video business that
allows us to finance and provide the high-speed services, including
digital television, which everyone wants in order to bridge the Digital
Divide. It is independent cable companies like mine that provide
broadband services to small towns throughout the country. Satellite
providers, telephone giants, or major cable companies--unlike ACA's
members--are not rushing to serve these communities, and I can
appreciate why. Large companies will never come rushing into these
communities because of the cost and difficulty of providing service in
rural America. The headlines you read about in the media are about new
services and suites of services offered to larger communities. If ACA
members' video service cannot survive, I can assure you we will not be
around to offer the cable modem services these communities need, and
the DTV services this committee wants. In short, video programming is
not ``just'' about programming choices and rates, but it is also the
foundation upon which advanced services, including DTV, are built.
As a result, there are four fundamental and specific changes that
must be made if your goal is to provide the greatest diversity of
video, DTV and advanced services, and to ensure that all consumers--
even in smaller markets and rural areas--have access to them. The four
changes are:

1. Ensure that consumers in smaller markets and rural areas are
not left behind in the digital transition. Take into account
and address the unique financial, technical, and operational
requirements of those companies that will be providing DTV
service in rural America.

2. Update and change the current retransmission consent rules
to help remedy the imbalance of power caused by media
consolidation.

3. Correct rules that allow for abusive behavior because of
media consolidation and control of content.

4. Make access to quality local-into-local television signals
available.

What Needs To Be Changed and Why
1. Ensure That Consumers in Smaller Markets and Rural Areas Are Not
Left Behind in the Digital Transition--Take Into Account and
Address the Unique Financial, Technical, and Operational
Requirements of Those Companies That Will Be
Providing DTV Service in Rural America
Several current DTV legislative proposals would require cable
operators to carry the primary digital signal of all broadcast
stations, but allow the cable operator to also simultaneously down-
convert certain commercial and educational stations to analog, and then
require the cable operator to carry both digital and analog signals all
on the broadcast basic tier. From the perspective of the independent
cable operators serving rural America today, this is no choice at all
for the following reasons:
Dual Carriage. Independent cable operators in smaller markets and
rural areas cannot afford the transition and equipment costs to
transmit solely digital signals. They will need to down-convert digital
signals to analog so that their subscribers in smaller markets and
rural America will have a signal to receive. If dual carriage is the
only option, most small systems will be unable to comply because of the
limitations of their systems will prevent them from carrying those
signals--the actual carrying capacity of the pipe into the home will be
too small. In addition, the cost of just carrying the digital signal
for most ACA members would be more than $1,000 per subscriber. That's a
cost that many smaller systems cannot support. Additionally, such a
solution would force every customer in my market to have a set-top box
or new digital television set for every TV in the house. In short, the
requirement for dual carriage of both the digital and analog signal
will impose significant additional unrecoverable costs, and siphon off
precious bandwidth used today to offer advanced communications services
like high-speed Internet, VoIP, and VOD, to name a few.
Hard Deadline. Current DTV proposals would impose a hard deadline
of December 31, 2008, when all analog transmission by broadcast
stations must cease. The ``hard deadline'' for the digital transition
will disproportionately impact ACA members in rural America and their
subscribers in at least two ways:

Some ACA members in remote areas are subject to the
``digital cliff'' effect. When broadcasters turn off their
analog signal these members will be unable to pick up any
signal to retransmit to their subscribers because of the
technical characteristics of the digital signal. If a cable
operator cannot pick up the digital signal, its subscribers are
even less likely to be able to pick up the off-air signal with
a home antenna.

Cable subscribers in rural areas are less able to afford
digital receivers or converters than subscribers in urban
areas.

Retransmission consent. As previously discussed, some broadcasters
are already using their DTV signal as a lever to impose more tying
demands and higher fees for retransmission consent on cable operators.
In some cases, some of the largest broadcasters have ignored ACA
members request for DTV retransmission consent. When a broadcaster
refuses to grant consent to a smaller operator, or demands exorbitant
fees or costly tying arrangements, this behavior impedes the DTV
transition. The bill must address these problems to ensure the
increased bandwidth available in the digital world will not just become
increased opportunity for more unwanted programming and higher rates to
be leveraged-down to consumers in rural America.
Digital-to-analog conversion. ACA members support the concept of
allowing the digital-to-analog conversion, without imposition of a dual
carriage requirement. Such a decision would allow smaller systems to
minimize the disruption to their consumers and would ensure our
continued viability. Unfortunately, current DTV proposals will first
require consumers to purchase new equipment. Second, these proposals
will place an insurmountable economic burden on operators by forcing
them to replace their networks. (See Exhibit 1) The simplest solution
would be to give operators the flexibility to down-convert digital
signals at the headend without the dual carry obligation.
The stark reality is that ACA members, without changes to current
DTV proposals that reflect their unique circumstances, face serious
financial hardship. This means that consumers served by ACA members in
most of the states represented on this committee may lose their
provider and all of the advanced services these companies provide.
Some may say that the loss in the marketplace of certain providers
like ACA members is simply a function of survival-of-the-fittest. We
would argue that rural America deserves competition in the video
marketplace just like the rest of the country. They also deserve to
experience the advanced services that bigger entities are rushing to
provide in more populated and profitable areas. The reality is that in
the rural markets ACA member companies serve and operate, larger cable
television providers will not fill in the service gaps if ACA members
are forced to exit their business.
Solutions to ensure no consumer, community, or provider are left
behind in the DTV transition:

Provide the ability to down-convert digital signals to
analog without the obligation for dual carriage;

Assist independent cable operators to upgrade facilities to
avoid the digital cliff effect and to be able to receive and
transmit DTV signals to their consumers;

Allow waivers of the carry-one-carry-all requirement to ease
the burden on smaller operators;

Make adjustments to retransmission consent rules and
exclusivity regulations.

ACA and its members understand and support the need for the
Committee to move swiftly to recapture analog spectrum for other noble
purposes. However, we strongly caution the Committee to consider the
real possibility of leaving consumers, and providers in smaller markets
and rural America, out in the cold with no choices, no signals and lost
services. We hope to work with the Committee to develop a DTV
transition bill that will recognize the unique circumstances faced by
providers and consumers in smaller markets and rural areas so that the
DTV transition will take place in positive ways for all consumers, not
just those located in populated areas.

2. Current Retransmission Consent Rules Must Be Updated To Help Remedy
the
Imbalance of Power Caused By Media Consolidation
The current retransmission consent and broadcast exclusivity laws
and regulations limit consumer choice, and impede independent cable
operators' ability to compete in smaller markets and rural America by
permitting distant media conglomerates to charge monopoly prices for
programming. This situation must not be carried forward into the post-
DTV world.
Current laws and regulations allow broadcasters to combine
retransmission consent and market exclusivity into a monopolistic
hammer. Both of these rules were created to preserve local
broadcasting, but now large media companies use those rules to hold
localism hostage to increase profits, and gain wide distribution for
niche programming like SoapNet and more recently LOGO, a gay-themed
Viacom Network. These same practices that were used with analog
broadcasting are already being applied to the digital world,
accelerating the problem.
Across America our association members and their customers are
seeing early signs that broadcasters are using this leverage to lean
excessively on independent cable operators to extract cash. ACA
member's systems usually serve only a small fraction of the households
in any DMA and have no leverage in negotiations with broadcasters.
Collectively our ACA members serve no more than 8 percent of all
television households and most of rural America. We estimate that this
year broadcasters will leverage retransmission consent rules to extract
an additional $1 billion from consumers served by ACA members for the
``privilege'' to receive free over-the-air signals. The average
increase in basic cable rates as a result could well be $2-$5 per
subscriber per month! Remember, for the consumer, they will not
experience any improvement in service, nor receive any new programming
despite being forced to pay this increase.
And broadcasters don't only demand cash for the right to carry
their local television stations. Some members of the largest media
conglomerates require our cable companies to carry affiliated satellite
programming in local systems, and even in systems outside of the
member's local broadcast market. In this way, ownership of a broadcast
license is used to force carriage of, and payment for, affiliated
programming by consumers who do not even receive the broadcast signal
at issue. These forced carriage requirements are also responsible for
forcing on some of the most objectionable and indecent content on
television today, such as SpikeTV, F/X, and Soap Net, among many
others.
Unless this Committee addresses these issues, price increases from
broadcaster demands for cash and additional channels will continue
unabated in the digital world. In fact, increased bandwidth will only
add fuel to this fire. Large media companies are using the free
spectrum licenses granted by the government for local broadcasting to
pad margins and to leverage often questionable nationally delivered
content. How those licenses are used is fundamentally part of
Congress's obligation in managing the transition of licenses from
analog to digital. Congress created the retransmission consent laws in
1992, to protect localism and must change them in 2005, to protect
consumers from the consequences of media consolidation in a new digital
world.
Broadcasters and programmers get away with these abuses today
because the pricing of retransmission consent does not occur in a
competitive market. Under the current regulatory scheme, media
conglomerates and major affiliate groups are free to demand monopoly
``prices'' for retransmission consent, while blocking access to readily
available lower cost substitutes.
They do so by two methods:

First, the network non-duplication and syndicated
exclusivity laws and regulations allow broadcasters to block
cable operators from cable-casting network and syndicated
programming carried by stations outside of the broadcaster's
protected zone. In other words, the conglomerate-owned station
makes itself the only game in town, and can charge the cable
operator a monopoly ``price'' for its must-have network
programming. The cable operator needs this programming to
compete. So your constituents end up paying monopoly prices.

Second, the media conglomerates require network affiliates
to sign contracts that prevent the affiliate from selling their
programming to a cable operator in a different market. Again,
the conglomerate-owned and operated stations are the only game
in town.

In these situations, the cable companies' only defense is to refuse
to carry the programming. This has virtually no effect on the media
conglomerates, but it prevents your constituents from receiving must-
have network programming and local news. This result directly conflicts
with the historic goals and intent of the retransmission consent and
broadcast exclusivity rules, which were to promote consumer choice and
localism.
There are ready solutions to this dilemma. When a broadcaster seeks
a ``price'' for retransmission consent, give independent, smaller and
medium-sized cable companies the ability to shop for lower cost network
programming for their customers.
Accordingly, in our March 2, 2005, Petition for Rulemaking to the
FCC, ACA proposed the following adjustments to the FCC's retransmission
consent and broadcast exclusivity regulations:

One: Maintain broadcast exclusivity for stations that elect
must-carry or that do not seek additional consideration for
retransmission consent. This ensures must-carry remains the
primary option for programmers and ensures ``localism.''

Two: Eliminate exclusivity when a broadcaster elects
retransmission consent and seeks additional consideration for
carriage. If the programmer decides to forego their must-carry
rights in the hopes of putting together a business deal with an
operator, allow the operator to negotiate freely without having
their hands tied.

Three: Prohibit any party, including a network, from
preventing a broadcast station from granting retransmission
consent.

On March 17, 2005, the FCC released ACA's petition for comments. By
opening ACA's petition for public comment, the FCC has acknowledged
that the current retransmission consent and broadcast exclusivity
scheme requires further scrutiny. Before codifying a new regulatory
regime for digital television that carries all of the baggage from the
analog world with it, Congress should ask similar questions, and make
the important decision to update current laws to rebalance the role of
programmers and providers.
Congress, too, should revisit the retransmission consent laws to
correct the imbalance caused by the substantial media ownership
concentration that has taken place since 1992. One solution is to
codify the retransmission consent conditions imposed on Fox/News Corp./
DIRECTV to apply across the retransmission consent process. The three
key components of those conditions include: (i) a streamlined
arbitration process; (ii) the ability to carry a signal pending dispute
resolution; and (iii) special conditions for smaller cable companies.
In summary, the retransmission consent and broadcast exclusivity
regulations have been used by the networks and stations to raise rates
and to force unwanted programming onto consumers. This must stop, but
it won't unless Congress acts. If a station wants to be carried, it can
elect must-carry. If a station wants to charge for retransmission
consent, let a true competitive marketplace establish the price.

3. Correct Rules That Allow for Abusive Behavior Because of Media
Consolidation and Control of Content
What most consumers do not understand is that my independent
company, and ACA member companies, must purchase most of their
programming wholesale from just four media conglomerates, referred to
here as the ``Big Four''--Disney/ABC, Viacom/CBS, News Corp./DIRECTV/
Fox, and General Electric/NBC. All of these companies have at their
core one of the top four national broadcast networks. In dealing with
the Big Four, all ACA members continually face contractual restrictions
that eliminate local cable companies' flexibility to package and
distribute programming the way our customers would like it. Instead,
programming cartels, headquartered thousands of miles away, decide what
they think is ``valuable'' content and what our customers and local
communities see. On a basic level the digital transition is a
fundamental paradigm shift that could be very disruptive for consumers.
Addressing these abuses is an opportunity for Congress to: (1) provide
tangible benefits to consumers; (2) fulfill the true promise of the
digital transition by providing more choice and control to consumers;
and, (3) to make a consolidated media more accountable to people they
serve.
To fix this situation, Congress must update and reform the rules so
that:

a. Local providers of all forms and customers have more choice
and flexibility in how programming channels are priced and
packaged, including the ability to sell programming channels on
a theme-based tier if necessary;

b. Tying through retransmission consent must end. Today, the
media giants hold local broadcast signals hostage with
monopolistic cash-for-carriage demands or demands for carriage
of affiliated media-giant programming, which was never the
intention of Congress when granting this power;

c. The programming pricing gap between the biggest and smallest
providers is closed to ensure that customers and local
providers in smaller markets are not subsidizing large
companies and subscribers in urban America; and,

d. The programming media giants must disclose, at least to
Congress and the FCC, what they are charging local providers,
ending the strict confidentiality and non-disclosure dictated
by the media giants. Confidentiality and non-disclosure mean
lack of accountability of the media giants.

Let me explain.

Forced Cost and Channels
For nearly all of the 50 most distributed channels (see Exhibit 2),
the Big Four contractually obligate my company, and all ACA members, to
distribute the programming to all basic or expanded basic customers
regardless of whether we think that makes sense for our community.
These same contracts also mandate carriage of less desirable channels
in exchange for the rights to distribute desirable programming.
A small cable company that violated these carriage requirements
would be subject to legal action by the media conglomerates, and for
ACA's members, this is a very real threat.
These carriage restrictions prohibit ACA members from offering more
customized channel offerings that may reflect the interests and values
of our specific community. Thus, any interest we may have in offering a
family tier as the basic tier to our constituencies is made virtually
impossible because of the corporate decisions made by the Big 4 and the
terms and conditions they impose on our companies.
More Forced Cost and Channels Through Retransmission Consent
As previously discussed, retransmission consent has morphed from
its original intent to provide another means to impose additional cost
and channel carriage obligations. As a result, nearly all customers
have to purchase basic or expanded basic packages filled with channels
owned by the Big Four (See Exhibit 3).

Forced Carriage Eliminates Diverse Programming Channels
The programming practices of certain Big Four members have also
restricted the ability of some ACA members to launch and continue to
carry independent, niche, minority, religious, and ethnic programming.
The main problem: requirements to carry Big Four-affiliated programming
on expanded basic eliminate ``shelf space'' where the cable provider
could offer independent programming.
If new independent programmers are to provide outlets for this type
of programming to reach consumers, you must ensure that they are not
subject to the handcuffs current programming practices place upon them.

Local Flexibility Is Needed
In order to give consumers more flexibility and better value,
changes in current wholesale programming practices and market
conditions are needed for all providers. Operators must be given more
flexibility to tailor channel offerings that work best in their own
local marketplaces.
As I have stated, the Big Four condition access to popular
programming on a range of distribution obligations and additional
carriage requirements. These restrictions and obligations eliminate
flexibility to offer more customized channel packages in local markets.
It's important to point out that neither my company, nor any ACA
member, controls the content that's on today's programming channels.
That content--decent or not--is controlled by the media conglomerates
that contractually and legally prevent us from changing or preempting
any questionable or indecent content.
However, if my company and other ACA members had more flexibility
to package these channels with the involvement of our customers,
current indecency concerns raised by both Congress and the FCC could
also be addressed.

Price Discrimination Against Smaller Cable Companies Makes Matters
Worse
The wholesale price differentials between what a smaller cable
company pays in rural America, compared to larger providers in urban
America, have little to do with differences in cost, and much to do
with disparities in market power. These differences are not
economically cost-justified and could easily be replicated in the IP
world as smaller entrants are treated to the same treatment our members
face.
Price discrimination against independent, smaller and medium-sized
cable companies and their customers is clearly anti-competitive conduct
on the part of the Big Four--they offer a lower price to one competitor
and force another other competitor to pay a 30-55 percent higher price
for the same programming. In this way, smaller cable systems and their
customers actually subsidize the programming costs of larger urban
distributors and consumers. This sad reality should not carry-over with
the digital transition.
In order to give consumers in smaller markets and rural areas more
choice and better value, media conglomerates must be required to
eliminate non-cost-based price discrimination against independent,
smaller and medium-sized cable operators and customers in rural
America.
With less wholesale price discrimination, ACA members could offer
their customers better value and stop subsidizing programming costs of
large distributors.

Basis for Legislative and Regulatory Action
Congress has the legal and Constitutional foundation to impose
content neutral regulation on wholesale programming transactions. The
program access laws provide the model and the vehicle, and those laws
have withstood First Amendment scrutiny. This hearing provides the
Committee with a key opportunity to help determine the important
governmental interests that are being harmed by current programming
practices.
Furthermore, based in large part on the FCC's actions in the
DIRECTV-News Corp. merger, there is precedent for Congress and the FCC
to address the legal and policy concerns raised by the current
programming and retransmission consent practices of the media
conglomerates. The FCC's analysis and conclusions in the News Corp.
Order persuasively establish the market power wielded by owners of
``must have'' satellite programming and broadcast channels, and how
that market power can be used to harm consumers. That analysis applies
with equal force to other media conglomerates besides News Corp.

Pierce the Programming Veil of Secrecy--End Nondisclosure and
Confidentiality
Most programming contracts are subject to strict confidentiality
and nondisclosure obligations, and my company, and ACA members are very
concerned about legal retaliation by certain Big Four programmers for
violating this confidentiality. Ask me what I have to pay to receive a
given channel and I cannot tell you because of terms and conditions the
conglomerates insist upon. Why does this confidentiality and
nondisclosure exist? Who does it benefit? Consumers, Congress, the FCC?
I don't think so. Why is this information so secret when much of the
infrastructure the media giants benefit from derives from licenses and
frequencies granted by the government?
Congress should obtain specific programming contracts and rate
information directly from the programmers, either by agreement or under
the Committee's subpoena power. That information should then be
compiled, at a minimum, to develop a Programming Pricing Index (PPI).
The PPI would be a simple, yet effective way to gauge how programming
rates rise or fall while still protecting the rates, terms, and
conditions of the individual contract. By authorizing the FCC to
collect this information in a manner that protects the unique details
of individual agreements, I cannot see who could object.
Armed with this information, Congress and the FCC would finally be
able to gauge whether rising cable rates are due to rising programming
prices as we have claimed, or whether cable operators have simply used
that argument as a ruse. A PPI would finally help everyone get to the
bottom of the problems behind higher cable and satellite rates. We at
ACA are so convinced that this type of information will aid you in your
deliberations that we challenge our colleagues in the programming
marketplace to work with us, and this committee, to craft a process for
the collection of that data.
In short, without disclosure, there is no accountability. The
digital transition is about how to manage broadcasting in America, and
is an opportunity to make things fundamentally better for consumers.

4. Make Access To Quality Local-Into-Local Television Signals Available
In the first section of my testimony, I outlined the enormous
technical, financial, and operational challenges facing independent
cable in smaller markets and rural areas to accomplish the DTV
transition. While we are committed to making the transition work, it
will be no small feat to make this transition happen in ACA members'
marketplaces without putting the many advanced services we now provide
at great risk.
Another important reality about digital signals is that they will
not likely have the same distribution range as the analog signals they
replace. One way to help solve this problem is to grant cable access to
local-into-local television signals already being delivered by direct
broadcast satellite (DBS) companies.
The digital spectrum assigned will not have the same propagation
qualities as many of the analog signals they replace. As a result,
while most metropolitan cable operators and DBS will have access to
improved digital signals, some rural cable operators will find they no
longer can receive any usable signal at all. This is what is refered to
as the digital cliff. In local-into-local markets, DBS can deliver
clear, local broadcast signals regardless of distance from
transmitters. ACA members and their buying representative, the National
Cable Television Cooperative in Lenexa, Kansas, have asked both DIRECTV
and EchoStar for the right to buy and pay for access to DBS' local-
into-local signals where a good quality signal is not available over-
the-air. However, the DBS duopoly refuses to allow rural cable systems
to receive these DBS-delivered broadcast signals, even though DBS now
sells the same signals to private cable operators, satellite master
antenna system owners, and several Bell companies.
Ironically, DBS now refuses to grant access to its programming,
despite the favored regulatory treatment it received to have access to
cable programming. The ability to receive local broadcast signals was
the reason Congress enacted the Satellite Home Viewer Improvement Act
in 1999, which Congress recently reauthorized through SHVERA. But
SHVERA does nothing to solve the local signal problem for rural cable
operators and customers.
Congress can solve this problem by revising the retransmission
consent laws as follows:

In markets where a satellite carrier delivers local-into-local
signals, that satellite carrier shall make those signals
available to MVPDs of all types on nondiscriminatory prices,
terms and conditions where the MVPD has the consent of the
broadcaster to retransmit the signal.

ACA's recommended revisions to the laws and regulations governing
retransmission transmission consent and broadcast exclusivity are
modest. But they will advance the widespread dissemination of good,
quality local broadcast signals to your constituents, and will address
the serious competitive imbalance currently hurting small market and
rural cable systems. Carrying this restrictive situation into the DTV
world would further compound this mistake. All video vendors must be
able to have access to quality signals if they are going to be viable
competitors within in the DTV marketplace.

Conclusion
This Committee stands today at the threshold of the new digital
world, but it is also a precipice. The challenges are many and the
risks are great.
The DTV transition provides you with the power to determine whether
to recognize that rural America and its service providers have unique
financial and geographic challenges to face while making this
conversion. At the same time you have the opportunity to repudiate
outdated regulatory structures that raise rates and force programming
on your constituents, while replacing it by injecting market-based
solutions.
I hope you will be able to address both halves to this problem, and
I appreciate the opportunity to testify on behalf of the ACA's many
members' views on these matters.
______

Exhibit 1--Expected Cost of the Digital Transition

------------------------------------------------------------------------
Upgrading headends to Upgrading headends to
receive and transmit downconvert signals
digital signals to analog
------------------------------------------------------------------------
Cost per headend $9,000 $4,500
Cost per set-top box $400
Cost per subscriber $5,000
------------------------------------------------------------------------

Per-Company Costs To Upgrade Facilities To Receive and Transmit Digital
Signals
Company #1
Number of current non-digital subscribers: 360,000.

------------------------------------------------------------------------
Avg. 1 TV per Avg. 2 TVs per
household household
------------------------------------------------------------------------
Total capital outlay for $87,300,000 $135,540,000
2006-2008
Percent of annual capital 49.32 percent 76.58 percent
budget
------------------------------------------------------------------------

Company #2
Total subscribers: 50,679.
Cost per encrypted HD channel: $4,587-$6,407.
Company #3
Total subscribers: 35,000.
Total capital outlay for 2006-2008: $85,000,000-$135,000,000.
______

Exhibit 2--Ownership of the Top 50 Programming Channels

------------------------------------------------------------------------
Channel Ownership
------------------------------------------------------------------------
BET Viacom/CBS
CMT Viacom/CBS
MTV Viacom/CBS
Nickelodeon Viacom/CBS
Spike Viacom/CBS
TV Land Viacom/CBS
VH1 Viacom/CBS
Comedy Central Viacom/CBS
ABC Family Walt Disney Co./ABC
Disney Walt Disney Co./ABC
ESPN Walt Disney Co./ABC
ESPN2 Walt Disney Co./ABC
Lifetime Walt Disney Co./Hearst
A&E Hearst/ABC/NBC
History Hearst/ABC/NBC
CNBC GE/NBC
MSNBC GE/NBC
Sci-fi GE/NBC
USA GE/NBC
Bravo GE/NBC
Shop NBC GE/NBC
Fox News News Corp.
Fox Sports News Corp.
FX News Corp.
Speed News Corp.
TV Guide News Corp.
CNN Time Warner/Turner
Headline News Time Warner/Turner
TBS Time Warner/Turner
TCM Time Warner/Turner
TNT Time Warner/Turner
TOON Time Warner/Turner
Court TV Time Warner/Liberty Group
Animal Planet Liberty Media
Discovery Liberty Media
Travel Liberty Media
TLC Liberty Media
Golf Comcast Corp.
Outdoor Life Comcast Corp.
E! Comcast Corp.
QVC Comcast Corp.
HGTV Scripps Company
Food Scripps Company
AMC Rainbow/Cablevision Systems
C-Span National Cable Satellite Corp.
C-Span II National Cable Satellite Corp.
WGN Tribune Company
Hallmark Crown Media Holdings
Weather Landmark Communications
HSN IAC/InterActiveCorp.
------------------------------------------------------------------------

______

Exhibit 3--Channels Carried Through Retransmission Consent

------------------------------------------------------------------------
Program Service Ownership
------------------------------------------------------------------------
FX News Corp.
Fox News News Corp.
Speed News Corp.
National Geographic News Corp.
Fox Movie Network News Corp.
Fox Sports World News Corp.
Fuel News Corp.
ESPN2 Walt Disney Co./ABC
ESPN Classic Walt Disney Co./ABC
ESPNews Walt Disney Co./ABC
Disney from premium to basic Walt Disney Co./ABC
Toon Disney Walt Disney Co./ABC
SoapNet Walt Disney Co./ABC
Lifetime Movie Network Walt Disney Co./Hearst
Lifetime Real Women Walt Disney Co./Hearst
MSNBC GE/NBC
CNBC GE/NBC
Shop NBC GE/NBC
Olympic Surcharges for MSNBC/CNBC GE/NBC
Comedy Central Viacom/CBS
MTV Espanol Viacom/CBS
MTV Hits Viacom/CBS
MTV2 Viacom/CBS
Nick GAS Viacom/CBS
Nicktoons Viacom/CBS
Noggin Viacom/CBS
VH1 Classic Viacom/CBS
VH1 Country Viacom/CBS
LOGO Viacom/CBS
------------------------------------------------------------------------
Comparing this with the Top Fifty Channels in Exhibit 1 demonstrates how
certain members of the Big Four have used retransmission consent to
gain a significant portion of analog and digital channel capacity.

The Chairman. Well, thank you very much.
Our next witness is Richard Slenker, the Executive Vice
President of DIRECTV.

STATEMENT OF RICHARD SLENKER, EXECUTIVE VICE

PRESIDENT, TECHNOLOGY AND ENGINEERING

OPERATIONS, DIRECTV, INC.

Mr. Slenker. Chairman Stevens, Senator Inouye, and members
of the Committee, my name is Richard Slenker, and I'm the
Executive Vice President of Technology and Engineering
Operations at DIRECTV. Thank you for inviting me to testify on
behalf of DIRECTV regarding the digital television transition.
I have two simple messages today. First, DIRECTV is
spending billions of dollars on satellites that will allow us
to offer as many as 1,500 local channels in high definition by
2008, all without a government mandate of any kind. Second,
DIRECTV's ability to offer these local high-definition channels
will be seriously compromised, if not totally eliminated, if
Congress adopts onerous carriage requirements.
While the requirements would burden cable operators, they
would cripple DIRECTV's high-definition local plans. In 1999,
Congress granted satellite operators the right to carry local
broadcast stations. In doing so, Congress created a ``carry
one/carry all'' regime for satellite that reflected the
technological differences between satellite and cable. This
unleashed, for the first time, real competition to cable, and
the result has been nothing short of astounding.
In 1999, the DBS industry had ten million customers. Today,
satellite has more than 25 million customers. This
extraordinary success is due, in no small measure, to the fact
that Congress recognized the differences between satellite and
cable technology, and crafted a law that takes these
differences into account. As a result, DIRECTV has invested
billions of dollars to provide analog local broadcast stations
in 135 local markets serving over 93 percent of U.S. television
households.
We are now extending this commitment to the provision of
high-definition local broadcast channels, once again investing
billions of dollars to design and launch four next-generation
satellites. This investment will drive vigorous competition
with cable, and hasten the digital transition, all to the
benefit of the American public.
Our ability to bring this digital and high-definition
broadcast programming to U.S. consumers will collapse if
satellite operators are forced to carry broadcasters' multicast
channels or all free bits. Any material increase in existing
carriage obligations will cripple our high-definition plans and
undermine the ability of DBS to compete effectively with cable.
To appreciate why any additional carriage requirements on
DBS would have such a devastating effect, it's important to
understand the capacity limitations and technical differences
between satellite and cable.
Quite simply, satellite has far less capacity to carry
local signals than do cable operators. This reflects the
differences between offering local signals on a national
satellite platform versus a local cable system. While a typical
cable system may only retransmit 10 to 15 broadcast signals at
a time, DIRECTV must simultaneously retransmit over 1,000
broadcast signals from a single satellite constellation.
DIRECTV has met this challenge by employing state-of-the-
art technology. First, DIRECTV has launched spot-beam
satellites that create additional capacity by reusing spectrum
in different geographic areas. Second, we increase capacity by
using advanced compression, a technique for mathematically
removing redundant and unneeded digital bits.
DIRECTV believes its future lies in bringing its customers
more high-definition programming, particularly local stations
in high definition. Our plans depend critically on two factors:
first, the ability to use cutting-edge technology, especially
use of advanced compression techniques; and second, the
carriage of a broadcaster's primary signal only. Both of these
elements are crucial, because even compression has its limits.
The amount of underlying broadcast content to be carried must
be reasonable.
If DIRECTV must carry each broadcaster's multicast
programming, we will be forced to cut back dramatically on the
number of markets we currently serve. Thus, it is imperative
that the satellite carriers be allowed to transmit only the
compressed primary video signal if they are to continue
providing local-into-local service in a substantial number of
the Nation's markets.
DIRECTV is able to retransmit local broadcast signals in
the first place because the ``carry one/carry all'' rules
specify only that DIRECTV retransmit the primary video and
accompanying audio signals of local broadcast stations, and
specifically permits DIRECTV to use reasonable compression
techniques in such retransmissions. DIRECTV can, thus, meet its
statutory obligations, all the while maintaining the digital
clarity that has become the hallmark of our service.
Imposing a multicast, must-carry, or all-free-bits
obligation on DBS would force DIRECTV to scrap its local-into-
local high-definition plans and shrink its local-into-local
broadcast service, casting an ominous shadow over what has been
an extremely successful Congressional effort to promote
competition in the video marketplace. We encourage Congress to
maintain policies that preserve a vibrant, competitive video
marketplace that has reaped enormous benefits for the American
public.
Mr. Chairman, and members of the Committee, I'd like to
thank you for allowing me to give DIRECTV's perspective on
these issues, and I'm happy to take your questions.
[The prepared statement of Mr. Slenker follows:]

Prepared Statement of Richard Slenker, Executive Vice President,
Technology and Engineering Operations, DIRECTV, Inc.

Chairman Stevens, Senator Inouye, and members of the Committee, my
name is Richard Slenker and I am the Executive Vice President,
Technology and Engineering Operations at DIRECTV Inc. (DIRECTV). I am
responsible for the day-to-day operations of DIRECTV's satellites,
broadcast centers, and other technologies used to provide direct
broadcast satellite (DBS) service. Thank you for inviting me to testify
on behalf of DIRECTV regarding the digital television (DTV) transition.
I have two simple messages for you today. First, DIRECTV is
spending billions of dollars on satellites that will allow us to offer
as many as 1,500 local channels in high-definition (HD) by 2008--all
without a government mandate of any kind. Second, DIRECTV's ability to
offer these local HD channels will be seriously compromised, if not
totally eliminated, if Congress adopts onerous carriage requirements.
While such requirements would burden cable operators, they would
cripple DIRECTV's HD local plans.
In 1999, Congress granted satellite operators the right to carry
local broadcast stations. In doing so, Congress created a ``carry one
carry all'' carriage regime for satellite that reflected the
technological differences between satellite and cable. This unleashed,
for the first time, real competition to cable, and the result has been
nothing short of astounding. In 1999 the DBS industry had 10 million
customers--and today satellite has more than 26 million customers. This
extraordinary success is due in no small measure to the fact that
Congress recognized the differences between satellite and cable
technology, and crafted a law that takes these differences into
account. As a result, DIRECTV has invested billions of dollars to
provide analog local broadcast stations in over 135 local markets,
serving over 93 percent of U.S. television households.
We are now extending this commitment to the provision of high
definition local broadcast channels. We are investing billions more to
design and launch four next-generation satellites over the next several
years. These satellites, which markedly extend the state-of-the-art in
the satellite industry, will have the capacity for as many as 1,500
high definition local broadcast channels. This investment will drive
vigorous competition with cable and hasten the digital transition, all
to the benefit of the American public.
I must caution members of the Committee that our ability to bring
this digital and high definition broadcast programming to U.S.
consumers will collapse if satellite operators are forced to carry
broadcasters' multicast service or ``all free bits.'' Any material
increase in existing carriage obligations will cripple our high
definition plans and undermine the ability of DBS to compete
effectively with cable.
DIRECTV urges Congress not to let this happen. Congress should
build on the success of ``carry one/carry all'' such that the ``the
practical differences between the two industries are recognized and
accounted for'' in the digital world. In this way, Congress will ensure
that the vibrant competitive marketplace we experience today will
continue to exist tomorrow.

DIRECTV Relies on State-of-the-Art Technology To Retransmit Local
Stations
Given its dominance in the video market, it is understandable that
the focus of the policy debate has centered on cable television. But it
is critically important for policymakers to account for the capacity
limitations and technical differences between DBS and cable in any DTV
legislation. Otherwise, expanded digital carriage requirements will
threaten DIRECTV's HD rollout in markets across the country, which
would only serve to harm competition in the video marketplace.
First, satellite has far less effective capacity to carry local
signals than do cable operators. This reflects the difference between
offering local signals on a national satellite platform vs. a local
cable system.
A typical cable central office, or ``headend,'' collects over-the-
air broadcast signals from the surrounding community and retransmits
those signals to viewers. Thus, a cable system will typically
retransmit ten to fifteen broadcast signals at a time. DIRECTV, by
contrast, must retransmit broadcast signals in markets from coast to
coast from a single satellite constellation, the satellite equivalent
of the cable headend. DIRECTV today retransmits the signals of over
1,000 local stations simultaneously. This requires an enormous amount
of capacity and has been the principal engineering challenge DIRECTV
has faced over the past 5 years.
DIRECTV has met this challenge by employing state-of-the-art
technology. First, DIRECTV has launched spot-beam satellites that
create additional capacity by reusing spectrum in different geographic
areas. The more traditional CONUS-beam satellites have a single, multi-
frequency (or multi-transponder) \1\ footprint that covers the entire
continental United States. While CONUS satellites are excellent for
retransmitting national programming, using them to retransmit local
broadcast programming is a very wasteful use of spectrum. For example,
if DIRECTV wanted to retransmit a Boston station on a CONUS satellite,
it would have to retransmit the station to the entire United States,
even though, by law, only Boston-area subscribers could watch it.
Naturally, if one were to try to retransmit local broadcast stations in
every market throughout the country via CONUS satellites, capacity on
the satellites would quickly be exhausted leaving little, if any room
for national cable programming.
---------------------------------------------------------------------------
\1\ A single DBS transponder covers 24 MHz of spectrum.
---------------------------------------------------------------------------
By contrast, spot-beam satellites are much better for the
retransmission of local broadcast signals because, rather than
``seeing'' the entire United States with a large number of
transponders, they ``see'' multiple, discrete areas, each with only one
or two transponders. Spot beam satellites thus allow the geographic
``reuse'' of satellite frequencies--as transponders operating over the
same frequencies can simultaneously transmit signals to Houston and
Chicago. This reuse is akin to your car radio--there might be FM
stations operating at 99.5 in Washington, D.C., New York, and Boston,
and, as long as they are far enough apart, they do not interfere with
one another. Thus, the 99.5 frequency is ``re-used'' among these three
cities. By covering discrete and non-overlapping geographic areas,
satellite spot-beams can accomplish much the same thing.\2\
---------------------------------------------------------------------------
\2\ To give you an idea of how important this technology is,
DIRECTV has 46 DBS frequencies, 10 of which have been dedicated for use
in spot beams to deliver nearly 900 local broadcast stations. If these
same frequencies were used in CONUS beams, they could carry only on the
order of 120 stations. Clearly, DIRECTV's use of advanced spot beam
technology has been the lynchpin of its local service capability.
---------------------------------------------------------------------------
The second technique used to increase capacity is compression, a
technique for mathematically manipulating information to remove
redundant and unneeded bits. In the early 1990s, compression rates were
roughly 5:1 (meaning that you could fit five cable channels or
broadcast signals on a standard 24 MHz DBS transponder). Today, for
standard definition television signals, compression rates are typically
between 11:1 to 12:1, and further improvements are on the horizon.
Compression rates for HD signals are, of course, much lower--but these,
too, are expected to improve.
Take, for example, the Washington D.C. designated market area.
DIRECTV satellites have a spot beam with two transponders covering the
region around Washington, D.C. At 12:1 compression, the retransmission
of each of Washington's 12 analog broadcast stations in standard
definition format can be achieved while leaving additional capacity for
carriage of local signals in the other markets covered by the same spot
beam. However, if DIRECTV were required to carry each station's
multicast signal without using compression, it would have to allocate
up to an entire transponder to each station. Under this scenario,
DIRECTV could carry only two Washington stations, and thus, under the
current ``carry one carry all'' rules, DIRECTV could not retransmit any
local signals to Washington (much less have capacity remaining to
support local service in other markets within the beam). Accordingly,
the spot beam infrastructure that DIRECTV has developed, and deployed
at a cost of billions of dollars, would be rendered essentially
useless. Moreover, even if it were possible to take all of the
frequencies DIRECTV currently uses for local signal carriage nationwide
and dedicate them to providing local stations in Washington at a 1:1
compression ratio, there still would not be sufficient capacity to
serve even this single market.
The bottom line is that, if you want to know how much capacity a
satellite operator has to retransmit local broadcast signals in a
particular market, you need to know not just how many transponders the
satellite operator has, but also how many transponders are available in
the spot beam covering that market, as well as how much the satellite
operator is able to compress the signal while still maintaining signal
quality.

When the Transition Ends, Cable Will Set Aside Less Bandwidth for
Broadcast Signals While DBS Will Dedicate More
The cable industry does not face the same technological hurdles or
bandwidth constraints as DBS when it comes to delivering local
broadcast stations. And more importantly, the end of analog
broadcasting will result in a huge spectrum windfall for the cable
industry. Today, cable provides local broadcast signals in an analog
format. Assuming the absence of additional carriage obligations, by
switching to digital and employing compression techniques, cable
operators will be able to reduce the amount of bandwidth they set aside
for broadcasters by at least 100 percent, and in many cases, much more.
The same is not true for DBS. We have always been digital, and have
already realized the efficiencies and bandwidth savings made possible
by advanced modulation, coding, and most importantly, digital
compression. As these techniques have improved, DIRECTV has been able
to ``fit'' more analog broadcast channels into spot beams. HD
programming, however, contains far more data than analog, requiring far
more capacity even after compression. Thus, HD broadcasting will
require significantly more bandwidth than DIRECTV dedicates to
broadcasters today. And, any kind of multicasting or ``free bit''
requirement would only further exacerbate this discrepancy imposing a
far greater burden on DBS than on cable.

Multicast Proposals Would Cripple DIRECTV's Local-Into-Local HD Service
DIRECTV is able to retransmit local broadcast signals in the first
place because the ``carry one carry all'' rules specify only that
DIRECTV retransmit the ``primary video [and] accompanying audio''
signals of local broadcast stations. They rightfully do not mandate the
amount of bandwidth that DIRECTV must use to retransmit the signals, or
that DIRECTV must retransmit signals that do not relate to the primary
video feed. Indeed, the law specifically permits DIRECTV to use
``reasonable compression techniques'' in such retransmissions. DIRECTV
can thus meet its statutory obligations, while reducing the bandwidth
of the signals, all the while maintaining the digital clarity that is a
hallmark of our service.
Some broadcasters, however, want to change this formulation for the
retransmission of DTV signals. They say that satellite carriers should
be required to retransmit not just the ``primary video'' of digital
signals, but also multicast services or in the alternative ``all free
bits.'' What that really means is that satellite carriers would be
required to retransmit the entire bit stream of a broadcaster's digital
transmission--including redundant and other bits unnecessary for a
quality digital video signal, and even bits that have nothing to do
with video service at all.\3\ Were such a rule applied under today's
carry one carry all regime, this would mean that satellite operators
would have to offer such a ``pipe'' to all broadcasters in a market
before retransmitting the digital signals of any such broadcaster. As
my earlier discussion of the Washington, D.C. market illustrates, if
that were the rule, DIRECTV would be carrying local stations in a
handful of markets versus the 135 we are in today.
---------------------------------------------------------------------------
\3\ See, e.g., Letter from Henry L. Baumann, NAB, et al., to
Chairman Michael Powell, FCC, MB Docket No. 98-120 (Sept. 5, 2002)
(suggesting that cable operators not be permitted to ``alter the bits
within the `data packets' of the broadcast DTV stream'' ).
---------------------------------------------------------------------------
DIRECTV believes its future lies in bringing its customers more
high-definition signals, particularly local stations in high
definition. Moreover, those signals will have to be of sufficient
quality to compete with the high-definition offerings of cable
operators, or DIRECTV will likely lose subscribers to cable. Our plans
depend critically upon two factors: (1) the ability to use cutting-edge
technology, especially the use of advanced compression techniques, and
(2) the carriage of a broadcaster's primary video signal only. If
DIRECTV is required to carry each broadcaster's multicast programming,
we will be forced to cut back dramatically on the number of digital
markets we can serve.

Multicast Must Carry Penalizes Creative Entrepreneurs and Threatens
MVPD Competition
Our decision to invest billions of dollars in order to provide a
local-into-local HD broadcast service is a response to the demands of
our customers and the competitive environment in which we operate. It
would truly be unfortunate if Congress were to jeopardize this
competition, and our ability to meet consumer demand, by imposing a
multicast must-carry obligation on DBS.
Quite frankly, the broadcasters have not made a compelling case as
to why their existing must-carry rights--carriage of their primary
video and accompanying audio signal--should be dramatically increased
in a digital world. Broadcasters play an important role in their local
communities and are required to serve the public interest in exchange
for their use of the public airwaves. They play a special and unique
role in our society and enjoy a special and unique privilege in the
guaranteed carriage of their programming on cable and satellite
systems. That privilege will remain undiminished once the transition to
digital broadcasting is complete. But if the broadcasters want to
exploit the opportunities that the digital era offers by creating new
content and new services, there is simply no reason why they shouldn't
have to compete with every other entrepreneur with a good idea.
Mandating the carriage of any new service a digital broadcaster may
offer is unfair to every other non-broadcast programmer, and will force
MVPD platforms to use precious bandwidth based on government fiat
rather than consumer demand.
The MVPD marketplace is competitive and will respond to compelling
ideas. If broadcasters create new programming services that consumers
demand, competing distribution platforms will want to carry it (to the
extent they have capacity to do so). Conversely, imposing a multicast
must-carry obligation on DBS would force DIRECTV to scrap its local
into local HD plans and shrink its local into local broadcast service,
casting an ominous shadow over what has been a successful Congressional
effort to promote multichannel video competition.
We encourage Congress to maintain policies that preserve a vibrant
competitive video marketplace that has reaped enormous benefits for the
American public.
Mr. Chairman and members of the Committee, I would like to thank
you for allowing me to give DIRECTV's perspective on these issues. I am
happy to take your questions.

The Chairman. Thank you very much.
The last witness is Mr. John Lawson, President and CEO of
the Association of Public Television Stations.
Mr. Lawson?

STATEMENT OF HON. JOHN LAWSON, PRESIDENT/CEO, ASSOCIATION OF
PUBLIC TELEVISION STATIONS (APTS)

Mr. Lawson. Mr. Chairman, Mr. Co-Chairman, it's good to see
you again. I'm still exhausted after the CPB hearing yesterday,
and I'm not sure how you do this every day. Members of the
Committee, thank you for inviting me to testify on behalf of
the local public television stations.
Public television has been a leader in the digital
transition. We've raised, with your help, over $1.1 billion for
the digital buildout. We've launched exciting new services in
high definition, multicasting, and wireless data delivery.
Last January, we concluded a landmark agreement that
guarantees that multiple digital channels from every public
television station will be carried on every major cable system
in America. And my Association and the Department of Homeland
Security have a cooperative agreement to use digital public
television to upgrade the aging Emergency Alert System.
We're truly serious about completing the transition. We're
prepared to work with you to provide solutions to make a hard
date a reality. The single-greatest barrier to success is the
public's lack of understanding about the conversion to DTV and
what it really means for them. There needs to be a well-
planned, adequately funded, closely coordinated campaign to
reach, especially, the tens of millions of households who
depend upon over-the-air reception. We need to make it seamless
for them to go digital. This campaign should begin soon, and
continue until every household is converted. Without this
focus, Congress and we will have a consumer train wreck on our
hands, and the hard date could be postponed for years.
Public television would prefer to be part of a large
coalition of stakeholders informed by the SwitchCo model in the
U.K. But, whatever the model, public television is willing to
play a leading role in this campaign. And we're suited to do
this for a number of reasons:
First, the over-the-air-reliant TV viewers are our viewers.
Research indicates that the over-the-air households correlate
strongly with public television's viewer base. When they watch
television, these people tend to watch PBS. Other OTA viewers
are disproportionately low-income, rural, Spanish-speaking, and
elderly, and we also effectively reach them with our
programming.
Based on examples from Europe, consumers will actually buy
set-top boxes if they see a value in doing so, which usually
means they get more free channels through DTV. Public
television, here, provides that value, because we offer
multicast programming, new free channels that are only
available through digital reception.
Finally, Americans trust public television, as confirmed in
poll after poll. And we have a Universal Service mandate. We
believe public television is in a unique position to reach the
last holdouts, and help them go digital.
Is there a cost to supporting consumer education? Yes. But
combined with appealing new digital broadcast services, it
could mean the government pockets a greater share of auction
revenue. The set-top-box subsidy could be reduced, because
consumers will actually seek the converter box in the
marketplace.
Senators, you have assisted public television immensely in
converting to DTV. Now is the chance to leverage that
investment, to make us partners in completing the digital
transition.
We also believe other elements are needed for success:
First, our agreement with NCTA guarantees carriage of our
multicast programming on cable systems. We're also talking with
ACA. But there are no provisions in law, and no voluntary
agreements in place yet, with the direct broadcast satellite
operators; and, one way or the other, we must guarantee digital
carriage on DBS.
Second, we need guaranteed carriage on new technology
platforms, and we are having promising discussions with the
telco's, I'm happy to report.
Third, along with libraries, museums, and universities, we
urge passage of S. 1023, the Digital Opportunity Investment
Trust, or DOIT, which was introduced this year by Senators
Dodd, Snowe, Durbin, and Burns. DOIT proposes to use a portion
of spectrum auction revenue to capitalize a trust fund which
would support the creation of digital content to serve the
education needs of this country. DOIT is a historical
descendant of the Land Grant College Act and the GI bill, both
of which led to monumental expansions in educational access for
Americans.
Finally, we hope the Senate will continue its historic
bipartisan role in support of public broadcasting. The Labor-
HHS appropriations bill is being marked up today, and we urge
you to provide full funding for public television and radio.
And we greatly appreciate the positive comments yesterday.
Investing in public television is a great investment for the
digital transition.
Thank you.
[The prepared statement of Mr. Lawson follows:]

Prepared Statement of Hon. John Lawson, President/CEO,
Association of Public Television Stations (APTS)

Mr. Chairman, Senator Inouye, other members of the Committee, thank
you for inviting me to testify on behalf of the local public television
stations.
Public television has been a leader in the digital transition.

