    [House Hearing, 111 Congress]
    [From the U.S. Government Publishing Office]

      THE NATIONAL BROADBAND PLAN: COMPETITIVE AVAILABILITY OF NAVIGATION
                                    DEVICES

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

                                    HEARING

                                   BEFORE THE

          SUBCOMMITTEE ON COMMUNICATIONS, TECHNOLOGY, AND THE INTERNET

                                     OF THE

                        COMMITTEE ON ENERGY AND COMMERCE
                            HOUSE OF REPRESENTATIVES

                         ONE HUNDRED ELEVENTH CONGRESS

                                 SECOND SESSION

                                   __________

                                 APRIL 29, 2010

                                   __________

                               Serial No. 111-117

          Printed for the use of the Committee on Energy and Commerce

                            energycommerce.house.gov

                      U.S. GOVERNMENT PRINTING OFFICE
    76-572                    WASHINGTON : 2012
    -----------------------------------------------------------------------
    For sale by the Superintendent of Documents, U.S. Government Printing Office,
    http://bookstore.gpo.gov. For more information, contact the GPO Customer Contact Center, U.S. Government Printing Office. Phone 202�09512�091800, or 866�09512�091800 (toll-free). E-mail, gpo@custhelp.com.

                        COMMITTEE ON ENERGY AND COMMERCE

                          HENRY A. WAXMAN, California
                                     Chairman
    JOHN D. DINGELL, Michigan            JOE BARTON, Texas
      Chairman Emeritus                    Ranking Member
    EDWARD J. MARKEY, Massachusetts      RALPH M. HALL, Texas
    RICK BOUCHER, Virginia               FRED UPTON, Michigan
    FRANK PALLONE, Jr., New Jersey       CLIFF STEARNS, Florida
    BART GORDON, Tennessee               NATHAN DEAL, Georgia
    BOBBY L. RUSH, Illinois              ED WHITFIELD, Kentucky
    ANNA G. ESHOO, California            JOHN SHIMKUS, Illinois
    BART STUPAK, Michigan                JOHN B. SHADEGG, Arizona
    ELIOT L. ENGEL, New York             ROY BLUNT, Missouri
    GENE GREEN, Texas                    STEVE BUYER, Indiana
    DIANA DeGETTE, Colorado              GEORGE RADANOVICH, California
      Vice Chairman                      JOSEPH R. PITTS, Pennsylvania
    LOIS CAPPS, California               MARY BONO MACK, California
    MICHAEL F. DOYLE, Pennsylvania       GREG WALDEN, Oregon
    JANE HARMAN, California              LEE TERRY, Nebraska
    TOM ALLEN, Maine                     MIKE ROGERS, Michigan
    JANICE D. SCHAKOWSKY, Illinois       SUE WILKINS MYRICK, North Carolina
    HILDA L. SOLIS, California           JOHN SULLIVAN, Oklahoma
    CHARLES A. GONZALEZ, Texas           TIM MURPHY, Pennsylvania
    JAY INSLEE, Washington               MICHAEL C. BURGESS, Texas
    TAMMY BALDWIN, Wisconsin             MARSHA BLACKBURN, Tennessee
    MIKE ROSS, Arkansas                  PHIL GINGREY, Georgia
    ANTHONY D. WEINER, New York          STEVE SCALISE, Louisiana
    JIM MATHESON, Utah
    G.K. BUTTERFIELD, North Carolina
    CHARLIE MELANCON, Louisiana
    JOHN BARROW, Georgia
    BARON P. HILL, Indiana
    DORIS O. MATSUI, California
    DONNA M. CHRISTENSEN, Virgin
        Islands
    KATHY CASTOR, Florida
    JOHN P. SARBANES, Maryland
    CHRISTOPHER S. MURPHY, Connecticut
    ZACHARY T. SPACE, Ohio
    JERRY McNERNEY, California
    BETTY SUTTON, Ohio
    BRUCE L. BRALEY, Iowa
    PETER WELCH, Vermont
          Subcommittee on Communications, Technology, and the Internet