We've raised, with Congress' help, over $1.1 billion for the
digital build-out.

We've launched exciting new services in HDTV, multicasting,
and wireless data delivery.

Last January, we concluded a landmark agreement that
guarantees that multiple digital channels from every public
television station will be carried on every major cable system
in America.

And my Association and the Department of Homeland Security
have a cooperative agreement to use digital public television
to upgrade the aging Emergency Alert System.

We are truly serious about completing our march to what we call
digital-only broadcasting. For these reasons, we are prepared to do
what we can to make a ``hard date'' a reality. We want to work with you
to provide solutions for a successful transition.
The single most significant barrier is the American public's lack
of understanding about the conversion to digital television and what it
means to them. There needs to be a well-planned, adequately funded,
closely coordinated effort to educate and inform the general public. We
must reach the tens of millions households who depend upon over-the-air
reception and make it seamless for them to go digital. Without this
focus, we, and Congress, will have a consumer train wreck on our hands,
and the hard date could be postponed by years.
We need a consumer awareness campaign that begins soon and
continues until every household has been converted. And like any
campaign, it should use a variety of media and outreach tactics--
especially television spots.
Public television would prefer to be part of a large coalition of
stakeholders, informed by the SwitchCo model in the United Kingdom. But
whatever the model, PTV is willing to play a leading role in this
campaign.
We are in a unique position to play a central role for a number of
reasons.

The over-the-air reliant TV viewers are our viewers.
Research indicates that the OTA households correlate strongly
with public television's viewer base. When they watch
television, these people tend to watch PBS, even more than
people with cable or satellite.

Other OTA viewers are disproportionately low-income, rural,
Spanish-speaking, and elderly viewers, all of whom we reach
with our programming, in some cases more than any other medium.

Based on examples from Europe, consumers will actually buy
set-top boxes if they see a value in doing so, which usually
means they get more free channels through DTV. Public
television here provides that value, because we offer multicast
programming--new free channels that are only available through
digital reception. We are the leaders, by far, in the
broadcasting industry, in offering new digital channels.

Finally, there is the trust factor. Americans trust public
television, as confirmed in poll after poll. We also have a
Universal Service mandate. We believe public television is in a
unique position to reach the last hold-outs and help them go
digital.

Is there a cost to supporting consumer education? Yes, but I also
believe the more we invest in consumer education, the less the
government will have to use auction revenue to subsidize set-top boxes.
Ultimately, consumer education, combined with appealing new digital
broadcast services, could mean the government pockets a greater share
of auction revenue, because consumers will seek the converter boxes in
the marketplace. (Please refer to Appendix A for a more detailed
description of a proposed consumer education campaign involving the
public television system.)
Senators, you have assisted public television immensely in
converting to DTV. Now is a chance to leverage that investment, to make
us partners in our Nation's drive to complete the digital transition.
Beyond consumer education and technical assistance, we believe
there are other elements necessary for a successful transition.

First, our agreement with the National Cable &
Telecommunications Association and its members, guarantees
carriage of public television's multicast programming on cable
systems. But there are no provisions in law, and there are no
voluntary agreements to ensure carriage of broadcasters'
digital signals on direct broadcast satellite systems. One way
or another, we must guarantee carriage of our digital signals
on DBS.

Second, we need guaranteed carriage on new technology
platforms. We are having promising discussions with the telcos,
who tell us that they want public television's digital content.
But again, one way or the other, we need to ensure public
television is carried and every American has access.

Third, the Department of Homeland Security has extended its
agreement with our Association under which we have conducted a
pilot project to develop the Digital Emergency Alert System for
the National Capital Region. We are now entrusted with planning
the national rollout of the D-EAS using digital public
television stations and the PBS satellite interconnection
system as the backbone. DHS is creating a system--through the
dual use of our infrastructure--that enables the President to
communicate instantly, through many different communications
devices, to the greatest number of Americans in a national
crisis. We are requesting an authorization to fund additional
connections to this backbone so that state and local
authorities can also originate emergency alerts for
distribution over the system.

Fourth, APTS urges the passage of S. 1023, the Digital
Opportunity Investment Trust (DOIT), which was introduced this
year with Senators Dodd, Snowe, Durbin, and Burns as co-
sponsors. DOIT proposes to use a portion of spectrum auction
revenue to capitalize a trust fund, which would support the
creation of digital content to serve the education needs of
this country. This proposal is the historical descendant of the
Land Grant College Act and the GI Bill, both of which led to
monumental expansions in educational access for Americans.

Finally, we hope the Senate will continue its historic,
bipartisan role in support of public broadcasting. The Labor-
HHS-Education appropriations bill is being marked up today, and
we urge you to provide full funding for public television and
radio. It is a great investment in the digital transition.

Thank you.
______

Appendix A--How to Make the ``Hard Date'' Less Hard on Viewers: A
Proposed Consumer Education Initiative by Public Television Stations

Public Television has embraced the digital transition for one
simple reason: we recognized early the rich dividends in expanded
services--from HD to multicasting to data-casting--that digital
technology would make possible for our stations to deliver. For Public
Television, the transition is succeeding on the provider side, but we
fear the consequences for households relying on over-the-air (OTA)
service if we fail to prepare them for the final chapter of the
transition.

The Problem: Shutting Off Analog Means Potentially Stranding Viewers
Whether viewed from a political, economic, or public service
perspective, stranding large numbers of viewers when analog signals are
turned off is an outcome all stakeholders in the digital transition
want to avoid. It is estimated that up to 22 million households rely
exclusively on analog service--and that those households are
disproportionately lower-income, rural, and/or elderly.
The Solution: Public Television Stations Lead a Public Education Effort
The key to a successful transition for OTA households is reaching
the affected households with good information. With nearly 90 million
viewers tuning in each week, and nearly 70 percent of households tuning
in at least once a month, Public Television has the capacity to reach
nearly every American affected by the analog shut-off.
We propose a public education effort that might include, but is not
limited to:

The creation of on-air spots to alert viewers to the
impending analog shut-off, explain why the conversion is taking
place, and inform them of the steps they can take to receive a
digital signal by the shut-off date;

The creation of local non-broadcast outreach efforts aimed
at educating targeted audiences about the transition, and the
means to ensure continuation of service in a digital format;

Convening local partnerships, including retailers, other
broadcasters, consumer electronics manufacturers, and social
service organizations to reach affected consumers throughout
each community;

Serving as a local dissemination point of contact for set-
top boxes (STBs) to eligible households as defined by Congress;
and

Provide technical assistance for consumers to help ensure
they can install the needed technology and receive over-the-air
digital signals.

Why Public Television?
Public Television reaches 99 percent of the American public.
Moreover, a recent study commissioned by the Corporation for Public
Broadcasting found that households dependent on over-the-air reception
are more likely than others to be regular public television viewers.
More importantly, we know we can effectively educate Americans
about the value of digital broadcast technology because we've already
done it. Long before there were any transmitters up and operating:

In 1998-99, PBS and the Harris Corporation created the DTV
Express, a 66-foot truck carrying a fully integrated digital
television station and HD theater. The DTV Express traveled the
country, providing seminars for state legislators, educators,
funders, engineers, and consumers.

PBS created HD spots for major retailers--including Best
Buy, Circuit City, Sears, and Costco--who used them to promote
HD and sell HDTV sets.

Local stations have engaged in extensive outreach and
education to consumers and potential content providers--from
the local Rotary club to the annual meeting of the National
Association of State Universities and Land Grant Colleges.

PBS.org features a special DTV section including a layman's
``crash course'' on DTV, local station guides, technical
information, and related links. Local station websites are
providing similar information.

Thanks in part to these efforts, Public Television has raised
approximately $1.1 billion, including $479 million from state
governments, to fund the digital build-out. We are grateful to have the
Federal Government as a major partner in this regard; beginning in
Fiscal Year 2001, Congress has appropriated about one-third of the
funding raised to date.

Americans Trust Their Local Public Television Stations
Polling consistently confirms the high degree of value and trust
that Americans place in public broadcasting. At a time when we are
asking Americans to ``surrender'' a technology to which they have grown
accustomed, and embrace a new technology, it makes sense to place a
trusted, local institution at the center of a comprehensive public
education initiative. We see this as a natural extension of our public
service mission.
______

Appendix B

Looking Out for Number Two

By Mark Schubin (May 2005)

The Balanced Budget Act of 1997, says U.S. analog TV may not be
broadcast after December 31, 2006. So why does House Commerce Committee
head Joe Barton want new legislation with a ``hard date''? It's because
the 1997 Act has three exceptions.
The first is rarely mentioned. It states that, if an ABC, CBS, Fox,
or NBC outlet is legitimately not yet broadcasting digitally by the end
of 2006, no station in its market need shut down its analog TV
broadcasts. No one expects that.
The third is often mentioned. It's referred to as the ``85 percent
rule,'' though that percentage doesn't appear in the Act. It allows
analog broadcasts to continue in any market where 15 percent of
households or more do not have digital TV reception equipment and also
don't subscribe to a cable, satellite, or other service providing
signals from each digital station in that market.
There are questions about whether cable systems carry each TV
broadcaster in all markets. Fifteen markets have more than 19 stations
each, and in each there are stations more than 55 miles from the
center. But the FCC could come up with a definition of ``market'' that
eliminates those problems, and the proportion of U.S. households that
subscribe to a multichannel service are already around 85 percent and
growing.
That leaves exception number two. Analog TV may continue in any
market where ``digital-to-analog converter technology is not generally
available.''
The FCC's ``tuner mandate'' has dramatically increased the number
of digital-TV receivers. It kicked in last July only for 50 percent of
TVs larger than 35-inches, and by year end, it had already caused a 150
percent increase in digital-TV reception devices. But that's receivers,
not converters.
In February 2004, KCSM, a public-TV station in San Mateo, CA, found
out that its lease on its analog transmission tower would not be
renewed. The station had been broadcasting digitally since September
2003, and was in a market that had greater-than 80 percent cable
penetration and 9 percent local-into-local satellite carriage. So they
decided--pending FCC approval--to drop their analog transmissions.
They did everything right. They contacted all of the cable and
satellite systems serving their market to ensure continued carriage via
their digital broadcasts. They contacted local retailers. They informed
viewers of the impending change on the air and via their website. They
compiled lists of receivers. They provided reception instructions. They
trained staff to field inquiries from viewers. Then, in late May 2004,
they pulled the plug.
Viewers whose screens went dark overwhelmed the station with calls.
About 10 percent ``would not be consoled.'' Another 45 percent wanted
to keep watching but didn't want cable, satellite, or new equipment.
The remaining 45 percent wanted to learn what they had to do to keep
watching. So the station staff told them.
Then, according to KCSM Director of Technology, Michelle Muller,
reporting on the experience at the PBS Technology Conference last
month, the station got a different kind of call. A local retailer
begged them to stop sending customers over because there was nothing to
sell them.
Consider a consumer electronics manufacturer's position. The
``tuner mandate'' requires TVs to be equipped with digital-reception
circuitry, and most households subscribe to cable or satellite and,
therefore, don't need a ``digital-to-analog converter.'' So why build
and distribute them? The proportion of digital-TV reception provided by
converters is steadily dropping.
On February 28, the FCC Media-Bureau staff issued a report
indicating that a ``natural retirement'' analog-TV shut-down date--when
all analog sets wear out and are replaced--would be 2032. As for KCSM,
they lost 38 percent of their audience.

The Chairman. Thank you all.
I'm going to have some written questions that we'll submit
to you. I believe it would be best if we moved through to every
member, if possible, this morning.
But I do have one question of Mr. Knorr. Tell me, what's a
``digital cliff''?
Mr. Knorr. A ``digital cliff'' is--the digital signals work
differently than the analog signals. You might think of it--
people are more familiar with cell phones, and an analog cell
phone, when you're on the edge of the signal, you could still
talk, but it might be fuzzy. When you have a digital cell
phone, you either can talk or you can't. The signal just goes
off. And that is what's commonly referred to as a ``digital
cliff,'' is that it either works or it doesn't. There is no
inbetween. There's no little-bit-fuzzy with a digital signal.
And so, a cable operator, as many of our members are, that
are on the fringe of a broadcaster's signal, they can receive
that signal today, but it's very likely that, when the
conversion to digital happens, that signal will go away----
The Chairman. Oh, I see.
Mr. Knorr.--and they will not be able to receive it.
The Chairman. They would not receive the signal that would
be digital, then, right?
Mr. Knorr. Correct.
The Chairman. Even though they were receiving analog, even
though maybe dimly, right?
Mr. Knorr. Correct.
The Chairman. Thank you very much.
Senator Inouye?
Senator Inouye. Thank you very much.
The Chairman. If there's no objection, we'll take a 5-
minute round. That'll take us an hour.
Senator Inouye. Mr. Fritts, before I proceed, I gather that
this is your last year as President and CEO. If that's the
case, I wish you very well.
Mr. Fritts. Thank you very much. I appreciate it.
Senator Inouye. Thank you for all your service these past
years. I appreciate it very much.
Mr. Fritts. Thank you.
The Chairman. You're presuming we won't get him up here
again.
[Laughter.]
Senator Inouye. Mr. Lawson just spoke of the successful
negotiations he's had, and you suggested that your broadcasters
may have some difficulty because you compete with cable
operators. Do you have any evidence of this?
Mr. Fritts. Senator Inouye, we have met with the cable
industry, at the request of some members of this committee, on
several occasions, and have advanced the same ideas that we're
advancing, in terms of multicasting, and have been soundly
turned away for that. And I think it's for competitive reasons.
If a local station is able to offer new services--take, for
instance, the services that the public stations--arrangement
that they have made with the cable association. They are no
threat to the cable industry. They don't compete. These are
public stations that are offering additional services.
Many of the services that broadcasters would offer would be
presumed to be somewhat competitive to the cable industry. The
cable industry, as you know, owns not only the pipe, but they
also own a large chunk of the programming that goes down that
pipe; and, therefore, it's been difficult for us to get a
dialogue started.
And what we're proposing is the same amount of spectrum be
used that was approved by the Supreme Court in the 1992 Cable
Act. And we believe that by not using more spectrum--and, in
fact, less spectrum in the future--that this will provide
additional free services to the American consuming public. And
I would think that ultimately would provide additional interest
in cable carrying those signals.
Senator Inouye. Mr. Knorr, do you wish to comment?
Mr. Knorr. Yes. We, as a cable operator, someone who's in
the field--I like more local content, if it's real local
content. That is beneficial for me in a competitive
environment. I mean, that's why we carry PBS Kids. I mean, it's
a very valuable--it's good-quality programming for our
consumers.
What we can't afford to do with our spectrum is carry what
may be a national weather feed from every broadcaster in the
market that's completely redundant, or to carry additional
shopping channels from broadcasters, and use up that spectrum.
And to say that we're going to use less spectrum is false.
Maybe in 10 years, we'll use less spectrum. But, in the short
term, it's critical, as even NAB has stated, to provide, where
possible, analog and digital signals. I mean, that's a
competitive advantage that we want to do, if we have the
capacity to do it.
The problem that--as a cable operator, that I have is,
we've spent millions of dollars to invest to create capacity to
provide new and advanced services; whereas, broadcasters have
been granted spectrum, and then granted additional spectrum to
get through this transition for free. And then now they are
trying to dictate what to do with the spectrum that we paid to
install, and not give us the ability to manage that to the
benefit of our consumers.
Mr. Fritts. Just to follow up on that, in terms of
multicasting, we have said that we would be glad to engage with
the Committee, both here and in the House, to provide
quantifiable public-interest obligations on these multicast
channels. And we would be happy to engage in that dialogue to
make sure that these services that are going to be offered are
relevant to the local community and important to all consumers.
Senator Inouye. Do you have any views on down-conversion by
cable operators?
Mr. Fritts. As we embrace this transition and go forward,
what we're proposing is what the former Chairman of NCTA
proposed, Michael Willner, in testimony before Congress,
wherein he supported legislation and positions saying that
analog sets should be carried in analog and digital sets should
be carried in digital as we go through this transition.
Ultimately, the transition will be over, analog will be
shut off, presumably at a date in 2009. And, when that occurs,
obviously that spectrum goes back, much of it, to the cable
industry, and, obviously, a large amount, one-third of it, goes
back for governmental purposes.
Senator Inouye. Mr. McSlarrow, do you have any views?
Mr. McSlarrow. What happens when you get to the date of the
transition is that, as Eddie just said, an analog signal goes
away and a digital signal comes in. So, if you're a cable
operator, you're taking a digital signal, but most of our
customers today, and in 2009, are going to be customers who can
only receive an analog signal, one way or another. So, what we
have proposed is that we down-convert the digital signal to
make sure everybody who has got an analog receiver is going to
receive an analog signal. But recall that even today many
people are digital cable customers and receive many digital
channels. That will still be the case in the future. And, in
fact, it'll be increasing in numbers. And many--and we're
hoping growing numbers--receive high definition today. And that
will continue to be the case, and into the future.
So, in terms of our proposal, the transition is seamless.
People, from 1 day before to the day after, will not notice a
difference.
There is a semantic difference between what NAB is saying
and what we're saying, that makes all the difference in the
world. We're saying, give us the flexibility to down-convert.
We're the ones who have to respond to the customer. We don't
deliver, they go to my colleague over here, two steps down. So,
we have every incentive. The government can't give us any more
incentive to make this work right for our consumers.
What Eddie, and NAB are saying is, instead, force us to
carry both the digital signal and the analog signal for every
must-carry station in every market for every operator in
America. And they don't all have the capacity.
Mr. Fritts. And we're not--if I could follow up on that--
we're not suggesting that cable systems that don't have the
capacity be burdened with this. The Supreme Court said one-
third of the capacity on cable carriage, and very few, if any,
cable systems have approached must-carry of up to one-third of
channel capacity in this. And so, what we're saying is, when
the conversion date occurs, in 2009, analog signals go away,
and then it all becomes digital, and then analog spectrum goes
back to the government, and the cable industry recaptures that
which was being used to transmit the analog signals.
Senator Inouye. My time is up, Mr. Chairman.
The Chairman. Yes. I would urge that--I assume the
witnesses can see the lights, as we can see them, I hope, but
we are on a tight time frame here this morning, so I would hope
that we'd stay within 5 minutes.
Senator McCain?
Senator McCain. Thank you, Mr. Chairman.
I am concerned about a lot of aspects of this issue, and a
lot of them are being explored by other questions, but I'm most
concerned about the freeing-up of spectrum for first
responders. Events in London indicated that this should
reinforce our view of this as a compelling issue.
As you may know, I served on the Commission that the
President appointed to examine the weapons of mass destruction
issue. Every witness before that Commission said they believed
there would be another attack on the United States. Today, our
first responders do not have the ability to communicate with
each other.
So, I have a simple question. And now we're looking at
December 31, 2008, which is two and a half years from now. I'm
not sure that the United States of America can wait that long.
I have one question for the panel. What do we need to do to
free-up this spectrum for first responders as quickly as
possible, and how soon can that be?
And I'll begin with you, Mr. Lawson.
Mr. Lawson. Senator, I believe the key is to provide for a
smooth transition for the over-the-air----
Senator McCain. How long would that be, Mr. Lawson?
Mr. Lawson. Well, we're not afraid of an end-of-2008 hard
date----
Senator McCain. End of 2008.
Mr. Lawson.--but there has to be--I believe that even if
you establish a hard date, it could fail. You could end up
pushing that date back if the consumer side of this transition
is not carefully, carefully managed.
Senator McCain. Mr. Slenker?
Mr. Slenker. Senator, we would agree with the date that the
Congress put forth, in terms of a hard date. I do----
Senator McCain. You know, we've had hard dates before, Mr.
Slenker.
Mr. Slenker. Yes, and what I was going to say is that I
think the hard facts of the matter are that there are hundreds
of millions of analog television sets in use in the United
States. And so, that date should--and I agree with you--should
be based on a date that is something that can be achieved,
while also providing the coverage that's required by consumers
and the American public.
Senator McCain. Go ahead, Mr. Knorr.
Mr. Knorr. I think we could support an end-of-2008 hard
date. The issue for us is--just as everybody has articulated--
would be consumers. And for--as a cable operator, if we have
the flexibility to manage our bandwidth and our capacity, I
think we'll be in a good position to help manage that
transition.
Mr. McSlarrow. If you told us today that we were going to
move to a hard date, we'd need 18 months to re-engineer our
facilities to do down-conversion. And so, we'll be ready
whenever you set a date.
Senator McCain. How would that happen, to get it done in 18
months, Mr. McSlarrow?
Mr. McSlarrow. Basically, we have to go into each of our
cable headends and re-engineer them, and allow for the digital
signal to go analog out. Some clearly would happen earlier than
18 months, but to get them all done throughout America would be
about 18 months.
Senator McCain. And that would mean provision of set-top
boxes for over-the-air television viewers?
Mr. McSlarrow. No. In this case, if we do it at the
headend, we won't have to do truck rolls, and it won't require
delivering set-top boxes to each consumer. We could just--we
can re-engineer the cable headend to take care of all the
customers delivered service by that headend.
Mr. Abud. Senator, we're ready, and we support a hard date.
But please remember that the hard date is only one component in
the big puzzle of this new transition. But, as far as a
broadcaster, I'm currently broadcasting analog and digital.
So----
Senator McCain. Yes, I know you are. I know very well that
you are. In fact, you will continue to broadcast analog, which
is what we need for the first responders now, for many, many
years. And if the 85 percent penetration rule continues, as
Chairman Powell stated before this committee, it could be
decades--decades before we get the analog spectrum for the
first responders.
Mr. Abud, what do I tell the Fire Chief and the Police
Chief in my home state, in Phoenix, Arizona? What do I tell
them? That they're not going to get this spectrum that they
need to communicate with each other until you decide that every
``i'' is dotted and every ``t'' is crossed?
Mr. Abud. Senator, we're ready. And----
Senator McCain. Tomorrow.
Mr. Abud. The headend is only one part of this puzzle, but
we are ready----
Senator McCain. You're ready to give up your analog
spectrum tomorrow to the first responders.
Mr. Abud. In most of the stations we are, and we will be
ready by December 2008.
Senator McCain. Mr. Fritts?
Mr. Fritts. Senator McCain, we understand the December 31,
2008, or somewhere in 2009, hard date. We assume that the 85
percent goes away as a part of the--enacting legislation that
you're----
Senator McCain. Although you supported strongly the 85
percent rule as it was put in previously.
Mr. Fritts. That is true. And I will say to you----
Senator McCain. Knowing full well that it would take
decades, as Chairman Powell stated, before there would be 85
percent penetration?
Mr. Fritts. I will say to you that our board met just 3
weeks ago and indicated that we would accept a hard date, as
selected by this committee, and understood the fact that when
that hard date took place the 85 percent would go away. And
that's the position that the NAB is taking now.
Senator McCain. Thank you, Mr. Chairman.
The Chairman. Thank you.
Senator Burns?
Senator Burns. When the cables--Mr. McSlarrow, when the
cables talk about--or Mr. Knorr--I think--better directed at
him. You spoke awhile ago about free spectrum and the
transition over. And what spectrum do you use in a cable
business that you had to purchase?
Mr. Knorr. What we have to do is, we have to invest in the
electronic hardware that is installed in people's backyards
that deliver the signal to the homes. And those vary----
Senator Burns. In other words, when you talk about that,
you don't talk about spectrum, you talk about capacity, as far
as bandwidth, is that correct?
Mr. Knorr. Correct.
Senator Burns. In other words, you just buy a bigger pipe.
Mr. Knorr. Well, we have to--yes, we have to upgrade our
technology, and we use spectrum up to--cable operators use it
up to--one gigahertz is the spectrum we use, but it is confined
to the wire and is not over-the-air spectrum.
Senator Burns. That's what I thought. When you talk about
spectrum, you talk about bandwidth on a wire.
Mr. Knorr. Correct.
Senator Burns. You didn't purchase that. You purchased it
because you had to buy a bigger wire, more than anything else.
Mr. Knorr. Correct.
Senator Burns. But you're going to have to have some sort
of a wire, whether it be optics or whether it be cable or
copper. And, of course, all of that is--the old copper and the
old cable is gone. In other words, you're in optics right now,
and that's where the future is, because that gives you
increased capacity without increasing the size of your pipe.
And that sometimes is--the American public, they don't
understand that. Spectrum is--spectrum is what we use over-the-
air. That's what you buy, or that's what you have. And that's
where I'm going.
Mr. Knorr. I think an important consideration is that,
either way, it's capacity. And just like the--a broadcaster
could not broadcast a digital and analog signal on the capacity
they had 15 years ago; they had to get additional capacity, and
that's in the form of over-the-air spectrum. And, in our case,
that additional capacity is in the form of more expensive wires
and fiberoptics.
Senator Burns. If they operate all of those in six
megahertz, does that impact on your capacity?
Mr. Knorr. If they could provide the analog signal, and the
HD signal, and the multicast all in the six megahertz, it is
true that it would not impact us. However, that is not the
case. It's misleading to say that cable gets that spectrum
back, because, as Mr. McSlarrow said, the customers can--will
continue to have analog sets past 2009. And unless you want to
increase the problem and make it larger, cable operators need
the flexibility to down-convert and to help make that problem
smaller.
Senator Burns. But could they operate in that six
megahertz? Could you broadcast an analog and a----
Mr. Knorr. No.
Senator Burns.--digital signal in that six megahertz?
Mr. Knorr. No, we cannot.
Senator Burns. OK.
The Chairman. Can I ask a question? It won't----
Senator Burns. Yes.
The Chairman.--come off your time. Won't you be sending a
digital signal to your digital subscribers at the same time?
Mr. Knorr. Yes.
The Chairman. But you say----
Mr. Knorr. But we'd need additional capacity to do----
The Chairman. When a broadcast signal comes through, it has
to be down-graded to analog.
Mr. Knorr. For it to reach analog sets, we'd have to down-
convert it, so that's all I--that's our spectrum problem, is,
we have to send out multiple signals to our customers.
The Chairman. What about the subscribers out there that
have gone digital?
Mr. Knorr. We would send out a digital signal to them,
where we have the capacity to do----
The Chairman. Digital for the over-the-air/must-carry
group. You say you would downgrade the analog signal. So it
would be passed through only as analog, right?
Mr. Knorr. I'm sorry?
Mr. McSlarrow. Mr. Chairman?
The Chairman. Isn't that right? Am I hearing right?
Mr. McSlarrow. You are right. I mean, what we're suggesting
is that we take the digital signal and, for the analog
customers, down-convert it to analog. The digital customers are
going to receive many of the same digital signals they receive
today.
The Chairman. But are you transmitting that over-the-air
broadcasted digital signal to that digital----
Mr. McSlarrow. In most cases, yes--and increasing.
The Chairman. In most cases.
Mr. McSlarrow. In most cases. And there may be a station
somewhere, where we don't have enough capacity to do both, but
it is our intent today, just as we do today, to continue doing
both.
The Chairman. I'm sorry. Mr. Burns?
Senator Burns. I'm going to sit here and listen, because
I'm--I would turn back the balance of my time. I've just got
some questions that have to be asked, sort of, privately, so go
to the next person.
[Laughter.]
The Chairman. You shouldn't say that. You shouldn't say
that. That's----
Senator Burns. Why? If they can be private, I can be
private.
The Chairman. Yes, sir, you may.
[Laughter.]
The Chairman. You're the boss. Sorry to interrupt you,
though. I didn't mean to interrupt your train of thought.
Senator Burns. No, I've got--go to the next guy.
The Chairman. All right. The next person, then, is Senator
DeMint.
Senator DeMint. Senator Burns, I probably should ask mine
privately, too----
[Laughter.]
Senator DeMint.--because I'll show my ignorance here.
But I'm trying to imagine the industry in a few years, with
a lot of new technology. I know Mr. Fritts is--one of the
issues that's difficult for you is the required multicast on
cable, DIRECTV. But you will continue--broadcasters will
continue to broadcast a digital signal. Am I correct? I mean,
it will be a broadcast signal that I could still receive at my
home with digital receiver capabilities, correct?
Mr. Fritts. That's correct, yes, sir.
Senator DeMint. In the future, if I wanted to be hooked up
to my local cable operator to receive all the channels I
wanted, but also have a little switch where I could receive ten
multicast stations from my local NBC affiliate, that that
technology is not difficult, correct?
Mr. Fritts. Depending on whether you get close enough to
the television station to get a good signal, that's correct.
Senator DeMint. Right. If I'm within--whatever--I can
receive that. So, it sounds like with--in the future, that if I
want multicast local television programming, if I want to
receive dozens of multicasts from my local affiliates, that I
could easily have that technology available, if, as a consumer,
I wanted it, at no additional cost to myself, because you're
going to continue to broadcast that digitally. Is that correct?
Mr. Fritts. That is correct.
Senator DeMint. OK. So, the argument that we must force
these cable folks to carry five or ten stations from all
broadcasters, in my mind, is somewhat questionable that that
needs to be a government mandate if, as a consumer, I can
receive it free, with probably a little additional technology
at home.
Mr. Fritts. Senator DeMint, you have the same situation
today that this committee and this Congress, in 1992, looked at
and thought that there was a governmental interest in carrying
local television stations on the cable system. And it went to
the Supreme Court.
Senator DeMint. You're talking about primary carry.
Mr. Fritts. I'm talking about the carriage. And what we're
talking about now is not increasing the bandwidth or the space
that's used; we're talking about--when we are all digital--
let's say, in 2009--we're talking about returning all of our
analog spectrum, which is a third of what we use now; plus, the
cable gets additional spectrum, because we are taking the
analog signal off of cable, because we're broadcasting only
digitally.
Senator DeMint. Right. But you are talking about using the
transition to digital as a way to get additional requirements
of stations that you broadcast imposed on cable and DIRECTV. I
mean, this was----
Mr. Fritts. It's the same amount of space. If we wanted to
slice that space up and have one HDTV channel, it uses the same
amount of space. If, on the other hand, the broadcaster wanted
to provide additional services for the local community--and,
again, we've agreed that we would be happy to sit down and
discuss quantifiable public-interest obligations of
broadcasting local services for that--so, we're using the same
amount of spectrum, we're just slicing it, for a period of
time, to multicast.
Senator DeMint. I understand. Thank you, sir.
I yield back, Mr. Chairman.
The Chairman. Thank you.
Senator Allen?

STATEMENT OF HON. GEORGE ALLEN,
U.S. SENATOR FROM VIRGINIA

Senator Allen. Thank you, Mr. Chairman.
The questions from Senator Inouye, I thought, got the folks
engaged in trying to get this into a practical understanding
for us, as well as the questions of Senator DeMint.
My goal, by the way, in all of this, is to get to wireless
broadband, which I think is very important for rural areas. And
I understand the needs for public safety and so forth, but I
think the innovations and the technology advancements,
particularly in getting wireless broadband into rural areas--
for that matter, anywhere else--as another option is the most
compelling reason for this.
Hearing all the witnesses here, they're all for a general
hard date, as opposed to--including listening to Mr. Fritts and
the 3-week-old position of the National Association of
Broadcasters--and just having a hard date, rather than some
quantifiable level of capabilities for customers, consumers, to
receive over-the-air broadcasting, which gets to the main
problem that I--you're all talking about all of your different
angles and what's your competitive advantage, one way or the
other. And I understand. I don't like government mandates. I'm
thinking, though, of how many television sets right now are not
capable of receiving digital broadcasts, whether via cable,
via, obviously, over-the-air, and, I suppose, as well, on
satellite.
The reality is, my household is probably like many others
who receive cable, and that is, you have certain TVs that are
on cable, and you have some TVs that are over-the-air. In your
family room, it's cable. Maybe your bedroom, it's cable. But
then, in the kitchen, the guest bedroom, so forth, if you have
a little TV, it's over-the-air.
So, if you could--our experts here, could you share with us
just the very practical problem of not wanting TVs to go off.
If you want an uproar from the people of this country, have
their TVs go off. And I find it very interesting that the date
for this is December 31, 2008, as opposed to the Summer of
2008, where you know darn well what the issue would be, in all
of those elections. And it's about a bunch of irate people who,
whether they live in cities or out in the country, are upset
that this isn't working out, or you have folks coming in,
putting set-top boxes on.
So, here's what we need to solve. How can we make sure that
these investments that people have made in these TV sets--and,
unfortunately, TV sets are being sold, today, that are not
digital-capable. I understand the marketplace. The reason for
it is that those digital TV sets cost substantially more than
an analog set, so people make that decision.
If any of you could share with the Committee and the
American people how many TVs right now--if this were done,
let's say, next month, how many TVs would not be capable of
receiving a digital signal? And then, what is a practical way
that we can absolutely ensure, as best we can, logically--and
we're never--it's never going to be perfect, especially when
the Government's involved--but, how can we assure that, when
this date occurs, you're not going to have a lot of people with
sets that they turn on, on that morning of January 1, New
Year's Day, not on for broadcast airwaves?
Mr. Fritts. We have done some research on that, Senator
Allen, and what we've learned is that there are roughly 20
million homes that are not connected to cable or to satellite.
Senator Allen. How many television sets are not?
Mr. Fritts. Seventy-three million television sets are
unwired in today's marketplace. We have entered into a joint
venture to help build--or to help get an RFP started to build a
converter box that will convert those over-the-air sets and
make them digital-capable through the converter box. Now,
they're analog sets with a converter box that'll down-convert
the digital signal, and hopefully in the $50 to $70 price
range.
There has been a discussion at this table--and in the
House, as well--about some form of taking some of the money
from the auctions and providing that for a subsidy. Our
position on that is to leave that to you, Members of Congress,
as to determine best how to go about that.
The numbers that we're quoting are also essentially the
same numbers the GAO is reporting, and also the same numbers
that the Consumer Federation reported. Actually, the Consumer
Federation was a little higher than ours.
So, if, on January 1, 2009, all analog broadcasting ceased,
we would have to have an education campaign in advance of that.
We would have to have converter boxes--which, by the way, we're
willing to undertake--over-the-air radio and television is
willing to undertake this campaign to help assure that
Americans----
Senator Allen. Let me interrupt, because my time is running
out.
Mr. McSlarrow talked about the down-converting as--that's
only going to work, though, for those television sets that are
actually hooked up to the cable. It seems to me a logical
approach. What's your view on allowing them to do that, rather
than having to put boxes on sets that are hooked up to cable?
Mr. Fritts. As long as all stations in the marketplace are
covered, we agree with that. We think it makes sense.
Mr. Abud. Senator, just quickly, if I may?
Senator Allen. Sure.
Mr. Abud. Just remember that in the case of the Hispanic
audience, 43 percent of my audience rely on over-the-air
television. And, ironically, this segment of the population
relies more on the services we provide as a local television
station.
Senator Allen. So, you would see this as a practical
problem, going into those households of your population that
you're talking about, and putting in boxes--set-top boxes.
Mr. Abud. Yes.
Senator Allen. Thank you, Mr. Chairman. My time's up.
The Chairman. Senator Rockefeller?

STATEMENT OF HON. JOHN D. ROCKEFELLER IV,
U.S. SENATOR FROM WEST VIRGINIA

Senator Rockefeller. Thank you, Mr. Chairman.
And I, like Senator McCain, have a variety of areas of
interest in this, but none more important than the first-
responder.
The year 2008--and I agree with the Constitutional State of
Virginia Senator's analysis, it's a little unsettling. Some
could--said you could do that before that, but we need to free
up spectrum for first responders. I don't know how many people
think that there will be an attack on this country before 2008,
or before 2007, but my guess would be it's a majority of
people, who know what they're talking about. And so, this isn't
just, kind of, a telecommunications discussion; this is a
question of questions, bottom-line matters. It's also a
question of national responsibility, national security, which
changes the whole debate.
So, to me, we need to have a significant portion of the
spectrum proceeds to be set aside for first responders, some of
whom are--just don't have the infrastructure--or maybe I should
say, many of whom don't have the infrastructure to be able to
receive what they will need. And so, you know, I fully support
making first responders in New York City and Los Angeles fully
able. I also know very well the situation in my own state,
which is a highly rural one, where first responders cannot
communicate with each other. I've met with, I think, virtually
all of them and--in the counties--and some of them still use
911 when they're trying to get attention. And I don't like
that. I don't know how much money's going to be available, in
terms of the spectrum. Senator McCain's bill talked about a
billion dollars. That was a good start on it. But the auction
of the broadcast spectrum provides an opportunity to be able to
help some of these first responders. And I'm interested in the
difference between the need to help them and the question of
running a business, and how those two may or may not conflict.
[The prepared statement of Senator Rockefeller follows:]

Prepared Statement of Hon. John D. Rockefeller IV,
U.S. Senator from West Virginia

Mr. Chairman, thank you for having this hearing today. Mr.
Chairman, I know we have a number of witnesses before us today so I
will be very brief.
I support the adoption of a hard date of January 1, 2009, as you
have suggested for completing the digital television transition. I
believe that we must move as quickly as possible to free-up the
broadcast spectrum for our first responders.
As importantly as freeing-up spectrum for first responders is, I
believe we should seriously consider setting aside a significant
portion of the proceeds of the spectrum auction for grants to first
responders for emergency communications equipment and infrastructure.
I fully support making sure first responders in urban areas have
the spectrum they need, but for West Virginia, at least, the biggest
obstacle to creating an interoperable public safety communications
network is not available spectrum, but rather available funds for
equipment purchase. I know our Co-Chairman knows very well the
tightness of the budget for the foreseeable future. The auction of the
broadcast spectrum provides a source of funding that our first
responders urgently need.
Much of the discussion today will center on how to make sure
consumers are not left in the dark after the transition to digital
television. I believe that the Committee should create as a robust
consumer subsidy plan as necessary to make sure no one will lose their
over-the-air signals.
Finally, I believe the Committee needs to address the size of the
blocks of spectrum that will be auctioned off from the transition.
Because spectrum is sold in large blocks, my state often does not see
the level of investment in wireless technologies as it might otherwise.
I believe we need to allocate smaller blocks of spectrum so smaller
companies in rural areas can purchase spectrum to build wireless
networks where larger national companies choose to not to invest.
Again, thank you for holding this important set of hearings, and I
look forward to hearing from our panel.

Mr. McSlarrow. Well, Senator, I'll take a crack at it. I
think--the way I think about this is, there are really two
large groups of people out there who are affected by the
transition, in terms of the spectrum----
The Chairman. They can't hear you in the back of the room.
Mr. McSlarrow. Is that better? OK.
Two groups of people. One are the over-the-air customers of
broadcasters. The other are cable and satellite. There is one
set of issues related to those customers who are over-the-air.
But, in our case, there are really two ways of coming at this.
If the spectrum goes away for the public safety purposes you
just identified, which we all in this room acknowledge are
important, either you can hand everybody a box--$67 for a box,
for a cheap digital-to-analog converter, $200 for a fully
interactive two-way box--or you can allow the cable industry to
spend its own money and down-convert at the headend. And the
difference is, if you had to hand everybody a box, it would be
about $9 billion. Some of that, most of that, would probably
have to be subsidized by the government, because there's no
principled reason why a cable customer should not receive a
subsidy if over-the-air customers are receiving a subsidy.
We're proposing a solution that means you don't have to deal
with that at all. We'll take care of it.
So, that's the tradeoff, in terms of the two types of
universes that you have as a business matter, taking into
account the important public policies that you've identified.
The Chairman. For the information of everyone, this
afternoon--that covered system there--we will demonstrate the
signal that will come over on analog or on digital to--this
afternoon.
Mr. Slenker. Currently, DIRECTV, as part of its service,
provides boxes that, in fact, do this. And we provide that
equipment today for free, as a part of this monthly
subscription that takes the local channels in the 130-plus
markets and analog-to-digital converts them, so that, on a
regular analog set at home, a digitized version of the local
stations are there. And I'd like to think that's part of the
growth that satellite has experienced. It hasn't all come from
cable; it's come from some over-the-air folks that now are able
to get good, crisp, digital signals of their over-the-air
stations locally, now through this satellite technology.
Mr. Knorr. I think there is an important piece that is
almost whizzing by. A lot of times--NAB's numbers, when they
talk about cable getting spectrum back, or they talk about only
this many million customers being affected, they're
overlooking--both of those can't be true at the same time. If
only that many customers are going to be affected, cable has to
have the opportunity to down-convert and offer signals to those
analog customers that don't have a box, or else that problem
becomes infinitely larger, as much as tenfold.
To use your example, those TVs, if you're a cable customer,
they're not being counted in NAB's numbers, because you have
cable, so obviously you have those signals. And, through cable,
if we can down-convert and continue to provide analog signal,
you can get those--you can hook those up to cable. I mean,
that's the advantage of cable.
In rural markets, some of those systems don't have the
capacity, and they may even need assistance to down-convert
those signals, but those customers will not suffer, as NAB
describes, by not being able to get the digital signal, because
of my friend to the left. I mean, those markets are
competitive. If a cable operator doesn't have the capacity to
offer those digital signals, they can still get those digital
signals, and that becomes a free-market competitive issue to
determine whether or not that cable operator can afford to
upgrade its capacity.
Senator Rockefeller. OK, can I--Mr. Chairman, can I just--
thank you for allowing me to interrupt and point out that the
funding for first responders is about a half-billion dollars,
so far, less than it was last year. So, I think this is--puts,
in some conflict, bottom-line thinking and national need.
Thank you.
The Chairman. Senator Ensign?

STATEMENT OF HON. JOHN ENSIGN,
U.S. SENATOR FROM NEVADA

Senator Ensign. Thank you, Mr. Chairman.
I want to make a couple of points, and then get to a couple
of quick questions.
You know, if we're looking at this from the consumer
standpoint, in my mind, the more free-market this is, the less
government-mandated it is. The bottom line, the consumer's
going to benefit in the end. We do have some national security
concerns with the first responders, especially today, that
indicate the importance of freeing-up this spectrum. As far as
jobs in the United States, the innovation that can happen if
this spectrum is freed up, we can't even imagine the type of
technologies that will develop when this spectrum is freed up.
There are a lot of compelling reasons. And I'm glad to hear
everybody--that everybody is for a hard date today, and we need
to make that, and we need to stick to a hard date.
And I think some of the concerns that we've heard today
about--Senator Allen, when you talked about making sure that
nobody's set is turned off. A lot of this, and almost all of
it, is really just a technology issue. It really is. None of
those sets need to be turned off with a hard date. It's a
question of how, though, we do the subsidy, how we get those
converter boxes to those analog televisions. And I believe that
all of that can be worked out amongst the Committee, as we move
forward with a bill.
What I want to get to is, because we've heard about this
down-conversion, and there are different issues, from what I
understand--down-conversion cable versus satellite. Because we
heard about the capacity on this must-carry. We've heard the
broadcasters say that they want basically the same amount of
spectrum that they have today. When they give up the analog
spectrum, they just want the same amount of spectrum they now
have on cable. From what I understand, especially with
satellite, that's different. You're going to need--if you have
that down-conversion, you're going to have limitations, when
you down-convert, on what you could carry. And it would hurt
local-in-local programming on the satellite if all of these
must-carry channels were required for you.
Mr. Slenker, could you address that?
Mr. Slenker. That's absolutely correct, Senator. I think,
as we've pointed out, we have fixed licensed spectrum for
satellite, and we literally count the amount of digital bits
today that we can fit into that fixed spectrum. We use state-
of-the-art compression technology to maximize the number of
local stations in a spot-beam market-by-market fashion, to
squeeze as many markets within the United States with the full
number of stations in that market. But should we be required to
carry additional content in those markets, that will exceed the
available--not only the available spectrum, but also the state-
of-the-art, in terms of technology.
Senator Ensign. I want to explore this whole must-carry,
you know, today versus what the broadcasters would like to see
in the future. Mr. Fritts, your--let's just say, for instance,
that some kind of compromise was reached, and, instead of
everything that you want, there was, you know, one or two
stations, or whatever, additional that you were putting in the
pipe. And a lot of the argument has been because of local
programming. OK? Would you support, for instance, say,
something like that, if a compromise was reached, an additional
station, or whatever it was, that the 80 percent of the content
is original local programming--that kind of a test for that
addition?
Mr. Fritts. Senator Ensign, I think what we would be happy
to do is sit down and figure out what makes sense, what the
right number is. I don't know if it's 80, or 50, or 40, or
whatever the right number is. But, please understand, we would
be happy to sit down and guarantee that there would be
quantifiable public-interest obligations on those additional
channels that would be under the multicasting rules.
Senator Ensign. The reason I bring this up is because I
think that the consumers are really the ones who will make the
choice in the future. In other words, if--you know, the
consumer's not going to want 82 shopping channels or 82 weather
channels, or whatever it is, and--because I guarantee if
cable--if the consumer wanted it, and cable wasn't providing
it, these satellite guys will. And if the consumer--if your
content is good enough, if your demand is good enough, they're
going to have to carry it. And it would seem to me that the
consumers making the choice when we're going through, that's--
we should not be picking the winners and losers here. We should
be allowing the consumer to pick the winners and losers amongst
you, and let you all compete. And, you know, some of you might
have a little bloody nose at the end of the day, but the bottom
line is, is that's what a free market is supposed to be about,
is government not picking the winners and losers, or at least
as much as possible.
Now, we are making a transition--and there are always
winners and losers when you go in a transition area--but, in
the future, we need to get out of this business, as much as
possible, and let you all compete, as much as we possibly can.
Mr. Chairman, I think that in the future, as we go to
this--you know, determining the subsidy, that is something that
we're going to have to determine. You know, should it be a
government fund? Should it be a private grant out there that
people can apply to? Should it be means tested? Should--all of
those issues need to be addressed, because I don't believe
that, you know, people like myself--maybe I do have a--you
know, a set in the back, you know, that--I don't think that I
should get a government subsidy just because I have to--if I
want one of my analog sets to have a converter box--you know,
whether they're $40, $50, $60--I just don't think that somebody
in upper income should have a subsidy. But, for some people,
for some seniors who, necessarily, can't afford it, some kind
of subsidy should be available for those. And the technology,
then, would take care of that.
So, thank you, Mr. Chairman.
The Chairman. Thank you very much.
Senator Snowe?

STATEMENT OF HON. OLYMPIA J. SNOWE,
U.S. SENATOR FROM MAINE

Senator Snowe. Thank you, Mr. Chairman.
Well, obviously, there is a governmental interest in this
whole process, because the Government is requiring people to
make investment in digital television, of some kind with this
hard-fast date, for the obvious, you know, good public-policy
reasons, because we need the spectrum for first responders, and
otherwise.
My concern is continuing to preserve the free over-the-air
television, and whether or not we're going to undermine local
programming on the question of whether or not cable is required
to carry multicasting programming. And, really, that's the
essence for me, because, in the final analysis, we have to
ensure that local programming continues.
Frankly, I don't happen to think it should be, sort of, an
option. I realize you'd have to, you know, download the analog
signal, but I'm trying to figure out what is the picture in the
future.
And I would like to start with you, Mr. Fritts. What is the
picture in the future if cable is not required to carry
multicasting programming? What would that mean for local
programming, primary broadcasters, from your standpoint?
Mr. Fritts. If cable were not required to carry any of the
multicast channels----
Senator Snowe. Right.
Mr. Fritts.--67 percent of the households, presumably,
would never get a chance to sample those, never get a chance to
see them, never know that they are there. And, while there are
70 million sets in 20 million households, probably not enough
to sustain a substantial market.
Currently, if public interest obligations were imposed on
local broadcasters, which they are currently under the
governmental interest and must-carry regime, what we're saying
is, actually, when we turn the analog off, and cable compresses
the six megahertz, it becomes three megahertz; and so, they get
50 percent back at the end of the transition. And what we're
saying is that if there is local programming that deserves to
be shown by local people, then the local cable monopoly ought
to carry it.
Think about this. Comcast owns everything on the eastern
seaboard, with the exception of Fairfax County. Cable has a
very strong monopoly position. They can tell a broadcaster what
gets on and what doesn't get on in this current regime. There's
only one cable operator in all of these regions, and there are
not two in Fairfax County, there are not two in these areas up
and down the eastern seaboard. So, with their monopoly power,
we think that it's only fair that local broadcasting be
continued and furthered by virtue of must-carry.
Mr. Abud. If I may, Senator, in the case of Spanish-
language television, we have a very close relationship with our
audience. We provide them with news and information locally
that they cannot get anywhere else. By not forcing the cable
companies to carry our signals, we will be keeping the benefits
of digital television from the consumer. And, you know, because
of that relationship that we've established with our audience,
we think that's crucial for this segment of the population.
Senator Snowe. Mr. McSlarrow?
Mr. McSlarrow. Senator, I will avoid the use of the tired,
hackneyed term ``monopoly,'' which everybody throws around. The
fact is, the only person who can actually force carriage on
anyone is a broadcaster forcing must-carry on cable. It's
interesting, cable networks can go up to a broadcaster and say,
``Hey, carry me. The law tells you to.'' So, that's the state
of the law. We live with it.
In the future, with multicasting, what's not being said
today is that we have an agreement, as John Lawson said, with
the public television stations all around the country to carry
their multicast signals. We carry, today, 500 multicast signals
around the Nation. It's all voluntary. We have C-SPAN cameras
here that the cable industry funded as a public-interest
obligation.
Senator Snowe. But I understand----
Mr. McSlarrow. It's all voluntary.
Senator Snowe. Yes, I understand that. But, in the absence
of any requirements, what ultimately happens? That's optional.
It's voluntary. But if the Government views that there's a
public interest in continuing free over-the-air television,
that you have local programming, where does that stand in the
long-term future, beyond 2009? And it is no different than the
1992 Cable Act, when we required a must-carry provision. I'm
not sure I see a major distinction in that regard. We're just
moving to an advanced stage of technology now, that we're
requiring, we're imposing on consumers. But yet we don't want
to lose the public interest of having free over-the-air
television.
That's what I'm grappling with here, because I really do
see that as the essence----
Mr. McSlarrow. I don't think----
Senator Snowe.--of what it's all about.
Mr. McSlarrow.--I don't think anybody disagrees with the
importance of over-the-air broadcasting. And I have no doubt
that it will maintain a viable presence in the future. And I
have no doubt that, just as we do today, voluntarily, we will
increasingly carry multicast signals from many commercial
broadcasters, as well as the public television stations around
the country. That is a different thing from saying that, in
every circumstance, multicast carriage should be mandated.
Mr. Knorr. I'd like to even further expand on that. Where
we see--I mean, there are many broadcasters that barely make
the minimum requirements for local content today with their
primary signal. In addition, as the question was asked earlier
about an 80 percent local content, and the response was, ``Oh,
maybe that should be 60, or 40, or whatever make sense, as long
as it's measurable.'' Well, 1 percent's measurable. I mean,
what--how much local coverage there is from broadcasting is
going to be up to broadcasters, not cable companies.
In our market, we're not a Comcast, we invest in a local
channel that we carry only on our cable system, and it is the
only local coverage for the markets we serve. The broadcasters
don't serve that. We step up, as a cable operator, and do live
6 and 10 o'clock news to cover our market area, because local
is very important.
So, I think, as a cable operator, I am happy to embrace
local, as long as it's really local and not just a facade of
local to put in a shopping channel or some other filler.
Senator Snowe. Did you want to speak to that?
Mr. Slenker. Yes, Senator, if I may. Senator, DIRECTV
believes so much in the importance of the primary local
television signal, the single local television signal, that we
are, without government mandate, spending billions of dollars
to build-out the ability to retransmit 1,500 local high-
definition signals. So, I would like to think we're in the
forefront of delivering those high-definition local digital
signals to the American public without any kind of government
mandate.
Mr. Fritts. Well, in fact, they do have a government
mandate: carry-one/carry-all. If they carry one local, they
have to carry all.
The Chairman. Senator Vitter is recognized for 5 minutes.

STATEMENT OF HON. DAVID VITTER,
U.S. SENATOR FROM LOUISIANA

Senator Vitter. Thank you, Mr. Chairman.
I wanted to build on Senator Allen's comments and questions
about the challenge of conversion. And I guess my comments and
questions are really focused by the last several weeks, in my
part of the world, in Louisiana.
We had a tropical storm. We barely missed a hurricane.
Louisiana is a relatively poor state. We have a much, much
higher percentage of non-cable-hookup sets. And so, that over-
the-air broadcast is an absolutely essential component for
public safety, particularly when we face regular threats on the
Gulf from hurricanes. So, making sure that every set gets this
capability to remain operating is no trivial matter, and it's
not merely a matter of convenience. It absolutely goes to the
core of public safety.
I'm concerned about first responders, and homeland
security, and all of that. That's a legitimate concern
essentially on the other side of the issue, pushing for quicker
conversion. But, in my part of the world, the dominant concern
is the one I'm talking about with regard to weather and
hurricane threats.
And so, I guess, to be very blunt, I hear this talk,
``Well, it's just a matter of technology. Clearly, this can be
done.'' I think it is a much, much bigger project, with a lot
more room for pitfalls than that sort of throwaway response
admits to. I mean, this is a big project, to make sure that TV
sets, particularly in rural areas and where poor folks live,
aren't just shut off. And I guess I'd invite some more
elaboration on how we really get that done and don't leave
people, particularly poor folks and those in rural areas, in
the lurch, not just for entertainment, but for essential public
safety information.
Mr. Lawson. Senator, we had an experience in the San
Francisco Bay area last year. Our station, KCSM, the public
station, the community-college licensee, had a tower issue, and
they really had to make a choice between analog broadcasting
and digital broadcasting. They chose digital, and they did
everything right. They went on the air for weeks and months.
They did publicity. They tried to negotiate carriage with cable
and satellite, with some success.
The day comes that they turn off analog, and it was chaos.
The retailers in the area called the station saying, ``Don't
send people to us. We don't have converter boxes to sell them.
We can get them on the Internet for $400 that will do high-
definition TV.'' But these are people--elderly people, who
wanted to do their yoga in the morning. The station ends up
losing 38 percent of its audience share.
I agree. I share your concerns, and Senator Allen's
concerns. We can make a hard date, but you're talking about a
major project. We're talking about a Y2K-level project, to
convert 21 million people.
As I said to the listening session, that was a successful
model. Let's look at the conversion of the metric system as a
model that didn't work. So, it has to be carefully planned.
And, in terms of public safety, I would like to reiterate
that public broadcasters working with our commercial colleagues
of all different media are making bandwidth available to the
Department of Homeland Security for an upgrade to the Emergency
Alert System. And that will depend, in part, upon over-the-air,
but there are also--we're looking to get that signal to all
sorts of devices, like cell phones. But it still depends on a
robust digital over-the-air broadcast signal.
Mr. Abud. If I may add, like I was talking about, the--our
relationship with the Hispanic community, our consumer really
needs us. They look at us as a lifeline, which is not the case
of the general-market audience. Sometimes they call us, even
before they call 911, to report issues or problems. And in
order for us to give them better service, just to give you an
example, we have initiatives right now with the Los Angeles
education school district. We are the partners to provide
support to the parents in how they help their kids going
through school. Having the multicast will allow us to expand on
those services, but I need to have the must-carry in order for
those services to reach all of the population and not only
those that get over-the-air.
Mr. Fritts. Senator, I used to operate radio stations in
Louisiana, so I'm familiar with the territory, and also concur
that this is a herculean problem. But if the Congress says 2009
is the date, we will run the necessary campaigns. We'll help
develop the technology to make sure that as few people as
possible are displaced. Because every time we lose a television
set to technology, if you will, we've lost an opportunity. Our
audience falls.
And we agree with you that local television is so
important, especially when you have so many hurricanes, and
tornadoes, and bad weather that comes through. Not just that,
but on everyday local information. And we think the best way to
do it is to continue the must-carry regime that was laid out in
1992, following the governmental interest, which was supported
by the Supreme Court.
Senator Vitter. Can I just interject? How does that
continuation of must-carry really address the conversion issue
I'm talking about? I don't get it. I mean, I'm talking about
people without cable. So, what does must-carry have to do with
that?
Mr. Fritts. It doesn't have anything to do with people
without cable.
Senator Vitter. OK. That's what I'm talking about.
The Chairman. Gentlemen, if I may, we're going to have a
follow-on hearing at 2:30 today. I have just a couple of
questions, if I might ask. I didn't ask any at the beginning.
Mr. Fritts, after you go digital, what's the future of the
over-the-air broadcasting for those people who don't want to
pay, who want their own set free to the consumer, but supported
by advertisers? What's the future of that system?
Mr. Fritts. We think it's going to be robust, a robust
system that will continue providing--it's going to be in a very
competitive world, even more competitive in the future than it
has been. Broadcasters who specialize in localism, who provide
more localism, rather than less, will be successful. Those who
scale away from that and try to provide just a national service
only, in my view, will have a more difficult time----
The Chairman. Congress has mandated that we'll be digital
after a certain date.
Mr. Fritts. That's correct.
The Chairman. But we will have set-top boxes that will
reduce the digital to analog during the period until the people
get digital TV, right?
Mr. Fritts. That's the current plan, yes, sir.
The Chairman. Now, Mr. McSlarrow, what do we do about the
emergency over the--emergency concepts in areas that are just
totally cable, and cable goes off the air?
Mr. McSlarrow. Well, I mean, we have to rely on the fact
that we have other ways to communicate.
The Chairman. I want to know what that is. You know, it's--
you don't carry--you don't have the ability for emergency
broadcasting back over-the-air again, do you?
Mr. McSlarrow. No, not currently. No, you'd have to rely on
either radio, or wireless, or some other form of communication.
The Chairman. So, in the things that Senator Vitter is
talking about--and, God knows, we all have our own earthquakes,
and tornadoes, and tidal waves--is over-the-air system still in
the national interest that we preserve over-the-air, and
preserve it in a digital basis, if possible?
Mr. McSlarrow. Absolutely.
The Chairman. Well, then, why do you suggest, once we go
through the process of converting over-the-air to digital, you
want to downgrade it to analog until your customers get over
the--set-top boxes? You don't want us to provide set-top boxes
to your customers. Why is that?
Mr. McSlarrow. I think it's more you don't want to, because
it'll cost $9 billion; whereas, we can down-convert at the
headend, take care of this at our own cost, give people exactly
the same service. The reason we need to down-convert is, we
have 40 million households----
The Chairman. But if those customers out there don't have
digital, they're your guys'.
Mr. McSlarrow. Right.
The Chairman. They have a set. They could pick up the over-
the-air digital if they had a set-top box.
Mr. McSlarrow. Actually, if they have a digital TV, they
could pick it up over-the-air, as well.
The Chairman. But, by definition, they don't have a digital
TV. We're talking about your----
Mr. McSlarrow. Our analog customers? Correct.
The Chairman. Your analog customers are sitting out there
in rural Louisiana, or an island in Hawaii or somewhere in
Alaska, but they're on a cable system, but those sets will pick
over-the-air broadcasting if they dial it in right, right?
Mr. McSlarrow. If they have a digital-to-analog converter
box with it, yes.
The Chairman. Yes. But these signals are going to be
digital now.
Mr. McSlarrow. Correct.
The Chairman. But those sets are still analog. And you want
us to maintain them in analog for a period of time, until you
get ready to convert them. I don't understand that.
Mr. McSlarrow. No, Mr. Chairman. I'm sorry, I haven't been
clear. No, we're all for the transition to digital. What we're
saying is, when it comes down to the point where we have to
distribute a signal to an analog customer, we need to be able
to give them an analog signal. Digital signals will go to
digital customers. So we're not----
The Chairman. But your signals are going out in digital to
your cable clients that have them, aren't they?
Mr. McSlarrow. And we can do both.
The Chairman. Well, why don't you want to do both--do must-
carry?
Mr. McSlarrow. We don't want to do both in every single
circumstance for every single operator for every single
station. That's when you get into real capacity crunches. But
we would love to be able to carry as much as we can. And we
will.
The Chairman. I promised we'd be finished by noon. One last
question.
How many analog customers do you expect to have on your
system in 2009, if we make that the hard date? How many sets
will still be on cable systems that are analog, and will remain
analog until something changes?
Mr. McSlarrow. We currently have--I think our estimate's
134 million analog TV sets in cable customer households, and 40
million of those households are just analog, period. I don't
know what our estimates are for 2009. I don't think it will be
too much different. We have 26 million digital subscribers now.
We're adding, you know, probably a million a year. But you're
still going to probably have roughly 50 percent of our
customers, by 2009, who will still receive analog----
The Chairman. And unless we do something about it, these
foreign producers of our TVs--and I don't know of any that are
produced at home--will continue bringing into the United States
sets that look like they're digital, but they're not digital-
ready. Unless we do something, all the televisions that come in
from now on will still be analog until we mandate it, isn't
that right?
Mr. McSlarrow. Well, you can buy--I mean, you can buy them
today.
The Chairman. But they're not all----
Mr. McSlarrow. I think----
The Chairman.--they could bring in digital sets starting in
October if we told them that's all they could bring in.
Mr. McSlarrow. Well, they sell digital sets now, Mr.
Chairman. And I think the key is notice, notice to consumers.
The Chairman. How much longer do you think we should allow
the sale of analog sets in the United States?
Senator Burns. To follow up on that, if the Senator would
yield, what if we mandated a chip in every television--new
television set to be sold today, that it could receive analog
or digital already built into the set? What would happen?
Mr. Knorr. I think----
The Chairman. The price would go up.
Mr. Knorr. Yes, I think that would be a question for the
electronics--but I assume that price might go up, but I think
that the sooner the digital chips are in the TV sets, the
sooner that accelerates the transition. I mean, as a cable
operator, I have no problem with the government wanting to buy
converter boxes for all my analog customers. You know, I don't
have any objection to that. But I think we can make that not
necessary. As several people have outlined, the natural
transition process, from the time the signals are available,
which has really only been the past couple of years, is a 10-,
to 15-, to even 20-year process. And what we're saying is, as
cable operators, we can facilitate that natural process by, at
the same time, getting spectrum released sooner, without
forcing customers to accelerate that natural transition
process.
The Chairman. Thank you all very much.
We're going to convene this afternoon at 2:30. And at the
beginning of that meeting, we will have the demonstration of
the improved signal concept.
Thank you.
[Whereupon, at 11:55 a.m., the hearing was recessed.]

THE DIGITAL TELEVISION TRANSITION--AFTERNOON SESSION

----------

TUESDAY, JULY 12, 2005

U.S. Senate,
Committee on Commerce, Science, and Transportation,
Washington, DC.
The Committee met, pursuant to notice, at 2:30 p.m. in room
SR-253, Russell Senate Office Building, Hon. Ted Stevens,
Chairman of the Committee, presiding.

OPENING STATEMENT OF HON. TED STEVENS,
U.S. SENATOR FROM ALASKA

The Chairman. The second session of this DTV hearing will
focus on the use of analog spectrum by public-safety and high-
tech groups. It will also consider consumer education about the
DTV transition. And, last, we'll examine how a subsidy program
for set-top boxes should be designed, and what it would cost.
We have six witnesses. But before we start, I want to begin
with a demonstration of the set-top boxes, which Mike Kennedy,
from Motorola, has agreed to demonstrate for us.
Now, Mike, you might want to wait, though, for some of the
other, sort of--we call them, tardy, OK?
[Laughter.]
[Senators appear.]
The Chairman. We do believe we're going to have a full--not
almost--an almost full bench. I'd prefer it to wait, if that's
all right with you. You're going to be here for a while,
anyway. Can we put that off?
Mr. Kennedy. That's fine. Absolutely fine.
The Chairman. And then, after it's over, for the audience's
information, Mr. Kennedy has agreed to turn this thing around
and let you all see the same thing. We couldn't set it up on
both sides at the same time.
So, why don't we start, then, with the concept of the
hearing? Let me first call upon Mike Kennedy, Senior Vice
President of Motorola. What we're going to do--do you all have
any opening statements here this afternoon?
Well, we'll just go across the panel, as we did this
morning, and then have questions from each Senator, when they
come in. But we'll pause, when we get a sufficient number, to
have Mr. Kennedy's presentation of this.
Mike?

STATEMENT OF MICHAEL D. KENNEDY, SENIOR VICE

PRESIDENT, AMERICAS COUNTRY MANAGEMENT;

DIRECTOR, GLOBAL GOVERNMENT RELATIONS, MOTOROLA

Mr. Kennedy. Good afternoon, Chairman Stevens, and members
of the Committee.
My name's Mike Kennedy, and I have responsibility for
Country Management for North and South America, as well as
Government Relations, for Motorola, worldwide. It's an honor to
be here with you today.
As you know, Motorola is the original high-tech startup
company, with over 75 years of technology heritage. We
developed the first cell phone, and have a 65-year history of
providing ever-advancing communications systems for public
safety. Today, Motorola is a leading provider of solutions for
cellular, wired, and wireless broadband, first responders, and
cable communications.
I want to thank you, Mr. Chairman, for scheduling this
hearing, and I appreciate the opportunity to appear before you
today to discuss the promise of completing the DTV transition
for America's consumers and first responders.
Before I discuss the importance of the spectrum for public
safety, I would like to talk briefly about the benefits that
will arise from portions of the 700 megahertz spectrum that are
to be used for commercial services. The characteristics of this
spectrum provide a unique opportunity for the development of
new wireless broadband service providers, particularly in rural
areas. The favorable propagation characteristics of the 700
megahertz band means that broadband services could be initially
deployed with only one-quarter of the infrastructure that would
be necessary in other spectrum allocations commonly used for
WiFi-type services.
Affordable wireless broadband will provide enormous
benefits to the American public, including providing access to
information and services such as telemedicine, so that doctors
can remotely treat patients, assist in delicate medical
procedures, and transmit large medical files; telework,
allowing work from home or other locations, thereby reducing
travel time, increasing efficiency, and providing people in
remote areas greater opportunities for employment; and distance
learning, providing greater opportunities for America's youth
to get a quality education. These are just a few of the
examples of the almost limitless applications and opportunities
provided by affordable broadband.
In addition, we can improve the quality of mission-critical
information to our front-line responders. For example, an
officer or an agent could transmit video of a potential
biological weapon and get real-time counsel from a remote
expert. Police could instantly send or receive a photograph of
an abducted child. Firefighters could access building
blueprints, hydrant locations, and hazardous-material data.
Unfortunately, these benefits for our safety and security await
Congressional action on DTV.
As you explore ways to complete the DTV transition, we
encourage you to continue your examination of the provision of
converter boxes to analog TV consumers who do not subscribe to
cable or satellite TV services. To make the transition a
success, consumer education, the converter box, and a hard date
will combine for a pain-free end to antique analog TV services.
Motorola estimates the price to a consumer for a digital-
to-analog converter box that would facilitate the transition on
January 1, 2009, to be $50. Anybody--this is an example--in
fact, this is a working converter box here that I will
demonstrate at your pleasure a little later--anybody can make
this box. It's a one-time marketplace. And we would encourage
you to examine it. As you look to craft policy to provide
converters for Americans who watch TV over-the-air with analog
sets, we think the affordable price of this box can really
help.
Mr. Chairman, at that point, what I would like to do is
hold the rest of my remarks. And I'll be happy to offer the
demonstration when you want me to.
[The prepared statement of Mr. Kennedy follows:]

Prepared Statement of Michael D. Kennedy, Senior Vice President,
Americas Country Manager; Director, Global Government Relations,
Motorola

Good morning, Chairman Stevens, Co-Chairman Inouye, and members of
the Committee.
My name is Mike Kennedy, and I am the Americas Country Manager for
Motorola and head of Global Government Relations for the company. We
have served state, and local public safety and Federal law enforcement
and their technology needs for more than 65 years. We also created the
walkie-talkie for the warriors of WWII, the pager, the satellite phone,
the cell phone, and now we are working to obsolete the cell phone with
mobile devices that will be more like universal remote controls for
life.
I want to express my appreciation to you, Mr. Chairman, for
scheduling this hearing to address the need to provide timely and
specific access to much-needed spectrum in the 700 MHz band to
America's first responders and for other wireless broadband purposes.
You and Senator Inouye have been great champions for the public safety
community and the need to end the digital television transition with a
fixed date.
As you know, the report of the National Commission on Terrorist
Attacks Upon the United States (hereinafter the ``Report'') highlighted
the critical need of the public safety community to have access to
additional spectrum for its mission-critical communications needs.
It is an honor to be here with you today to discuss how we can
implement one of the recommendations of the Report that remains un-
legislated, and provide for a safer America by ensuring that first
responders have the resources needed for life-saving communications.
The horrible events last week in London further amplify the need to
provide our emergency responders with the tools necessary to respond as
quickly and effectively as possible.
Ending the digital television transition, as you know, also frees
up spectrum for advanced commercial services. These services will
enable greater connectivity for rural areas, greater competition in the
provision of broadband, and new mobile applications to link people with
technology's promise no matter where they may be: in the home, at work,
in the car, or out and about going about living their lives.
Motorola's Technology Heritage
Motorola is a leading provider of communications and information
solutions, including public safety, private, commercial wireless,
cable, and wireline communications. We have more than six decades of
experience in meeting the mission-critical needs of our public safety
customers. We offer an extensive portfolio of solutions specifically
designed to meet the rapidly evolving safety and security needs of
these customers. Our solutions include interoperable mission-critical
radio systems based on the P25 public safety interoperability standard;
command and control solutions; identification and tracking solutions;
information management for criminal justice and civil needs; and
physical security and monitoring solutions.
In 2002, our public safety business in Motorola received the
Malcolm Baldrige National Quality Award, the Nation's premier award for
performance excellence and quality achievement. We continually strive
to translate the quality processes upon which this award was based into
high quality and reliable communications systems for our public safety
customers. Motorola works very closely with our customers to help them
implement communications capabilities needed for both every day mission
critical needs and catastrophic events.
Motorola invented the cell phone in 1973. Today we are leader in
multi-mode, multi-band communications products and technologies and are
transforming the device formerly known as the cell phone into a
universal remote control for life. We are advancing seamless mobility
with innovative technology solutions and delivering proven capabilities
in cellular, wireless broadband and wireline access technologies, with
recognized leadership in integrating core networks through wireless IP,
wireless softswitch and IP multimedia subsystems. As the largest cable
set-top box provider, we are providing scalable, integrated end-to-end
systems for the delivery of broadband services that keep consumers
informed, entertained, and connected.
As a company, Motorola has also been a leader in developing and
providing technology for the broadcast and cable industries. In 1947,
we built one of the first affordable TV sets, which was offered to
consumers for under $200. In 1957, the company built the technology for
the first pay-per-view cable event. In 1963, as TV upgraded from black
and white to color, Motorola developed the first truly rectangular
picture tube for color television in a joint venture with the National
Video Corporation. The tube quickly became the standard for the
industry. In 1972, we developed the first remote-controlled set-top
box, and in 1992, Motorola helped launch the digital revolution by
proposing to the government a concept that no one else had seriously
considered--transitioning from analog to digital technology to drive
the market to high-definition TV (HDTV) and facilitate the recovery of
spectrum.

Recommendations of the 9/11 Commission Report
The Report by the 9/11 Commission extensively reviewed how
emergency responders communicated or, in too many cases, were unable to
communicate, during the tragic events of September 11, 2001. The Report
notes that there was substantial inability to communicate on the needed
level of interoperability at the World Trade Center, the Pentagon, and
in Somerset County, Pennsylvania.
While it is clear that prior coordination, advanced preparation,
and training by responding agencies greatly enhanced communications
among emergency personnel when it was done, all too often this prior
planning, coordination, and training did not occur, and the ability of
multiple agencies to work together to maximize their life-saving
efforts was frustrated.
Planning and coordination can only go so far, however, to provide
effective communications in an emergency. Absent proper equipment and
resources communications capabilities can quickly become overwhelmed,
greatly diminishing their effectiveness. Proper resources not only
include radios that can interoperate among agencies using a common
standard, but also spectrum to ensure the availability of sufficient
system capacity. The 9/11 Commission recognized this fact and
recommended that Congress legislate the expedited and increased
assignment of radio spectrum for public safety.
Motorola, the Nation's major law enforcement and fire fighting
organizations, as well as the associations representing America's
cities, counties, and mayors fully support this recommendation. The
spectrum referred to in the report is in the 700 MHz band. Public
safety identified the need for this spectrum 8 years ago in a September
11, 1996 report by the Public Safety Wireless Advisory Committee. That
report, rather eerily, indicated that the 24 MHz under consideration
today should be available within 5 years. As we all know, 5 years later
the horrific terrorist attacks on our soil gave rise to the 9/11
Commission, which again, urged that these frequencies be made available
to public safety. In the absence of these frequencies being available
to public safety for their critical communications needs, the Nation
unfortunately is needlessly less equipped than it should be--in an area
we know how to fix--to protect the American people. After the first
report was published, Congress acted quickly, to allocate this spectrum
to public safety in 1997. Unfortunately, since then, public safety's
ability to use this spectrum has been greatly hampered or stopped in
the areas where it is most needed--the major urban centers. The reason
is the continued use of the spectrum for analog broadcast television
services absent a date-certain as to when the spectrum will be fully
transferred to public safety's use. The communication needs of public
safety are too important to allow this uncertainty to continue.
Swift action by this Congress can provide public safety access to
one of the fundamental building blocks of an effective communications
system--spectrum. Congress' commitment made in the Intel Reform bill,
passed in December, to pass legislation this year to end the DTV
transition was excellent, and we urge you not to be deterred.
Current law sets December 31, 2006, as the date for clearing
television from the band. However, this is not a firm date.
Broadcasters do not have to clear the band until 85 percent of the
households in their service areas have the capability to receive
digital TV signals, an environment unlikely to be met by year-end 2006.
Under current law, while TV incumbents are required to vacate this
spectrum at the end of 2006, they can receive an unlimited extension of
this deadline based on the state of the transition in their particular
market. So, in reality, there is no ``hard date'' when the transition
will end and the spectrum will really be accessible to public safety
and wireless broadband service providers everywhere. This is not the
optimal situation for the public safety or high tech communities and
those they serve. We commend and encourage efforts by this Committee to
act on the recommendation of the 9/11 Commission that legislation be
enacted that would clear this spectrum nationwide for public safety as
close to year-end 2006 as possible. We also applaud Senators McCain and
Lieberman for their dedicated efforts to help advance this need with
their SAVE LIVES Act. We eagerly look forward to the direction that
you, Mr. Chairman, will take and offer our support, in advance, to you
on this vitally important initiative.

Converters Can Enable a Date-Certain for the Transition, Increase
Channels, and Provide a Clearer Picture for Consumers With
Analog TVs
While clearing the 700 MHz spectrum for public safety will affect a
small number of viewers relative to the improved security gains for
many, Motorola believes there are options for mitigating the over-the-
air impact while affording the invaluable benefits of completing the
full transition to digital television. Completing the transition to
digital television will have numerous benefits, including spectrum for
advanced public safety and consumer services, enhanced and expanded
viewing options for the public, more efficient use of the spectrum, and
the likelihood that digital stations will provide a wide variety of
data and other services to the public.
The Congress could realize the gains of the transition as early as
possible by setting a hard date for the transition, and ensuring that
viewers continue to have access to free over-the-air television by
providing inexpensive digital-to-analog over-the-air converter boxes to
those that need them. A similar approach was used in Berlin, Germany,
to ensure a seamless and pain-free crisp analog-to-digital TV
transition. This was achieved through the provision of converter boxes
to some TV consumers who did not subscribe to cable or satellite TV
service and maintained an analog TV set. We believe this is a positive
step that could provide a real path forward on how to solve the
transition here in the U.S. The Berlin Model worked. To make it a
success, consumer education, a converter box subsidy, and a hard
transition date combined for a real win. This type of approach can
allow this Congress to reach a solution that addresses the needs of all
stakeholders. The status quo cannot be allowed to stand. A simple
technology solution that you can enable will guide the public and
industry through the transition, and fulfill the Committee's years old
vision of making available the advanced services in the 700 MHz band
that will benefit the American people.
Motorola is a TV set-top box provider. In comments to the FCC
almost one year ago, we stated that--assuming that the market is driven
by a hard deadline of December 31, 2006, for the end of the DTV
transition--we estimated that the cost of a digital-to-analog over-the-
air converter box would be approximately $67 per unit. That estimate
was based on the best possible foreseeable technology and
implementation information available at that time. Today, we are
pleased to be able to say that our estimate was a conservative one.
Suppliers are making changes that provide better integration of the
converter components, and prices are moving down. We would now expect
that a $67 dollar price would be achievable earlier than originally
expected, and believe that this downward trend will continue. We expect
that by January 1, 2009, converters would be available for
approximately $50 assuming that a hard deadline for the end of the
digital transition is set.
The implications of this $50 figure are profound. Such a price per
unit would peg the cost of providing one digital-to-analog converter
box for every exclusively over-the-air household, based on studies by
the Consumer Electronics Association,\1\ at around $660 million. Asking
consumers to contribute $20 toward the box would reduce the government
cost to around $400 million, and also help minimize fraud. While the
population will grow, these over-the-air TV numbers will continue to
decline dramatically by January 1, 2009. As CEA testifies today, in
2005, approximately 12 percent of the Nation's households rely on over-
the-air TV, and at the end of 2008, they project the number to drop to
6.8 percent, or about 60 percent of what it is today. Applying this
trend to the above figures, a $50 converter box provided to every
exclusively over-the-air household would cost the government
approximately $400 million without a consumer contribution, and $250
million with a $20 contribution.
---------------------------------------------------------------------------
\1\ Letter dated June 7, 2005 from Mr. Gary Shapiro, CEO of the
Consumer Electronics Association, to Congressmen Barton, Dingell,
Upton, and Markey, citing 13.2 million over-the-air households and 38.3
million over-the-air televisions nationwide at the present.
---------------------------------------------------------------------------
The cost to provide converters to those who need them is much less
than the anticipated spectrum auction proceeds for the commercial
digital wireless broadband licenses that would occupy the reclaimed
analog TV spectrum.
Upon conclusion of the transition, viewers who receive their
television programming through cable or satellite will not have to make
any changes to continue using their existing analog television sets.
The relatively small percentage of viewers who receive their television
programming directly from over-the-air broadcasts will be able to
continue using their existing television sets, although a digital-to-
analog converter will be needed to do so.
The converter receives the digital signal and converts it to an
analog signal that analog TVs recognize. They are easy to install and
use. The converter is connected between the antenna and television
using standard cables and connections. The connections are compatible
with even the oldest television sets.
There are a number of advantages to receiving digital signals even
while viewing an analog television. Digital TV signals are less prone
to interference and generally provide a clearer picture than analog
signals. The converted digital signals are free from the ``ghosts'' and
``snow'' experienced with off-air analog signals. This provides an
improved viewing experience and a significantly better picture over
fair quality analog transmissions. Going digital also gives
broadcasters the opportunity to provide over-the-air viewers with more
channels and viewing options. With digital, broadcasters can send
multiple channels of programming in the same space that one analog
channel occupies. The digital-to-analog converter recognizes all of
these channels and displays them independently on existing analog
televisions. Many broadcasters are already taking advantage of this
opportunity to provide viewers with more programming and information by
providing multiple channels of over-the-air content, including
additional programming or local news and weather information.
Setting a firm transition date is critical to resolve the current
chicken and egg conundrum of the DTV transition. As you know, doing so
will not only provide critically needed spectrum for public safety, but
will also unlock new entertainment and information services for
consumers, and will provide additional opportunities for American
industry. Wireless communications provide our first responders with the
right information, at the right time and in the right place, whether
that information is voice, data, or video.
Public Safety Needs 700 MHz Spectrum for Critical Technologies
Motorola's partnership with the public safety community over the
years has taught us that first responders need systems designed
specifically for mission critical operations to get the job done. For
example, as with most of the Northeast and Midwest, the State of
Michigan was confronted with a large-scale emergency during the August
2003 blackout. Despite the failures experienced by various commercial
carrier networks in Michigan, and surrounding states, due to these
power outages, Michigan's nearly 12,000 public safety radios
experienced no interruptions in communications. Police officers,
firefighters, and EMS providers worked as a team in real-time to serve
the public. Michigan had control over its communications because it had
created a statewide mission critical network designed specifically for
catastrophic situations and events, including the disruption of normal
power sources. While many public safety entities also use public
carrier networks for less critical communications, there is no
substitute for mission critical systems when the safety of first
responders, and the public they serve is at risk.
Effective mission critical mobile and portable communications
systems are absolutely essential to public safety operations. Police
officers, firefighters, emergency medical personnel, and their
departments use mobile and portable communications to exchange
information that can help protect public safety officials and the
citizens they serve. Traditionally, this information was mostly
exchanged by voice. Increasingly, as public safety entities strive to
increase efficiency and effectiveness in today's world, they also need
the capability to reliably transmit and receive high performance data,
still images, and video. Spectrum is the road upon which such
communications travel, and increased communications requirements lead
to the need for more spectrum.
Based on a thorough justification of need, Congress and the Federal
Communications Commission dedicated 24 MHz of spectrum in the 700 MHz
band to state and local public safety in 1997. The FCC established
specific nationwide interoperability channels within this spectrum
allocation, as well as both narrowband and broadband channels to
support a variety of identified public safety communications
requirements.
However, 8 years later, incumbent television stations operating on
channels 62, 63, 64, 65, 67, 68, and 69 prevent public safety access to
this essential resource in most major urban areas where the demand for
more spectrum is the greatest. The recent focus on increased
interoperability and Homeland Security make availability of this public
safety spectrum nationwide even more critical.
These channels are critical to public safety for two reasons:

(1) Together, the new 700 MHz and current 800 MHz bands provide
the best opportunity to integrate interoperable communications.
The 700 MHz band's proximity to the 800 MHz band allows public
safety agencies to expand their current 800 MHz narrowband
voice and data systems for interoperability and regional
coordination on an ``intra'' as well as ``inter'' agency basis.
Equipment operating in these combined frequency bands on the
FCC-endorsed Project 25 interoperability standard is
commercially available today. The FCC has granted each state a
license to operate such narrowband communications in the 700
MHz band. Localities throughout the country are actively
engaged in spectrum planning at 700 MHz, a prerequisite for
obtaining their own FCC licenses. For example, after a year-
long review by the FCC, the Southern California regional plan
was approved, but TV incumbency prevents actual use of the
spectrum in much of that area.

(2) 700 MHz is the only dedicated spectrum allocation where
public safety can implement advanced mobile wide area systems
that bring high-speed access to databases, the intranet,
imaging, and video to first responders out in the field.

This technology offers a whole new level of mobile communications
capabilities, which is far beyond today's voice and low-speed data
applications. For example:

a. An officer or agent could transmit video of a potential
bomb, or biological weapon and get real-time counsel from an
expert in another location.

b. Local or State police could instantly send or receive a
photograph of a missing or abducted child.

c. Crime scene investigators can transmit live video of
footprints, fingerprints, and evidence to speed analysis and
apprehension of perpetrators.

d. Firefighters can access building blueprints, hydrant
locations hazardous material data, and other critical
information.

e. Paramedics can transmit live video of the patient to doctors
at the hospital that would help save lives.

Motorola previously conducted wideband trials together with public
safety entities in Pinellas County, Florida and the City of Chicago. We
are also proud to be part of the broadband demonstration that is being
led by the Office of the Chief Technology Officer for the District of
Columbia Government (OCTO). That system provides coverage throughout
most of the District, and is providing valuable information to law
enforcement agents. We are proud to be working with the OCTO on an
innovative solution that will deliver powerful applications to the
front-line first responders here in our Nation's Capitol. All of these
trials operate under experimental 700 MHz licenses from the FCC. The
capabilities demonstrated are the emerging powerful multi-media
applications that will bring public safety communications into the
Twenty-First Century.
As you know, the 24 MHz of spectrum in the 700 MHz band is
allocated for state and local public safety use. Congress, in the
Intelligence Reform and Terrorism Prevention Act of 2004 (Public Law
108-458), signed into law in December, directed the Federal
Communications Commission, along with the Department of Homeland
Defense and the National Telecommunications and Information
Administration, to conduct an assessment of public safety spectrum
needs to determine whether this allocation is sufficient to meet the
communications needs of public safety. This effort is ongoing, and is
especially important as we see the demand for information, exemplified
by trials like the one here in the District, grow for access to full
broadband services for public safety.
In addition, while this allocation will be available for state and
local law enforcement, no comparable spectrum allocation exists for
meeting the Homeland Security requirements of Federal agencies or
critical infrastructure entities. Such interoperability among state and
local first responders, Federal agencies and critical infrastructure
entities will best be achieved through the availability of comparable
spectrum resources. These issues must be carefully considered in order
to provide a comprehensive and long-term solution that meets America's
security needs.
Once cleared, the original 24 MHz of spectrum allocated to Public
Safety in 1997, will support narrowband and wideband applications for
State and Local government agencies. Narrowband 12.5 kHz channels
provide the capacity for voice and text-like data. This will help
promote interoperability as public safety entities necessarily expand
their capabilities. Notably, narrowband radios which support both 700
and 800 MHz in one radio are already available. As users purchase
additional radios for their 800 MHz systems, they will have the
capability to use the 700 MHz band once it is cleared. Wideband
spectrum at 700 MHz supports applications such as image-rich records
access and higher speed video streaming over wide areas.
The Public Safety community, the FCC and multiple equipment
manufacturers have already spent considerable time and resources to
develop the operational and technical rules for that 24 MHz of
spectrum. In addition, both narrowband and wideband interoperability
standards have been developed and are supported by multiple competitive
manufacturers. For example, the TIA902 SAM standard for wideband public
safety operations at 700 MHz has been developed and unanimously adopted
by the public safety community and multiple competitive manufacturers.
Subsequently, the TIA 902 wideband standard was endorsed by the Public
Safety community and specifically recommended for FCC adoption.
700 MHz Spectrum Holds the Promise of Economic Benefits and Growth
In addition to the 24 MHz of spectrum allocated to public safety in
the 700 MHz band, there is 84 MHz of spectrum allocated for commercial
uses. Of this, 24 MHz has already been licensed, although use is
severely limited due to continued use of the spectrum by TV
broadcasters. Of the 108 megahertz to be reclaimed, 60 megahertz remain
to be licensed. This spectrum holds tremendous promise as a home for
another generation of advanced wireless broadband services that that
will provide American citizens with greater access to information, and
provide immense economic benefits from greater productivity.
The societal benefits of providing access to broadband services can
not be questioned. Broadband access enables powerful applications. For
example:

Telemedicine so that doctors can remotely treat patients
that are too frail or injured to travel to an expert medical
facility, to remotely assist in a delicate medical procedure,
or to transmit large medical files or information for
evaluation at an expert specialized facility.

Telework, which allows workers to work from home or other
locations outside of the regular company office. This reduces
travel time to work, can increase efficiency and provide people
in remote areas greater opportunities for employment.

Digital government so that leaders can provide citizens
greater access to government services through e-government
initiatives.

Advanced farming to improve and increase the efficiency of
monitoring and controlling of agricultural resources,
increasing crop and livestock yields by alerting farmers to
problem areas, and providing farmers access to the information
necessary to take corrective action. These technologies can
reduce the costs associated with distribution of farm products,
and can increase the safety of food supply by enabling better
tracking of products through the production and distribution
network.

Distance learning so that all Americans have access to the
best possible education on an equal footing.

Increased access to services and opportunities for persons
with disabilities will strengthen their participation in the
information economy.

These are just a few examples of the almost limitless applications
and opportunities provided by broadband.
While the benefits of broadband are clear, America's commitment to
widespread cost-effective deployment of broadband is not. The United
States has steadily slipped down the broadband deployment slope
compared to the rest of the world, and now ranks 16th in broadband
subscribers as a percentage of the population. The spectrum that will
be made available at 700 MHz as a result of the transition to digital
television provides a unique opportunity to provide facilities-based
competitive broadband services. The favorable propagation
characteristics of the 700 MHz band will allow broadband services to be
initially deployed with approximately 25 percent of the infrastructure
that would be necessary in the 2.4 GHz band, which is commonly used for
WiFi today, considerably reducing the costs of deployment. These
propagation characteristics also allow for easier penetration through
and around potential obstacles to deploying wireless services in higher
frequency bands. The characteristics of this spectrum make it ideal for
both mobile and fixed services.
Exclusive licenses for use of these frequencies will allow
operators to provide the highest quality service in terms of
reliability, and will provide incentives for efficient use. Such an
opportunity could significantly advance efforts to provide broadband
services to all Americans.
The economic benefits of this spectrum are enormous. Estimates of
the auction revenues from this spectrum range from $10 billion toward
$30 billion. This pales in comparison, however, to the economic
benefits to society. When considering such implications as increased
productivity for the Nation, and lower costs of services to consumers
due to making this spectrum available for better uses than merely
analog TV, the economic benefit to America was recently estimated at
$233 billion to $473 billion dollars in a report by the Analysis
Group.\2\
---------------------------------------------------------------------------
\2\ Analysis of an Accelerated Digital Television Transition,
Colman Bazelon, Analysis Group, May 27, 2005.
---------------------------------------------------------------------------
Significant steps have already been taken that will provide for
rapid commercial use of this spectrum when it is fully available.
Standards bodies, including the 3rd Generation Global Partnerships and
the Telecommunications Industry Association have already adopted
standards for use of technology in this spectrum.\3\ Standardized
technology will lower the cost of equipment and provide for rapid
acceptance of equipment and services. In addition, companies that have
licenses in this spectrum band have begun to deploy systems in the
limited areas not encumbered by broadcast stations. For example,
Qualcomm has developed its MediaFLO^TM system to provide
voice and data multimedia to mobile devices. Such innovative
technologies hold the promise of providing consumers with access to
exciting new levels of information and entertainment.
---------------------------------------------------------------------------
\3\ See, TIA standard TIA-1030 http://www.3gpp2.org/Public_html/
specs/C.S0057-0 v1.0_020904.pdf and 3GPP TS 45.005 (http://
www.3gpp.org/ftp/Specs/archive/45_series/45.005/45005-710.zip).
---------------------------------------------------------------------------
In closing, Mr. Chairman, and members of the Committee, we urge you
not to be deterred from sticking as close as possible to the original
December 31, 2006 goal. Making this spectrum available for new
innovative technologies to support first responders and consumers
nationwide anytime near the end of 2006, will not happen without you.
The Report of the 9/11 Commission has reaffirmed the need for this
spectrum and added new impetus to making it available to our Nation's
First Responders. We urge you to take swift action this year to make
this important long-awaited objective a reality for law enforcement,
fire fighters, emergency medics, and your constituents. As we have just
seen, our allies in London were attacked by terrorists. All of the
experts tell us that it is not a matter of if, but when, will they
strike us here again. Communications tools are vital in these
emergencies. We know this and we know how to make them available--it
starts with ending the DTV transition.
Motorola stands ready to support this Committee to help minimize
the impact on the viewing public of making 700 MHz spectrum available,
and to put this spectrum to its highest and best use--protecting
American citizens. We respectfully urge the Congress to take action to
implement the recommendation of the 9/11 Commission to make the 700 MHz
spectrum fully available to public safety by a date certain as soon as
possible.
Thank you.

The Chairman. Well, thank you for your courtesy.
Our next witness is Harlin McEwen, International
Association of Chiefs of Police, Communication, Technology
Committee. He's chairman of that committee.
Mr. McEwen?

STATEMENT OF HARLIN R. McEWEN, CHAIRMAN,

COMMUNICATIONS & TECHNOLOGY COMMITTEE,

INTERNATIONAL ASSOCIATION OF CHIEFS OF POLICE

(IACP); COMMUNICATIONS ADVISOR, MAJOR CITIES CHIEFS

ASSOCIATION (MCC), NATIONAL SHERIFFS' ASSOCIATION

(NSA), MAJOR COUNTY SHERIFFS' ASSOCIATION (MCSA)

Mr. McEwen. Thank you, Mr. Chairman, and members of the
Committee, for an opportunity to appear before you today.
My name is Harlin McEwen, and I am a retired Police Chief
of the City of Ithaca, New York. And I'm also retired as the
Deputy Assistant Director of the Federal Bureau of
Investigation here in Washington, D.C. I serve as the Chairman
of the Communications and Technology Committee of the
International Association of Chiefs of Police, a position I've
held for more than 27 years. I also serve as the Communications
Advisor for the Major City Chiefs Association, the National
Sheriffs Association, and the Major County Sheriffs
Association.
In addition to these organizations, today I'm also speaking
on behalf of the Association of Public Safety Communications
Officials International, better known as APCO, the Police
Executive Research Forum, the International Association of Fire
Chiefs, the Congressional Fire Services Institute, National
Association of State EMS Directors, the National Association of
Counties, and the National League of Cities.
Citizens rely upon their local and state police agencies,
sheriffs offices, fire departments, emergency medical services,
and other public-safety agencies to come to their assistance
wherever and whenever needed, whether it is a crime in
progress, a civil disturbance, a building fire, a forest fire,
an automobile accident, a health emergency, a natural disaster,
or, as we learned on 9/11, a terrorist attack. Citizens assume
that those first responders will get the call, and will have
the communications tools they need to address emergencies
quickly and efficiently.
Radio spectrum is critical for public-safety agencies to
maintain the communications capability they need to protect the
safety of life and property. However, in 1996, a blue-ribbon
committee determined that public-safety agencies did not have
sufficient radio spectrum to do their jobs.
Congress responded in 1997, by directing the FCC to
reallocate 24 megahertz of spectrum in the 700 megahertz band
for public-safety services. Unfortunately, the 700 megahertz
band public-safety spectrum continues to be blocked by
television stations on Channels 63, 64, 68, and 69, and, to
some degree, on adjacent Channels 62, 65, and 67, especially in
the major metropolitan areas. Under current law, these stations
are permitted to stay in the band until December 31, 2006, or
when 85 percent of the households in their market areas have
the ability to receive DTV signals, whichever is later.
In the meantime, the public-safety spectrum needs
identified in 1996 have worsened, especially since 9/11, as
police, sheriffs, fire, and EMS, and other public-safety
agencies are being asked to assume greater roles in protecting
homeland security. A current example is last week's tragic
bombings in London, and the heightened security now placed on
our Nation's public transportation systems.
Anytime there is a terrorist attack against the U.S., or in
any other part of the world, public safety must have even more
effective and interoperable radio communications capability.
Therefore, the public-safety community supports legislative
efforts that call for an early and firm date by which
broadcasters must clear the channels occupied in the 700
megahertz band.
The 700 megahertz band is critical for public-safety
agencies to alleviate dangerous congestion on many existing
radio systems, which places first responders and the public at
risk. The spectrum also will facilitate new and expanded multi-
agency communications systems to promote interoperability among
first responders in the field.
Finally, additional spectrum will allow for deployment of
new public-safety communications technologies. However, until
the Congress establishes a date certain for TV broadcasters to
vacate the 700 megahertz band, most public-safety agencies, and
state and local governments cannot begin significant planning
and funding for new radio systems on that spectrum. The 9/11
Commission specifically recommended that Congress support
legislation providing for the expedited and increased
assignment of radio spectrum for public-safety purposes. In
response to this recommendation, the Intelligence Reform and
Terrorism Prevention Act of 2004, included a sense of the
Congress that this issue must be addressed in the First Session
of the 109th Congress.
In addition to our urgent need for the 24 megahertz of
spectrum previously allocated by Congress for public safety,
the tragic terrorist acts of September 11, 2001, and advances
in technology have intensified the need for further allocations
to provide for public-safety-area wireless broadband data
networks.
In order to aid this effort, the Intelligence Reform Act
required the Department of Homeland Security and the Federal
Communications Commission to analyze this spectrum requirement
and report back to Congress later this year. Therefore, we
support language in S. 1268, the SAVE LIVES Act, that would
permit Congress to designate additional public-safety spectrum
in the 700 megahertz band following completion of those
studies.
In closing, I would again stress that the public-safety
community supports legislative efforts that call for an early
and firm date by which broadcasters must clear these channels
occupied in the 700 megahertz band.
Thank you very much.
[The prepared statement of Mr. McEwen follows:]

Prepared Statement of Harlin R. McEwen, Chairman, Communications &
Technology Committee, International Association of Chiefs of Police
(IACP); Communications Advisor, Major Cities Chiefs Association (MCC),
National Sheriffs' Association (NSA), Major County Sheriffs'
Association (MCSA)

Thank you, Mr. Chairman, and members of the Committee for the
opportunity to appear before you today.
My name is Harlin McEwen and I am the retired Police Chief of the
City of Ithaca, New York, and I am also retired as a Deputy Assistant
Director of the Federal Bureau of Investigation in Washington, D.C. I
serve as the Chairman of the Communications and Technology Committee of
the International Association of Chiefs of Police (IACP), a position I
have held for more than 27 years. I also serve as the Communications
Advisor for the Major Cities Chiefs Association (MCC), the National
Sheriffs' Association (NSA), and the Major County Sheriffs'
Association. In addition, today I am speaking also on behalf of the
Association of Public Safety Communications Officials--International
(APCO), the Police Executive Research Forum (PERF), the International
Association of Fire Chiefs (IAFC), the Congressional Fire Services
Institute (CFSI), the National Association of State EMS Directors
(NASEMSD), the National Association of Counties (NACo), and the
National League of Cities (NLC).
Citizens rely upon their local and state police agencies, sheriffs'
offices, fire departments, emergency medical services, and other public
safety agencies to come to their assistance wherever and whenever
needed, whether it is crime in progress, a civil disturbance, a
building fire, a forest fire, an automobile accident, a health
emergency, a natural disaster, or, as we learned on 9/11, a terrorist
attack. Citizens assume that those first responders will get the call,
and will have the communications tools they need to address emergencies
quickly and efficiently.
Radio spectrum is critical for public safety agencies to maintain
the communications capability they need to protect the safety of life
and property. However, in 1996, a blue ribbon committee (the Public
Safety Wireless Advisory Committee or ``PSWAC'') determined that public
safety agencies did not have sufficient radio spectrum to do their
jobs. Among PSWAC's recommendations was that 25 MHz of spectrum be made
available from TV channels 60-69 (the 700 MHz band) within 5 years.\1\
Congress responded in 1997, by directing the FCC to reallocate 24 MHz
of spectrum in the 700 MHz band for public safety services.
---------------------------------------------------------------------------
\1\ As I and others have often noted, the date of the PSWAC report
was September 11, 1996. Exactly 5 years later, on September 11, 2001,
the spectrum identified by PSWAC was still not available for public
safety use in most of the Nation.
---------------------------------------------------------------------------
Unfortunately, the 700 MHz band public safety spectrum continues to
be blocked by television stations on channels 63, 64, 68, and 69 (and,
to some degree, adjacent channels 62, 65, and 67), especially in major
metropolitan areas. Under current law, these stations are permitted to
stay in the band until December 31, 2006, or when 85 percent of the
households in their market areas have the ability to receive DTV
signals, whichever is later.
In the meantime, the public safety spectrum needs identified in
1996 have worsened, especially since 9/11, as police, sheriffs, fire,
EMS, and other public safety agencies are being asked to assume greater
roles in protecting homeland security. A current example is last week's
tragic bombings in London, and the heightened security now placed on
our Nation's public transportation systems. Any time there is a
terrorist attack against the U.S. or in any other part of the world,
public safety must have even more effective and interoperable radio
communications capability. Therefore, the public safety community
supports legislative efforts that call for an early and firm date by
which broadcasters must clear the channels occupied in the 700 MHz
band.
The 700 MHz band spectrum is critical for public safety agencies to
alleviate dangerous congestion on many existing radio systems, which
places first responders and the public at risk. In much of the nation,
there are no longer any frequencies available for new or expanded
public safety radio systems. As a result, too many first responders are
crowded on common channels, blocking critical communications, both on a
day-to-day basis and, especially, when major emergencies occur. Once
cleared of TV stations, the 700 MHz band channels will facilitate
expansion of public safety systems already operating in the adjacent
800 MHz band, and the construction of many new public safety radio
systems across the Nation.
A key benefit of the 700 MHz band spectrum is that it will allow
for new and expanded multi-agency communications systems to promote
interoperability among first responders in the field. While there are
many causes and solutions to the interoperability problem, in many
cases the most effective long-term solution is to consolidate agencies
on the same radio system, or at least on systems in compatible
frequency bands. Some states and counties have built such multi-agency
systems (often in the now-crowded 800 MHz band), and many others would
do so if sufficient radio spectrum were available. Clearing the 700 MHz
spectrum would also allow many existing 800 MHz systems to expand their
capacity to accommodate additional public safety agencies. The FCC
rules for the 700 MHz band also ensure that all radios operating within
the 700 MHz band will include designated interoperability channels and
a common digital interoperability standard (Project 25).
Additional spectrum will also allow for deployment of new public
safety communications technologies, such as mobile data networks that
will provide first responders with access to critical information in
the field. Today, agencies seeking to implement new data networks are
often stymied by the lack of sufficient radio spectrum.
The public safety benefits of the 700 MHz band are very real.
However, until Congress establishes a date certain for TV broadcasters
to vacate the 700 MHz band, most public safety agencies and state/local
governments cannot begin significant planning and funding for new radio
systems in that spectrum.
The 9/11 Commission specifically recommended that Congress support
legislation providing ``for the expedited and increased assignment of
radio spectrum for public safety purposes.'' In response to this
recommendation, the Intelligence Reform and Terrorism Prevention Act of
2004, included a Sense of Congress that this issue must be addressed in
the First Session of the 109th Congress.
In addition to our urgent need for the 24 MHz of spectrum
previously allocated by Congress for public safety, the tragic
terrorist acts of September 11, 2001, and advances in technology have
intensified the need for further allocations to provide for public
safety wide-area wireless broadband data networks. The National
Intelligence Reform Act of 2004, requires the Department of Homeland
Security (DHS) and the Federal Communications Commission (FCC) to
analyze this spectrum requirement and report back to Congress later
this year. Therefore, we support language in S. 1268 (The SAVE LIVES
Act) that would permit Congress to designate additional public safety
spectrum in the 700 MHz band following completion of those studies.
In closing I would again stress that the public safety community
supports legislative efforts that call for an early and firm date by
which broadcasters must clear the channels occupied in the 700 MHz
band.

The Chairman. Thank you.
The next witness is Charles Townsend, who is the Chairman--
I guess you're CEO of Aloha Partners.

STATEMENT OF CHARLES C. TOWNSEND, PRESIDENT/CEO, ALOHA
PARTNERS, LP

Mr. Townsend. Thank you.
Good afternoon, Chairman Stevens, Co-Chairman Inouye, and
members of the Committee.
My name is Charlie Townsend, and I'm President and Founder
of Aloha Partners. I've been in the telecommunications industry
for the past 25 years, and I have founded two cellular
telephone companies, and been President of one cable TV
company.
About 5 years ago, I concluded that wireless broadband
business had the potential to be as successful as the cellular
telephone business is today; however, the key to that success
will be the spectrum that is used to deliver the service.
I believe that 700 megahertz is the optimum spectrum to
deliver wireless broadband. As a result, I founded Aloha
Partners in 2001, and was the largest buyer of licenses in the
original 700 megahertz auction. Aloha has invested over $100
million in 700 megahertz licenses. It is now the largest 700
megahertz licensee, holding licenses that cover over 175
million people, roughly 60 percent of the United States.
Aloha has been actively evaluating potential uses for 700
megahertz spectrum for the past 3 years, and is planning on
launching several market trials in the next 12 months. Aloha
has also been approached by a number of Fortune 500 companies
about potential joint ventures and uses of the spectrum.
As a result, Aloha is in a unique position to provide the
Committee with information regarding potential uses of the 700
megahertz spectrum, who is likely to bid for the remaining
licenses in the 700 megahertz auction, and what the benefits of
the DTV transition are likely to be.
The DTV transition offers five major benefits for U.S.
households. I will focus on two of them today:
The first is broadband. The United States is lagging behind
other developed countries in broadband penetration. This is
primarily due to two factors--the lack of availability of
broadband in rural regions of the United States, and the lack
of broadband competition in urban markets.
Last year, the Pew Charitable Trust conducted an extensive
study of broadband in rural and urban markets. The study showed
that 25 percent of all American homes only have access to one
or no broadband providers. The study also showed that nearly
one in three rural homes do not have access to any form of
broadband. Seven hundred megahertz frequencies have the
potential to solve both of these problems, because 700
megahertz is the most cost-effective frequency available to
provide wireless broadband service.
In addition to broadband, Aloha believes a number of
Fortune 500 companies plan to use 700 megahertz for new
wireless services. These companies fall into two groups: the
companies planning to use 700 megahertz for WiMAX broadband
technology and companies planning to use 700 megahertz for
mobile TV. Aloha believes that the companies that will
participate in the 700 megahertz auction include major cable
companies, such as Comcast, Cox, and Time Warner. These
companies recognize that they need a wireless product to bundle
with their telephone and video offerings. Major ISPs like AOL,
AT&T, and Covad recognize that they can no longer rely on the
Bell operating companies to deliver their broadband product,
and they will need 700 megahertz spectrum to bridge the last
mile.
Aloha believes that a second group of bidders is interested
in offering mobile TV and mobile music. Most major
entertainment companies are likely to recognize that mobile TV
and music services will be the next major growth industry in
the entertainment business. As a result, potential bidders may
include companies like Sony, Disney, and Time Warner that will
want to control the technology and method of distribution for
this market.
However, it is important to appreciate that all of these
companies recognize that time-to-market is critical for their
success. At present, it appears that the remaining 60 megahertz
of 700 megahertz spectrum will not be available for another 3
years. Any further delay in getting to market is likely to
influence their willingness to participate in the auction, or
pay significant sums for the spectrum.
In conclusion, Aloha has been fortunate to purchase a large
block of 700 megahertz and be exposed to many opportunities to
use 700 megahertz, for wireless broadband, and mobile TV and
music services. Aloha is prepared to bid on additional 700
megahertz licenses as soon as they are available. Aloha urges
this Senate Commerce Committee to accelerate the DTV transition
so that these additional services may be available.
Thank you.
[The prepared statement of Mr. Townsend follows:]

Prepared Statement of Charles C. Townsend, President, Aloha Partners,
LP

My name is Charlie Townsend, and I am the President and Founder of
Aloha Partners. I have been in the telecommunications industry for the
past 25 years, and have been President of three cellular companies and
one cable TV company. I founded, expanded and eventually sold two of
the three cellular companies. About 5 years ago, I concluded that the
wireless broadband business had the potential to be as successful as
the cellular telephone business is today. However, the key to that
success will be the spectrum that is used to deliver the service. I
believe that 700 MHz is the optimum spectrum to deliver wireless
broadband. As a result, I founded Aloha Partners in 2001, and was the
largest buyer of licenses in the original 700 MHz auction.
Aloha's Perspective
Aloha has invested over $100 million in 700 MHz licenses. It is now
the largest 700 MHz licensee, holding licenses that cover over 175
million people, roughly 60 percent of the United States population.
Aloha has been actively evaluating potential uses for 700 MHz
spectrum for the past 3 years, and is planning on launching several
market trials in the next twelve months. Aloha also has been approached
by a number of Fortune 500 companies about potential joint ventures and
uses of its spectrum.
As a result, Aloha is in a unique position to provide this
Committee with information regarding potential uses of 700 MHz
spectrum; who is likely to bid for the remaining licenses in the 700
MHz auction; and what the benefits of the DTV Transition are likely to
be.
The DTV Transition offers five major benefits for U.S. households:

(1) Better Television Picture Quality
(2) More Broadband Competition
(3) New Wireless Services
(4) Better Emergency Communications
(5) Value to the U.S. Economy

Better Television Picture Quality
Nearly 10 years ago, the Senate passed the original DTV
legislation. You envisioned that consumers would receive better picture
quality and more channels. That vision is as true today as it was a
decade ago. Digital TV will significantly improve television pictures
for everyone . . . not just for those who have digital TV sets. Digital
TV signals are less affected by interference than analog signals and
usually provide clearer pictures than traditional analog reception.
Digital signals eliminate the ghosting and snow that many over-the-air
households currently experience. Most people have focused on the
benefits that people with new digital sets and high definition sets
will receive. These newer television sets are primarily in cable and
satellite homes. Little attention has been focused on the significant
improvement that will be seen on analog sets in over-the-air homes. I
would like to focus on the benefits that people with analog over-the-
air sets will receive. Last week, I personally visited Motorola's
office here in Washington, and was able to see a demonstration of their
latest digital set-top box. This allowed me to compare what a DTV
signal looks like when you use a converter for your analog over-the-air
television. Motorola showed side-by-side comparisons of the current
over-the-air analog picture and the new over-the-air digital picture
when seen on an analog set. I am glad to report that I did not need an
electrical engineering degree to tell the difference. While I am not a
technical expert on television picture quality, I would say there was a
significant improvement in the digital signal viewed on the analog set,
probably a 25-50 percent improvement. Not only was the picture quality
more vivid and bright with the digital Over-The-Air picture, but the
snow and picture fade that I could see on the analog television set was
absent from the digital picture. My conclusion was that if you can give
everyone access to those new digital signals, you are going to have a
lot of very happy Over-The-Air television viewers out there.

More Broadband Competition
Broadband has the potential to be one of this country's key
economic engines for the next 10 years. Unfortunately, the United
States is falling behind countries like China, Japan, Korea, and even
Iceland, with respect to broadband. This is due in considerable part to
two factors: the lack of availability of broadband in rural regions of
the U.S., and the lack of broadband competition in urban markets. Last
year, the Pew Charitable Trust conducted an extensive study of
broadband in rural and urban areas. That study showed that 25 percent
of all American homes only have access to one or no broadband
providers. The study also showed that nearly one in three rural homes
do not have access to any form of broadband. 700 MHz frequencies have
the potential to solve both of these problems; because 700 MHz is the
most cost-effective frequency available to provide wireless broadband.
Studies have consistently shown that 700 MHz can provide broadband
service in rural areas at half to one third the cost of the 1900 MHz
personal communications services frequencies used by the cellular
carriers (see Attachment). 700 MHz can provide broadband services in
rural areas at one fourth to one sixth the cost of the 2400 MHz WiFi
and MMDS (now BRS) frequencies used by unlicensed owners and by
companies such as Sprint and Nextel. 700 MHz has the advantage of
traveling further and being able to penetrate walls, dense foliage, and
other obstructions without the deterioration of signal experienced with
either 1900 MHz or 2400 MHz wireless transmissions. These features make
700 MHz the ideal frequency for providing wireless broadband in both
rural and urban markets. Not only can 700 MHz be used to provide high-
speed Internet access, but it can also offer low-cost VoIP service for
voice customers. What this means is that rural areas that were
previously ``unreachable'' can now get broadband service on an
affordable basis.

The Digital Divide Can Be Closed
America has always been a land of opportunity. However, the
advancements in Internet access have not made those opportunities
available to everyone. Late last year, the NTIA announced results of an
additional study of broadband in rural and urban areas. The NTIA
findings were very similar to those in the Pew Internet study. NTIA
concluded, however, that differences in broadband penetration are due
not to lack of interest in broadband, but rather to lack of broadband
availability in rural areas. Almost one out of four homes in rural
areas have no access to broadband service, compared to urban areas
where 95 percent of homes can get at least one broadband provider. The
NTIA concluded that wireless technologies using frequencies like 700
MHz ``are better suited at present than cable or DSL for providing
high-speed Internet access in areas whose population density is low.''
In essence, broadband has created two groups of households: the haves
and the have-nots. The 700 MHz spectrum can close that gap.

The Rural Paradox
Some broadcasters have portrayed rural areas as having the most to
lose in the DTV transition. Paradoxically, rural areas are likely to
lose the least and gain the most from the DTV transition. Compared to
urban areas, rural areas will likely face fewer transition issues
because cable and satellite service penetration rates already are high,
and rising, in rural areas. At the same time, broadband availability is
low and unlikely to rise unless 700 MHz spectrum is freed-up for this
purpose.
For example, Montana has an estimated 86 percent of its homes
covered by satellite and cable. That leaves about 50,000 of the
households that are receiving TV Over-The-Air and potentially in need
of assistance to complete the transition. On the other hand, more than
175,000 households are estimated to be unable to receive broadband
because they live in low-density areas. In other words, the number of
households in Montana that are being deprived of broadband is over
three times as large as the number of households that may be affected
by the DTV transition. Montana is not an isolated case. A number of
states represented on this committee face the same situation: Arkansas,
Louisiana, Maine, Mississippi, Nebraska, North Dakota, South Carolina,
Virginia, and West Virginia. The beauty of the DTV transition is that
these states will be the biggest beneficiaries of the transition;
because the DTV transition not only will solve their broadband problem,
but also will deliver better TV reception to Over-The-Air households in
the process.

Aloha Introductory Markets
Aloha plans to conduct several trial markets to demonstrate the 700
MHz benefits for wireless broadband. Later this year, Aloha will launch
a trial in Tucson, Arizona, to demonstrate the 700 MHz coverage
advantages in both rural and urban areas. In the first half of 2006,
Aloha will launch a trial in a top 20 market to demonstrate how public
safety groups and commercial broadband can be combined on the same
network and integrated together.

New Wireless Services
Based on discussions Aloha has had with a number of Fortune 500
companies, Aloha expects the 700 MHZ auction to be highly competitive.
Aloha believes that these companies plan to use 700 MHz for a number of
new wireless services. The potential bidders probably will fall into
two groups: (1) companies planning to use 700 MHz for WiMax broadband
technology and (2) companies planning to use 700 MHz for Mobile TV.
Aloha believes that the companies that may participate in the 700
MHz auction include major cable companies like Comcast, Cox, and Time
Warner. These companies recognize that they need a wireless product to
bundle with their telephone and video offerings. Major ISPs like AOL,
AT&T, and Covad recognize that they can no longer rely on the Bell
operating companies to deliver their broadband product and that they
will need 700 MHz spectrum to bridge the last mile. Large satellite
companies like EchoStar and DIRECTV and wireless operators like T-
Mobile, Alltel, and Clearwire also will be interested in using 700 MHz
WiMax to compete in both the data and VoIP markets.
Aloha believes that the second group of bidders is interested in
offering Mobile TV and Mobile Music. Qualcomm already owns some 700 MHz
spectrum and has announced an $800 million commitment to roll out
Mobile TV and Music services nationwide. Crown Castle also owns
spectrum and plans to roll out Mobile TV and Music services in major
markets next year. Major entertainment companies are likely to
recognize that mobile TV and music services will be the next major
growth opportunity in the media entertainment business. As a result,
potential bidders may include companies like Sony, Disney, and Time
Warner that will want to control the technology and method of
distribution for this new market.
However, it is important to appreciate that all of these companies
recognize that ``time-to-market'' is critical for their success. At
present, it appears that the remaining 60 MHz of 700 MHz spectrum will
not be available for another 3 years. Any further delay in getting to
market is likely to influence their willingness to participate in the
auction or pay significant sums for the spectrum.

Better Emergency Communications
Many people have discussed the value that 700 MHz can bring public
safety through voice communications and low-speed data. However, there
are also some significant benefits that can come from 700 MHz high-
speed Internet access as well. Police can compare on-line finger prints
and watch videos real-time to monitor emergency situations. Fire
Departments can view schematics of buildings and hazardous material
locations while at the scene of a fire. And EMTs can transmit EKGs and
send videos of injuries from the location of the emergency.

Value to U.S. Economy Is Significant
Aloha has estimated in previous filings with the House Commerce
Committee that the remaining 700 MHz spectrum could generate between
$20 to $30 billion for the U.S. Treasury if an auction were held in the
near future. Since that filing, a number of noted economists have
indicated that the benefits to the U.S. economy should not be viewed
solely in terms of one-time auction revenues, but also in terms of
broader economic potential. Coleman Bazelon, noted economist and Vice
President of the Analysis Group, has estimated that the 700 MHz
spectrum could generate up to $475 billion in benefits to the U.S.
economy.

The Sooner the 700 MHz Auction the Better
There has been some discussion that delaying the 700 MHz auction
may be beneficial. However, it is unclear to me who will benefit from
any further delays. The sooner the spectrum is auctioned:

1. The sooner millions of U.S. television viewers will see
significantly improved pictures.

2. The sooner there will be additional broadband competition in
urban and rural markets.

3. The sooner new wireless services will be available
throughout the country.

4. The sooner emergency communications will be improved.

5. The sooner the U.S. economy will generate up to $475 billion
in economic benefits.

Conclusions
Aloha has been fortunate to purchase a large block of 700 MHz, and
be exposed to many opportunities to use 700 MHz for Wireless Broadband
and Mobile TV and Music services. Aloha is prepared to bid on
additional 700 MHz licenses as soon as they are available. The United
States economy, TV households, rural communities, and first responders
will all be direct beneficiaries of the auction of 700 MHz spectrum.
Aloha urges the Senate Commerce Committee to accelerate the DTV
transition so that these benefits will be realized sooner rather than
later.

The Chairman. Thank you very much.
The next witness is Mr. Gene Kimmelman, Senior Director of
Public Policy and Advocacy at the Consumers Union.

STATEMENT OF GENE KIMMELMAN, SENIOR DIRECTOR OF PUBLIC POLICY
AND ADVOCACY, CONSUMERS UNION; ON BEHALF OF CONSUMERS UNION AND
CONSUMER
FEDERATION OF AMERICA

Mr. Kimmelman. Thank you, Mr. Chairman, Co-Chairman Inouye,
members of the Committee. On behalf of Consumers Union, the
print and online publisher of Consumer Reports, we appreciate
the opportunity to testify today. We totally concur with the
notion that it is time for more spectrum to be made available
for public safety, and endorse your desires to free up the
analog spectrum that broadcasters have been using. But I want
to spend a few minutes with you walking through, in practical
terms, what it means for consumers.
You heard the back and forth between the cable and
broadcast industry earlier today as to how the market could or
should work. This is a funny market for consumers. As the
Committee well knows, this is one of those markets where more
players come in, there's more technology than ever before, and
prices keep going up and up, and it doesn't quite seem to work
the way competition is supposed to.
So, what happens here with people's TVs? Well, by our
surveying we find that there still are at least 15 percent of
American consuming households that just rely on over-the-air
television. I think most surveys show similar numbers. More
than 16 million households get their television service over-
the-air. When you cutoff the analog signal, those television
sets will not work.
But that's not the whole story. In asking consumers who get
cable and satellite whether they also have television sets that
are not hooked up to those services, we find that there are as
many as 45 million additional sets that consumers say are not
used for DVDs, are not used to play games, that are used to
receive over-the-air signals, in addition to their cable and
satellite hookups. Those analog sets will also go black after
this transition. And we find, as you well know, most consumers
don't just have one television set; on average, they have at
least two.
So, what's the issue for consumers? Well, these are all
folks who went out and bought a television, where the retailers
told them, manufacturers told them, ``It will work. It'll
receive over-the-air signals.'' They have a full expectation
that every dollar they spent on those sets would get them over-
the-air signals.
If you transition, give back analog spectrum for a very
worthy cause, for public safety and for more competition, those
people are left in the dark without a converter box, like Mr.
Kennedy is showing you. Who pays?
Well, there obviously are concerns here for low-income
consumers, people of limited resources. There are concerns in
rural areas, where television service may be more important
than anywhere else. And we believe those people ought to be
held harmless. But think about it for a minute. Why should
anyone--anyone, regardless of income--have to pay just to keep
their television set working, particularly in an area where
we're talking about freeing up spectrum to auction off, as Mr.
Townsend indicates, to many highly well-financed commercial
entities that want to enter the market, provide new services,
and that will be bringing in revenue for the Federal Treasury?
Why not use those proceeds, the first dollars available from
those auctions, to ensure that consumers are not worse off as a
result of this transition? Let's make sure that people's TV
sets keep working. And let's also make sure that what we get
out of this truly is a benefit to the public.
Mr. Townsend indicates a wonderful new development, more
competition in the broadband area--we welcome that, but we also
note that, in the other part of this marketplace, we've had
enormous consolidation. SBC buying AT&T, Verizon buying MCI. We
see very few options, as Mr. Townsend pointed out, for
broadband service, and a great need, particularly for rural and
lower-income people. Wireless broadband offers a possibility of
prices as much as 50 percent lower than many of the offerings
we're seeing in the marketplace today, from cable modem
service, from the Bell companies with their DSL services. It's
critical that, if you move to free up this spectrum and put it
out to auction, that we not allow the largest companies that
currently dominate the market to dominate it even further.
And, finally, with all this spectrum available and the
important needs of broadband, we urge you to consider really
creating an open space, some unlicensed area where new players
can come in using new technologies--WiFi mesh networks--to
bring us more choices, more competition. The competition you
heard about this morning between broadcasters and cable is a
funny kind of competition. It's over numbers of channels on the
system, it's over ad revenue.
Senator Ensign, you pointed out that consumers ought to be
able to pick the winners and losers. I'm totally with you on
that. Consumers all want that. The problem is, cable companies
decide what channels go on their systems. Consumers don't
decide what channels go on. Broadcasters decide what cable
channels they're going to bundle with their broadcast channels
and pressure cable companies to either take them or leave them.
Broadcasters offer a wonderful local service, but do you
realize that half of all broadcasters in this country don't
even do local news? Do not even produce local news? There are a
lot of problems in what cable and broadcast are offering. I
leave it to you to pick the winners and losers there. What's
important for consumers is to have--to win by having more
choices in the marketplace.
So, we urge you, as you go through this transition and
bring back spectrum, please hold consumers harmless, and please
devise rules so that we end up with more players, more
competition, and, hopefully, more broadband available so that
consumers get better services at lower prices.
Thank you.
[The prepared statement of Mr. Kimmelman follows:]

Prepared Statement of Gene Kimmelman, Senior Director of Public Policy
and Advocacy, Consumers Union; on behalf of Consumers Union and
Consumer Federation of America

Consumers Union \1\ and Consumer Federation of America \2\
appreciate the opportunity to testify on the transition from analog to
digital television. The digital transition, as envisioned by the 1996
Telecommunications Act, has failed, requiring additional Congressional
action. That legislation will determine whether the transition to
digital television will ultimately benefit American consumers with more
programming and telecommunications choices, or whether it will impose
billions in direct costs on consumers and exacerbate concentration in
telecommunications markets.
---------------------------------------------------------------------------
\1\ Consumers Union is a nonprofit membership organization
chartered in 1936, under the laws of the State of New York to provide
consumers with information, education and counsel about goods,
services, health and personal finances, and to initiate and cooperate
with individual and group efforts to maintain and enhance the quality
of life for consumers. Consumers Union's income is solely derived from
the sale of Consumer Reports, its other publications and from
noncommercial contributions, grants and fees. In addition to reports on
Consumers Union's own product testing, Consumer Reports with more than
5 million paid circulation, regularly, carries articles on health,
product safety, marketplace economics and legislative, judicial and
regulatory actions which affect consumer welfare. Consumers Union's
publications carry no advertising and receive no commercial support.
\2\ The Consumer Federation of America is the Nation's largest
consumer advocacy group, composed of over 280 state and local
affiliates representing consumer, senior citizen, low-income, labor,
farm, public power, and cooperative organizations, with more than 50
million individual members.
---------------------------------------------------------------------------
To ensure the outcome is the former not the latter, any legislation
that this Committee takes up on the digital transition must:

Ensure that consumers do not bear the direct costs of the
transition, which are estimated to be $3.5 billion or more, or
suffer from the loss of television signals they rightfully
expect to receive;

Promote market competition, rather than consolidation,
through appropriate allocation of the 108 MHz of returned
spectrum to new entrants and smaller existing market players,
particularly in the area of broadband wireless;

Promote unlicensed, or open-market, use of spectrum by both
commercial and noncommercial entities of a portion of either
the reclaimed or digital spectrum to promote competition,
foster advanced communications services, and bridge the digital
divide by promoting universal, affordable access to broadband
Internet; and

Prevent further concentration of local media markets by
addressing ownership restrictions for dominant local broadcast
outlets in the post-transition, digital environment.

We look forward to working with members of the Committee to ensure
that any legislation on the digital television transition incorporates
these core consumer provisions. We elaborate on these critical needs
below.

Hold Consumers Harmless
Consumers buy televisions with the reasonable expectation that they
will be able to receive free over-the-air television broadcasts over
the life of their televisions. And that life can be substantial.
Research from Consumer Reports shows that televisions are the
workhorses of consumer electronics: they last for decades. Even today,
as Congress focuses on a hard digital television transition date,
millions of consumers are buying new analog sets on the assumption they
will work for years to come. A federally mandated transition to digital
turns that assumption on its head: for consumers relying on over-the-
air broadcasts, their sets will be useless for their primary purpose.
An artificial, government-imposed mandatory transition to
broadcasting solely using digital signals will create, at a minimum, a
monumental inconvenience for consumers who will be forced to purchase a
costly converter box to ensure their televisions will keep working. And
if Congress gets this wrong, the transition will not merely
inconvenience consumers, which is nuisance enough, it will impose on
them direct costs of $3.5 billion or more.
Therefore, any conversion to digital television must ensure that
the analog sets now in use will continue to function after the
transition without imposing additional costs on consumers.
The number of consumers that could be left in the dark by the
digital transition is substantial. New consumer research conducted by
Consumers Union and the Consumer Federation of America \3\ shows that
about four in ten American households, or about 42 million households,
continue to rely on about 80 million over-the-air televisions (OTA-only
sets) for some or all of their television viewing. Given very low sales
of digital-ready televisions in recent years, virtually all of these
sets are likely to be capable of receiving only analog signals.
---------------------------------------------------------------------------
\3\ Attachment A, Estimating Consumer Costs of a federally Mandated
Digital TV Transition. June 29, 2005, Consumer Federation of America/
Consumers Union.
---------------------------------------------------------------------------
Of the 42 million households with OTA-only sets, about 16 million
rely solely on about 35 million over-the-air televisions to watch
television programming. The remaining 26 million households with OTA-
only sets are those that subscribe to cable and satellite services, but
also rely on up to an additional 45 million OTA-only sets--those not
connected to the subscription service but used for over-the-air
broadcast program viewing. These are sets that are used, for example,
in the kids' rooms, the kitchen, the home office, and so forth. For
cable/satellite households, our estimates explicitly excluded
unconnected sets that were NOT used at all for broadcast viewing.
We present these estimates not as exact numbers of households and
analog sets directly affected by the transition, but rather as an
indicator of what the ``real'' numbers are likely to be. There has been
substantial confusion over the number of over-the-air reliant
households to which Congress will need to provide compensation for the
costs of converter boxes required to keep their otherwise fully
functional TV sets working. At the high-end were estimates by the
National Association of Broadcasters and the Government Accountability
Office that found 73 million over-the-air sets in use. At the low-end
were estimates by the Consumer Electronics Association that found only
33 million such sets. Based on our research, we believe the latter
estimate dramatically understates the number of over-the-air reliant
sets, and that the NAB/GAO estimates are more likely in-line with
reality. Even after adjusting the NAB estimates by different
assumptions, such as the number of sets per households, 65 million
represents the lower bound estimate of the number of OTA sets in
American households.
As Congress considers whether and how much to compensate consumers
for the costs imposed on them by the government-mandated transition, CU
and CFA believe it should allocate proceeds from the auction of
reclaimed spectrum to a compensation program in an amount which
reflects the number of OTA-only sets and OTA-only households at the
highe- end of estimates provided to date. Relying on lower estimates
could lead Congress to understate the number of households affected,
the total costs to consumers and the level of the compensation
necessary to hold consumers harmless from the Congressionally-mandated
transition to digital television.
Based on higher estimates of OTA-only sets and the GAO's estimate
of a cost of $50 per converter box, the federally-imposed, mandatory
transition to digital TV could impose costs of $3.5 billion or more on
consumers just to keep their sets working.
As shocking as these aggregate numbers are, the costs to individual
households will likewise by substantial. The digital conversion
effectively increases the cost of television sets consumers have
already purchased. According to the Consumer Electronics Association, a
25-inch television--the most popular set--sells, on average, for about
$200. A $50 converter box effectively increases the cost of that set by
25 percent. The costs of smaller sets selling for $100 would
effectively increase by 50 percent. Given that, according to both our
estimates and those of the GAO, the average over-the-air household has
two televisions, the costs for them are double--effectively a consumer
tax of $100 or more just to facilitate a transition that benefits
broadcasters, equipment makers, retailers, and other industry players.
While we support proposals that attempt to hold cable and satellite
subscribers harmless by providing for down-conversion of digital
signals, down-conversion does not address unconnected analog sets in
cable and satellite subscriber-households. As noted above, the some 25
million households that fall into this category have reasonable
expectations that those sets will continue to work. These households,
as well as those that rely solely on over-the-air programming, should
be compensated for the costs of the converter boxes required to keep
these sets working.
We hope Congress agrees that this is an unacceptable cost for
consumers to bear, regardless of their income, just to be able to view
over-the-air broadcasts their sets used to receive.
Therefore, we urge Congress to establish and fully fund a program
that will compensate all households that continue to rely on over-the-
air sets for the full costs of digital-to-analog converter boxes
required to keep sets functioning. Even using the conservative estimate
of spectrum auction revenue of $10 billion that the digital transition
facilitates, the Committee would be able to both meet its budget
reconciliation obligations and fully compensate all households with
over-the-air reliant sets for the costs of converter boxes.
This principle is not new to Congress. The Commercial Spectrum
Enhancement Act (CSEA), enacted in 2003, has been instrumental in
encouraging the development of new uses for spectrum. But that law also
stipulates that auction proceeds must cover 110 percent of the costs of
relocation. For DTV transition legislation, the Committee therefore
should adopt a principle similar to that embodied in the CSEA.
Consumers have not demanded or driven this transition, which largely
benefits others, and they should not be asked to bear its costs.
According to the New America Foundation, sales of televisions with
digital broadcast tuners represented just 4 percent of all televisions
sales in 2004, suggesting consumer demand for digitally broadcast
television is quite small. Indeed, the transition largely benefits
other parties: the broadcasters who requested the transition in the
first place; the electronics manufacturing industry which will sell
millions of converter boxes and expensive digital televisions; and the
dominant telecommunications providers that seek licenses for the
additional spectrum freed by the transition.
The digital transition may, if managed appropriately, provide
significant public benefits. But, unquestionably, it will be viewed as
an abject failure by consumers if they are forced to bear the costs of
acquiring digital-to-analog converter boxes, or face the equally
unpalatable alternative of losing access to over-the-air television.

Promote Market Competition With Licensed and Open-Market Spectrum
Congress has the unique and important opportunity during this
transition to ensure that reclaimed spectrum will be used to facilitate
robust competition in the broadband market--providing new opportunities
for smaller companies, new market entrants, and other wireless
providers to access valuable spectrum that will allow them to better
serve their customers and effectively compete in the marketplace.
Statistics supplied by the Federal Communications Commission and
JPMorgan show that the high-speed data marketplace is highly
concentrated; in fact, it has become a cozy duopoly. Cable providers
and telephone companies have each divided and conquered their markets,
and don't compete against each other outside of their territories. As a
result of weak competition, broadband penetration in the U.S. is
proceeding at a slower rate than many other countries--the U.S. now
ranks 16th in the world. Without competitive alternatives, broadband
Internet access will remain a service available only to consumers in
those markets deemed desirable by dominant providers--and then only at
the high prices these monopoly providers demand. Rural and low income
communities are left behind. Spectrum policies adopted as part of the
digital transition can remedy the problem or exacerbate it.
A quick glance at the remaining alternatives demonstrates that it
is up to Congress, through the spectrum policies it designs in any
digital transition legislation, to provide new competitive
opportunities in broadband:

Broadband-Over-Power-Lines (BPL) and community fiber-to-the-
home (FTTH): BPL is an exciting new technology that delivers
broadband over a wire already available in nearly every home in
the country--electrical wiring. Though its rollout has been
limited to date, it offers significant potential for the
delivery of affordable, high-speed Internet. Similarly, FTTH
uses fiber initially laid by utilities for their own purposes,
like meter-reading to deliver broadband services. In some
communities, publicly owned utilities are offering high-speed
Internet through BPL and FTTH. Unfortunately, despite the
enormous potential for these technologies to facilitate
universal broadband access, more than a dozen states have
erected roadblocks--or even banned--communities and the
utilities they own from providing these advanced services.
These roadblocks--and Federal preemption efforts like those
already introduced in the House of Representatives--could
prevent BPL and FTTH from providing ubiquitous access to
broadband Internet.

Wireless Broadband (WiFi): WiFi, offered today by many by
Wireless Internet Service Providers (WISPs) across many of
America's cities and towns, uses a limited band of unlicensed,
or open-market spectrum that was originally allocated to it
because no one else wanted this ``junk band.'' WiFi is now
relied upon by millions for their primary broadband
connectivity, and millions more for secondary, mobile
connectivity.

Importantly, the costs of providing wireless broadband appear
to be significantly lower than wired solutions, keeping costs
to consumers affordable. Today, consumers enjoy wireless
broadband services for as little as $15 per month--less than
half the cost of most wired broadband services offered by
telephone or cable companies. Those dominant providers also
typically require consumers to purchase bundled services--
telephone or cable service--in order to receive broadband
access, or charge much higher rates for unbundled broadband
Internet.

WiFi is already an economic generator for thousands of small
and mid-sized businesses that provide ``hot spots'' in places
where people gather like coffeeshops, conference centers and
airports. But companies, communities and non-profits are also
using WiFi to connect parks, neighborhoods, and even to entire
cities and towns. NYCWireless, a New York nonprofit, provides
affordable wireless service to Bryant Park in Midtown
Manhattan. Now it's working with churches and community groups
to provide service in Harlem neighborhoods and housing
developments. Tribal Digital Village is a network of 18 tribal
villages east of San Diego. It delivers high-speed Internet
service to many community centers in their area, and uses the
bandwidth for language preservation programs. It is currently
developing a web portal that meets local needs. Tribal youth
even train adults how to use the technology, benefiting
everyone. The Alaska Marine Highway System, a project of the
Department of Transportation uses WiFi to connect its ships to
their network when they are at sea.

WiFi offers great promise for providing ubiquitous broadband
access across the nation. This is particularly important for
rural or underserved urban markets, where existing cable or DSL
providers are not offering service. But equally important,
wireless providers can offer an affordable competitive
alternative to areas that have access only to a single high-
priced, monopoly provider.

But the growth potential of this now $10 billion industry is
limited because under current licensing schemes, WiFi is
limited to the unlicensed 2.4 and 5 GHz bands--spectrum that
does not allow signals to pass easily through obstacles, such
as trees or walls. These bands are also extremely crowed; WiFi
shares this spectrum with hundreds of consumer electronic
devices. In order for wireless broadband to become an option
for more Americans, providers need access to unlicensed low-
frequency spectrum below 1 GHz--less crowded spectrum with
propagation characteristics that allow it to travel though
buildings, mountains, and other obstacles.

It is imperative that the American public is able to better utilize
the two incredibly valuable, publicly owned blocks of spectrum, which
today are under the near-exclusive control of the broadcasting industry
at no-cost to them: the digital band below 698 MHz which broadcasters
will retain; and the 700 MHz band, which will be reclaimed after the
transition.
As part of the digital transition, Congress must ensure that both
reclaimed and digital spectrum will be used to foster universal access
to broadband and foster stronger market competition. We offer the
following recommendations:

1. Promote Improved Competition Through Spectrum Auction Policy
If the merger between Sprint and Nextel is approved, just three
companies will dominate the wireless industry. The owners of two of
those wireless companies--Verizon Wireless and Cingular--are near-
monopoly telephone companies that also dominate local and long-distance
calling throughout the United States. Other, smaller wireless companies
remain minor players that lack the spectrum needed to compete and match
services over the long-term.
But if rights to the valuable spectrum that will be freed up by the
transition are available only to the dominant wireless carriers as
smaller players are priced out of the market, the auctions will only
make a badly concentrated market even less competitive--undercutting
quality-of-service, reducing choices, and inflating prices. Without the
proper safeguards in place, Congress virtually ensures the auctioning
of spectrum to dominant providers that already control the bulk of this
concentrated market and who will be unlikely to offer more affordable
wireless Internet services that compete with their wired offerings.
Newly available spectrum could be used for wireless broadband in
rural and urban communities. Even licensed options could be new
alternatives to the incumbents for high-speed Internet access. The
Congress should ensure that of the estimated 60 MHz to be returned and
offered at auction, adequate spectrum is set aside for auction to new
market entrants and small existing players. Doing so will put pressure
on the largest market players to compete, resulting in lower consumer
prices, higher quality, and expanded choices.

2. Promote Universal Access to Broadband by Allocating Spectrum for
Unlicensed Use
Congress also has a unique opportunity during the transition to use
portions of the returned spectrum to grow unlicensed, or open-market,
uses of spectrum. Open-market spectrum expands the ability of ordinary
citizens to use and share the public airwaves. But the potential to
further expand the ability of people to use their airwaves is
constrained by relegating unlicensed use to higher-frequency ``junk
bands.''
As noted above, the ``junk bands'' were given this moniker
precisely because the signals that can be transmitted at these
frequencies are limited--they do not pass easily through walls or trees
like TV signals do. And many other devices--like garage door openers,
microwaves, and cordless phones--use the same space.
If the principle of sharing the spectrum in a non-interfering
manner is extended to portions of lower frequency spectrum below 1 GHz,
the potential to deliver wireless broadband and other communications
services at lower costs will expand dramatically. Congress can and
should expand the space in which the unlicensed or noncommercial use of
the airwaves is encouraged and allowed. It can do so in following ways:

First, it should set aside a portion of the reclaimed
spectrum to be dedicated for unlicensed use. A set-aside of 18
to 20 MHz of recovered spectrum on a nationwide basis would
open adequate space to promote unlicensed uses.

Second, it can set aside a small part of the digital
spectrum for unlicensed use by allowing non-interfering use of
white spaces, or through appropriate assignment of new digital
channels. Congress cannot ignore the fact that the digital
spectrum is the largest part of the spectrum made available to
private entities not subject to auction.\4\ With the windfall
provided to broadcasters in the 6 MHz they will be allowed to
retain, broadcasters will be able to provide six or more
digital channels--far more than ever anticipated when Congress
enacted the 1996 Telecommunications Act--where they previously
offered one.
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\4\ Certain parts of the spectrum have been set aside or assigned
for public governmental uses, like defense, safety and education, and
not subject to auction. The original cellular licenses were also given
to licensees.

Fortunately, the digital spectrum can be allocated in a manner
that enables broadcasters to offer a full slate of digital
multicasts while leaving enough room for unlicensed wireless
---------------------------------------------------------------------------
Internet services in these low frequency bands;

These proposals for unlicensed use of the digital bands could
be particularly effective in encouraging wireless broadband
deployment in rural areas where more white space is available
and fewer channels are occupied. Under current rules and
proceedings, the Federal Communications Commission has moved
only haltingly to expand the non-interfering uses of the
spectrum. A clear public policy promoting the non-interfering
use of spectrum would speed the process along, and allow
unlicensed sharing of spectrum to advance much more rapidly.

The unlicensed use of even a small portion of newly available
spectrum would provide untold public benefits. Among many, the most
notable is the opportunity to support expansion of community wireless
Internet services, offering perhaps the first meaningful opportunity
for bridging the digital divide that has confounded policymakers for
more than a decade.

Address Media Ownership
At a time when concerns about competition, cost, and diversity of
programming have prompted a revisiting of media ownership rules, the
DTV transition could worsen the problem in local markets. Congress
should not ignore the serious implications digital transmission has on
media concentration.
We have significant concerns about the power provided to local news
companies that already own and control local newspapers and radio
stations being provided with the capacity to offer six or more digital
channels where they previously offered one.
Though all local broadcasters will receive the same new digital
capacity, they cannot all take equal advantage of it. Only a few
stations in any market currently produce or offer local news. Those
that do will gain even more market control in a multicast digital
environment.
A Consumers Union/Consumer Federation of America study of station
ownership between 1975 and 2000, found that the number of television
station owners fell from 540 to 360, and the overall number of stations
rose. But the number of TV newsrooms declined during this same period.
In fact, only half of all broadcast TV stations provide news. Stations
with newsrooms, particularly those affiliated with large news
conglomerates, will be better able to utilize the additional digital
capacity, dominating local news carriage, reducing diversity of news
and information, and increasing the volume and impact of a single
owner's voice in the news marketplace in their community.
To address this problem, Congress should:

prevent broadcasters from holding two television licenses in
a community; and

prevent television broadcasters from also owning a daily
newspaper in the same market.

In 2003, millions of Americans, a bipartisan coalition from the
House, a majority of the Senate, and leaders from both parties raised
concerns about media conglomerates owning two stations in most markets,
or three stations in the largest ones. Unless Congress acts to prevent
it, the digital transition has the very real potential to substantially
increase the ability of a few broadcast giants to dominate local news
markets nationwide.

Serving the Public Interest
In exchange for the privilege of free and exclusive use of the
public airwaves, broadcasters must serve the ``public interest,
convenience and necessity'' through the fulfillment of public interest
obligations, such as the provision of educational, civic, political,
and other programming. Among many shortcomings of these obligations,
however, has been the ability of the broadcasters themselves to define
what constitutes programming in the public interest. In addition,
compliance with overly vague obligations is difficult both to verify
and enforce. In short, these obligations have failed to serve the
public.
The FCC should hold broadcasters accountable for their public
interest obligations, both now and after the DTV transition, preferably
through quantifiable and enforceable requirements. These are worthy
goals and they should be met. However, given the historical and
inevitable shortcomings of these obligations, improvements to the
public interest obligation in any digital transition legislation will
be insufficient to adequately serve the public interest.
Such provisions are neither an effective nor equivalent substitute
for legislative requirements allocating spectrum to promote market
competition and unlicensed use for requirements allocating a portion of
retained spectrum for independent local news, information, or
entertainment programming. Setting aside a portion of the airwaves for
unlicensed, open use would expand the ability of people to speak with
electronic voices in a manner the promotes free speech rights more
dramatically than any single act Congress has taken since exclusive
licenses were introduced.
There is little debate that, to date, the imposition of vague
obligations on broadcasters has failed the public interest. In order to
meet public needs, Congress must address the critical competitive,
diversity, and ownership concentration issues we have raised in our
testimony through the effective, equitable, and appropriate allocation
of one of the most valuable publicly owned resources--radio spectrum.
If Congress takes these steps, it will provide far more meaningful
public benefits than any improvement to public interest obligations can
offer.

Summary
Consumers will not thank Congress for digital television if it also
means they have Congress to thank for the cost of inconvenience, of
paying for converter boxes out of their own pockets, or the higher
prices of new TVs, computers, or equipment to integrate their home
entertainment systems. The enormous costs of the digital transition
should be paid for by the ample proceeds generated by the auction of
reclaimed spectrum, and by the many industry players that will profit
from this transition.
Digital television is a positive technology that has the potential
to benefit consumers and the public as a whole. But that potential can
only be realized through the appropriate spectrum policies adopted as
part of the transition that promote competition and innovation in the
telecommunications market that will lower prices, improve service, and
expand choices for consumers.
We look forward to working with the Committee in stimulating a
rapid transition to digital television broadcasting and to craft
legislation that will resolve these important issues for both consumers
and affected industries.

The Chairman. The witness who should have spoken before Mr.
Kimmelman is Mr. Gary Shapiro, President and CEO of the
Consumer Electronics Association. My apology. Could you tell
us, before you start, before we turn on the light, what is the
Consumer Electronics Association?

STATEMENT OF GARY J. SHAPIRO, PRESIDENT/CEO, CONSUMER
ELECTRONICS ASSOCIATION (CEA)

Mr. Shapiro. The Consumer Electronics Association is a
national trade association of some 2,000 technology companies.
Many of your colleagues have seen us best at the International
Consumer Electronics Show in Las Vegas, Nevada, the world's
largest technology show--in the world's best trade-show
location, too, I might add.
[Laughter.]
Mr. Shapiro. These are the PC-makers, the digital
television, cellular telephone--these are the companies that
have driven the economy, driven technology. We also have
retailers as members, as well, and these are the companies
which are bringing the future.
The Chairman. Are these manufacturers?
Mr. Shapiro. Manufacturers, retailers and integrators,
distributors. Mostly manufacturers, overwhelmingly. The large
and small mom-and-pop manufacturers all over the country----
The Chairman. Any TV manufacturers----
Mr. Shapiro. Almost every TV-maker. To be a member, you
must be a U.S. company with U.S. presence of some type. You
might be--a few of them are overseas-headquartered, but they
have U.S. facilities. But, overwhelmingly, they are U.S.-owned-
and-operated companies.
The Chairman. But do they manufacture here?
Mr. Shapiro. Yes. We have--we employ, in the consumer
electronics industry, probably almost two million people
indirectly, directly, several hundred thousand.
The Chairman. Well, thank you.
Mr. Shapiro. It's a much larger industry than broadcasting,
actually.
The Chairman. Thank you. Start the clock. Thank you. My
apology.
Mr. Shapiro. Well, thank you very much, Chairman Stevens.
Thank you, Co-Chairman Inouye and members of the Committee.
We support, as a trade association, our 2,000 member
companies, a hard deadline to the end of analog broadcasting.
That will bring the certainty we will need. It'll be a win-win
situation for all stakeholders. It'll allow manufacturers and
retailers to label analog products. And, of course, it will
foster innovation. And, as we heard, it will strengthen our
national security.
Now, thanks to great products, great content, intense
competition, and, quite frankly, falling prices, digital
television sales are setting records virtually every quarter.
If Congress sets a hard deadline, we expect to have sold 97
million digital television tuners by 2009, and we estimate
that, by that date, we'll have digital television tuners in 86
percent of American homes.
Of course, the digital television is succeeding, the
transition is succeeding, because consumers are learning about
digital television. We've run some award-winning promotional
efforts. We've done lots of things to inform consumers about
this great product. But we support the consensus on a late-2008
hard cut-off date. And with a hard deadline, stations will know
what to broadcast, manufacturers and retailers will know what
to make and to stock, and consumers will know what to buy. The
stakes are very high here.
And, of course, we recognize the concerns that Mr.
Kimmelman expressed, about disenfranchising consumers. But,
indeed, the data shows that the number of consumers in the
category has been somewhat exaggerated.
If there's any doubt about this, consider the total lack of
outcry when it was announced that NFL Monday Night Football
will not be broadcast free over-the-air; in the future, it will
only be cable or satellite. No articles were written. No
consumer complaints were received. Indeed, nearly 87 percent of
American TV homes now receive their broadcast programming via
cable or satellite. Furthermore, only 37.7 million of the 285
million television sets used in the U.S. are used to view over-
the-air programming. That's only 11 and a half percent of the
TV sets are even using an antenna now to get over-the-air
programming. This means that if analog ceased tomorrow, less
than 13 percent of the population would not have access to a
broadcast signal.
And, in those homes that do have cable or satellite, we've
asked them, we've surveyed them. What did we find? Only 14
percent use an antenna on their second, third, or fourth
television. And, of course, as we proceed toward the deadline,
cable and satellite penetration will go up, and these numbers
will diminish, in terms of the impact.
But what about the people that don't subscribe to cable or
satellite? Our research shows that this population's decision
not to subscribe to cable or satellite is not made, generally,
for economic reasons. These are people for whom television is
not a high priority. And three-quarters of these analog-only
homes are willing to buy a new TV, buy a $50 decoder, or
subscribe to cable or satellite. Some consumers will be
affected by a hard date, and that's why we understand your
interest in creating a program to allow consumers to have
access to low-cost digital-to-analog converters.
The simple fact is that, while an analog broadcasting
cutoff is important for our Nation, it will only have a small
practical impact on the viewing habits of vast majority of
Americans. And, for this reason, we commend you for your
suggestion that analog broadcasting end by January 1, 2009.
Now, our primary goal, of course, is to make the DTV
transition as consumer-friendly as possible, and that's why we
support the hard cutoff date. But we are concerned about some
proposals to accelerate the digital deadlines in a way that
will harm consumers and create significant disruptions at
retail. This would be unfortunate. Actually, government set
these dates. The manufacturing and retail community relied upon
these dates. And now we're being told that perhaps they should
be accelerated aggressively for the 13- to 24-inch category,
which is the lower-cost televisions. That would have an
enormous impact on television reception devices. These are
VCRs, DVDs, and digital video recorders. And it would
dramatically increase--perhaps even double--the price of most
affordable small-screen TV sets, or force manufacturers to now
produce those models, rather than be in noncompliance. This
would be an impact that consumers would see from this DTV
transition. They'll walk in their store, and the lowest-priced
TV sets have, all of a sudden, doubled in cost.
We urge the Committee to also address the important issue
of signal degradation if the signal comes in through cable. And
we ensure that the digital signal be carried under all
circumstances. Where cable operators are carrying broadcast
signals digitally, they should not be allowed to reduce the
quality of the signal, or the sound quality, or eliminate
program-related material. If a broadcaster is actually
providing a full HDTV signal in Dolby digital surround-sound,
then that is what HDTV owners who subscribe to cable should see
and hear.
Of course, we look forward to working with you to bring
about this glorious DTV transition to a successful and timely
conclusion. Meanwhile, we'll continue our unprecedented efforts
to educate consumers about digital television. And I,
personally, pledge our CEA support and commitment working with
you and other stakeholders, to ensure a speedy and consumer-
friendly transition and a prompt return of the analog broadcast
spectrum.
Thank you.
[The prepared statement of Mr. Shapiro follows:]

Prepared Statement of Gary J. Shapiro, President/CEO,
Consumer Electronics Association (CEA)
Chairman Stevens, Co-Chairman Inouye and members of the Committee:

Thank you for inviting me to discuss our Nation's progress in the
transition to digital television (DTV), and the steps that should be
taken to conclude the transition in the most beneficial and
understandable manner.
I represent the Consumer Electronics Association (CEA), the
principal U.S. trade association of the consumer electronics and
information technology industries. CEA's 2,000 members include
virtually every DTV manufacturer. Our members invented DTV, and we are
thrilled by its astounding marketplace success. CEA also represents the
cutting-edge information technology companies who will use the
recovered analog broadcast spectrum to provide all Americans with
innovative new wireless products and services.
CEA strongly supports the enactment of a hard deadline for the end
of analog broadcasting. A hard deadline will bring certainty to the DTV
transition. It will provide a ``win-win'' scenario for all
stakeholders, while fostering innovation and strengthening homeland
security and public safety. We urge you to include a hard analog cutoff
date in any DTV legislation this committee considers.

DTV Sales Continue to Rapidly Increase
Our most recent sales figures show that the first 4 months of 2005
brought the greatest volume of DTV sales ever recorded, with 3 million
DTV products accounting for $4.7 billion of consumer investment and
contribution to the robust U.S. economy. This is a remarkable 45
percent increase in unit sales from the same time period in 2004.
More than 17 million DTV products have been sold since the first
HDTV sets hit the market in the fourth quarter of 1998. Americans
already have invested an astonishing $25 billion in DTV products. HDTV
is the driver behind these phenomenal sales figures, with high-
definition displays and receivers representing 85 percent of the DTV
products sold to date.
Sales are being driven by the rapid price declines that are typical
of our industry. DTV prices are 75 percent lower than they were 5 years
ago and are still declining by approximately 15 percent each year.
Today there are numerous DTV options under the $700 mark, and even some
expected soon for as low as $400. Over the next 2 years, our members
plan to introduce $60 digital-to-analog converters that will allow
analog TVs to receive digital TV broadcasts.
Meanwhile, DTV products have spread from specialty retailers and
major consumer electronics chains into warehouse clubs, mass merchants,
and now discount stores like Wal-Mart and Target.
When consumers walk into retail stores, they now enjoy an
unprecedented variety of DTV products to meet their needs and budgets.
Buyers can choose from a vast array of compelling displays from
traditional CRT sets to cutting-edge new technologies like plasma, LCD,
DLP, and LCoS.
Most important to the current debate is the fact that consumers now
can choose from 200+ ``integrated'' models that include over-the-air
ATSC tuners.
To put this in perspective, digital television has been adopted
twice as quickly as color television. While it took color television 10
years to achieve 5 percent penetration from introduction, digital
television products are already in 16 million American homes.
Indeed, overall revenues from digital TV now outpace those from
analog TV. Television manufacturing is now a digital industry.
As impressive as those numbers sound, we are only beginning to move
up the ``hockey stick curve'' of sales, especially with respect to
integrated DTV sets equipped with digital over-the-air (ATSC) tuners.
CEA forecasts that 9 million integrated DTVs will be sold this year,
16.7 million in 2006, 27 million in 2007, and 33 million in 2008.
Including set-top boxes, by 2009, we will have sold 97 million DTV
tuners, and we estimate that over-the-air tuners will be found in 86
percent of American homes.
At the same time, sales of analog sets are declining precipitously.
We project sales to decline 36 percent in 2006, and an additional 53
percent in 2007.

CEA Is the Leader in DTV Consumer Education
The CE industry has every business incentive to educate consumers
about the qualities and features of the DTV they want to purchase. That
is why CEA runs an extraordinary educational effort to ensure that
consumers are fully informed about their DTV options.
Just last month, the National Association of Consumer Agency
Administrators (NACAA) presented CEA and the FCC with the prestigious
Achievement in Consumer Education Award for our joint efforts in
informing consumers about the transition to DTV, and helping consumers
make the digital choices that are right for them. We are committed to
continuing our educational efforts with the FCC, and invite all
interested parties to join in our campaign to inform Americans about
the digital transition.
As the primary conduit to consumers, it is critical that retail
floor staff is properly equipped to provide accurate and easy-to-
understand information.
CEA aggressively responded to this challenge and created a
comprehensive DTV retailer-training program called CEKnowHow (it can be
viewed online at www.ceknowhow.com). This program is available to all
retailers over the Internet. It equips them with the most up-to-date
online training for sales associates, so that they can effectively
respond to consumer inquiries on DTV and HDTV.
CEA also designed, printed, and made available to retailers a ``tip
sheet'' that explains the DTV transition and basic DTV terms and
technology. In late 2004, CEA partnered with the FCC and the Consumer
Electronics Retailers Coalition (CERC) to distribute more than 750,000
copies of the tip sheet to consumers, retailers, and professional home
theater installers.
More recently, the Consumer Electronics Retailers Coalition (CERC)
issued its own retail consumer guide, ``What you need to know about the
`DTV Transition''--A Dozen Questions & Answers,' that focuses on the
choices that consumers will have when analog broadcasting ends. This is
available at www.ceretailers.org.
Over the last year, CEA also visited with major consumer
electronics buying groups and talked to more than 2,000 dealers to
bring them the latest information on the DTV transition. We have
collaborated with Comcast on an educational DVD that covers DTV
information ranging from basic definitions to the equipment required to
receive and view HDTV content via antenna, satellite or cable delivery.
CEA also is making every effort to reach out directly to consumers.
Millions of readers across the country saw our inserts in TV Guide and
Sports Illustrated magazines explaining the basics of DTV, how to get a
signal, what product choices are available, and so on. We also have
showcased HDTV before hundreds of thousands of consumers through
exhibits at home design shows, and trade exhibitions, and viewing
parties in public venues across the Nation.
CEA exposes millions of consumers to HDTV through our nationally
pre-packaged video and news releases, as well as our national CEA media
tour. And our quarterly HDTV Guide is the single most authoritative
list of the DTV products and programming currently available.
Meanwhile, CEA has taken the lead in promoting consumer awareness
and use of over-the-air digital television reception. Through our
AntennaWeb program, consumers can visit a website (www.antennaweb.org),
enter their home address, and find the optimal outdoor television
antenna for their specific location. This site receives approximately
100,000 hits per month.
We also see it as our obligation to recognize those who are going
above and beyond the call of duty in furthering the DTV transition.
Every year, our Academy of DTV Pioneers honors the best of the best in
HDTV programming, reporting and retailing. And, as it should be, every
year the categories get more crowded and competitive.
This is just a sampling of CEA's strong commitment to educating
consumers and retailers about the DTV transition.
In short, for the DTV transition, everything is moving rapidly in
the right direction. Product sales continue to rise, as prices decline.
The amount and variety of HDTV programming continues to increase.
Content delivery industries are increasingly jumping onto the HD
bandwagon. Exciting new products are rolling into the marketplace.
Consumer and retailer education is advancing. By almost any measure,
digital television is a marketplace success.
Now is the appropriate time to take the next step and bring the
broadcast digital transition to a successful conclusion, just as
envisioned by this Committee when the Congress loaned public spectrum
to the broadcasters for the DTV transition a decade ago.

The Time for a Hard Deadline Is Now
The 700 MHz band currently occupied by analog broadcasters is
beachfront property on the spectrum landscape. The prompt recovery of
this spectrum by Congress will produce immense public interest and
economic benefits while fostering innovation and protecting our
national security.
First, the analog TV broadcast spectrum is ideal for advanced
wireless broadband applications. A hard date will spur innovators to
develop a broad range of new wireless technologies and services. These
new wireless services will offer unprecedented access to rural and
underserved areas, while creating competition that will drive down
prices for all wireless consumers.
A hard date also will fundamentally change and accelerate the DTV
marketplace. With the certainty of a hard deadline, stations will know
what to broadcast, manufacturers will know what to make, retailers will
know what to stock, and consumers will know what to buy. With the
completion of the digital transition now an imminent reality, all
affected industries will shift our consumer education efforts into an
even higher gear.
But the rationale for a hard date goes deeper than promoting new
technologies and broadband access. As reinforced by recent evacuation
of the White House and this Capitol, the gravest threat to our safety
is another national calamity like we suffered on September 11, 2001. It
is now more apparent than ever the 700 MHz band held by broadcasters is
essential to the swift and effective response of Homeland Security,
police, firefighters, and other first responders.
That is why the Association of Public Safety Communications
Officials has implored you to set an analog broadcasting cutoff date,
stating that ``the security of our homeland and the lives and property
of our citizens as well as our responders are at stake.''
The key to unleashing these benefits is for a hard date to be set,
and set now.

The Vast Majority of Americans Now Choose Cable or Satellite To Provide
Their Television Programming
Americans now have more ways to receive video programming than ever
before. The vast majority of Americans receive local and network
broadcast signals via cable and satellite (and will soon have these
services available via telephone, mobile, and wireless broadband).
Meanwhile, the statistics show that a small and declining number of
households now rely exclusively on a free over-the-air broadcast
signal, and a minimal number of TV sets are actually used to watch
broadcast TV.
If there is any doubt about this, consider the total lack of public
outcry over the recent announcement that Monday Night Football, a long
staple of broadcast TV, will soon be available only to satellite and
cable households.
Indeed, our research shows that only 32.7 million (or 11.5 percent)
of the 285 million television sets used in the United States are used
to view over-the-air television programming.
This phenomenon is driven by the fact that television today is
largely a wired (i.e., cable or satellite) service. Of the nearly 110
million American homes with at least one TV, 60 percent receive a cable
signal, and 24 percent receive a DBS signal. Our research shows that
roughly 2 percent receive both cable and DBS, while another 2 percent
of homes use their sets exclusively with VCRs, DVD players, or
videogame systems and do not use their sets with over-the-air or
subscription services.
In total, approximately 86 percent of American homes get their TV
signal from cable or satellite (and thus network and local broadcast
feeds). This means that if the analog cutoff occurred today,
approximately 12 percent of the population of 110 million TV households
would not have access to a broadcast signal through cable or satellite.
And this number is shrinking every year. Cable and satellite
penetration continues to grow by about one to 2 percentage points
annually. What's more, the market research firm Sanford Bernstein has
just concluded that cable and satellite subscribers are growing 3.6
percent annually.
With only 32.7 million sets used to view over-the-air television,
it is clear that the vast majority of TVs in the U.S. are not used for
this purpose. The number of over-the-air homes will decline even
further as more and more Americans pay to subscribe to TV services,
including new technologies such as Internet-Protocol TV, and television
via telephony, and over powerlines. Additionally, growing broadband
penetration will continue to change how Americans receive their
programming. In fact, broadcasters are increasingly providing their
content through other means including the Internet and mobile phones.
Just recently, Verizon announced a deal where it would provide NBC's
feed over its fiber network.
With respect to consumers with neither cable nor satellite, our
research shows that this population's decision not to subscribe
generally is not driven by economic reasons. Indeed, our data shows
that 68 percent choose not to subscribe for a reason other than cost--
with almost a third reporting that they do not subscribe because they
``don't watch that much TV.''
Those who do not subscribe to cable or satellite watch on average
30 percent less television per week than cable and satellite
subscribers. Nearly six of ten say television simply is not a high
priority for them. Fewer than three in ten indicate that insufficient
funds play a role in their decisions not to subscribe to cable or
satellite television.
I should note that this population of over-the-air households does
not eschew technology. Seventy-nine percent of antenna-only households
own a home radio; sixty percent own a cell phone and desktop or laptop
PC; and forty-eight percent have some type of dial-up or broadband
Internet connection.
Some opponents of a hard deadline raise concerns about the
unconnected analog TV sets in households that subscribe to satellite or
cable TV, and claim that most of these sets are used with antennas for
watching over-the-air analog signals. In fact, primary viewing most
often occurs on the TV that is connected to pay services. Of the 173.3
million sets in cable homes, only 4.4 million are used to receive over-
the-air broadcasts. More often, the unconnected TVs are shunted to a
less used room and hooked up with a DVD player, VCR, or video game.
Indeed, our research shows these sets are used at least half the time
for one of these many alternate uses. In addition, as many cable
companies no longer have a monthly charge for additional outlets, this
issue has become increasingly irrelevant for cable homes.
In households utilizing an antenna, TVs connected to the antenna
are often primarily used for an activity other than watching broadcast
television. Of the 25.9 million sets in exclusively over-the-air homes,
3.4 million are used exclusively for watching pre-recorded content,
playing video games, and other non-broadcast uses. Further, in these
households, the TV connected to an antenna is used approximately 40
percent of the time with DVD players, VCRs, and videogame systems.
Our research indicates that three-quarters of antenna-only
households are willing to take some sort of voluntary action to ensure
that they continue to receive television programming when analog
broadcasts end. Twenty-two percent indicated that they would buy a new
TV capable of receiving DTV signals; forty-two percent would buy a $60
set-top converter; 9 percent would start subscribing to cable or
satellite; and 22 percent would do nothing since the TV isn't used to
watch over-the-air broadcasts.
At the same time, we must acknowledge that some consumers may be
adversely impacted by a hard date. That's why we respect and understand
the interest of some policymakers in creating a program whereby those
viewers would have access to low-cost digital-to-analog converters. In
the past, our members have testified that, with economies of scale,
converter prices will be in the $60 range by the time of the proposed
cut-off date. One extremely serious development that will interfere
with this projection would be the imposition of state or national
energy usage mandates on converters, which would adversely impact
converter price and availability.
By the time of a year-end 2008 cut-off--combining present adoption
trends for cable and satellite, and forecasts for uptake of recently
announced TV services from telcos like Verizon and SBC, as well as the
jump in purchases likely to occur with a hard cutoff date--the number
of American homes that would lose their primary video signal will
likely would be closer to 6.8 percent.
We are aware that certain other surveys purport to show a much
higher level of reliance on over-the-air broadcasting. However, CEA
stands firmly by our survey and data results. We are extremely proud of
our long-standing dedication to providing accurate and sound
information to policymakers, the technology industry, and the financial
community.
Compared to other surveys, our data is extremely comprehensive. To
our knowledge, CEA's new research is the only survey that asks about
the specific usage of each and every individual set in a household.
Unlike other surveys, we also limited our survey to TVs in the
household that had been turned on within the prior 3 months, thereby
allowing us to have an accurate, real world analysis of TVs that are
actually in use.
The accuracy of the various survey methodologies and results are
important because they indicate the potential cost of proposed programs
to minimize the viewer impact of the analog cutoff. We are glad to
provide CEA's complete survey documents and offer to further analyze
the data in any way that assists Congress in developing proposals to
minimize viewer impact.
The simple fact is that, while an analog broadcasting cut-off is
important for our nation, it will have no impact on the viewing habits
of the vast majority of Americans. We believe the types of education
and public awareness steps that have been discussed with your
colleagues can effectively address the needs of those who wish to rely
only on broadcast television.

CEA Endorses a Hard Deadline, and Offers Suggestions To Bring About a
More Expeditious Transition
In the United States, the transition to digital television has
always been envisioned as having two purposes. The first was to bring
the wonders of digital TV, and especially high-definition TV to
American consumers. The second was to capture the public interest and
economic benefits of the return of the analog spectrum.
We are now well on our way toward accomplishing the first
objective, and it is appropriate that we turn our attention to the
second.
CEA unequivocally endorses the establishment of January 1, 2009,
for the recovery of the analog spectrum. The setting of a date certain
will benefit consumers as spectrum is reallocated for purposes ranging
from public safety communications to exciting new services such as
wireless networking and Internet access.
CEA offers a number of suggestions that will help this Committee
craft legislation to hasten the digital transition, while ensuring the
most expeditious, practical, and consumer friendly result.
Specifically, we recommend the following:
1. Tuner Mandate Acceleration: A current FCC proceeding seeks
comment regarding the acceleration from July 1, 2007, to no later than
December 31, 2006, of the requirement for manufacturers to include
over-the-air tuners in 13 to 24 inch sets and other TV reception
devices (such as VCRs, DVDs and DVRs).
In terms of any proposals to accelerate the tuner mandate
requirements, we are concerned that any proposed changes in the
existing requirements would severely reduce the retail market for these
products.
Manufacturers need a minimum of 18 to 24 months to plan, develop,
and deploy new equipment. An accelerated tuner mandate could force some
manufacturers who determine that meeting the new regulations are not
feasible (and fear inability to comply with the FCC's regulations) to
move to tunerless sets or to stop manufacturing altogether the small-
screen TV models which cannot be fitted with digital tuners--which many
manufacturers are reluctant to do, and which would defeat the purpose
of the tuner mandate itself.
Even if manufacturers were able to meet a foreshortened production
schedule, a date any earlier than March 2007, could result in cost
increases that the marketplace cannot sustain. Of course, this assumes
that legislation would be enacted in September 2005, to ensure an 18-
month manufacturing schedule that would enable manufacturers to meet a
March 2007, date. Some of our members believe that accelerating the
tuner deadline for 13 to 24 inch sets and other TV reception devices to
any earlier than March 2007, would double the development costs for
manufacturers, as well as double the price of a typical 13 inch
television to consumers. Retailers have pointed out that their
customers buy TVs in this product category often out of necessity; many
buy a $69 TV on a layaway plan. If the product is rejected by lower
income and other consumers because the price exceeds their budget, it
will not be carried by retailers and, eventually, not produced by
manufacturers. This helps neither broadcasters, consumers, nor the
transition, and irrespective of any later subsidy plan, places the
burdens of the transition on those who can least afford it.
The FCC and the Congress have consistently recognized the 18-month
manufacturing cycle when they have imposed requirements on TV set
manufacturers. The V-chip and closed captioning regulations are key
examples.
The unfortunate result of an overly-aggressive acceleration of the
tuner mandate deadlines would be to decrease the number of DTV tuners
in the marketplace, which clearly does not serve the transition.
We recognize there is a growing consensus that some acceleration of
the FCC's present July 1, 2007 deadline is desirable. While
manufacturers have relied in good faith on the existing July 2007 date,
CEA believes that March 2007 is the earliest possible date, consistent
with the manufacturing and retail placement cycle, for the integration
of digital reception capability into 13" to 24" sets and other devices
having an analog tuner. Any deadline prior to March 2007 will only
result in the absence of smaller TVs and other products from the
marketplace as they are pulled from distribution in advance of the
deadline.
A March 2007 date allows time for economies of scale to develop.
This will lessen the ``sticker shock'' for consumers, allowing these
products a chance to compete against less expensive, tuner-less
alternatives. Indeed S. 1268 (the SAVE LIVES Act) sponsored by Senators
McCain and Lieberman, proposes a March 1, 2007 date in order to
minimize market disruption and consumer harm.

2. Digital Carriage and Non-Degradation: We urge the Committee to
address the important issue of signal degradation, and ensure that a
digital signal is carried under all circumstances. It is fundamental
that when cable operators are carrying broadcast signals digitally,
they should not be allowed to reduce the sound or picture quality, or
alter or eliminate program related data. American households--most of
whom are cable customers--have invested more than $25 billion dollars
in high-definition televisions. If a broadcaster is providing HDTV
programming and Dolby Digital surround sound, then that is what HDTV
owners who subscribe to cable should see and hear.

3. Television Labeling: CEA fully supports educational labels in
connection with analog televisions when paired with the certainty of a
hard date. However, manufacturers will need 120 to 180 days to include
the labels on the product itself to incorporate this extra step into
the manufacturing cycle. A period of 90 days would be required if the
label is designed as a sticker placed on the outside of the product
packaging. Any shorter notice would mean that highly automated
production lines would have to be stopped and re-organized at great
cost, or else the labels would have to be added manually at similarly
great cost. Conversely, with enough advance notice to automate the
labeling process, labeling is of course a much less significant cost.
Retailers also have accepted an obligation, once a hard date is
set, to display consumer advisory labels in the vicinity of sets with
only analog tuners and in their web-based marketing--in each case with
some variations according to the store arrangement and means of
display. Additionally, they have indicated that they plan to assist
their customers with supplemental materials and to propose options to
their customers targeted to the customer's specific needs. In order to
prevent screen damage upon removal by a consumer or retailer,
consideration should be given regarding the necessity of placing the
label ``on-the-screen'' so long as it is attached to the product as
shipped.
CEA urges that any label language should be concise--otherwise,
consumers may not read or understand it. CEA and the Consumer
Electronics Retailers Coalition recommends the following language:

``This TV has only an `analog' broadcast tuner so will require
a converter box after [date] to receive over-the-air broadcasts
with an antenna, because of the transition to digital
broadcasting on that date. (It will continue to work as before
with cable and satellite TV systems, gaming consoles, VCRs, DVD
players, and similar products.)''

We suggest that the FCC be tasked to work with industry and
consumers to develop an appropriate label along these lines, as
proposed in S. 1268, the SAVE LIVES bill.

4. Channel Allotments: CEA supports a timetable of December 31,
2006, as the final date for the FCC to issue final broadcaster channel
allotments, and an additional 7 months to conclude any reconsideration
of such allotments. We urge the Committee not to extend the
reconsideration period beyond 7 months, as this could cause the final
end-date for analog broadcasting to slip to 2010.

5. Broadcaster Disclosures: In light of our own aggressive consumer
education efforts, CEA has been disappointed with the paltry level of
DTV consumer education offered by the broadcasters to date, especially
the almost complete lack of broadcaster-sponsored public service
announcements (PSAs). We urge the Committee to address this issue, and
we urge that any legislation require increased broadcaster-consumer
education activities. Specifically, the Committee should consider
starting the required announcements at least 1 year before analog shut-
off, and increasing the number of ads from two per day--at least in
months closest to the analog shut-off--and imposing separate
educational requirements on networks, as well as local broadcasters.
This makes sense because broadcasters are the ones with a vested
interest in transitioning the remaining over-the-air viewers to
digital. Broadcasting is a powerful and effective communications
medium, and it is essential that the broadcasters themselves step up
and do their part to educate the Nation about the transition to digital
television.

6. Broadcaster Compliance: Ensure that broadcasters comply with
Federal Communications Commission maximization/replication
requirements. As of today, more than 100 stations have requested a
waiver and extension of the FCC's July 1, 2005 requirement for
maximization and replication for stations affiliated with a top-four
network and located in the top-100 markets. Broadcasters must comply
with FCC rules to ensure a successful and rapid transition. Despite the
broadcasters' words about the importance of the DTV transition and all
they have expended to convert to digital, the real test is what they
are doing. They are seeking extensions and waivers today, just as they
have been doing for the last 5 years. Only a hard shut-off date enacted
into law will make them realize that the DTV conversion is inevitable
and for real.

Conclusion
Setting a realistic date certain for the end of analog broadcasting
and the recovery of the analog spectrum for new purposes is the right
thing to do. It is right for consumers, it is right for innovation, and
it is right for America's national security. A hard deadline will help
foster the creation of new, high-skill jobs, and it will promote
America's technology leadership in an increasingly competitive world.
We commend the Committee for its efforts to bring the broadcast DTV
transition to a successful and timely conclusion. In the meantime, we
will continue our efforts to educate consumers about digital
television. I pledge CEA's continuing commitment to working with this
committee and other stakeholders to ensure the most timely and consumer
friendly transition, as well as a prompt return of the analog broadcast
spectrum.

The Chairman. Thank you.
And, last witness, Michael Calabrese, the Vice President
and Director of Wireless Future Program for the New America
Foundation.
Mr. Calabrese?

STATEMENT OF MICHAEL CALABRESE, VICE PRESIDENT/
DIRECTOR, WIRELESS FUTURE PROGRAM, NEW AMERICA FOUNDATION

Mr. Calabrese. Yes, good afternoon. My name is Michael
Calabrese. I direct the Wireless Future Program with New
America Foundation, which is a nonpartisan policy institute
here in Washington. Thank you for inviting my testimony today.
The TV band has become a vast wasteland of underutilized
airwaves that are urgently needed for both public safety and
for wireless broadband services, which I'll emphasize. On
average, a high-powered TV station operates on each of those
channels in only 15 of the Nation's 210 local television
markets. And in every market, a low and steadily shrinking
share of American homes rely on over-the-air reception at all.
Because of the urgent need to reallocate these frequencies,
it is critical that Congress not repeat the mistake of the
Balanced Budget Act of 1997. The 1997 Budget Act set a deadline
for TV band auctions, but not a policy to ensure that the
spectrum would be cleared by a date certain. As a result, in
2002, most of those auctions were canceled, or generated very
low returns, for one primary reason: wireless firms are not
willing to pay market prices for spectrum indefinitely
encumbered by politically powerful TV stations. But a credible
hard deadline, one reinforced by a broad consumer compensation
program, can spin straw into gold.
Based on recent private-spectrum transactions and public
bids, the ten channels that could be licensed are expected to
generate between $15 and $30 billion. Because this auction
value vastly exceeds the Committee's budget requirements, we
recommend that Congress use this opportunity to make three
telecom policy investments with long-term benefits for the
general public.
The first is a broad-based converter rebate that ensures
all households still relying on analog over-the-air are held
harmless. By earmarking a relatively small share of the
expected auction revenues for a consumer compensation fund,
Congress can both protect vulnerable consumers, and ensure that
potential wireless bidders' business plans will not be
disrupted by a voter backlash.
Providing one $50 converter box or rebate to each of the 16
million households that rely exclusively on over-the-air
reception would cost about $800 million. Providing one rebate
to each of the 44 million households that report relying at all
on over-the-air reception for their local channels would cost
about $2.2 billion. So, that's the range.
In either case, the cost represents merely a fraction of
the revenue that TV band auctions will raise if, and only if,
bidders are confident the deadline for clearing those channels
will not again be delayed. Although a means-tested compensation
program would be less expensive, we believe it is neither
administratively practical nor fair. If the Committee does not
choose to means test the consumer rebate, we believe that, on
balance, it would be most cost efficient to reimburse qualified
retailers.
Qualified retailers could be required to offer converters
certified by the FCC to limit the consumer share of the cost to
a small co-pay and to provide the degree of technical support.
If possible, any rebate program should also give consumers the
choice to use it to offset the cost of a converter box, a new
digital TV, or even a satellite dish or cable set-top box,
since any of these devices will preserve access to broadcast
channels.
The second public investment that should be part of this
transition involves promoting the rapid deployment of
affordable and mobile broadband services. Because wireless
signals at this frequency pass easily through walls and trees,
reallocating the 700 megahertz band could jumpstart the
deployment of more affordable wireless broadband connections,
particularly in rural areas.
The U.S. has fallen from third to 16th in broadband
adoption worldwide over the past 5 years, according to the ITU.
The lack of affordable highspeed Internet access for millions
of homes and small businesses in the U.S. is a threat to
American competitiveness. We recommend that Congress address
this broadband gap by using the DTV transition to encourage
both licensed and unlicensed wireless broadband networks as
competitive alternatives to wireline cable, and DSL offerings.
Thousands of mostly rural commercial Internet service
providers, or WISPs, and dozens of municipalities, already use
the crowded unlicensed band at 2.4 gigahertz to deploy WiFi and
other wireless connections to hundreds of thousands of
businesses and consumers, at distances of up to 30 miles. The
problem is that the unlicensed WiFi bands are small and shared
with over 200 million consumer devices, from microwave ovens to
cordless phones.
The DTV transition can promote rapid, affordable broadband
in two ways. First, from the ten channels now designated for
auction, the FCC should be directed to reallocate at least
three, roughly 20 megahertz, for shared unlicensed use. Second,
the FCC should be directed to complete its pending rulemaking
that would open unassigned TV channels below Channel 52 for
unlicensed public access, subject to strict rules to avoid
interference.
Finally, the $15 billion to $30 billion market value of the
ten channels available for auction makes possible a third
investment. Any auction of the people's airwaves should be seen
as an opportunity to invest in the digital future of our public
media and educational institutions. The proceeds exceeding the
CBO score could be earmarked to capitalize a trust fund, to
finance ongoing investments in both educational public media
and e-learning content and applications. We recommend that the
Committee incorporate within this DTV legislation funding for
the Digital Opportunity Investment Trust, or DOIT Act that was
introduced in May by Senator Burns, Senator Snowe, here on your
committee, as well as Senators Dodd and Durbin, which earmark
spectrum revenue for these purposes.
Thank you for your time, and I look forward to answering
any questions.
[The prepared statement of Mr. Calabrese follows:]

Prepared Statement of Michael Calabrese, Vice President/Director,
Wireless Future Program, New America Foundation

Thank you, Mr. Chairman, and members of the Committee, for this
opportunity to testify today. My name is Michael Calabrese, Vice
President of the New America Foundation, a nonpartisan policy institute
here in Washington. I direct New America's Wireless Future Program,
which is dedicated to promoting more efficient and fair access to the
public airwaves.
I will focus largely on the opportunity to use this DTV legislation
to advance the national interest in more rapid and affordable
deployment of high-speed broadband access, particularly in rural and
other underserved areas. Because the market value of the channels
designated for auction vastly exceed the Committee's budget
requirements, I believe the Committee should use this bill to pursue
policies that will be far more beneficial to the Nation than a budget-
driven bill that merely maximizes short-term auction revenues.
Several years ago we began urging members of this committee to set
a hard deadline for the end of the digital TV transition--and to make
that deadline realistic by earmarking a portion of the resulting
spectrum revenue to compensate consumers needing to purchase a digital-
to-analog converter box. TV channels 52 to 69 have become a vast
wasteland of underutilized airwaves that are urgently needed for both
public safety and for wireless broadband services. On average, a high-
power TV station operates on each of those channels in only 7 percent
of the Nation's 210 local television markets; and in every market, a
low and steadily shrinking share of American homes rely on over-the-air
(OTA) reception at all (see Table 1 below).

Table 1: How U.S. TV Households Receive Television: 1994 vs. 2004*
----------------------------------------------------------------------------------------------------------------
Dec. 1994 June 2004
Dec. 1994 (Share of All June 2004 (Share of all Change
TV Households in the United States (Millions) TV (Millions) TV (%)
Households)(%) Households)(%)
----------------------------------------------------------------------------------------------------------------
Over-the-Air Only 31.5 33 16.1 15 -48.9
----------------------------------------------------------------------------------------------------------------
Total MVPD Subscribers** 63.9 67 92.3 85 44.4
Cable 59.7 66.1
DBS 0.6 23.2
Other 3.6 3.0
----------------------------------------------------------------------------------------------------------------
* 2004 Data: FCC, ``Annual Assessment of the Status of Competition in the Market for the Delivery of Video
Programming: Eleventh Annual Report,'' January 14, 2005. Available at: http://hraunfoss.fcc.gov/edocs_public/
attachmatch/FCC-05-13A1.pdf; 1994 Data: FCC, ``Annual Assessment of the Status of Competition in the Market
for the Delivery of Video Programming: Second Annual Report,'' December 11, 1995. Available at: http://
www.fcc.gov/Bureaus/Cable/Reports/.
**MVPD = Multichannel Video Programming Distributors are Cable, DBS, and other services.

The Importance of Reallocating Airwaves From Broadcast to Broadband
The DTV transition no longer has anything to do with high-
definition TV, or with U.S. competitiveness in TV manufacturing, as
Congress was led to believe a decade ago. Today the true threat to
American competitiveness is the lack of affordable, high-speed Internet
access for millions of homes and small businesses. The U.S. has fallen
from 3rd to 16th in broadband adoption worldwide over the past 5 years,
according to the International Telecommunications Union (ITU). Last
fall, a Fortune magazine cover story reported that ``nearly everyone in
South Korea has Internet access that puts Americans to shame.'' In
South Korean cities, ``broadband is as basic a utility as water and
electricity . . . ordinary households get faster Internet connections
than all but the biggest U.S. businesses.'' The typical cable and
telephone broadband connection here is ten times slower than the 20
megabits-per-second speeds offered in South Korea for the same price or
less. This ``broadband gap,'' if it continues, will result in slower
rates of U.S. innovation, e-business creation, job growth, and
technological competitiveness in an increasingly digital world.

Table 2: International Broadband Adoption: Selected Rankings*
------------------------------------------------------------------------
Broadband subscribers per
Rank Country 100 inhabitants
------------------------------------------------------------------------
1 South Korea 24.9
2 Hong Kong 20.9
3 The Netherlands 19.4
4 Denmark 19.3
5 Canada 17.6
16 United States 11.4
------------------------------------------------------------------------
* International Telecommunications Union, cited in National Journal,
available at: http://www.njtelecomupdate.com/lenya/telco/live/tb-
QGBX1114459808856.html.

The DTV transition provides an opportunity for Congress to open a
third and more affordable broadband pipe to homes and small businesses.
Industry studies show that because TV band frequencies (700 MHz band)
propagate easily through obstacles, such as walls and trees, access to
these low frequencies can reduce the deployment costs for wireless
networks by a factor of three or more compared to cellular bands above
2 GHz. Congress can choose to rely on the cable and telco wireline
duopoly to trench fiber to every home and business--or at least those
in locations that will be profitable to connect. Or we can open the
broadband pipe the public already owns--the public airwaves--as a
common carrier for communities, entrepreneurs and innovation.
Because of the urgent need to reallocate these frequencies, it is
critical that that Congress not repeat the mistake of the Balanced
Budget Act of 1997. In an effort to score revenue, the 1997 OBRA set a
deadline for TV band auctions, but not a policy to ensure that the
spectrum would be cleared by a date certain. As a result, in 2002, most
of the auctions were canceled or generated very low returns for one
primary reason: wireless firms are not willing to pay market prices for
spectrum indefinitely encumbered by politically-powerful TV stations.
But a credible hard deadline for channel clearance--one reinforced by a
broad consumer compensation program--can spin straw into gold. In
addition to cellular incumbents, many new wireless service providers
are expected to bid on 700 MHz licenses, as they are so well suited for
video, mobile, and other consumer broadband applications. Based on
recent private-spectrum transactions and public bids--for cellular
spectrum with far less valuable propagation characteristics--the 10
channels that could be licensed are expected to generate between $15
and $30 billion.\1\
---------------------------------------------------------------------------
\1\ See the market analysis by the Brattle Group, in the letter
from William P. Zarakas and Dorothy Robyn, Principals, Brattle Group,
to the Hon. Joseph Barton, May 18, 2005, available at http://
www.brattle.com/_documents/News/News253.pdf.
---------------------------------------------------------------------------
The tremendous market value of the 10 channels (60 MHz) available
for auction gives Congress the leeway to avoid passing another
shortsighted, budget-driven bill. Because auctioning even 40 MHz of TV
band spectrum will generate $10 billion or more, we recommend that
Congress use this opportunity to make three telecom policy investments
with long-term benefits for the general public:

A broad-based consumer converter box rebate that ensures all
households that still rely on analog over-the-air reception are
held harmless.

The reallocation of 20 of the 60 MHz of spectrum available
for wireless services to unlicensed broadband networks, as well
as the opening of unassigned DTV channels in each market for
sharing by low-power unlicensed devices.

The earmarking of TV band auction revenue in excess of the
CBO ``score'' into a trust fund to help finance the digital
future of public broadcasting and e-learning technologies.

The ``Last Granny Rule'': A Small Share of the Auction Revenue Can
Compensate Consumers and Ensure No Additional Delay in
Reallocating TV Frequencies
Because ``free'' TV has taken on the nature of an entitlement in
American culture, legislation that makes analog TV sets obsolete will
be keenly felt, even in middle-class homes, as a type of ``taking.''
This is the unwritten obstacle to ending the DTV transition that we
have called the ``Last Granny Rule'': even if the FCC or Congress sets
a hard deadline, it will be subject to delay (or defeat) if a
substantial share of voters relying on analog OTA view the government
as making their TVs useless without the purchase of a converter box (or
new DTV). Manufacturers, including LG/Zenith and Zoran, now estimate
that in mass production, a digital-to-analog converter would sell for
$50. \2\
---------------------------------------------------------------------------
\2\ Leading manufacturers project a range of $50 (LG/Zenith, Zoran)
to $67 (Motorola), assuming industry-wide demand of 10 million units.
See ``Tech Company Touts Solution to Quick DTV Transition,''
Communications Daily, May 2, 2005, and FCC MB Docket No. 04-210, Media
Bureau Staff Report Concerning Over-the-Air Broadcast Viewers.

Table 3: The Cost of Four Options for a DTV Transition Consumer Subsidy*
------------------------------------------------------------------------
Cost as
Household percent of
Eligibility Total Likely
based on Number of Subsidy/ Assumed Cost Auction
reliance on Households Converter Take-up (100% Value of
over-the-air Eligible Rate Subsidy) Unencumbered
(OTA) TV Spectrum
($20B)**
------------------------------------------------------------------------
Option #1: 7.09 m (44 $50 7.09 m $355 1.8
Only low- percent of (100 million
income OTA OTA-only percent)
exclusives; households
Limit one )
set/
household
Option #2: 16.1 m (15 $50 16.1 m $805 4.0
All percent of (100 million
exclusive 108.4 m TV percent)
OTA households
households; )
Limit one
set/
household
Option #3: 108.4 m $50 43.8 m $2.2 11.0
All TV (16.1 m (100 billion
households; OTA + 92.3 percent
Limit one m non-OTA) of OTA +
set/ 30
household percent
of non-
OTA)***
Option #4: 108.4 m $50 73 m (45 $3.6 18.0
(NAB (16.1 m m sets billion
Scenario)** OTA + 92.3 in OTA +
** All OTA m non-OTA) 28 m
sets in all sets in
households non-OTA
hh's)
------------------------------------------------------------------------
* The FCC's Report Concerning Over-the-Air Broadcast Television Viewers
notes that 14.98 percent of U.S. TV households rely exclusively on
OTA, citing the 2005 MVPD Report. See: FCC, ``Media Bureau Staff
Report Concerning Over-the-Air Broadcast Viewers,'' February 28, 2005,
and FCC, ``Annual Assessment of the Status of Competition in the
Market for the Delivery of Video Programming: Eleventh Annual
Report,'' January 14, 2005. Available at: http://hraunfoss.fcc.gov/
edocs_public/attachmatch/FCC-05-13A1.pdf.
** Market Value of unencumbered spectrum is at least $20 billion at
$1.65 per MHz/pop, based on the FCC's valuation of the Nextel spectrum
swap, and recent private cellular license sales, as above.
*** NAB/MSTV data indicates 28 million unwired sets are in use in the
Nation's 92.3 cable/DSL households. See NAB/MSTV, Comments, In the
Matter of Over-the-Air Broadcast Viewers, August 11, 2004, MB Docket
04-210.
**** Option #4 is the solution most called for by the NAB, which assumes
that a converter subsidy be made available for every analog TV set in
all households that rely on OTA (i.e., all sets not connected to
cable, DBS, or another subscriber service.)

By earmarking a relatively small share of the expected auction
revenues for a consumer compensation fund, Congress can both protect
vulnerable consumers while also ensuring potential wireless bidders
that their business plans won't be disrupted by a voter backlash. As
the table just above demonstrates, providing one $50 converter box to
each of the 16 million households that rely exclusively on OTA
reception would cost about $800 million. The cost of one converter box
for each of the nearly 44 million households (including 28 million
cable and DBS subscribers) that report relying at all on OTA reception
is $2.2 billion. \3\ In either case, the cost represents merely a
fraction of the revenue that TV band auctions will raise if, and only
if, bidders are confident the deadline for clearing those channels will
not again be delayed.
---------------------------------------------------------------------------
\3\ NAB/MSTV data indicates 28 million unwired sets are in use in
the Nation's 92.3 cable/DSL households. Approximately 30 percent of
subscription TV households would thus have any use for a converter
subsidy. See NAB/MSTV, Comments, In the Matter of Over-the-Air
Broadcast Viewers, August 11, 2004, MB Docket 04-210.
---------------------------------------------------------------------------
Options for Making Consumer Rebate Generally Available
1. A Consumer Mail-In Rebate

Advantages: Rebate forms can be used to limit eligibility--
or limit the number of subsidies per household--by tracking
consumer information.

Disadvantages: Consumers must pay up-front before getting a
refund, which disproportionately impacts low-income and fixed-
income households; the paperwork required to process rebate
applications would be costly for both consumers and government;
it may be impossible to limit the subsidy to low-income
households without costly and intrusive cross-checking through
IRS.

2. A Qualified Retailer Rebate

Advantages: Consumers are not required to pay anything up-
front; offering the converter ``free,'' or at very low-cost
(co-pay), eliminates ``red tape'' for the customer, reduces
administrative costs, and enhances satisfaction with process;
participating retailers could be required to offer optional
installation and/or technical support services.

Disadvantages: Retailers cannot limit the eligibility, or
number of converter subsidies, by household (individuals
acquiring converters from multiple stores); limits could be
enforced only by mailing a coupon to each eligible household
(e.g., one per household via counties).

3. A Refundable Tax Credit (Refund Occurs Whether There Is A Tax
Liability Or Not)

Advantages: Easier to confer a means-tested subsidy; reduces
fraud by linking to consumer information; administratively
efficient if done during a single tax year.

Disadvantages: Lower take-up rate possible among low-income
households who lack easy access to tax information, or do not
file taxes at all; substantial time-delay between purchase and
the tax refund; additional tax form complexity.

We believe that a means-tested compensation program is neither
administratively practical nor fair. Verifying eligibility requires
access to tax return information--which rules out rebating the subsidy
directly to retailers. A mail-in application (Option 1 above), premised
on the consumer's estimate of family income, would raise concerns about
privacy and accuracy. While a refundable tax credit (Option 3 above)
could piggy-back the existing individual tax return process by adding a
line for a single tax year, consumers would need to pay first, wait
months for a refund, and be able to show a proof of purchase if
audited. It would also deter low-income earners not required to file.
Because the auction of the public's airwaves will generate more
than enough revenue to compensate consumers, it seems only fair to
offer at least one rebate to each household. Indeed, the government's
failure to require warnings on analog TVs purchased during the past
five-to-ten years will only heighten the perception among the middle-
class that they should be compensated for a policy change that forces
them to purchase a converter box or new digital TV. Although the 18-
month transition in Berlin, Germany, relied on a means-tested subsidy--
the government purchased and distributed DTA converters directly to
6,000 very low-income households--more affluent households also
immediately received a far greater number of digital OTA channel
selections in return for purchasing a converter or new DTV.
If the Committee does not choose to means-test the consumer rebate,
we believe that on balance it will be most cost-efficient to reimburse
``qualified'' retailers (Option 2 above). These retailers would need to
agree to offer converters certified by the FCC, to limit the consumer
share of the cost (e.g., a small ``co-pay''), and to provide a degree
of technical support. If eligibility is limited to one rebate per
household, a coupon could be mailed to each household. If possible, any
rebate program should give consumers the choice to use it to offset the
cost of a converter box, a new digital TV, or even a satellite dish or
cable set-top box, since any of these devices will preserve access to
broadcast channels and serve the policy purpose of the DTV transition.

The DTV Transition Should Facilitate Both Licensed and Unlicensed
Wireless Broadband Deployment, Particularly in Rural Areas
New wireless networks are extending more affordable broadband
access to new communities in every state, spurring economic development
and helping to bridge the digital divide. Clouds of wireless
connectivity now cover college campuses and downtown business
districts--``hot zones'' that expand on the WiFi ``hot spots'' now
offering unwired Internet connections at 18,000 locations nationwide.
\4\ These zones, in turn, are becoming clouds, extending ubiquitous
broadband access to entire towns and counties. Commercial wireless
Internet service providers (WISPs) are connecting homes, farms, and
small businesses to broadband at distances of up to 30 miles. Municipal
networks--in small towns like Chaska, Minnesota, and in rural villages
like Coffman Cove, Alaska--are blanketing under-served areas with high-
speed Internet access at affordable prices. In other towns--such as
Scottsburg, Indiana--public-private broadband networks have saved jobs
by keeping businesses from moving out. And in other towns--such as
Granbury, Texas, and San Mateo, California--these same networks serve
as mobile communications systems for police and other public safety
agencies.
---------------------------------------------------------------------------
\4\ ``Warp Speed for Wireless Networks,'' Business Week, June 21,
2005.
---------------------------------------------------------------------------
What all of these innovative broadband networks have in common is
the tiny sliver of unlicensed frequencies they use to transmit signals.
In fact, far more homes and small businesses now rely on wireless
Internet services delivered over unlicensed spectrum, while very few
last-mile broadband connections (and zero municipal wireless hot zones)
have been deployed on licensed bands. Thousands of mostly rural
commercial Internet service providers (WISPs), and dozens of
municipalities and nonprofit community networks, already use the
crowded 2.4 GHz unlicensed band to deploy wireless connections to
hundreds of thousands of businesses and consumers. Unlicensed spectrum
has spurred billions of dollars in economic activity, saved jobs, and
opened up new opportunities for local economic development,
particularly in rural areas.
WiFi is just the beginning of a wireless paradigm shift--a radio
revolution premised on shared, unlicensed access to the airwaves that
will determine if the U.S. will be a leader or a laggard in the next
generation of Internet technologies. Like licensed cellular providers,
who need more and better spectrum to meet the growing demand for
wireless data services, an allocation of low-frequency spectrum for
shared, unlicensed access will promote the deployment and lower the
cost of Internet access provided by entrepreneurial WISPs and community
networks. The problem is that the WiFi band (2.4 GHz) is small,
uneconomical, and shared with well over 200 million consumer devices,
from microwave ovens to cordless phones, and baby monitors. Opening
returned (and unassigned) TV band spectrum for WISP and community
access on an unlicensed basis will greatly stimulate broadband
deployment, rural access, and growth in America's high-tech sector.
We recommend that Congress use the DTV transition to encourage both
licensed and unlicensed wireless broadband networks as competitive
alternatives to wireline cable and DSL offerings. DTV transition
legislation can accomplish this in two ways:
First, from the 60 MHz (10 channels) in the 700 MHz band now
designated by the FCC for auction and exclusive licensing, the FCC
should be directed to reallocate 20 MHz for shared, unlicensed use
under Part 15 rules. Even if only 40 MHz is auctioned for exclusive
use, this is in addition to the 90 MHz reallocated for auction next
year under the Commercial Spectrum Enhancement Act signed into law just
last December. In the low-frequency, high-penetration frequencies below
2 GHz (the ``beachfront'' spectrum), 26 MHz is currently allocated for
unlicensed devices versus roughly 290 MHz for licensed cellular
services.\5\
---------------------------------------------------------------------------
\5\ In the nearby but less valuable 2-3GHz band, the ratio of
licensed cellular to unlicensed spectrum is less than the ratio below 2
GHz, but still more than two to one. The unlicensed WiFi band at 2.4
GHz has 83.5 MHz of spectrum, but the licensed cellular bands, mostly
at 2.5 GHz, occupy more than 200 MHz of spectrum.

Second, the bill should direct the FCC to complete its pending
rulemaking (Docket 04-186) that would open unassigned TV channels below
Channel 52 for unlicensed public access, subject to rules designed to
avoid risk of harmful interference to the dwindling number of over-the-
air DTV consumers. Even after the DTV transition, Channels 2 through
51-288 MHz of prime spectrum--remain designated exclusively for TV
broadcasting. Yet only about seven TV stations are licensed to operate
at full power in each market, on average. Even fewer stations operate
in some rural markets. As former FCC Chairman Michael Powell recognized
when he initiated the notice of proposed rulemaking last year, the
unassigned ``white space'' can be opened, on a market-by-market basis,
for shared, unlicensed use by operators using equipment certified by
the FCC to ensure there is no interference with licensed DTV stations
on nearby frequencies.
Unfortunately, this rulemaking has drawn intense opposition from
the broadcast lobby, which would rather keep open the possibility of
owning or using today's wasted guard band spectrum in the future. To
ensure that this vast ``white space'' wasteland is used for affordable
broadband and wireless innovation more broadly, we recommend that
Congress adopt findings to that effect and direct the FCC to complete
the proceeding within 6 months.

Auction Revenue Above the ``Score'' Should Be Designated To Capitalize
a Trust Fund for the Digital Future of Public Broadcasting and
E-Learning Technology
While reclaiming spectrum for public safety and advanced wireless
services is critical, we urge Congress to take advantage of the
resulting auction revenue windfall to ensure that our Nation's public
service media can thrive in this digital future. Public broadcasting is
uniquely positioned to be a leading part of the solution to many of the
fundamental challenges facing our society. It can harness digital
technologies to expand public media services in education, homeland
security, public health, and civic affairs that would not otherwise be
available on commercial channels--and it can create wholly new and
dynamic approaches over both added digital channels and over the
Internet and other new media platforms. Nowhere is an enhanced role for
public service media more vital than for early childhood learning, as
well as for learning lifelong. America's classrooms and homes could
better boost academic achievement if they had ready access to the high-
quality multimedia resources that are needed to engage teachers and
students in information age learning.
Over the past 6 months, I have had the honor of directing the
Digital Future Initiative, a panel of prominent leaders from both
inside and outside of the public broadcasting system, which has been
meeting to consider how public broadcasting should reshape its role and
exploit emerging digital technologies to meet critical public needs,
particularly in education. This Digital Future Initiative, Co-Chaired
by Jim Barksdale, the former CEO of Netscape, and Reed Hundt, former
Chairman of the Federal Communications Commission, will issue a report
by September that will describe why an investment in a modernized and
expanded public service media system would be so beneficial for the
nation. We hope you will consider this need in thinking about the value
of reinvesting spectrum revenue to enhance the Nation's digital future.
Any auction of the people's airwaves should be seen as an
opportunity to invest in the digital future of our public media and
educational institutions. As noted earlier, because the TV band
auctions are likely to yield more revenue than the Congressional Budget
Office will officially project, we recommend that the proceeds
exceeding the CBO ``score'' be earmarked to capitalize a trust fund to
finance ongoing investments in both educational media and e-learning
content and applications. Legislation that does exactly this was
introduced by two members of this Committee in May. Senators Snowe and
Burns, along with Senators Dodd and Durbin, have introduced a trust
fund proposal that would be funded from earmarked spectrum revenue--the
Digital Opportunity Investment Trust (DOIT) Act. The DOIT Act calls for
the creation of a trust to finance, among other things, the
digitization of materials stored in museums and libraries, as well as
research and development to improve digital educational content, media,
and methods. The DOIT Act includes an annual 21 percent set-aside to
public broadcasting entities for digital educational content
development.\6\ That Act should be incorporated into the DTV transition
legislation.
---------------------------------------------------------------------------
\6\ See the Digital Opportunity Investment Trust Act, introduced in
the Senate (as S. 1023) on May 12, 2005, by Senators Dodd (D-CT), Snowe
(R-ME), Durbin (D-IL), and Burns (R-MT), and in the House (as H.R.
2512) on May 19, 2005, by Representatives Regula (R-OH), Markey (D-MA),
and Gillmor (R-OH).
---------------------------------------------------------------------------
Finally, while broadcasters lobby for multicast must-carry rights,
they oppose any expansion of their public interest programming
obligations. The U.S. stands apart from the developed world in giving
commercial broadcasters free must-carry rights and the option to
negotiate payments from cable and DBS systems (retransmission
consent).\7\ Licensees should be required to use DTV's enormously
increased capacity to expand the coverage of diverse viewpoints and of
local civic affairs and election contests. In exchange for their far
more valuable DTV licenses, Congress could require broadcasters to air
a minimum of 3 hours per week of local civic or electoral affairs
programming.\8\ Studies have shown the many ways in which broadcasters
fail to deliver meaningful coverage of local civic and electoral
affairs:
---------------------------------------------------------------------------
\7\ See J.H. Snider, ``Should DTV Must-Carry Be Expanded, Sunset,
Or Preserved As-Is?'' (Washington, D.C.: New America Foundation, May
2005), especially Appendix A: ``A Comparison of European Union and U.S.
Must-Carry Regulations.''
\8\ The Public Interest, Public Airwaves Coalition (PIPAC), of
which the New America Foundation is a member, has proposed to the FCC a
quantifiable and verifiable public interest test. For more information,
visit the Campaign Legal Center's PIPA Coalition website at: http://
www.ourairwaves.org/fcc/.

Local public affairs accounts for less than one half of 1
percent of all programming on local television stations,
according to a 2003 study.\9\
---------------------------------------------------------------------------
\9\ See ``Broadcasters `Black Out' Public Affairs Programming, New
Study Finds,'' Alliance for Better Campaigns Press Release, October 22,
2003. Available at: http://www.better
campaigns.org/press/release.php?ReleaseID=50.

Elections below the Presidential level receive meager
coverage. During several weeks leading up to the 2002 midterm
elections, most newscasts on local TV stations contained
virtually no election coverage at all.\10\
---------------------------------------------------------------------------
\10\ See ``Most Local TV Newscasts Are Ignoring the 2002 Mid-Term
Elections,'' Alliance for Better Campaigns Press Release, October 16,
2002. Available at: http://www.bettercampaigns.org/press/
release.php?ReleaseID=37.

While cutting campaign coverage, broadcasters are airing
more--and making more money from--paid political advertising
than ever before. In the 2004 elections, candidates, parties,
and independent groups spent $1.6 billion on TV ads in the
Nation's 100 largest media markets--more than double the $771
million spent in 2000.\11\
---------------------------------------------------------------------------
\11\ See ``Political Ad Spending on Television Sets New Record:
$1.6 Billion,'' Alliance for Better Campaigns Press Release, November
24, 2004. Available at: http://www.bettercampaigns.org/press/
release.php?ReleaseID=65.

We believe that like the current minimum standard for airing
children's educational programming, a license renewal processing
guideline that called on stations to air a minimum amount of
programming related to local civic issues and elections, under their
own editorial control, would not present Constitutional problems.
Alternatively, commercial broadcasters should pay an annual spectrum
user fee to finance a trust fund for the digital future of public
broadcasting and educational content more broadly.\12\
---------------------------------------------------------------------------
\12\ Former FCC General Counsel Henry Geller has proposed
monetizing broadcasters' public interest obligations in this manner.
See Henry Geller and Tim Watts, ``The Five Percent Solution: A Spectrum
Fee to Replace the `Public Interest Obligations' of Broadcasters,''
(Washington, D.C.: New America Foundation, May 2002).
---------------------------------------------------------------------------
Conclusion
Local TV broadcasting, perhaps the most profitable, legal business
in America today, has arguably received the largest government
subsidies in U.S. history. Yet, there is no end in sight to the digital
TV transition. Every year this delay imposes an opportunity cost of
tens of billions of dollars on taxpayers and consumers who are deprived
of both payment for commercial use of the public airwaves, and the
economic value that spectrum-starved wireless broadband services
providers could provide more efficiently at low frequencies.
We urge Congress to foreclose any further delay by setting a fixed
deadline for the return and clearance of TV Channels 52-69. The best
means to this end is a broad-based consumer converter box rebate that
ensures all households that still rely on analog over-the-air reception
are held harmless. The resulting certainty will ensure the public
receives full market value from the auction of a portion of the return
channels. However, we also strongly recommend that roughly one-third
(20 MHz) of the TV band spectrum reallocated for wireless services be
reserved for shared, unlicensed wireless broadband, which is
particularly important for extending affordable Internet access to
rural and other under-served areas.
Finally, we recommend that auction revenue that exceeds the CBO
``score'' be designated to capitalize a trust fund to finance the
digital future of public broadcasting and for e-learning services, such
as in the proposed Digital Opportunity Investment Trust legislation.
Thank you again for this opportunity to testify. I will be most
happy to respond to any questions, or to assist staff as the Committee
develops its own solution to this important problem.

The Chairman. Well, thank you very much.
Mr. Kennedy, I think that we've a attrited a little bit, so
we have lost part of your audience. But I think we should
proceed now, if we may.
Mr. Kennedy. My pleasure, Senator.
Let me explain what we have here. These look like high-tech
TV sets. These are analog television receivers. They are flat-
screen receivers, which makes them easy to carry over here to
show you. But these are equivalent to the television receiver
that we all have at home somewhere, often in that upstairs
bedroom.
I've got this receiver hooked to that $50 converter box
that I talked about. This receiver is not hooked to the
converter box. They're receiving an off-the-air analog
television signal through that rabbit-ear antenna over there.
So, you can see, by that, this is a very similar situation to
what we would have at home.
This is Channel 4 here in Washington, D.C. I hope you can
see it. It's right off of that antenna, over-the-air analog
broadcast. You can see, the picture has what we would call
interference, or snow, in it. It's not a very clear picture.
It's perhaps a watchable picture, but it's certainly not a very
good picture.
Now I'm going to bring up the same channel that's been
passed through this converter box. I hope you can all see the
difference.
Senator Burns. Is that the same station?
Mr. Kennedy. Same station, slightly delayed, because
there's a little bit of processing in the converter box. So,
you're--now, you wouldn't notice this at home--you wouldn't
have the two sets next to each other--but there's a slight
delay. You can certainly see the interference here, and the
interference is gone there.
Senator Burns. Now, I have cable on that channel in my
house----
Mr. Kennedy. You have cable.
Senator Burns.--in Arlington, and I get the same lines off
that cable as you're getting right there.
[Laughter.]
Mr. Kennedy. I think the problem is, Senator----
Senator Burns. I pay $47 for those lines.
[Laughter.]
Mr. Kennedy. You must not be using a Motorola set-top box.
[Laughter.]
Mr. Kennedy. We'll come out and take a look at that.
Senator DeMint. Is this a digital signal?
Mr. Kennedy. This is a digital signal, where it says
``converted over-the-air.'' Pardon me, the converter box is
taking the digital signal that's being broadcast by Channel 4
today. It is formatting that to display it on an analog
television.
Senator DeMint. Now, on the right, we have a digital
signal----
Mr. Kennedy. On the right, you have an analog signal.
That's today's over-the-air television. That's exactly what you
have.
Senator DeMint. So, you have simulcast of analog and
digital.
Mr. Kennedy. Yes. Yes. So, we get a cleaner picture. And
then if I can--let me go back here. A number of TV broadcasters
are also using their digital signal to multicast, to send more
than one signal out to their audience. Here you can see, this
is Channel 4, their second channel. So, not only with this
converter box do you get a cleaner TV signal, but you get
additional channels to watch. And, as I go through these,
Channel 7, their main broadcast, Channel 7, their second
signal--that's not possible on the analog set.
Senator DeMint. If it was a digital-only signal, would the
TV on the right be blank?
Mr. Kennedy. Yes, if the analog signal were turned off. In
fact, that's why--one thing we're here to talk about today, the
15 percent, roughly, of the homes with sets out there who would
not be able to receive a digital signal, absent some sort of a
converter like this.
And let me just show you one other thing. Channel 26 is
actually broadcasting four multicast channels. So, this is the
second Channel 26, second channel. You can see, here is Channel
26 for kids.
Senator DeMint. Could they do ten channels if they wanted
to?
Mr. Kennedy. I'm not that good of an engineer. I think
there are about--four or five is about the limit.
The Chairman. Is that digital-ready--is it total-digital
now? This is----
Mr. Kennedy. It's total-digital.
The Chairman.--digital receiver, digital signal.
Mr. Kennedy. Yes, the digital signal is being broadcast by
the television station, and it's being received by this digital
receiver, this converter box, and turned into an analog signal.
Senator DeMint. I think we just saw a digital cliff.
The Chairman. No, that's the reverse of a cliff, because
this has gone up.
Senator DeMint. But it's going down.
The Chairman. No, it's--it's a digital signal coming in----
Senator DeMint. There it went.
The Chairman.--on analog, and turned into digital.
Mr. Kennedy. Right. No, I'm sorry, sir. This is a digital
signal coming in, being converted to analog so we can see it on
an analog television.
The Chairman. Oh, I--yes, he's right, then. All right. I
was wrong.
Mr. Kennedy. That's it. As I said earlier, we--with a hard
date for DTV transition, we'd have that box on the market in
January of 2009, for $50.
The Chairman. Ooh, that's a wake-up call.
Well, we do thank you very much, Mr. Kennedy. That's
interesting to see. A colleague of mine, my age, says, at the
time when you get a digital signal on a digital-ready set, it's
like being in a new generation. It's really a wonderful
opportunity.
We are at the point where we'll ask members if they have
any questions.
Senator Inouye?

STATEMENT OF HON. DANIEL K. INOUYE,
U.S. SENATOR FROM HAWAII

Senator Inouye. I would like to ask Chief McEwen a
question, if I may. If Congress establishes a hard date, how
long will it take your organizations to build systems and
acquire the equipment necessary to put the 24 megahertz of
spectrum into use?
Mr. McEwen. Well, that's the heart of the issue for public
safety, to be very honest, and I appreciate the question.
Without a date certain, nobody will plan to use the
spectrum, because they can't get the funding that will be
committed either by local, state, or Federal sources. And, to
be very honest with you--I don't want to speak for Mr. Kennedy,
but we've been told by the manufacturers that they aren't even
going to begin to produce equipment that we could use until
there is a date certain, because, for instance, if you
establish a date certain of 2008, and they started to develop
equipment today for our use, that could be obsolete in two or 3
years, and they could develop much better equipment, you know,
at the time that they know that this is going to be purchased.
Nobody is going to purchase equipment until they can use it. So
it's kind of a difficult problem for us.
So, the issue here is that if you start--to give you an
example to try to answer your question--if you were to start to
develop a system, if we had a date certain of today, and we
started today, it takes about a year of planning, and
licensing, and developing your whole plan. It takes another
year of putting out a request for proposal for the equipment
that you're going to purchase, and a decision has to be made to
purchase equipment. And it takes another year for that
equipment to be purchased, or to be built, and to be actually
put into service. So, it takes about a minimum of 3 years from
the date we start that process. So, if you give us a date
certain, we can actually begin to develop that strategy at that
point in time when we know there is a date certain.
Does that answer the question?
Senator Inouye. Yes. In other words, if we delay the hard
date too long, we'll be having several disasters before you're
finished.
Mr. McEwen. I would say that's very likely. I mean, that's
a very sad situation that could happen. I mean, no matter what
you do today--we've been waiting since 1997, when the Congress
told the FCC to give us this spectrum, so there's been a whole
series of years we've been waiting. This is an important thing
for us, to get that date set.
Senator Inouye. Well, I'm certain that all of the members
of the Committee support your efforts. We'll have to work out
some way to accommodate you.
Mr. Kennedy?
Mr. Kennedy. Senator, thank you. I just wanted to
underscore one point. Because the problems that Mr. McEwen
talks about are very real problems for the public-safety
community and for manufacturers, one of the things that we have
done is, we have already implemented some of these frequencies
in some of the public-safety systems we sell today. In other
words, the frequencies we're talking about here are adjacent to
currently licensed and used frequencies. And we've taken the
opportunity to load them into some of our walkie-talkies, our
police radios. There are about 100,000 out there in service
now. They can't be turned on, they can't be used in these
frequencies, because of the issues with DTV. But we have tried
to get, sort of, a jumpstart on getting the right kind of
radios into the public-safety marketplace.
Senator Inouye. Mr. Kennedy, since you're on there, you
said that the converter boxes will be available. When will
these boxes be available?
Mr. Kennedy. I said January of 2009. We need, again, the
certainty of a hard date to really commit to the program.
Senator Inouye. That's providing the hard date is 2006?
Mr. Kennedy. I'm assuming 2008.
Senator Inouye. Should consumers have the ability to get
subsidized converter boxes?
Mr. Kennedy. You know, I think that's a question, really,
for the Committee. The box is not that complicated to build.
It--you know, it's--it could be built by other manufacturers
also. It isn't, in a sense, the--from our perspective, the
business of selling the box is not really the goal here. Our
goal is to try to help free up all of the radio spectrum.
Senator Inouye. I'd like to follow up on a question that
the Chairman asked. Are there any U.S. manufacturers of TV
sets?
Mr. Shapiro. I assume that's for me. Yes, there are. In
fact, there is significant manufacturing which occurs in the
United States, of projection and cathode-ray tubes in
Pennsylvania and in California, I believe, and in Arkansas, as
well. And I can follow up in writing.
There's a lot of talk, though. The broadcasters have said
foreign manufacturers--they have certainly done a good job of
trying to create that impression.
We have almost two million jobs in the United States
connected with the consumer-electronics industry. And, to the
extent that manufacturing has shifted abroad, it's shifted from
Mexico to China, it hasn't shifted from the U.S. out. And these
are, you know, very low-scale factory jobs.
The reality is, there's a tremendous amount that's done in
the United States with chip development, with designs, with
sophisticated displays of the entire range of the consumer
electronics industry. And certainly there's a tremendous amount
of manufacturing of TV sets that occurs abroad.
The reality is, the entire industry is one which is
multinational and is pulling along a good portion of the U.S.
economy, and that goes from TVs and displays to all sorts of
devices. The average American family now owns 25 consumer
electronics products. These are devices which are making a huge
difference in our productivity, in our ability to telework, and
everything else.
So, coloring this as an issue of overseas production is
very deceptive, because, again, it was from Mexico to China, to
a large extent. But manufacturing occurs all over the world,
and especially if you look at components and chips, a lot of
that occurs in the United States.
Senator Inouye. My time is up now.
The Chairman. Thank you very much.
Senator Burns?

STATEMENT OF HON. CONRAD BURNS,
U.S. SENATOR FROM MONTANA

Senator Burns. Thank you.
Just for the record, we've got all kinds of spectrum out
there. Why, this 700 megahertz, does it become very important?
What is it--anybody, anybody answer that. This is a technical
question, I know. Why does that work, and not the 600, or the
800, or whatever? Give me an idea.
Mr. McEwen. Public safety is in multiple bands. We go into
the 30 toP megahertz band, we're in the 150 megahertz band,
we're in the 450, we're in 700 to 800. And we've got some new
4.9 gigahertz. So, we're all over the place. And the main
reason is that spectrum is--as you know, is a valuable
commodity, and there isn't enough spectrum in any one place to
allocate it without displacing other people for public-safety's
needs.
The Congress and the FCC, in 1996, made the decision that,
because of the way this--this analog conversion to digital was
going to take place, that it was an opportunity for public
safety to get the additional spectrum that they needed. That's
why that particular band. There isn't any spectrum currently
available in those other bands that you're suggesting. So,
that's why it's important to us.
Senator Burns. In other words, you chose to displace the
broadcast industry----
Mr. McEwen. No.
Senator Burns. What?
Mr. McEwen. No, we didn't choose it. The FCC and the
Congress knew that this spectrum was going to be available when
the conversion from analog--I mean, if you understand, when you
go from an analog channel this wide, down to digital channels
this wide, that left spectrum. And the decision was made that
this was spectrum that would be good for the use of public
safety. And it's very good for mobile-type communications.
Senator Burns. But it does not contain any other quality,
other than that, then there's just a big chunk of it.
Mr. McEwen. And it's very good for mobile-type use, is the
purpose for us. It's very----
Senator Burns. We've somebody else who wants to talk. Yes?
Yes?
Mr. Calabrese. Senator, the--when you get below--it's very
important to get below one gigahertz, for broadband. I mean,
I'm sure there are reasons, for public safety, but I'm familiar
with wireless broadband. Vulcan Ventures and other firms have
done studies that show that the deployment cost for a wireless
broadband network drops by a factor of at least three when you
compare, for example, deploying broadband in the WiFi band,
which is up, say, at 2.4 gigahertz, compared to being below one
gigahertz.
So, for--one reason is, then, you can go out and build a
rural broadband network at one-third the cost if you get into
the TV band. And the other reason we look at the TV band is
because, you know, the--even after the DTV transition,
broadcasting will have 49 channels, 288 megahertz of that prime
spectrum, and yet there's only an average of seven full-power
stations operating in each of the Nation's 210 markets. So,
even though there might be 20 in New York or Los Angeles, when
you're in Alaska or some other states there may only be four,
or five, or six, and yet we're wasting all of that prime
spectrum that could really lower the cost of rural broadband
deployment.
Senator Burns. Yes?
Mr. Townsend. Senator, is this a trick question?
Senator Burns. Sort of.
Mr. Townsend. OK, I'll try it.
Senator Burns. Throw me a tricky answer.
[Laughter.]
Mr. Townsend. We've operated at many different
frequencies--at 1900, 800, 700--as you know, I think--that's
why I asked you that question--for every 700 megahertz of
spectrum that you go up--from 0 to 700, 700 to 1400, 1400 to
2100--the distance that that signal can travel gets cut in
half. So--I mean, just generally; it's not exactly right, but
that's generally it--so, a 700 megahertz signal can travel
about two and a half times as far as a 1900 PCS signal. That's
a big deal. It means that you can cover 1,000 square miles with
a single cell site, compared to four cell sites at 1900. So,
the cost of deploying a nationwide network, particularly in
rural areas, is dramatically cheaper at 700.
The second advantage is that the 700 megahertz signal, kind
of, goes straight. So, it goes right through walls, and
buildings, and everything else. Whereas, the 1900 signal has
that old sine curve you saw in math class. And when it hits a
wall, it bounces off. So, the 1900 signals can't get into
buildings as well.
Mr. Shapiro. And the reason that's important is for public
safety. For example, the firemen that were in the World Trade
Center on September 11th, they could have gotten the signal
with a broadcast signal. With other higher frequencies, it
doesn't go through the concrete. The broadcasters had the
spectrum about 50 years ago, when science was a lot less
sophisticated, and it's huge. This six megahertz is just huge
for each broadcaster. And what the transition's actually doing
is, they're keeping essentially the same amount of spectrum
they had, in terms of their ability to send out a signal, but
it's just being used more efficiently, and the holes in the
Swiss cheese are being transferred over, back to the public for
other purposes.
Senator Burns. OK. Now, I have a--now, should it be--
anybody who wants to answer this--in other words, you're asking
Congress to set policy, basically. So, you say it's
insignificant that we have only 11 percent of the people out
there who depend on over-the-air broadcast, who do that now.
And you said it was not necessary, for economic problem--
economic reasons. Is that correct, Gary?
Mr. Shapiro. Yes.
Senator Burns. OK. We are going to--we are going to, then,
set policy that tells America, from this point on--from 2008,
the end of 2008--that all Americans will have to pay for their
news, their sports, their entertainment----
Mr. Shapiro. No. That's not----
Senator Burns.--that used to come over----
Mr. Shapiro. Senator, with respect, that's not what we're
saying. The world has dramatically changed. Americans now have
the choice of six or seven different ways of getting
information into their home--broadcast, cable, cellular--the
broadcast one is free; there are other ones that are relatively
free, also. WiFi is almost free now. But the fact is, if only
one out of ten Americans are using over-the-air broadcasts to
get a signal, those Americans--you're looking at some types of
policies which would allow those Americans to have
alternatives, either through some types of rebate, or the
ability to get a converter. The fact is that one out of four
American families buys a new TV set every year anyhow. As we go
on five or 10 years from now, that will make a difference. The
costs will go down so much, it would be incorporated.
What I'm saying is, look at one future of the TV set which
is barely used today, and Congress is going to give three or 4
years' notice to American consumers that that will be turned
off. Just the way people buy computers today, they don't expect
them to be working in five or 10 years. This is a feature. The
fact is, most TV sets are used for cable, satellite, DVD,
games. The over-the-air broadcast component is barely used
today. And, yes, it's significant to the people that use it,
but if you consider the alternatives which would allow those
Americans that want to go out and get that converter box--
subsidized, low-cost, rebate, whatever it is--the ability to do
that, I predict that that will be a very small number of
Americans.
It happened in Berlin. Berlin went over to digital
television, and the government was absolutely shocked that, of
all the Berlin citizens who were eligible to go get this free
thing, only a few thousand out of the tens of thousands who
were eligible actually went and got it. They ended up with a
lot of converter boxes they couldn't get rid of because the
Germans basically wanted--didn't care about over-the-air.
Senator Burns. Anybody else want to comment on that?
Mr. Kimmelman. Senator Burns, if I could just say, quickly,
I'm pretty stunned at Mr. Shapiro's cavalier attitude about
this. I mean, I'm sure--they sell a lot of electronic
equipment. They make money doing it. I understand they want to
sell more. But, by our count, there are 80 million sets out
there that could go black that people are using today, not for
games.
Now, I'm not trying to scare anybody. A $50 converter box
would be a wonderful thing to come to the market, and we want
public safety to be taken care of, but we need to do this
responsibly. These are TV sets that people are actually using,
they say they're using. Now, if the consumer electronics
industry thinks there are fewer, I urge you to have them
indemnify and cover the cost of the $50 box if they're so sure.
I don't believe their numbers are right. But, more importantly,
these are sets that work today. Why should people have to pay
just to keep those sets working? If they're going to--if they
want to buy a digital TV, if they want to buy a set-top box, if
they want to buy anything, wonderful, we're all for it. But if
they just want to keep their television sets working to get
over-the-air signals, why should they have to pay?
Senator Burns. You want to respond to that, Mike?
Mr. Kennedy. Yes, Senator.
The Chairman. This will be the last response.
Senator Burns. OK.
Mr. Kennedy. OK. Senator, all I wanted to add is that this
converter box allows television to continue to work. It's sort
of a future-proof on your analog TV set. So, we are not here
asking the Congress to turn off television. Absolutely not.
We're asking the Congress to make available spectrum for public
safety and other, sort of, great growth wireless services in
the United States. And we're demonstrating a solution that
basically takes care of the individual viewers at--the few
remaining viewers that are still looking at over-the-air
broadcasts. So----
Senator Burns. OK.
Thank you.
The Chairman. Yes, sir.
Senator Ensign?

STATEMENT OF HON. JOHN ENSIGN,
U.S. SENATOR FROM NEVADA

Senator Ensign. Thank you, Mr. Chairman.
I want to just address a couple of things that--Mr.
Kimmelman, you talked about holding harmless the consumer. But,
you know, in all of the consumers--the fact is, in this new
world with this spectrum freed up, the spectrum is going to get
more, not less. There are going to be so many more services.
You talk about, you know, the people in Alaska and Montana
that, right now, cannot get broadband. OK? And that digital
divide is going to get wider without this spectrum being freed
up. The consumer is going to get more. Those televisions are
not going to go black. Those televisions just need to have
converters, and the converters are--the technology is very
simple technology. The $50 number--you know, I can't tell you
how many different manufactures I've heard from that that $50
number is a very conservative number. It could be even as low
as $35-$40. The fact that--how many of our households today
have computers? They pay a lot more than $35-$40, and they
expect those computers to last three, maybe four--and if--some
people will maybe go five or 6 years if they're real
antiquated, but, basically, they're thinking about turning
those things over that often. A $50, you know, converter box is
really not a lot. And, for those--and I believe, you know, we
can have some kind of a program--I'm not sure exactly what it
will look like now--for those low-income people that want to
convert over, or that need a little subsidy, or say they want a
subsidy, put it out there. And I think that--I agree, I think
the same thing will happen as happened in Germany. I think you
put it out there and very few people will take advantage of it.
But, for those who need the satisfaction of that, the
policymakers need that satisfaction out there, put it out
there. I don't have a problem with that. That's a compromise
that we can make.
But, you know, for people like us, here at this table, or
you, or the people in the audience here, we don't need a
subsidy for a little converter box for those televisions that
are analog. I have eight TVs in my house, in every little room,
and every one of those are analog. OK? Now, I plan on--you
know, soon, a couple of the main TVs--you know, going to the
consumer electronics show and buying some things. But----
[Laughter.]
Mr. Shapiro. We appreciate that.
Senator Ensign. But, you know, I mean, I--there's no way I
should be getting a subsidy, or people that can afford it. It's
not an expense that's of any significance. The benefits,
though, are huge.
I want to address the cost aspect--not the cost, but the
revenue aspect of the spectrum. Mr. Townsend, you've been
quoted before. The CBO, I think--Mr. Chairman, if I'm not
incorrect, CBO estimated $10 billion on the auction. Is that
about right? And that was interesting--about the date is--
during our listening session, as some of the people--you know,
the CBO was saying that the sooner you do it, the less money
you raise--during the listening session, some of the people
made the argument that the later you do it, the less money that
is raised because of compression technology. Mr. Townsend,
could you, one, give us--for the hard date that's been talked
about today, give us what your estimate is, versus the $10
million the CBO has estimated, but also talk about, whether
it's sooner or whether it's later, what you think would happen
to the revenue. I mean, I think we should listen to people that
have actually been out there bidding on this auction.
Mr. Townsend. Our estimate was $20- to $30 billion sometime
in the next 2 years. That was based on comparable transactions.
We went and looked at what other people are buying and selling
spectrum at 1900, which I don't think is as good as 700. That's
what they're paying today. In terms of, is it more valuable----
The Chairman. What was the date, now?
Mr. Townsend. I didn't give a specific date. It was, kind
of--this is what 1900 is selling for right now. I think if the
date--this is a tough question, because we would like to buy
that right now. And I think the companies we've talked to would
like to buy it right now. So, as the time goes on, hopefully
they'll be eager to buy it, as well in the future as they are
in the past. I don't think pushing it out too far is a good
idea.
Senator Ensign. So, in other words, you don't think that
it'll be more valuable into the future, and there's a chance it
could be less valuable.
Mr. Townsend. That's correct.
Senator Ensign. OK.
The idea that--I think, that needs to be emphasized today,
that all--virtually across the board, from what we've heard
from people, is a hard date. I mean, that--I don't know if
anybody else is watching this thing, or listening. That's
significant news today, that virtually everybody that's
testified here believes that the Nation needs to go to a hard
date, from first responders, to the manufacturers to the
broadcasters, cable. Virtually everybody has agreed that a hard
date--it's just some of the issues on how do we get to that
hard date, how much of a subsidy, protecting the consumers--
what are the other issues involved--the must-carry and all of
that, some of the details that we can work out, but the
significance, I think, of the hearing, and, I think, why it's
so significant that you've held these hearings, Mr. Chairman
and Senator Inouye, is that we have now a hard date to go
toward, and work out the details in the meantime. So, I think
it's very significant, what has happened here today.
Thank you, Mr. Chairman.
Mr. McEwen. Senator--could I just make a comment, Mr.
Chairman?
The Chairman. Yes, sir.
Mr. McEwen. Your sheriff, Bill Young, in Las Vegas, is in
a--as you know, that's a rapidly growing metropolitan area--he
is facing this rapidly growing population and has increasing
congestion in his radio channels there. His is one of the
places that is looking to use 700. It's a good example of what
we're faced with around the country. I just wanted to make that
point.
The Chairman. Very good.
Senator Rockefeller? No, wait. Senator DeMint's first.
Senator DeMint? Pardon me.

STATEMENT OF HON. JIM DeMINT,
U.S. SENATOR FROM SOUTH CAROLINA

Senator DeMint. Thank you, Mr. Chairman.
I've been trying to determine the winners and losers in
this transition, and it seems like the complainers are on the
consumer side, Mr. Kimmelman, the broadcasters. And, as an old
marketing guy, the first thing that comes to my mind as I
listen to all of this, the digital transition could put the
broadcasters back in business. What I just saw here this
morning--and you sitting at home with those rabbit ears, and
you're getting three or four lousy signals, like Senator Burns
gets from his cable, somehow.
[Laughter.]
Senator DeMint. But, with the same rabbit ears, the same
old analog TV, now, with broadcasters--with the ability to
broadcast four or five, and probably a lot more, stations, you
could sit at home with 20 or 30 stations on your old analog
with your rabbit ears with as good a signal as anyone else
could get. And people like me could say, ``Why in the world am
I going to pay for cable?'' Then we'd make the cable people
sharpen their pencils in the DIRECTV. This seems like one of
the greatest opportunities for consumers that we could possibly
have. Instead of me paying $50 a month, I could pay one time
for a $50 converter and get free television with 20 or 30
stations. It would put the national broadcasters back in
business, instead of spending millions on one channel that they
send to their franchisees, the franchisees would become much
more valuable. I just can't imagine that the folks who are very
much thinking they're on the losing end were the ones who will
actually be in the driver's seat with this transition.
So, I appreciate the demonstration today. And if anything's
wrong with my logic, Mr. Kimmelman or any of the rest of you,
please let me know. But I think what we've heard today, Mr.
Chairman, it's time to just do it and set a date certain, and
get this thing done. And I think the market will determine the
rest.
I yield back.
The Chairman. Very good. Thank you.
Now Senator Rockefeller?

STATEMENT OF HON. JOHN D. ROCKEFELLER IV,
U.S. SENATOR FROM WEST VIRGINIA

Senator Rockefeller. Thank you, Mr. Chairman.
Mr. Kennedy, Mr. McEwen, I would like to ask you this
question together with Mr. Kimmelman. After 9/11, the world
changed, and everybody says that happily. And I find a certain
kind of awkwardness in our discussion of the date certain by
which we have to produce this thing, which will allow first
responders, for example, to be able to get what they need in
order to haul people out of the tragedies, or a series of
tragedies, which is almost certainly coming, and could very
well come before the date.
Now, the question--my question is this, and it's not a
particularly friendly one, but it bothers me a lot. Another
form of national security in this country is our dependence
upon foreign oil. Americans are uniquely geared not to be able
to address that problem. Toyota Motor Companies, which is the
largest corporation in the world, I think, they decided that
they were going to address the problem of energy efficiency in
cars. And they've done it through the introduction of hybrid
engines, and they're going to go on from there.
Now, there wasn't any law in this country that said that
people were going to use hybrid engines, or that by a date
certain we had to be using hybrid engines, but they started out
cautiously, and they didn't introduce that many of them, and
now the demand is so high that it takes a year to get one of
these Toyota Prius, which are extraordinary vehicles.
Now, there's no--as far as I know, there's no date. They
usually come in through California, which is more receptive to
these things. And the rest of us learn.
My question is, Why is it that--a company like Motorola,
that the American industry, which has direct response to the
people you represent, Mr. McEwen, that they have to be given a
date certain in order to do something which they know darn well
is in the national interest? And the reason they have to be
given a date certain, I think, is because otherwise they say,
``Well, we're not sure people would buy our product.'' Well, if
this country is under siege--and I happen to think that it is,
and I happen to think that most thinking people think that it
is, and that there are going to be a variety of things
happening, we're going to really need--we're going to--your
folks, Mr. McEwen, are going to need this capacity.
So, philosophically, would you, Mr. Kennedy, address the
concept--and you, Mr. Kimmelman, address the concept--of
requiring--and I'm all for a date certain, but how do I know
that it can't be 2008? How do I know it can't be 2007? I mean,
American industry can respond to anything in the world. And do
you have to have a careful roadmap laid out for you, exactly
how many people would buy it, in what states, and what would be
the level of profit, and what would be the level of purchase?
I'm made very uncomfortable by this. We're talking strictly
national security here. And I think when national security is
talked about, the Congress does all kinds of extraordinary
things, and so does private industry. They rise to the
occasion. This somehow seems to separate itself because it gets
into spectrum, and it has a more, sort of, cerebral context to
it; and, therefore, we don't treat it in the same way. But, in
my judgment, it gets right at the heart of the matter of
protecting the American people.
Mr. Kennedy. Well, Senator, thank you.
I mentioned earlier that--I mean, we certainly, very much,
appreciate the concern over security. We are the largest
communications supplier to the first-responder community, I
believe. We've taken some risk ourselves. I mentioned earlier
that we have already taken our own risk to put some of these
frequencies in systems we're selling today. That's an effort to
lower the cost for our first-responder customers in the future.
We take the risk that we will never be able to activate those
frequencies unless we have a hard date, or we clear the band.
In terms of the converter box, we need about 12 or 18
months to gear up production of that box. We would be selling
into a diminishing market. You've heard Mr. Shapiro talk today
about--every year there are more digital televisions in the
market and fewer analog, and every year--there's certainly some
question about exactly what the number is, but every year there
are fewer people watching over-the-air broadcasts.
So, basically, we are not--when we talk about this
converter box, it's not an investment in a future business;
it's actually an investment in something that we believe would
help make the spectrum available for first responders and for
others.
So, it--I guess that I would have to say that we're--I
think we're doing what we can and should do here, by being
here, by showing you this box.
Senator Rockefeller. Mr. Kimmelman?
Mr. Kimmelman. Yes, Senator Rockefeller, I think for
national security the American people would pay higher taxes, I
think they would support every effort to enhance our public
safety. What you are hearing, though, is that the market hasn't
developed. Out of more than 20 million sets sold last year,
only a few million were digital sets. They're expensive, and
not as many people are buying them. People are still buying
analog sets, day-in and day-out, today. It's part of the
problem.
So, I think an orderly transition may be helpful here,
because spectrum is used in different ways. Your cell phone
can't work with Senator McCain's provider, probably, and vice
versa. I mean, we've got--I've got an open market that has
allowed for multiple uses and standards, and the question is,
How many sets do you want people to have to buy? The benefit
here is that no one should have to pay higher taxes, no one
should have to pay more, because you are--you heard, 10
billion--you heard, as much as $30 billion could come in from
auctioning this off in an orderly way, hopefully to promote
more competition and diversity in the marketplace. So, there is
a way to do this that enhances public safety, if done
appropriately.
Mr. Calabrese. Senator, if I could make one comment, which
is that--I wasn't planning to talk on this, but I do believe
it's possible to clear the channels for public safety ahead of
the rest. You know, I mentioned earlier that there's only--out
of the Nation's 210 local TV markets, there are only 15--on
average, 15 high-power TV channels operating on any one of
those channels. But on the public-safety channels--63, 64, 68,
69--there are far less than that, between four and ten stations
operating on those channels.
And so, the DTV transition does not necessarily need to be
simultaneous in every market nationwide. I would think you
could have a rolling transition, where you clear those--clear
the stations that are operating on those four channels in the
markets where they're located. In other words, do the DTV
transition in those markets first. It may mean a more expensive
converter box, but that may be a price to pay.
Senator Rockefeller. Thank you.
The Chairman. Thank you very much.
Mr. Townsend. Could I just give you a quick answer, from
the commercial side? It's different from what these guys are
saying.
That was the question I asked, How come we can't do this
faster? And the answer I get from commercial manufacturers of
wireless broadband equipment is, you give them a date, they can
have this stuff ready in 12 months. When I--if we were to get
the broadcasters in here and give them truth serum, I think
they would tell you they could do it in 18 months. So, if you
guys set a date, my guess is--and you wanted to crack the
whip--you could have this done in 18 months.
The Chairman. Senator McCain?

STATEMENT OF HON. JOHN McCAIN,
U.S. SENATOR FROM ARIZONA

Senator McCain. Thank you, Mr. Chairman.
And, Chief McEwen, earlier today Telemundo said they'd be
ready to hand over its broadcast spectrum tomorrow. What's the
earliest date public safety would be prepared to use that
spectrum?
Mr. McEwen. We would begin the planning immediately. If you
gave us a date certain of tomorrow, as I already have answered
earlier for Senator Inouye, the--it takes us about 3 years.
First of all, we need to get the funding. And so, we need that
date----
Senator McCain. Let's assume you get the funding and the
date. How long does it take you?
Mr. McEwen. If I have the funding and date today, it takes
about 2 years before you can actually implement, turn on the
system--if I had all the planning done and the funding done,
and the funding committed. So, it's not a quick thing. It
doesn't happen quickly.
Senator McCain. Mr. Kimmelman, you talked about the need
for Congress to compensate over-the-air viewers for the need to
buy additional equipment--in other words, a set-top box of some
kind. Why do you believe the government should compensate the
consumers and not broadcasters or other industries? Although I
think the broadcasters may have been amply compensated with
free spectrum, but----
[Laughter.]
Senator McCain. Go ahead.
Mr. Kimmelman. Senator McCain, are you suggesting we should
compensate the broadcasters?
[Laughter.]
Mr. Kimmelman. Well, I mean, these are dislocation costs.
And there is precedent in law, and you have established it
before, where there's dislocation as you rearrange uses of
spectrum, that you compensate. In this case, it is not the
broadcasters who are harmed. They are getting a very valuable
asset for much less, and possibly as much as six stations'
worth of capacity for every one they had in the past. That's an
awfully valuable----
Senator McCain. How much would it cost if we wanted to
provide set-top boxes for--first of all, for every household,
and then for every television set?
Mr. Kimmelman. By our estimates, based on our surveying,
you're talking $2-$3.5 billion out of the $10-$30 billion from
spectrum auctions, is what it would take to take care of
everybody. And let me add that it's not just compensation.
Senator Rockefeller raised the issue of public safety. If a
cable system goes out once you've gone digital, and you're
getting your broadcast signals digitally, and there are still
analog sets out there--Senator Vitter raised it before--how do
people know about it? How do they find out? It may be valuable
to keep one analog set in most households, with one of these
set-top boxes, so that you'll be able to find out about
disasters and what steps to take, whether they be from outside
forces or natural disasters.
So, there is a security--a national security reason, as
well, to think about making sure consumers can have access to
communications over-the-air.
Senator McCain. If you noticed--if somebody has told--if
you've got an over-the-air television set that's not connected
to your cable or satellite in your home, and we're going to
give you a set-top box, are you're going to get a run on over-
the-air television sets bought?
Mr. Kimmelman. I seriously doubt it, Senator McCain. I
think that--I mean, people are buying what pleases them. People
are buying digital boxes, expensive boxes, if they like them.
They're buying very big sets. Some people are buying small
ones. And some people will hold them. I recognize that people
buy sets all the time. And Senator Ensign raised it. We're for
people buying whatever they want. But a lot of people hold
their sets and use them for five, ten, 15, even 20 years. And
so, even if they're buying new ones, they're keeping the old
ones.
Senator McCain. Is part of your argument that we should buy
the set-top boxes because it's--there are a lot of low-income
households who can't afford to subscribe to cable or satellite?
Is that part of your rationale?
Mr. Kimmelman. Absolutely, Senator McCain. Of the 16
million who get over-the-air television only, the GAO estimates
about--at least 40 percent of them are lower-income. We heard
this morning that there is a large percentage of Hispanic
households who rely on over-the-air. A lot of people with
limited means still rely on over-the-air television.
Senator McCain. Mr. Townsend, in your testimony you
discussed Aloha's plan to bring wireless broadband to rural
areas, including Arizona. There has been some speculation that
Aloha may flip these licenses to wireless carriers once a firm
date is set. Is that--can you comment on such speculation?
Mr. Townsend. Well, nobody's called me and made us any
offers.
Senator McCain. I asked you if you would contemplate
selling. It's very valuable stuff you've got.
Mr. Townsend. I have to speak as the CEO of our company. I
think we believe this stuff is about the best spectrum you can
have for broadband that's available. We plan on deploying
wireless broadband over the next few years. If somebody came
and offered us eight gazillion dollars, I'd have to ask our
investors what they want to do.
Senator McCain. Mr. Kennedy, what's Motorola doing to
ensure that public-safety equipment is interoperable--not only
interoperable with other Motorola equipment, but also with
competitors' equipment?
Mr. Kennedy. Well, Senator, we're building equipment to a
standard called P-25. That is a federally-recognized standard.
It's a publicly available standard. A number of other
manufacturers build to that standard, also. So, we do have
interoperability out there in the marketplace.
Senator McCain. Mr. Kimmelman, how many times have we had a
date certain?
Mr. Kimmelman. Quite a few. And one of my greatest fears,
Senator McCain, is that even if you move forward, in budget
reconciliation, with a date certain, 2 years from now we could
be here again with a date certain, and things not having
progressed far enough and you wondering whether you need to
extend that date. And that would not be good for the American
people.
Senator McCain. If history holds true, we'll be here 2
years later.
I thank you, Mr. Chairman. I don't mean to be so cynical in
my----
The Chairman. Well, thank you very much. It's been a very
informative hearing, so far.
Mr. Shapiro, I want to get back to this TV-set question.
Now, I was told, categorically, there are no television sets
manufactured ready for sale in the United States, totally. Now,
you say that there's a large percentage. Aren't you telling us
that the components--that consumer electronics are added to
some of these boxes? Are you really producing, from ground up,
more than half of the television sets in this country?
Mr. Shapiro. I didn't mean to imply that, Senator. I don't
believe we are. As I indicated, the manufacturing has shifted
rapidly from Mexico to China. I think the Mexicans are very
upset about that. But the fact is that some of the chips in
some TV sets are made in the U.S. And I'd be happy to follow
specifically, after this hearing, with details.
The Chairman. It's very important, because I think we're
seeing something develop here this afternoon that I didn't
anticipate, and I think that Senator DeMint has a point about
the set-top boxes. Is anyone manufacturing set-top boxes in
this country today?
Mr. Shapiro. Well, there are two major producers of set-top
boxes: Motorola and Scientific Atlanta, two U.S. companies.
And, indeed, Motorola is one of the patent-holders, I believe,
of the specific ATSC standard, that it would be part of, not
only every set-top box, but everything having to do with HDTV
getting that over-the-air signal.
The Chairman. What's the production on your line, then, Mr.
Kennedy?
Mr. Kennedy. Well, that's right. I don't have that figure
available. I would just comment. Manufacturing--unfortunately,
there's no easy, simple answer here. As Mr. Shapiro said
earlier, it's a complicated answer. I mean, the design and
development is often done in the United States.
The Chairman. You built this box, didn't you?
Mr. Kennedy. Yes, we did. Yes. Yes.
The Chairman. What does it cost?
Mr. Kennedy. We can sell it for $50. It costs something
less than that. Again, I don't have that at my fingertips.
The Chairman. You know, I've got a place up in Alaska.
We're there about 12 nights a year. And I'm paying twice the
cost of the set-top box now just to keep that thing on when I'm
not there. I'd love to have a couple of set-top boxes.
I think Senator DeMint's got a point--we may have missed
that point, and it's a very good one--that many people may like
to convert back to over-the-air if they had the set-top boxes.
I wish you could tell us what the production capability is.
Suppose we picked Mr. McEwen's date, 2 years, and said, you
know, it's a firm, absolute date, it's going to take two-thirds
to change it, or something like that. Now, are there going to
be boxes available?
Mr. Kennedy. Sure.
The Chairman. When are they going to be available?
Mr. Kennedy. Sure. We need 12 to 18 months to gear up a
production run sufficient to meet the demand that we see out
there now. Now, if some of the Senators are right, and people
start to shift back to over-the-air television, that would
create more demand for the product. But when we look at the
number of sets that are out there right now--the number I have
is actually 20 million sets--when we look at those sets, we'd
need 12 to 18 months to gear up in time to meet that.
The Chairman. Well, we're going to give a transcript of
this hearing to CBO and ask them to review their past findings,
in terms of the amount that's going to come in from spectrum.
Mr. Townsend, you may get that call, after all.
But I do think, if you're right, Mr. Townsend, and Senator
DeMint has a point, we ought to consider listening to Senator
McCain even more and bringing the date closer, rather than
taking it out. We're taking it out a little bit, primarily
because of revenue. We had to have the revenue. We're mandated
to bring in $4.8 billion, in this bill. So, we have to be sure
we get at least that much. Now, I think some of you ought to
give us some idea about how to help on that.
I do worry a little bit, though, about--again, about the
problem of those people who are out there who cannot afford the
boxes. And that's added onto that $4.8 billion. It has to be
+$4.8 billion in order to--how much those boxes will cost, as I
understand it. So, I do believe we have the basis for change in
this bill, and----
You had a question that you wanted to ask, Senator Burns,
is that right?
Senator Burns. I just had one question. Can we do the same
thing--sorry, I didn't have my thing--dealing with translators?
Mr. Kennedy. Yes, translators would just be broadcasting an
over-the-air analog signal, so I think the same box would work
with translators.
Senator Burns. OK.
The Chairman. Now, let me go back to one thing that
bothered me this morning. And I think he's doing a fine job for
his association. Mr. McSlarrow, Kyle, said they preferred to
downgrade the signal when it came in so that the people who
were using analog sets on their system could get the over-the-
air broadcasting on the existing sets. Now, is there anyone
manufacturing a box to go the other direction? Is that
possible? Could I have an analog set and buy a box that would
convert it up to the digital signal?
Mr. Shapiro. You really need the digital TV set, to
appreciate that. An analog set would only be as good as an
analog set can be. And, as was demonstrated, almost anything
digital is better, but you always have--a system is only as
strong as its weakest component, and today the weakest
component would be the analog picture.
The Chairman. But I can't buy a box to put on my set to
pick up--they're going to be broadcasting over-the-air digital,
now. I can't use that to go up, though, to that set. I can only
still convert it back to analog for me for my set. Is that
right?
Mr. Shapiro. Yes. Right.
The Chairman. It's not technically possible to go the other
way?
Mr. Kennedy. Senator, what this box does is, it takes the
over-the-air digital signal and converts it to an analog signal
so it can be displayed on a conventional analog television set.
The Chairman. Right.
Mr. Kennedy. I'm not aware of how you would go--in a sense,
do that in the other direction.
Senator Burns. You've already got a digital set, so you
don't have to convert it the other way, right?
The Chairman. No, I've got an analog set, but I want the
digital signal, and not just----
Senator Burns. You're going to get it.
The Chairman. I'm only going to get the converted signal on
analog, as I understand it. Correct me if I'm wrong, Mr.
Shapiro. Am I wrong?
Mr. Shapiro. Part of it, you could think of it--like, you
can never get a--if you think back to black-and-white sets, you
can never get color on a black-and-white set, because the
system doesn't allow it. You had to buy the color TV set to get
the color.
The Chairman. Well, that gets me back to the sets, again.
Part of this equation has to be that we stop sets coming in
that are going to require people to convert. What is wrong with
the suggestion that was made that we require anyone producing a
set after, say--what?--November 15th in this country--or
selling them--has to have a chip in it that converts it? What's
wrong with that?
Mr. Shapiro. I think what's wrong with that is, you take a
$70 13-inch set, and you would add another $150 or so of cost
to it, and consumers would go in and say, ``Why--what happened
to the price of the TV sets?''
The Chairman. The chips only--the chips in this thing don't
cost that much money.
Mr. Shapiro. In three or 4 years, they may not; but today
to add that integrated feature to a TV set, it costs a minimum
of $100 to $200, if not more. It's a very sophisticated--almost
first- or second-generation process now.
The Chairman. Well, how do we get away from the point
that----
Senator Burns. Stick the box in.
Mr. Shapiro. But the box costs that amount of money, and
someone has to pay----
The Chairman. We're going to pass a law that says that this
is the absolute drop-dead date. But, meanwhile, the country
gets flooded with these things that won't--that are going to
require set-top boxes to enjoy the signal.
Mr. Shapiro. Yes, but nine out of ten of those are not even
being used for analog--for over-the-air signal.
The Chairman. You said one of our four people buying a new
TV set----
Mr. Shapiro. One out of four families every year, if not
more.
The Chairman. I've got to tell you, they must be producing
kids, then, because they've still got their sets out there,
don't they?
Mr. Shapiro. Well, my point----
The Chairman. I mean, these sets are just another added-on
set to the analog area, is what I'm telling you; they're not
coming in digital.
Mr. Shapiro. Well, now we're selling more digital sets than
we are analog, and that trend is going to increase. If Congress
sets a hard deadline, that'll increase even quicker and more.
And once Congress is--once we're able to say, ``The law is that
these sets will no longer get a signal after 2008,'' the
consumer's going to start thinking about it. Today, forcing
consumers to think about it, when they see--you know, they see
two sets side by side, one is great, with a big picture, but
it's $700 more than the old analog one--but they may want to
use that analog one for a DVD, for video games. That's what
these sets are really being used for. Broadcasting now is a
very minor use of a television set.
The Chairman. I've told this to my colleagues before, I
don't like to confess my stupidity, but I was convinced, a year
ago, that the set I bought was digital. It's analog.
Mr. Shapiro. Well, I would like to----
[Laughter.]
The Chairman. Right on the face, it says ``digital,'' but
it's not--it's digital-ready, they told me.
Mr. Shapiro. Well, once you experience HDTV, I think you'll
remember it, because it has such a great big wide picture.
The Chairman. I understand that, but I don't want that
experience for other people, buying a set who think it's
digital and it's not.
Senator Burns. No, but, listen, I'll tell you what, there
is a difference, though, Senator, between a digital TV set and
a high-definition television set. Remember that.
The Chairman. What would it take to have people agree they
put that on the set? I believe, if we set a date--let's take
the original date, 2006, OK? Suppose we said--the place--the
country would still be flooded with those sets that won't pick
up the signal.
Mr. Shapiro. They would be--that would allow manufacturers
to put labels saying, ``As of 2006, that you will not get a
signal on this, and, essentially, you're buying a monitor,
you're buying something usable for video games, or for cable,
or satellite.'' That would allow that.
But we are supporting a hard deadline of almost any date,
as long as there's a hard deadline. We want to see that. That
allows us to tell consumers that Congress has said this will
happen.
The Chairman. Senator Inouye has a question.
Senator Inouye. I think we can reach certain conclusions.
First, every member of the panel and the Committee has used the
words ``deadline,'' ``hard date,'' ``drop-dead''----
[Laughter.]
Senator Inouye.--or what have you. Second, I think we can
conclude that whatever is involved here is complex and
complicated.
And I'm just wondering, do most of the people of the United
States realize what's happening in this room? Do they know that
we're discussing conversion? Are they prepared for it? If we
suddenly thrust upon them a deadline, what's going to happen?
Mr. Townsend. Senator Inouye----
Senator Inouye. We're a bunch of politicians here.
Mr. Townsend.--you raise an extremely valid point. I don't
believe the American people have any idea what is being
discussed, and the significance of it, and what it'll mean for
them. And so, I believe Mr. Lawson, this morning, indicated
that this needs a kind of Y2K preparedness. I wouldn't want to
overstate it, but there are a lot of pieces that have to come
together for people to be able to feel comfortable with
changing how they receive signals on their television set, and
knowing how much it's going to cost them.
Senator Inouye. If what you say is correct, should we
involve ourselves in some educational process?
Mr. Kimmelman. Absolutely, Senator Inouye. I think if the
Committee moves forward with legislation, if you set a date, if
you go forward, it's incumbent upon all of us to come together
with an informational program. And it's really all the
industry. I know it's not their motivation, but, in reality,
they'll make a lot of money selling a lot of equipment here,
and someone's going to pay for it. Whether it's consumers or
someone else, I don't know. And so, it's really incumbent upon
all of us to work together to make sure people are well
informed, and they know that what they buy will work and how
it'll work.
Mr. Shapiro. Senator Inouye, we would welcome your
involvement. We've spent several years, and several million
dollars educating the public about this, and, indeed, nine out
of ten American adults are now aware of the terms ``DTV'' and
``HDTV,'' and over half intend that their next TV-set purchased
will be digital television.
But, while we've been out there promoting over-the-air
television and broadcasting, and having websites for how to buy
an antenna, and doing all these things, the broadcasters have
been almost totally silent on this; and, instead, they've
focused on regulating cable, and regulating satellite and
regulating us. And we've been asking the broadcasters to step
up and promote free over-the-air broadcasting, and they have
not. And I think this would be an excellent opportunity--I
hope, as a part of any legislation, there is a mandate that
they do that. If they're going to get this great public
spectrum, they should be out there promoting the fact that
there's free over-the-air broadcasting, and that there's HDTV,
and they have not done that, to this point.
The Chairman. Mr. McEwen?
Mr. McEwen. Yes, I think--you know, I think the time has
come. And, you know, I would encourage you to keep on the
thinking that you're going down this road, and that is that--
you know, what we were trying to say, and we've been saying for
years, is that, in 1997, when you mandated that we were going
to get this spectrum, if you had made the decision then that in
5 years there wouldn't be any more analog sets built, that
would have stopped the problem. We wouldn't be having this
problem. And the problem is, today you're re-examining that
same issue.
If you don't make that decision sooner or later, it's going
to just continue to be a problem. I mean, the education is a
very important issue, I agree with that, but you can't start
educating until you can tell people what to expect. And they
don't know what to expect without you making that date certain.
The Chairman. I think it should have a double-whammy, and
that is, we won't allow a set to be sold after a certain date
that's not digital, but we won't provide a set-top box for any
TV that's bought after a date closer to us. I just don't think
we should do that.
Let me----
Mr. Shapiro. Mr. Chairman, the FCC has done that. There are
dates that say you cannot sell an analog set, alone. And we are
respecting those dates.
The Chairman. They did that, but I don't think it's very
enforceable----
Mr. Shapiro. Well, for larger TV sets now--you cannot buy a
larger analog set.
The Chairman. That's a large one.
Mr. Shapiro. And it's going down. Next year, it will be
almost everything.
The Chairman. Well, we want to bring it really closer to
us.
Let me take a last comment and privilege.
You mentioned the German experience. Just keep in mind that
my state alone is bigger than Italy, Germany, France, and
Spain. We've got a different country here. You can learn much
from what goes on on the continent. I really think we ought to
think very seriously about what happens to rural America, in
terms of this legislation. And we, all of us, represent
portions of rural America. So, I think we will reflect it in
the Committee.
Anyone else have any questions?
Yes, Mr. Kennedy?
Mr. Kennedy. Senator, I just want to add to Senator
Inouye's discussion about education. I think that's very
important. I think that, to date, the debate has been
mischaracterized. It has been mischaracterized largely, I have
to say, by the broadcasters as ``turning off television.'' I
think what we've tried to show today is that it's not about
turning off television; it's about releasing spectrum for
commercial and first-responder purposes. TV viewers, over-the-
air viewers, with the right converter box, are going to get
more choice, they're going to get better pictures. So, I think
to underscore the educational need here to, kind of, make sure
everybody understands what the real debate is about.
Thank you.
The Chairman. I hope you will be willing to answer
questions of some of the people who have got very technical
questions.
Mr. Townsend?
Mr. Townsend. Senator, you know, your point about the rural
areas, I think, has been a little misconstrued in some circles.
I think the rural areas are going to be the big benefactors
here. And the reason is, even though everybody thinks they're
the people who receive over-the-air television, that's not
true. The rural areas generally have a much lower number of
over-the-air television sets than the metropolitan areas do,
because of the satellite receivers. For example, in Montana,
which I think you would definitely classify as rural, there
are--under 10 percent of the over-the-air sets are receiving TV
over-the-air.
I think the big benefit's going to be--taking Montana or
Alaska, or any of these states, really--is that if you do the
DTV transition, you're going to have very few rural people
affected by the over-the-air sets, and tons of them able to get
rural broadband. And so, they're going to be--they're not going
to have much downside from watching TV, but they're going to
have an enormous upside by getting in rural broadband.
The Chairman. I hope you're right. Those rich ranchers up
there in Montana, they can afford it. I'm not sure the reindeer
herders can.
[Laughter.]
The Chairman. Thank you all very much.
[Whereupon, at 4:10 p.m., the hearing was adjourned.]

A P P E N D I X

Prepared Statement of Jerry K. Rose, President,
Religious Voice in Broadcasting

Multicast must-carry in digital television (DTV) is the single most
important legislative issue for full-power religious broadcasters in
our country. As the Committee considers introducing a DTV bill this
session, we would like to encourage you to include a mandatory
multicast must-carry provision to ensure non-major network affiliated,
small, independent, religious and minority broadcasters maintain a
proportionate voice in the digital television landscape.
In this regard, the following testimony will provide insight on
four important issues raised during the multicast must-carry debate;
offer detailed information regarding the financial hardships being
faced by RVB stations working to comply with the government mandated
build-out to DTV; and supply information on the types of programming
RVB stations air and produce and their programming plans for
multicasting in DTV.
First, although cable operators have invested millions to build
their systems out to digital, broadcasters have also invested millions,
sometimes up to 75 percent of their operating budget, to meet the
minimum DTV requirements mandated by the Federal Government. However,
cable operators made their decision based on a business model that will
reap significant benefits; while small, independent and religious full-
power stations were mandated to make this burdensome investment, even
in circumstances where the business model was not a profitable venture
for their stations. To add to the dilemma, many religious broadcasters
will experience a dilution of their voice when they become one channel
out of 800-1000 on a digital cable system instead of one of 100
channels on an analog system. Multicast must-carry offers these
broadcasters an opportunity to maintain a proportionate voice in the
digital television environment.
Second, broadcasters are not asking cable operators to carry any
additional spectrum, not a single MHz more, than is currently being
carried on their analog systems. Moreover, cable operators can now
compress each broadcaster's 6 MHz of spectrum into 3 MHz on their
digital cable systems, even with multicast must-carry, thereby reducing
by 50 percent their carriage requirements, and are not required to
carry broadcast channels beyond one-third of their capacity. In their
latest DTV position paper dated May 26, 2005, the Christian
Broadcasting Association quoted John Alchin, CFO of Comcast, as
stating: ``We can turn 70-80 analog channels into 1000-1600 digital
channels with 15-20 compression with virtually no investment''.\1\
Therefore, cable operators will not face debilitating capacity issues
if required to carry broadcaster's multicast signals. This is
especially significant considering that most cable operators have among
the highest profit margins--40 percent and more--of all
telecommunications industries in the country.
---------------------------------------------------------------------------
\1\ Cable World, May 22nd issue (p.32).
---------------------------------------------------------------------------
Third, while RVB takes no position regarding the recent
consolidation of multi-media conglomerates, media concentration has
contributed to an increase in horizontal and vertical integration.
Greater integration exists today than before the 1992 Cable Act, which
makes multicast must-carry increasingly important to preserve the
government's interest in free over-the-air local broadcast television,
information from a multiplicity of sources and fair competition in the
television programming market; issues cited by the Supreme Court as
justification for must-carry in Turner Broadcasting System, Inc. v.
FCC. We strongly believe there should be a place for broadcasters who
are not affiliated with major media conglomerates in the digital
television landscape.
This is especially important given that RVB stations provide the
type of local and community focused programming that Congress intended
to preserve. For example, WLMB-TV 40 in Toledo, Ohio, airs a weekly
program entitled, Find a Local Church. The program features various
places of worship in the local Toledo region so that those who are new
to the area can familiarize themselves with the region's local
churches. KSCE-TV 38 in El Paso, Texas, offers several hours of
Spanish-language programming daily to serve their large Hispanic
community with local public interest and education programs. They also
have 3 hours of Arabic-language programming available on a weekly
basis, including a women's interest program. KTLN-TV 68 in San
Francisco, California, focuses on Korean, Chinese, and Spanish-language
programming to serve the diverse demographic of that area. KTLN is also
part of the Total Living Network in Aurora, Illinois, which produces
approximately 700 hours of local programming yearly, including
Newsmakers, a program covering current events of importance to the
local Chicago communities. (More examples of programming aired and
produced by RVB stations and their programming plans for multicasting
in digital television can be found in the Appendix.)
Cable operators argue that market forces should determine which
broadcasters receive cable carriage of their multicast signals. In a
perfect world, the most ``compelling'' programming would receive
carriage and a government mandate would be unnecessary. However, recent
events indicate that this is not always the case. For example, during
the ``two-dish'' satellite debate in Congress last session, it was
revealed that satellite television providers were systematically
placing some highly rated stations, including Spanish-language and
religious broadcasters, on a second dish which reached a substantially
diminished viewing audience. Satellite providers offered no clear or
logical explanation for this systematic practice and later moved these
stations to the first dish when questioned about this practice by
Members of Congress.
Furthermore, operators found that a market-based approach did not
work for cable channels under the proposed a la carte structure and
informed the Hill that many cable programmers would not survive without
bundling that assured cable carriage for certain channels. Cable argued
that their business plan could not be sustained under an a la carte
structure that would allow viewers to pick and choose programmers and
that the market could not accurately determine what programming was
considered compelling by viewers across America. Yet, in the case of
multicast must-carry, cable operators are urging Congress to let the
market determine which broadcasters should receive carriage of their
multicast signals, primarily because they own competing programming.
Arguably, religious, small, independent, Spanish-language and non-major
networks and broadcasters are at a bigger disadvantage than cable
channels in seeking carriage of their multicast signals. Cable's
positions on these two issues are inconsistent and would result in the
disparate treatment of broadcasters and would be detrimental to small,
independent and religious full-power broadcasters.
The original intent of must-carry in the 1992 Cable Act was to
ensure that small, independent and non-major media affiliated
broadcasters would continue to provide valuable diversity of
programming to our nation. As we transition to digital television,
multicast must-carry will help small, independent, minority and
religious broadcasters maintain their voices and allow them to continue
serving niche markets with diverse local and community-focused
programming. We would encourage the Committee to consider these issues
as the DTV bill develops this session and ask that it include multicast
must-carry.

Financial Hardship Information of RVB Stations Working To Comply With
the Government Mandated DTV Build-Out
RVB stations are experiencing significant financial hardships as a
result of the government mandated DTV build-out. The government
mandated DTV build-out disproportionately affects small and independent
broadcasters and threatens our viability.
RVB stations did not seek Federal support for digital television,
nor did we commit to airing high definition programming in exchange for
digital spectrum. Major networks like ABC, NBC, FOX and CBS can more
easily finance the transition and leverage their assets to negotiate
strong retransmission consent agreements and cable carriage for their
secondary networks, making DTV a profitable undertaking for their
companies. Small, independent and non-major network affiliated
broadcasters lack the power to negotiate for cable distribution of our
multiple digital broadcast signals and need multicast must-carry to
retain a proportionate voice in digital television. In the absence of
multicast must-carry, major networks and vertically integrated cable
channels are the beneficiaries of a Federal DTV mandate that places
smaller broadcasters at a federally imposed competitive disadvantage.
With the foresight that forced conversion would require debilitating
financial investments, dilution of our voices and reduced services for
our viewers, RVB would have opposed Federal regulations for an unfunded
digital television mandate.
Promoting diversity of viewpoints and choices in the television
medium is an important government interest. A regulatory environment
that gives small and local broadcasters the opportunity to maintain
existing local operations, while simultaneously fostering growth and a
proportionate voice in digital television, preserves a basic tenant of
American communication policy--promoting widespread dissemination of
information from a multiplicity of sources. The impeditive costs
associated with the digital television transition, for non-major
network affiliated broadcasters without the assurance of multicast
must-carry, will continue to disproportionately affect our ability to
function, considering many of us are only marginally successful under
an analog business model.
The challenges of the digital transition have caused some
broadcasters to sell their stations, and others will falter because of
financial difficulties associated with the uncertainty of digital must-
carry requirements. Multicast must-carry is the single most important
issue facing RVB stations as we plan for future broadcast operations in
digital television.
The following is a partial list of RVB members experiencing
financial hardships during the digital transition:

Kevin Bowers WTLW--Lima, OH
Garth Coonce Tri-State Christian Television--
Marion, IL
Bob D'Andrea Christian Television Network, FL
Steve Easom KSBI--Oklahoma City, OK
Blackie Gonzalez KCHF--Santa Fe, NM
Rusty Yost WGGN--Sandusky, OH Christian Faith
Broadcast, Inc.
Rich Hawkins WLLA--Kalamazoo, MI Christian Faith
Broadcast, Inc.
Dan Huber WBPH, Allentown, PA
Ken Mikesell WTGL & WLCB--Orlando, FL (WTGL DTV 53
& WLCB DTV 46)
Charles Reed KMCT--Monroe, LA
Grace Rendall KSCE--El Paso, TX (KSCE DTV 39)
Jerry Rose KTLN--Novato, CA
Richard Schilg WSFJ--Newark, OH
Jamey Schmitz WLMB--Toledo, OH
Mike Smith WLFG--Grundy, VA & WAGV--Harlan, VA
Peter Sumrall LeSea Broadcasting--Southbend, IN
James Thompson WGGS--Greenville, SC; WATC-Atlanta, GA

Digital Build-Out Demands Significant Financial Investments With
Limited
Opportunities for Independent Broadcasters To Mitigate Costs
The Government mandated digital build-out imposes precarious
financial burdens on non-major network affiliated broadcasters forced
to finance higher electricity bills, maintenance fees, engineering and
attorney costs, insurance premiums, phone bills, digital equipment and
additional supplies and services necessary to meet DTV operating
deadlines. Depending on the market location, RVB broadcasters have
currently expended anywhere from $50,000 to $4.5 million to convert
their stations, and are expected to spend approximately $156,000 to
$5.5 million more.
Independent stations in the same market as network-affiliated
broadcasters may outlay similar, but disproportionate, costs during the
digital conversion. Expenditures by RVB stations typically cover only
the necessities of conversion but constitute a large portion of total
operating revenues and a significant drain on resources. Following the
digital conversion, independent stations will have spent resources
equivalent to major network stations but will continue to be
systematically refused MSO carriage of our multiple signals. We will
not be able to use advanced digital technology to defray or recoup our
investments without must-carry. However, major network affiliated
broadcasters are currently striking deals for carriage of all their
signals including secondary network channels by using their leverage as
large multi-tiered media conglomerates. Many RVB stations will not be
able to meet financial obligations resulting from digital television
investments without assurance that our multicast signals will be
distributed through cable.
Table 1 reflects the to-date expenditures made by some RVB stations
in preparation for the digital transition. Also listed are estimated
future costs necessary to complete the conversion and operating costs
for the year 2003.

Table 1
(All figures are approximate)
------------------------------------------------------------------------
Future Costs
Call Market To-Date Cost for 2003 Operating
Sign of Build Out Completion Expenditures
------------------------------------------------------------------------
KTLN San Francisco- $1 million $4 million $1,802,717
Oakland-San
Jose
WGGS Greenville, $400,000 $2 million $1,317,000
SC
WATC Atlanta, GA (WGGS)
WTGL Orlando, FL Nearly $3 $2.5 million $1,871,000
million
WLCB
KSCE El Paso, TX $200,000 $1.6 million $360,541
WLMB Toledo, OH $412,000 $156,000 $1.2 million
WLFG Grundy, VA $4.5 million $350,000 $480,000
WAGV Harlan, KY
------------------------------------------------------------------------

The figures in Table 1 vary from market-to-market and the extent of
actual build-out, but share the important commonality of an undue
burden. The best use of the digital spectrum for RVB stations will
likely be a combination of high-definition and standard definition
programming with multicasting. Each community will have a custom
planned digital television model based on its local needs. A mixture of
spectrum usage will allow stations to develop new and expanded
community service programs, recoup expenses imposed by the government's
unfunded digital television mandate, and ensure that local communities
continue receiving important, demographically tailored and
inspirational programming from a multiplicity of sources.
All RVB member stations have reduced operating costs to fund the
digital transition by limiting or eliminating valuable programming.
Such decisions are among the most difficult to make. Our stations are
struggling with the burden of developing digital programming plans in
an uncertain regulatory environment, while simultaneously laboring to
finance the costs of digital build-out. Multicast must-carry is the
lynchpin to our viability.

Multicast Must-Carry Is Necessary To Create Parity Between Analog and
Digital MSO Carriage Requirements
Must-carry legislation was enacted to protect small, independent
and non-major network affiliated local broadcast voices that were being
denied carriage by cable operators. The Commission's ``primary video''
ruling adversely affects the balance created in the 1992 Cable Act and
unduly burdens smaller broadcasters struggling with the transition.
Recent reports indicate that major broadcast networks have either
signed or are negotiating multicast carriage agreements for their
digital signals. Major networks have historically used their leverage
to negotiate successful retransmission consent agreements and multicast
carriage deals are expected. Major network affiliated broadcasters,
including their commonly owned secondary networks, have a distinct
advantage in developing digital television business and programming
plans because they can capitalize on advanced technology with the
understanding that cable operators will carry all their new programming
streams.
For instance, Viacom, which owns CBS, possesses the leverage to
negotiate carriage of its broadcast and cable channels, including MTV,
through its commonly owned cable networks that are affiliated with
cable distributors. We are not affiliated with profitable and dominant
major network broadcasters that can negotiate multicast carriage of
secondary networks, like NBC and Telemundo or CBS and UPN; while
leveraging their main broadcast channel feed. As independent stations,
we would hope that our programming, public services and audience
loyalty would prompt cable to carry our multicast signals. However,
this has not been the case and in instances where local cable systems
have entertained our requests for dialog on digital carriage, we have
been informed that their corporate offices, located in distant cities,
have policies against carriage of independent station's multicast
channels.
Regardless of our extensive record of public service and community
support, independent full-power stations will continue to be
systematically rebuffed when seeking carriage of multiple signals in
the absence of a FCC mandate. However, trends in digital carriage
requirements show that multicasting is an important component to the
future of digital television. In order to compete in digital television
with major networks, their affiliates and other cable programmers, we
must be able to maintain parity in the television medium.

Evidence of RVB Stations Experiencing Financial Difficulty Is Pandemic
The following are examples of RVB member experiences with the
digital television transition:
Mr. Jamey Schmitz of WLMB-TV 40 in Toledo, Ohio, runs a nonprofit,
commercial television station primarily funded by viewer contributions
with additional financial support from advertising revenues. To-date,
they have incurred DTV costs of $412,000, $12,000 of which was expended
on electricity alone. WLMB estimates that $156,000 is necessary to
complete the transition. Moreover, if the transition extends beyond the
2006 target date, WLMB will be required to replace a dated analog
transmitter at a cost of $500,000--a significant investment for this
station.
WLMB has been on the air for 5 years and won the prestigious
National Religious Broadcaster's Television Station of the Year award
for 2 consecutive years, 2003 and 2004. The station is a valuable part
of the Ohio community because of its locally produced shows that
reflect the unique characteristics of the market. WLMB and its viewers
were disappointed when the station suspended plans to invest in new
community-based programming, including popular local high school
sports, due to the financial burdens of the digital transition. WLMB is
contemplating infomercials as a source of revenue; although Mr. Schmitz
and his colleagues would prefer to focus on the public service and
community programming that continue to make WLMB a successful, valuable
and beloved community broadcast station.
Ms. Grace Rendall of KSCE-TV 38 in El Paso, Texas, estimates that
their annual operating expenses for their digital TV station will
exceed $500,000 per year. This figure is in addition to their analog
expenses and significantly higher than KSCE's 2003 total gross revenues
of $360,541. As a non-commercial station dependent on viewer
contributions, KSCE has already borrowed $15,000 and anticipates
financing an additional $1.6 million to comply with the government-
mandated build-out. Ms. Rendall has encountered resistance in securing
additional financing because of the perception that declining revenue
will be realized from the digital operations of KSCE without cable
carriage of their multicast signals.
KSCE has engaged outside help to supplement its small staff and
identify outside funding sources, conduct audits for grant proposals
and hire personnel to plan and implement the digital conversion. The
financial difficulties KSCE is facing have caused an indefinite delay
of plans for developing new and expanded free programming. KSCE is a
small station suffering from a loss of valuable time, resources and
assets which they are investing to meet the FCC's imposed digital
deadlines.
Mr. Ken Mikesell's digital stations, WTGL-DTV 53 and WLCB-DTV 46 in
Orlando, Florida, will cost an additional $75,000 per year to operate,
in addition to annual debt servicing and programming costs associated
with the transition. An investment of $5.5 million more is necessary
for DTV completion. Borrowing funds for this venture is difficult
because lenders express concerns about the negative financial
implications of independent broadcasters' ability to service debts
without a clear digital multicast must-carry requirement. Mr.
Mikesell's financial struggles have forced him to downsize from 25 to
14 employees. He continues to seek funding sources to avoid
disenfranchising his remaining employees and the elderly, minority and
poor communities of Orlando, that comprise the majority of his viewing
audience, and rely on the important local programming his stations
provide.
Mr. Bob D'Andrea, Chairman of Christian Television Network (CTN)
and owner of Florida stations WCLF-TV 22 in Tampa Bay; WHBR-TV 33 in
Pensacola; WRXY-TV 49 in Fort Myers; and WFGC-TV 61 in West Palm Beach,
expects his annual operating expenses to increase an additional
$166,000 for DTV operations. Mr. D'Andrea has borrowed $5 million of
the $7 million currently necessary for the digital build-out of his
Florida stations, and estimates financing another $700,000 for
completion. The Christian Television Network (CTN) is currently airing
both analog and digital signals from their stations and requested FCC
authority to cease analog broadcasting operations to reduce costs. The
FCC denied their request, forcing CTN to implement across-the-board
cutbacks.
Mr. Mike Smith's digital operations for WLFG-TV 68 in Grundy,
Virginia and WAGV-TV 44 in Harlan, Kentucky, have increased annual
operating expenditures by $150,000. Moreover, maintaining the new
digital equipment requires specialized engineering costs of $100,000
during the first year and $120,000 for subsequent years. Insurance for
the WLFG and WAGV buildings and their new digital equipment, and higher
phone bills associated with the remote control transmitter that
operates from the studio, have placed major financial burdens on Mr.
Smith's operations. In an attempt to mitigate costs, Mr. Smith began
airing infomercials, which he removed after receiving negative feedback
from his viewer base. He continues to look for creative cost cutting
and financing arrangements to support his broadcast operations, but is
experiencing significant difficulties and sees multicasting as the only
way to maintain and increase his viewing audience and sustain a viable
business model for his digital stations.
Dr. James Thompson has borrowed $400,000 to build out of his
stations WATC-TV 57 Atlanta, GA, and WGGS-TV 16 Greenville, SC, and
must acquire an additional $2 million to complete construction. An
annual debt service of $75,000 plus a yearly increase of $12,000 in
expenses for DTV operations has forced Dr. Thompson to contemplate
infomercials to meet rising costs, a measure he hopes to avoid through
increased programming revenues from multicasting.

Without a Multicast Must-Carry Requirement, the Financial Burdens
Imposed by the DTV Transition Will Perpetuate the Loss of
Independent Religious Broadcast Voices and a Diversity of
Viewpoints
When the DTV build-out was announced, some family-friendly and
spiritual broadcasters sold their stations because the costs of
providing DTV services were not feasible without the assurance of cable
carriage for digital signals. The mission of religious broadcasters is
unique, in that RVB member stations are not driven by profit
maximization. Our success is measured by the positive impact we have on
our local communities and viewing audience, and we will continually
resist compromising programming choices aimed at serving our loyal
constituencies.
However, small and independent stations with limited resources will
not survive a DTV transition that imposes severe financial burdens
without multicast requirements for cable operators. The systematic
refusal by cable operators to carry the multicast signals of smaller
independent broadcast stations has resulted in systematic refusals by
financial institutions to invest in our digital businesses. Our
stations simply cannot survive in a digital television world where the
Federal Government places us at a non-functional competitive
disadvantage. Should multicast must-carry not be enacted in the near
term, America will permanently lose valuable independent television
voices--and these stations will never be part of the television
landscape again.
As the transition to digital television continues to offer viewers
new and innovative programming, it is essential that there remain a
place for small, independent and non-major network affiliated
broadcasters. It should be noted that these stations face tremendous
difficulties in seeking to get their multicast signals carried even
when they offer compelling local programming and possess a strong and
loyal audience.
In fact, research indicates that 81 percent of programmers are
affiliated with a major media company.\2\ Thus, small, independent and
religious broadcasters who are not affiliated with a major media
conglomerate lack the leverage to negotiate with cable operators to
receive carriage of their multicast signals in digital television.
Given the dilution of their voices in digital television, it is certain
that some of these stations will either be forced to enter into some
type of financial ownership or affiliate agreement with major media
conglomerates or go dark.
---------------------------------------------------------------------------
\2\ The America Channel, ``Market Analysis of Networks in 20+
Million Homes'' (May 31, 2005).
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This would be tragic considering that the original intent of must-
carry in the 1992 Cable Act was to ensure that small and independent
broadcasters would continue to provide valuable diversity of
programming to our nation. As we transition to digital television
multicast must-carry will, in many cases, provide the only assurance
that small, independent, minority and religious broadcasters can
maintain a proportionate voice and continue serving niche markets with
diverse local and community-focused programming. We would encourage the
Committee to consider these issues as the DTV bill develops this
session and ask that it include multicast must-carry.
______

Appendix A
Examples of Current RVB Programming and Projected Multicast
Programming
Mike Reed plans on utilizing the benefits of multicasting to
further expand the fifty hours of local programming his station, KMCT-
TV 39, airs each week in the West Monroe, Louisiana area. KMCT's
current programming includes Fully Alive, a live, one-hour nightly talk
show hosted by Mr. Reed, which brings diverse people from the community
together to discuss issues of the day. Guests include Members of
Congress, Louisiana Governors and local Mayors who speak on topics such
as health, marriage and other local concerns. During the show KMCT has
a phone bank available for viewers to call in with questions, concerns
or comments. Lessons from God's Word, hosted by Pastor Eugene Brown,
provides a spiritual outlet for those who cannot leave their homes
because of injury or illness. Let God Be True is a locally-produced
show that airs the preaching of area churches and highlights the
teachings of Pastor Larry Burrel, who uses graphs and visual aids to
educate viewers. Sacred Conversations is a locally-produced show hosted
by Mr. Robert Charles Payne, a West Monroe businessman, and previous
football coach for West Monroe High School. Mr. Payne invites guests to
speak about issues facing the community, including sports, health and
disciplines of life.
KMCT's programming schedule is replete with locally-produced shows
that provide valuable services to Louisiana communities. KMCT would
utilize the benefits of multicasting to lengthen and expand their
current programming to include a 24-hour church channel that would
cover local services and church sponsored community activities.
Additionally, KMCT would like to air a 24-hour children's channel and
24-hour youth channel with programs focused on the specific interests
of these age groups. In an effort to promote student sports in the
area, KMCT would like to expand local sports coverage by devoting a
channel to playback shows of Neville High School and Ouachita High
School. Each of these schools currently airs an hour per week of game
highlights and interviews with coaches and players. Ouachita High
School also interviews students to discuss activities on campus
including clubs, organizations and other school sponsored programs.
KMCT supports the development of broadcasting and production experience
for students at the University of Louisiana at Monroe and Grambling
University, which has a predominantly African-American student body, by
hiring them to work at the station and cover issues relating to their
university, including local sports. The close proximity between KMCT
and several high schools and universities will facilitate increased
coverage of local sports and student activities through multicasting,
and facilitate employment opportunities in broadcasting.
Richard Hawkins is the General Manager of WLLA-TV 64, the only
independent station in the Kalamazoo-Grand Rapids-Battle Creek market.
WLLA offers a variety of family-friendly programming, boasting the most
hours of local programs in the market--17 hours per week. Among the
shows WLLA airs is, Transformed, a daily show hosted by Pastor Joel A.
Brooks, Jr. that focuses on the African-American constituency through
programming that promotes racial harmony. Mr. Brooks leads an inter-
denominational and multi-racial congregation of 2,000 people. Getting a
Grip is a unique show, hosted by one of the few female Pastors in
Kalamazoo. Mrs. Beth Jones' teachings extend to the community at large
and reflect a female perspective on the Christian doctrine. Pastor
Duane VanderKlok hosts Walking by Faith, a daily teaching and bible
study program that breaks from tradition by taking viewers on
adventures that relate to bible stories, including hunting expeditions.
Pastor Addis Moore hosts Mt. Zion Baptist Church, another program that
targets the African-American population and focuses on the needs of
that community.
In addition to valuable local church programming, WLLA works with
the Western Michigan University (WMU) to air local coach's shows, as
well as men and women's basketball games. In association with the
Michigan High School Athletics Association, WLLA is committed to
annually airing the girl's high school volleyball championships from
the WMU campus, which provides a unique opportunity for these young
girls to gain public exposure. WLLA would use digital technology to
multicast a 24-hour channel of other local sports. Other digital
program plans include a 24-hour channel of family-friendly and
wholesome programming, and a youth channel with music and programs to
benefit young people.
Dr. James Thompson has developed a loyal and devoted following in
South Carolina, due to his remarkable thirty-year record of broadcast
public service to Greenville, and its surrounding areas with his
station, WGGS. He has similar stature in Atlanta, Georgia, where he
owns a second television station, WATC. Most notably, Dr. Thompson and
his wife Joanne host The Nightline, a live two-hour weeknight call-in
program on WGGS, which gives people from the community an opportunity
to discuss a variety of local interests. Discussion topics have
included conversations on current weather conditions and crop
conditions; oral histories of South Carolina; highlights of area
elderly and indigent care services as well as conversations on how
issues of national significance affect South Carolinians. The Atlanta
station, WATC, devotes the same amount of time and resources to their
live, local nightly show. WGGS' daily variety program, The Peggy Denny
Show, offers cooking and household tips and reviews of local arts and
politics. Nancy's Heartbeat, hosted by Nancy Corso, Greenville's local
chiropractor with a Master's Degree in Trauma, is a weekly show on
fitness and the latest news in medicine. Jewish Jewels is a show that
focuses on the Jewish religion and those who practice the faith in the
area.
Since the beginning of the Iraqi War, Dr. Thompson's stations have
been airing a daily scroll of the names of the local soldiers who are
committed to active duty in Iraq and ask viewers to send prayers and
well wishes to the troops. WGGS keeps a phone bank of volunteer
``listeners'' who comfort lonely or in need viewers in the area and
refers more troubled individuals to local crisis help groups. WATC also
is the home to a unique program, The Gravedigger Show, hosted by Joe
Oreskovich, a former homeless man who was rescued by the local fire
department. Joe interviews firemen, policemen, doctors, politicians and
others to inspire and provide resources, guidance and hope to those in
most need and at-risk, including alcoholics, the unemployed, and the
indigent.
Our stations seek the ability to multicast to expand current
programs and invest in developing new and original programming. On
numerous occasions, North Greenville College has asked us to air
student produced shows (a request that is usually unable to be granted
because of established programming commitments). With the ability to
multicast, we could provide the College its own channel, which would
benefit both the students and the community. Moreover, because of its
geographical location, WATC would like to air a 24-hour gardening and
agricultural channel, in addition to a 24-hour sports channel that will
focus on elementary, secondary and college level sports. Finally, we
would continue to reach out to the community by providing a vocational
and employment channel that would be a resource for job announcements,
provide information on various trades and professions and promote
employment in the area.
Grace Rendall and KSCE-TV 38 in El Paso, Texas, play a unique role
in their diverse community by providing bilingual and local programming
to the ethnic and religious groups in the region. KSCE airs daily
programming in English and Spanish and provides valuable media
resources for El Paso's large Hispanic community, which has limited
family-friendly programming choices. Additionally, KSCE airs a variety
of programs that cater to the sizable El Paso Jewish community, like
the Monday thru Friday showing of the daily news by the Israel
Broadcast Authority from Jerusalem and Jewish high holy season shows.
KSCE is also the only broadcast station in the area that meets the
needs of the estimated 3,000 Arab-speaking population. They broadcast 3
hours a week in Arabic, with teaching, music and a woman's interest
roundtable. With the ability to multicast, KSCE is interested in
continuing its diversity outreach by dedicating two digital channels to
full time Spanish-language formats--one for general purpose and the
second for a youth and adult educational needs.
Steve Easom's KSBI is the last locally owned station in the
Oklahoma City, Oklahoma market, and it provides more local programming
than all full power stations in that DMA combined. With the ability to
multicast, KSBI is committed to increasing the youth, elderly and
Hispanic focused programming that they currently provide. In addition,
they seek to expand their local sports coverage and unique programming.
For instance, the Oklahoma City area boasts a strong hunting and
fishing community. KSBI produces and airs a program, On the Water and
In the Woods with Cody and Cody, a hunting and fishing show hosted by
two local Oklahoma teens that focuses on hunting safety from the
experiences of teenagers. Furthermore, when a local major network
affiliated station was not able to air Oklahoma State University and
University of Oklahoma coach's football playbacks because of their
affiliate obligations, KSBI negotiated for carriage of the programs. As
part of the agreement, KSBI stipulated that it would not run overtly
sexual ads that may be offensive to a family audience during playback
airings. Not only did the University of Oklahoma accept these
conditions, but the head athletic director commended Mr. Easom for
``raising the bar'' in this area.
Belarmino ``Blackie'' Gonzalez's station, KCHF in Santa Fe, New
Mexico, is dedicated to offering the communities of New Mexico positive
informational and entertainment choices. KCHF plays an active role in
the Santa Fe area through shows like Issues & Answers, a weekly program
hosted by New Mexico's Press Secretary that invites representatives of
state government agencies to discuss valuable state programs that are
available to New Mexicans. Additionally, KCHF highlights local
charitable causes including efforts to help victims of the Los Almos
fires. Comfort My People supports Israeli victims of terrorism through
the United Jewish Communities' programs. With added ability to
multicast, KCHF hopes to take their current youth programming block and
develop a channel that expands its reach to young people with shows
like The Real, which discusses issues affecting teens and provides
community outreach and help hotlines for at-risk youth. With
multicasting, KCHF would expand their Spanish-language programming by
developing a channel specifically focused on family-friendly programs
for the Hispanic community in New Mexico.
Jamey Schmitz of WLMB Toledo, Ohio, has committed to using the
benefits of multicasting to serve local viewers by providing a worship
channel that would feature 24-hours of local area religious-related
services. This channel would include expanded versions of WLMB's
Pastor's Point and Find a Local Church, programs that feature up to
ninety-eight different local religious venues a year. To date, over
thirty denominations have been represented on these half hour weekly
programs. Currently, the station has a backlog of over one hundred
community leaders and venues awaiting the opportunity to feature their
services. In many cases, these shows are the only television exposure
that churches, synagogues and cultural-specific religious organizations
including African-American and Hispanic parishioners are afforded.
These shows have been extremely successful in helping new Toledo area
residents and those new to faith find a place of worship for their
families.
WLMB would also reach out to the growing Hispanic community in
Ohio, by starting a 24-hour Spanish-language channel that would expand
upon of their current weekly half hour Spanish-language program, which
is the only foreign language program in the entire market. WLMB
regularly receives requests from Hispanic leaders to include updates of
local Latino-sponsored events on the show. As this segment of the
population continues to grow, the ability to reach these viewers
through a channel devoted to their specific needs would utilize free-
over-the-air broadcasting in a manner consistent with the objectives
enumerated in Turner v. FCC. Additionally, WLMB would like to start a
24-hour youth channel (a G rated MTV type channel) that would provide
local teens the opportunity to become involved in the production,
filming and editing of television programs. Toledo teens would have a
local outlet to air programming that is timely and relevant to their
evolving needs and interests. WLMB envisions expanding their current
music video show that features local artist's interviews and family-
friendly music videos. Finally, WLMB is pleased that in 2004, it will
begin airing the Toledo Mud Hens baseball games. The beloved Mud Hens
are the farm team for the Detroit Tigers. With multicast, WLMB would
air 24-hour local news and sports channels, as a collaborative effort
with organizations like the Mud Hens and area high schools and
colleges.
Ken Mikesell's Orlando, Florida station, WTLG, would use its
additional channels for Spanish and Asian language content; educational
programs including PBS shows not aired in the market; shows serving
central Florida's large population of seniors and children; a civic and
local government channel to inform the transient population of
available public services; and other locally-produced programs. The
station would expand upon its regular programs featuring local
nutritionists, physicians, counselors and other community leaders who
discuss health, psychological and spiritual needs of the community.
WTLG produces the Easter Sunrise service at Sea World, in Florida, for
uplink to stations across the country, including the Armed Services
Network, which it carries to all U.S. military bases. WTLG is extremely
active with local social and civic organizations and uses its airwaves
to promote interest and support for worthwhile projects. For instance,
the station organizes food drives for local ministries; arranged for
receipt of over 5,000 turkeys to the Destiny Food Center in Orlando for
Thanksgiving 2002; provided ``Bags of Joy'' to over 2000 families
through Harvestime International in Sanford; works with Operation
Christmas Child, run by Reverend Billy Graham's son Franklin, to supply
toys, toiletries and clothing to the needy; and participates in many
other rewarding ventures. As a melting pot for many ethnicities,
Orlando is the perfect example of a community in need of additional
local programming choices to serve its diverse constituents.
Christian Television Network (CTN), headquartered in Clearwater,
Florida, is dedicated to bringing positive Christian programming with
family-friendly, wholesome messages to its viewers from all socio-
economic backgrounds. Since its inception twenty years ago, CTN, its
Tampa Bay station WCLF, and its founder Bob D'Andrea have developed
unique local programs including, Bay Focus, an original show that
features and highlights ministries in central Florida that are involved
in charitable activities to feed the homeless, create support centers
in inner cities, and provide assistance to the needy. CTN also devotes
numerous hours of programming to youth and Latinos with original
programs like La Vida Ahora (Today's Life), Vida Dura (A Hard Life),
Kids Like You, and Kids on the Move. CTN also owns full-power stations
including WHBR-Pensacola, WHTN-Nashville, WVLR-Knoxville, WRXY-Ft.
Myers, WFGC-Palm Beach, and WGNM-Tampa. With the ability to multicast,
CTN will further develop and expand programming that distinguishes CTN
from other broadcasters.
While not a 24-hour religious station, KIKU in Honolulu, Hawaii, is
unique in that it broadcasts in eight languages every week providing
Hawaiian Asian language constituents with the only free-over-the-air
broadcast programming in their native languages. Shows like Korean
Christian Broadcasting, Chinese Community Broadcasting in Mandarin and
Kikaida, entertain and inform those who have no other sources of
broadcast programming in their native languages. KIKU would use
multicasting for specialized local Asian language channels. For
example, KIKU's Community Calendar, a bi-weekly English service, could
be translated into different Asian languages. The diverse Hawaiian
community depends on KIKU's programming and multicasting would provide
a much-needed outlet for these services.
Finally, Total Living Network (TLN) is a Chicago-based organization
with a San Francisco affiliate, KTLN. TLN's main objective is to
produce and distribute original programming for the TLN schedule and
the broader family-friendly broadcast marketplace. The unique
programming TLN provides includes Aspiring Women, a show designed to
address the concerns of modern women of all ages and backgrounds; and
Health Town, an invigorating, healthy lifestyles show for the entire
family. TLN also produces Solid Rock VDO, an inspirational and
entertaining music video show. All Around Rockford is a show that
highlights ministries in the community. Mr. Jerry Rose, President of
TLN, hosts Newsmakers a public affairs program that addresses difficult
issues with supplemental media resources including a panel of
journalists who discuss current events. Newsmakers was nominated for an
Emmy for Outstanding Achievement for Information Program-Public Affairs
Series. TLN also works with several community-based nonprofits, such as
Kids Around the World, Pregnancy Care Center, Noah's Ark Animal
Sanctuary, Rockford Rescue Mission and Motherhouse to provide public
service announcements and broadcast exposure for their causes. TLN has
found that their locally tailored programming brings members of the
community together. Specifically, TLN focuses its outreach efforts on
issues to help viewers cope with addiction, physical/mental abuse,
health, grief, homelessness, gangs, divorce and sexual assault.
Multicasting would give TLN the opportunity to expand its services and
the positive programming.
______

Prepared Statement of the Consumer Electronics Retailers Coalition
(CERC)

Consumer Electronics Retailers have been involved in the transition
to digital techniques since 1985, when they helped introduce the
digital audio Compact Disc. Two decades later, it is high time to
complete this transition. The single most effective thing that the
Congress can do is to set a clear, definite, unconditional date for the
cessation of analog broadcasts.
CERC members include specialist retailers Best Buy, Circuit City,
RadioShack, and Tweeter, general retailers Target and Wal-Mart, and the
three major retail associations--the North American Retail Dealers
Association, the National Retail Federation, and the Retail Industry
Leaders Association.

A Hard Date for Cessation of Analog Television Broadcasts
CERC has long favored a ``hard'' and unconditional date for moving
exclusively to digital terrestrial broadcasts. In light of the complex
budgetary and other factors involved, we have not presumed to tell the
Congress what that date should be. CERC agrees with the witnesses and
Committee members who participated in the July 12 hearings that it
should be no later than January 1, 2009.
The key factor. from CERC's perspective, is that the date be
reliable and unconditional, so that if we tell consumers that analog
terrestrial broadcasting via an antenna will not be delivered after
that date, it will be a truthful statement. We do not want to be in the
position of telling customers to buy or not to buy products based on
inaccurate or unverifiable information.
Once the transition date is clearly and reliably set, we and our
vendors can start advising consumers that, on a specific future date,
they will need to rely on alternatives to receiving analog signals from
an antenna.

Public Education
Even without approaching the question of whether a consumer will be
impacted by the cessation of analog broadcasts, advances in technology
keep offering new options and choices to consumers. Most of these have
little or nothing to do with whether an over-the-air tuner is included.
They are:

Transmission and Display formats--High Definition; Enhanced
Definition; Standard Definition--digital (progressive);
Standard Definition--interlaced (digital or analog). \1\
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\1\ Transmission may be in one signal format but display in
another.

Program and screen formats--Widescreen aspect ratio (16x9)
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or ``traditional'' aspect ratio (4x3).

Signal acquisition--Antenna; cable; satellite; and now
``wireless,'' and ``broadband'' variations.

Tuning, authorization, and payment--In the receiver; in a
``set-top box'' or PVR or other device; or through a
``CableCARD''-enabled set that allows purchase of premium
channels without a set-top box.

Types of displays--``Traditional'' and ``slim'' cathode ray
tube (direct view and rear-projection); LCD panel; plasma
panel; LCD rear-projection; DLP rear-projection; LCoS rear-
projection; and DLP and other projectors.

Types of storage devices--VCRs; DVRs (removable media); PVRs
(non-removable media) and variations (PCs, game players, hand-
held devices).

Types of interfaces between devices--composite analog;
component analog (SD); component analog (HD): DVI/HDMI;
Firewire; USB; wireless variations; and associated forms of
copy protection which triggers only for certain programming.

These features and facilities represent essential progress. But the
availability of such a wide array of features requires retailers and
manufacturers to provide increased customer guidance. Consumer
electronics retailers serve our customers best by trying to ``qualify''
the customer--ascertain his or her needs and wants, home room size and
space, viewing and recording practices, potential for a home network,
and budget. We then proceed through a series of questions. What is your
programming preference? How do want to receive it--off air, cable,
``telco,'' satellite, Internet? Do you want the option of moving
programming throughout the house? What devices do you already have? How
many of those would you like to keep? How important is sound; do you
want all your products linked to a home theater receiver and speakers?
Do you know about HDTV? Will you want to record HDTV? The sales
associate then identifies the combination of display formats and
features, signal acquisition choices, and home network options that
give the consumer what he or she needs. Today, unless the consumer has
already firmly decided upon a specific purchase--and with the aid of
Internet research, many have--retailers can not serve the consumer by
offering products on an isolated basis. Retailers must determine how
all of the devices will fit together and to do this the retailer has to
consider the whole picture.

The CERC Guide to the DTV Transition
CERC members have continually updated their consumer information,
in our product displays, advertising, and websites, to explain to
consumers the sometimes dizzying array of choices in this transitional
environment. We have also worked with the FCC and the Consumer
Electronics Association (CEA) to develop, publicize and distribute a
``DTV Tip Sheet'' with core information about digital television
products and services.
In June, CERC released a 3-page consumer guide, What You Need To
Know About The ``DTV Transition''--A Dozen Questions & Answers, to
address the more particular issues that arise from the planned end to
analog broadcasts. \2\ CERC's press release that accompanied the Guide
said:
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\2\ The Guide is available on the front page of the CERC website,
www.ceretailers.org; it is provided for the record as an Appendix to
this submission. CERC indicated in its press release that it has no
objection to other entities reproducing or distributing the Guide.

``[W]e thought we should assemble for consumers what is now
known about the prospects for analog TV broadcasts to be shut
off. and what this may mean for them. We've tried to put
together answers to the most basic questions, but not to
mislead consumers by omitting future options or considerations.
At the moment there's no way to do this in less than three
pages of print. We'd prefer to have a shorter piece with fewer
variables, but we don't want to tell customers anything that's
inaccurate or incomplete.'' \3\
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\3\ The entire June 29 press release remains available at
www.ceretailers.org.

CERC also invited anyone who thinks the Guide is inaccurate,
incomplete, or could be condensed, to propose changes to be
incorporated in future releases. The key to cutting down the number of
variables, however, lies in definitive action by the Congress on the
issues that give rise to the present uncertainties.
Text and Placement of Label for TV Receivers Lacking Digital Tuners
CERC's specific suggestions as to any mandatory point of display
labeling requirements--once a ``hard date'' has been set--are as
follows:
Text. The label should be as concise as possible, while not
misleading the consumer or unnecessarily driving him or her to more
expensive products. Based on our experience as retailers, we are
concerned that too long a label will not be read by many consumers. We
want any advisory label to be readily understood when placed on or near
a product on a retail shelf. So, if there is to be an advisory label,
CERC has proposed one (subsequently endorsed by the CEA) that consumers
would be likely to read and understand:

Notice: This TV has only an `analog' broadcast tuner so it will
require a converter box after [date] to receive over-the-air
broadcasts with an antenna, because of the transition to
digital broadcasting on that date. (It should continue to work
as before with cable and satellite TV systems, gaming consoles,
VCRs, DVD players, and similar products.)

Placement. The label should he packed with or affixed to the
television receiver, so a retailer would have the choice of leaving the
label on the set for shelf display, or moving it to the vicinity of the
set (so as not to cover the screen). It should also be printed on the
outside of boxes.

The labels should be packed with the covered TV receivers,
to reduce uncertainty and to avoid mistakes, at retail, about
the products to which the labels apply. To avoid screen damage
upon removal by a retailer or consumer, the label should not
necessarily have to be ``on the screen'' so long as it is
attached to the product as shipped.

The retailer should be able either to leave the label on the
product for shelf display, or move this label to the vicinity
\4\ of the point of product display. If a label is affixed to a
screen, it should not necessarily have to remain there, as this
could make it difficult for consumers to compare products.
---------------------------------------------------------------------------
\4\ CERC believes that a display requirement of a label ``in the
vicinity'' of the product on the shelf is more realistic than the
``adjacent to'' language of the House Staff Draft--depending on how
``adjacent'' is interpreted, this might not be possible without
blocking other important information or features of the product or of
another product on display.

The label text should also be printed on the outside of the
retail boxes for the products to which it applies, because some
retailers display TV products only in the closed boxes.
Requiring that these boxes be opened could lessen a consumer's
---------------------------------------------------------------------------
confidence that he or she is receiving a factory-fresh product.

We believe that Internet-based sellers (including our own
sites) should have equivalent ``labeling'' obligations at their
own ``point of display'' for the product, or, if there is no
``display,'' at the point of sale.

Subscription Carriage of Local Digital Broadcasts
Much of the discussion of alternatives in the CERC Guide arises
from uncertainty as to whether, and to what extent, local digital
broadcasts will be carried to consumer homes by subscription services
such as cable and DBS. CERC has no position on the ultimate outcome of
the heated, ongoing debate between the broadcast and cable industries
on this score. Some elements pertaining to such carriage, however, seem
to be widely agreed upon in principle:

That many consumers--up to half of all cable subscribers--
now watch broadcast channels, without aid of either a set-top
box or an antenna, via the analog carriage of analog broadcast
signals over cable to consumers' homes, where these signals are
directly tuned by the analog tuners of these consumers' TVs.

That it is possible to maintain this carriage, even after
analog broadcasts cease, via the tuning of the equivalent
digital local broadcast at a cable ``headend,'' and the
conversion or translation \5\ of that broadcast into an analog
transmission for carriage to these consumers' homes, exactly as
occurs today.
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\5\ This has also been discussed as ``down-conversion,'' which CERC
believes to be an unnecessarily freighted term. Sustaining a previously
received analog broadcast service to a consumer, via conversion from
digital, actually is likely to result in an improvement in the received
signal. A ``down-conversion'' occurs only if the broadcast signal is
not also passed along as a digital simulcast (as it generally is today)
in its original resolution.

That it is more efficient, in a community of, e.g., 200,000
such viewers, for this conversion to occur once, at the cable
headend, rather than 200,000 times--once in each consumer's
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home.

That in order for these ``basic cable'' consumers to be able
to receive such carriage as they do today, without leasing a
set-top box, they will need TV receivers with analog tuners--a
point that is often overlooked in discussions of why there
remains a legitimate consumer demand for TV receivers with
(only) analog tuners.

CERC believes that the highly nuanced debate about the
circumstances and obligations adhering to such carriage produced a
somewhat confusing record in the July 12 hearings. It believes that
there is actually no serious controversy about the basic points laid
out above, and that these points should be clearly understood as a
basis for legislative determinations.

Obligations on Other Industries
Broadcasters should be obliged to make consumers aware of their
digital channels and of the Transition. CERC. like CEA. has been
disappointed with the lack of effort to date on the part of
broadcasters to educate the consumer about the DTV Transition, and was
pleased to hear, on July 12, a commitment by NAB to do so, as well as
NAB's endorsement of a January 1, 2009 ``hard date.'' These steps will
be a welcome change from newspaper advertisements apparently aimed at
further confusing the public about the transition by saying or implying
that viewers would necessarily have to buy a new TV receiver after the
transition date. That this is not the case was amply demonstrated at
the July 12 hearings.
CERC hopes that broadcasters will join in our effort to give
consumers a full and candid view of their options, as they appear now,
and as they will appear once the Congress has set a real transition
date and has determined what the broadcast carriage rules will be. In
the meantime, retailers have every incentive to offer consumers their
most fully-featured products, rather than the less fully featured
products that often have lower profit margins. But retailers also are
obliged to serve, first and foremost, the actual needs of the customer,
which vary greatly according to circumstance and preference.
The ability of retailers to sell products with integrated broadcast
tuners is not helped by the fact that most broadcasters are not airing
their digital channels at full power, or conspicuously promoting their
digital channels through on air or print advertising. It is in our
interest to sell products with DTV tuners, but we need help from the
broadcasters in interesting our customers in buying them.
Provisions Re ``Tuner Mandate''
Thus far, under the FCC's ``Tuner Mandate'' regime, our experience
has been that a government mandate trying to force all shoppers to buy
features that many or most do not in fact, need can be
counterproductive to the success of the Transition.\6\ We therefore
caution against trying, in this legislation, to use a government
mandate rather than the ``hard date'' itself as the main instrument for
influencing supply and demand. In particular, we are concerned about
provisions that would run ahead of feasible design, engineering, and
production cycles:
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\6\ We have found the mandate to equip 50 percent of all displays
of 36 inches and above with digital tuners to be particularly
counterproductive. By rationing the ultimate supply of products without
such tuners, it has encouraged retailers to secure their supplies by
ordering these products up-front, and to await price cuts on the
products that contain tuners, because manufacturers will be required to
sell these whether or not there is a demand for them. Such demand will
be limited because, while many consumers may need or want terrestrial
tuners in their displays, most of our customers are cable and satellite
subscribers who might not need or want to pay for a broadcast tuner.

They would likely drive the market toward products with no
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off-air tuners at all;

They would deny useful products to those consumers least
able to afford television receivers; and

They would be inconsistent with, and detract from, the
provisions (as discussed above) that recognize cable headend
conversion to analog transmission as meeting Transition
requirements.

The FCC's Tuner Mandate has proved a fragile instrument for driving
the television receiver market toward the inclusion of DTV tuners. Even
the requirement that 100 percent of a size category of television
receivers must include DTV tuners can have only limited impact on
consumer choices, because not all video display products are
``television receivers.'' \7\ In an era in which more than 85 percent
of households are connected to cable or satellite, the hard fact is
that most consumer displays for video programming may not need to be
``television receivers''--that is, the displays meet consumer needs
without relying on any TV tuner, analog or digital, because they
receive their programming from a cable, satellite, or other set-top box
over non-broadcast interfaces.
---------------------------------------------------------------------------
\7\ A ``Television Receiver'' is a product having an off-air
broadcast tuner and antenna terminals. The Tuner Mandate requires only
that products with analog off-air tuners must have digital off-air
tuners as well. A consumer display product, such as a PC monitor, may
have a variety of interfaces to accept both analog and digital
television signals from cable, satellite, or other set-top boxes, yet
lack any off-air tuner, so it is not a ``Television Receiver.''
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CERC would oppose, in particular, any provision that would move the
existing FCC Mandate date for televisions with screen sizes of 13
through 24 inches, and other products containing television tuners
(such as VCRs, ``PVRs,'' and DVD recorders), up to a date any earlier
than March 1, 2007, because it would likely destroy, rather than
enhance, these product categories. Such a provision would damage both
the transition and the least-affluent portion of the viewing public.

First, these sets are very severely affected by price
considerations. A consumer who buys a $69 13-inch color
television is generally moved by necessity, more than by a
search for the most compelling experience. CERC's general
retail members have noted that many of these sets are bought on
layaway, by customers who do not have bank accounts. Even
semiconductor maker Zoran, which has no retail experience and
has made predictions based on assumptions that are at best
aggressive and at worst unrealistic, admits that adding a DTV
tuner in the timeframe now under discussion would increase the
cost of such a product by ``around $80-$100 depending on the
brand and model.'' \8\ Having the price of a $69 color TV go to
$169 by July 1, 2006, would eviscerate the low-end of this
product category, punishing the consumers who are least able to
afford television receivers.
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\8\ See Zoran May 16, 2005, ex parte letter in FCC Docket No. 05-
24.

If small TVs become too expensive for their market, the only
alternative would be product lines of ``receivers'' with no
off-air tuners at all. We have seen this class of ``monitor''
product emerge already in the large-screen category, even
though the DTV tuner is a much smaller component of the cost of
a large-screen television. A 22 inch LCD display with no tuner,
for example, could be an alternative for a consumer who relies
on a cable or satellite set-top box anyway.\9\
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\9\ We had hoped that prospective inclusion of the ``CableCARD''
feature, which can be inexpensively added to products with DTV tuners,
would heighten their appeal to consumers, but unfortunately these
products are not being promoted by the cable industry, and issues have
been raised as to their technical support. Of the approximately one
million such TV receivers sold to date, only about 40,000 are being
served by CableCARDs.

Driving analog tuners out of inexpensive televisions seems
especially counterproductive in light of the expectation,
discussed above, that cable operators will convert DTV
broadcasts to analog broadcast transmissions at their headends,
so that consumers with analog tuner TVs will be served. If TV
sets do not have analog tuners, there is no point in converting
signals to analog at cable headends. ``Basic cable'' customers
who rely on analog tuners to tune these channels will be sorely
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surprised when their sets have no place to plug in the cable.

The Congress, concerned as it is about consumers who must
bear the costs of the transition, needs to confront the fact
that a low-end TV with only an analog tuner may be the only
affordable option for some consumers. To drive these sets out
of the market prematurely, by advancing Tuner Mandate dates
that double the prices of such sets, is to place the burden of
the Transition on those who are least able to afford it.

CERC has not asked that the existing Tuner Mandate dates for 13
inch receivers be pushed back. But we think it would be contrary to the
legislation's purposes, and very unfair to low-income consumers, to try
to move them up. The same is even more true for receivers with screen
sizes below 13 inches. CERC and CEA will be presenting evidence to the
FCC that, for the smallest categories of TVs, and for VCRs and other
small chassis devices that lack TV screens, the design, engineering,
and production resources of manufacturers are simply not available to
produce such products for sale by a date any earlier than March 1,
2007; and to the extent some might be available, the cost is likely to
be prohibitive for the (largely low-income) consumers who define the
market for such products.\10\
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\10\ TV manufacturers have been fully engaged in phasing DTV tuner
capacity into their larger products first, in accordance with the
existing FCC mandate. Their necessary engineering, design, and
production resources are still engaged in this effort and cannot
instantly be turned to the separate engineering and production
requirements posed by different and smaller chassis products.
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Consumer Subsidies
CERC has not presumed to tell the Congress whether there should be
such a subsidy or who should be eligible to receive it. Nevertheless,
we all stand ready and willing to assist with our nationwide
distribution abilities. But we do have a few concerns over how a
subsidy might be applied or administered. Our core concerns are these:

Congress should not attempt to fix the prices of real-world
products based on the funds available for a subsidy. There are
too many variables, including large differences in the
projections of costs 2 years hence, and of the number of
households and sets for which there is a demand.\11\
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\11\ There are potential regulatory hurdles. as well. For example,
California recently established an energy standard of 8 watts in ``on''
mode, 1 watt in ``standby'' mode for converter boxes--an unrealistic
standard, unlikely to be met by the ``converter'' displayed during the
hearing. If such state provisions are not pre-empted in the subsidy law
they could impede acquisition of products or increase costs.

We believe that any subsidy should flow directly from the
government to eligible consumers. Retailers' role in the
process should be limited to doing what we do best: providing
the best product that fits the consumer's needs and desires.
However, as stated above we stand ready and willing to assist
in any reasonable subsidy program. There are retailers in every
neighborhood in America that could assist in product
distribution. But the program must be sufficiently simple, must
minimize financial risk to the retailer, and provide reasonable
---------------------------------------------------------------------------
incentive to participate.

CERC would have specific concerns over a subsidy program
that would require retailers to advance the subsidy amount to
consumers, and to recover it from the government:

-- Any retailer reimbursement program should be a direct
obligation of the U.S. Government for each sale of a specified
product. Reimbursement within a standard commercial time-frame
should be assured.

-- A number of specific questions with respect to eligibility,
reimbursement, and avoiding and accounting for fraud, would
need to be addressed.\12\
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\12\ These questions include: How to prevent false claims? Would
all retailers, no matter how large or small, be audited regularly by
the government? How to apply the program to Internet-based merchants;
how to find them to audit the bona fides of their claims for
reimbursement? CERC members are concerned that the opportunities for
abuse presented by such a reimbursement program--as to which internal
accounting data would be the only evidence of actual sales--would lead
either to loss of credibility for all claims, or to government and
retail auditing costs that are dramatically out of scale to the amounts
being claimed. Would eligibility requirements for retailers be imposed?
Would attempts be made to artificially set or define retail prices for
particular products? Would adequate provision be made for the expenses
imposed on retailers? CERC would oppose both retailer eligibility
requirements and attempts to set or pre-define the retail price of
products. Retailers should be reimbursed for their transaction and
shipping costs, including the direct and indirect costs of audits.

Several CERC members have been interviewed by, and voiced their
views and concerns to, the U.S. Government Accountability Office and
the Congressional Budget Office. The members of CERC know that the
issue of the subsidy is a difficult one. While we take no position on
whether there should or should not be a subsidy, we can provide real-
world input as to how programs might operate and assist the Committee
in avoiding purported solutions based on unrealistic assumptions.
CERC and its members stand ready to assist the Committee in
addressing any or all of the issues discussed in this submission. We
appreciate the opportunity to provide this submission, and its
Appendix, for the record.
______

What You Need To Know About the ``DTV Transition''--
A Dozen Questions and Answers

1. What is ``DTV?''
DTV stands for ``digital television,'' or, in this case, the
broadcasting of digital television by local TV broadcasters. The
signals are sent from local transmitters, over-the-air, to homes, by
modern digital techniques rather than the older ``analog'' methods that
are not as efficient.

2. What is ``HDTV?''
HDTV (short for High Definition Television) is the highest quality
form of DTV. Not all DTV broadcasts are in HDTV and not all DTV
receivers can display HDTV. Broadcasts in HDTV are available only on
DTV broadcast channels--they are not available over analog broadcast
channels. (HDTV is also available from digital cable, satellite, and
other services.)

3. What is the ``DTV Transition?''
In the next few years, it is likely that over-the-air broadcasting
of free TV (from broadcast transmitters to homes) will move exclusively
to ``digital'' channels, and the more familiar ``analog'' channels will
be switched off. Already, almost all broadcasters are using two sets of
channels--the newer ``digital'' channels, and the ``analog'' channels
that have been in use since the 1940s. It is these ``analog'' channels,
by which you are accustomed to identifying your local broadcasters,
that are being replaced by different, digital channels that in most
cities are already on the air.

4. Will there be any charge to receive these digital channels?
No, broadcasts that are now free (or advertiser-supported) to
consumers who receive them via antennas are expected to remain free.
(It is possible that additional ``pay'' services may be launched in the
future, but these are not expected to replace the free services offered
today.)

5. Why will over-the-air broadcasting stop on the ``analog'' channels?
For more than half a century, TV broadcasts have used the
technology that was invented in the 1920s and 1930s, and refined (by
adding color) in the 1950s. In 1997, when broadcasters became
interested in HDTV, and in order to find additional space for emergency
communications and advanced services, the Congress decided that it was
time for TV broadcasting to move to more modern and efficient
``digital'' techniques, which support HDTV or, alternatively, allow
broadcasters to offer more channels to viewers. So, Congress instructed
the Federal Communications Commission (``FCC'') to assign to
broadcasters new ``DTV'' channels and, after a ``DTV Transition''
period, to have the broadcasters return their old analog channels.

Once DTV broadcasts are up and running (as they are now in
many communities)--and consumers are able to receive them
(which many are, particularly over digital cable and satellite
services)--the ``analog'' channels with which most consumers
presently identify local TV stations, are supposed to
disappear. Their frequencies will be re-assigned for other uses
through an ``auction.'' Holding an auction for these
frequencies will free up space for new ``broadband'' and other
communication services, and will help emergency responders to
coordinate their communications. (Finding new frequencies for
emergency communications became a high priority after September
11, 2001.)

6. When will over-the-air broadcasting on the analog channels stop?
Congress's original target date was the end of 2006, but you have
not heard much about it because this date was subject to a number of
conditions--primarily, the readiness, as judged by the FCC, of most
consumers to receive the newer digital broadcasts--and these conditions
are unlikely to be met by the end of 2006. However, pressed by the need
to ``recover'' this valuable spectrum for other uses, and with the
facilities for digital broadcasting now well established, Congress is
considering new legislation that would set a clear, definite and
unconditional date for analog broadcasts to stop--the transition would
have to be complete by January 1, 2009.

7. I now subscribe to cable or satellite. Do I need to be concerned
about an end to free, over-the-air analog broadcasts?
You will probably not notice much change for those TVs hooked up to
your cable or satellite service, but you might be missing out on some
opportunities. Cable operators pick up most local broadcasts at a
central location and send them to homes over cable; satellite services
increasingly are able to do this as well. It is likely that they will
continue to provide whatever free local broadcast programming they
currently provide to you, even after there is this change in
broadcasters' means of transmission. However:

If you have TVs in your house that are not hooked up to your
cable or satellite service, and rely on an antenna to receive
conventional broadcasts, you will need to make alternative
arrangements to keep watching these TVs.

In the future, cable operators might also move to ``all
digital'' means of delivery, which could mean you would need to
lease a ``set-top box'' or own a TV with a digital cable tuner
(such as one with a ``CableCARD'' slot) to continue to receive
the channels you now view on a conventional TV.

If a local broadcaster launches several new digital
channels, a cable, satellite, or other programming service
operator might not agree, or be required, to carry all of their
local digital or HDTV broadcasts. You might, therefore, need a
DTV or HDTV tuner and an antenna in order to receive those
channels.

8. Does my TV have a DTV tuner? What about my VCR, DVD recorder, PVR,
DVR, etc.?
The only televisions that have DTV tuners are those that have been
sold--since about 1998--as having an ``integrated'' HDTV broadcast
tuner (also called an ``ATSC Tuner''). Most of these products are also
capable of displaying HDTV, so they are sometimes advertised or sold as
``HD Built-in.'' (A set sold as ``HD-ready'' is capable of displaying
HDTV but does not have a built-in HDTV tuner.) Recently the FCC has
started requiring--on a phased-in basis--that larger TVs with
``analog'' tuners also be marketed with built-in or separate DTV
tuners, so you should be seeing more and more ``integrated'' or
``built-in'' products in stores. (Some of these may be ``DTV'' or
``EDTV'' sets that cannot display full HDTV.)

Separate HDTV broadcast tuner products have been available
for several years. (You are likely to know if you have one.)
Once Congress passes its ``transition'' legislation, you can
expect to see ``DTV Broadcast Converter'' products that, when
hooked up to an antenna, convert the new digital broadcast
signal to an old analog signal that your older TV can tune and
display.

Most VCRs, DVD recorders, personal video recorders (PVRs)
and digital video recorders (DVRs) do not presently have HDTV
or DTV broadcast tuners, even though they may record by digital
means. (However, if one of these products has a slot for a
``CableCARD,'' it probably also has an HDTV or DTV broadcast
tuner.) ``DVRs'' provided by cable operators do not have
digital broadcast tuners (cable operators use a different means
to transmit digital signals), but some provided by satellite
operators do. The considerations for supporting these non-TV
products are similar to those for your present TVs.

9. What does the future shutoff of the analog channels mean to me if I
am shopping for a new TV?
If you plan to purchase a new TV that will rely on a rooftop or
indoor antenna, you may want to make sure that it has an integrated
(built-in) HDTV or DTV tuner. In fact, as noted above, FCC rules now
require of TV manufacturers that any TV with a screen size of 36 inches
or greater that has an analog broadcast tuner must also have a DTV
broadcast tuner built-in or marketed to retailers with the set. This
requirement is being phased-in to all sets and other products that have
analog TV tuners. (``Monitors,'' however, such as those used with
computers, need not have any tuner.) One bonus: Many of these ``built-
in'' sets also have slots for CableCARDS which, when provided by your
cable operator, allow you to tune premium cable channels (including
HDTV channels) without needing a set-top box. This gives you an
additional choice if, in the future, you might plan to subscribe to a
cable service.

If your new set is going to be hooked up to a cable,
satellite, or telephone company video programming service
instead of to an antenna, you may not need a DTV broadcast
tuner. You can expect to receive all of the broadcast channels
that you are accustomed to watching if they are carried by this
operator. However:

-- If these broadcast channels are not carried, or are not
carried in full HDTV resolution, you will need an antenna to
get the remaining local channels, and your set would need an
HDTV or DTV tuner built-in or added on (depending on whether
the channels you want include HDTV broadcasts and whether your
set can display HDTV). For local information, see
www.antennaweb.org.

-- You may in the future need to lease a set-top-box from your
cable, satellite, or telephone company, particularly if your
new set does not accept a CableCARD.

10. What does the future shut-off of the analog channels mean to me in
watching the TVs now in my home that are not connected to a
cable or satellite service?
If your TV is not currently hooked-up to an antenna (for example,
it is being used to play video games, or to watch DVDs or camcorder
movies, etc.), nothing will change, because only free over-the-air
broadcasts will be affected by this DTV broadcast transition. If your
existing TV currently relies on an antenna to receive free broadcast
programming (and it does not have an ``integrated DTV tuner''), you
will have several options:

You could subscribe to a cable, satellite, or other program
delivery service that carries the broadcast programming in
which you are interested. If you are already a cable,
satellite, or other programming service subscriber, you can
extend your hook-up to reach this TV. To continue to rely on an
antenna, you will need an external ``DTV Broadcast Converter''
product.

If your set is ``HD-ready'' you will want a tuner that can
display HDTV broadcasts in full HDTV resolution (rather than
``down-converting'' them to a Lesser format).

If your set is a ``standard'' television, you will want to
obtain a ``DTV Broadcast Converter'' product that converts a
``DTV'' or ``HDTV'' broadcast to a standard ``analog'' output
that your TV can receive--either as ``channel 3 or 4'' or one
of the other standard inputs that your TV already has. The
Congress is considering whether or not to assist some or all
consumers in obtaining these converters, but no decision has
yet been made on this issue. Relatively inexpensive DTV
Broadcast Converter products are likely to show up in stores
once the legislation has passed, and the ``transition date'' is
known for sure.

11. What else do I need to know about HDTV?
High Definition Television, or ``HDTV,'' is the more general name
for showing video in a new and better format--a wider screen with about
5 times the picture information. All types of video displays--
conventional picture tubes, the various sorts of projection TVs, and
the new ``flat panels''--can show HDTV if they are designed to handle
all of this video information in the new format. You can expect a
product to tune or display HDTV only if it was sold or advertised as
such.

If your existing set is not ``HD-ready'' or ``HD built-in''
(``integrated'') it will not display an HDTV signal in full
quality, even if an ``HDTV broadcast converter'' is attached to
it.

If your existing set is ``HD-ready'' it should display an
HDTV quality picture when an HDTV broadcast converter is
attached (but will display only a standard quality picture from
a ``DTV Broadcast Converter'' that is not advertised as HDTV).

For your existing TV that cannot handle HDTV a ``DTV
Broadcast Converter'' should tune the HDTV broadcast channels,
but provide them to your set in the standard quality format
that your set can display. (Some, but not all, of these might
also provide HDTV-quality signals to ``HD-ready'' sets.)

12. What is ``EDTV?''
Enhanced Definition Television, or ``EDTV,'' refers to the
capability of displays to show pictures at about the same quality level
as DVDs--better than pictures from standard analog broadcasts, but not
of the same quality as an HDTV display. For such a set, you might get
better performance from a broadcast converter product that has enhanced
capabilities as well. For further information on display formats, see
the Consumer Electronics Association's HDTV Consumer Guide at http://
farsight.decisionmark.com/docs/cea.pdf.