                             RICK BOUCHER, Virginia
                                     Chairman
    EDWARD J. MARKEY, Massachusetts      FRED UPTON, Michigan
    BART GORDON, Tennessee                 Ranking Member
    BOBBY L. RUSH, Illinois              CLIFF STEARNS, Florida
    ANNA G. ESHOO, California            NATHAN DEAL, Georgia
    BART STUPAK, Michigan                JOHN SHIMKUS, Illinois
    DIANA DeGETTE, Colorado              GEORGE RADANOVICH, California
    MICHAEL F. DOYLE, Pennsylvania       MARY BONO MACK, California
    JAY INSLEE, Washington               GREG WALDEN, Oregon
    ANTHONY D. WEINER, New York          LEE TERRY, Nebraska
    G.K. BUTTERFIELD, North Carolina     MIKE FERGUSON, New Jersey
    CHARLIE MELANCON, Louisiana
    BARON P. HILL, Indiana
    DORIS O. MATSUI, California
    DONNA M. CHRISTENSEN, Virgin
        Islands
    KATHY CASTOR, Florida
    CHRISTOPHER S. MURPHY, Connecticut
    ZACHARY T. SPACE, Ohio
    JERRY McNERNEY, California
    PETER WELCH, Vermont
    JOHN D. DINGELL, Michigan (ex
        officio)

                                 C O N T E N T S

                                  ----------
                                                                       Page
    Hon. Rick Boucher, a Representative in Congress from the
      Commonwealth of Virginia, opening statement....................     1
        Prepared statement...........................................     3
    Hon. Cliff Stearns, a Representative in Congress from the State
      of Florida, opening statement..................................     5
    Hon. Anna G. Eshoo, a Representative in Congress from the State
      of California, opening statement...............................     6
    Hon. John Shimkus, a Representative in Congress from the State of
      Illinois, opening statement....................................     7
    Hon. Michael F. Doyle, a Representative in Congress from the
      Commonwealth of Pennsylvania, opening statement................     7
    Hon. Mary Bono Mack, a Representative in Congress from the State
      of California, opening statement...............................     8
    Hon. Edward J. Markey, a Representative in Congress from the
      Commonwealth of Massachusetts, opening statement...............     9
    Hon. Robert E. Latta, a Representative in Congress from the State
      of Ohio, prepared statement....................................    95

                                   Witnesses

    Michael T. Williams, Executive Vice President and General
      Counsel, Sony Electronics, Inc.................................    11
        Prepared statement...........................................    13
        Answers to submitted questions...............................    98
    Kyle McSlarrow, President and Chief Executive Officer, National
      Cable and Telecommunications Association.......................    15
        Prepared statement...........................................    17
        Answers to submitted questions...............................    99
    Matthew Zinn, Senior Vice President, General Counsel and Chief
      Privacy Officer, TiVo..........................................    29
        Prepared statement...........................................    31
        Answers to submitted questions...............................   106
    Eric Shanks, Executive Vice President, Entertainment, DirecTV....    41
        Prepared statement...........................................    43
        Answers to submitted questions...............................   108
    Harold Feld, Legal Director, Public Knowledge....................    52
        Prepared statement...........................................    54
    David E. Young, Vice President, Federal Regulatory Affairs,
      Verizon........................................................    68
        Prepared statement...........................................    70
        Answers to submitted questions...............................   114

                       Submitted materials for the record

    Letter of April 28, 2010, from the Motion Picture Association of
      America to the Subcommittee, submitted by Mrs. Bono Mack.......    97

      THE NATIONAL BROADBAND PLAN: COMPETITIVE AVAILABILITY OF NAVIGATION
                                    DEVICES

                                  ----------

                            THURSDAY, APRIL 29, 2010

                  House of Representatives,
    Subcommittee on Communications, Technology,
                                      and the Internet,
                              Committee on Energy and Commerce,
                                                        Washington, DC.
        The subcommittee met, pursuant to notice, at 10:02 a.m., in
    Room 2123, Rayburn House Office Building, Hon. Rick Boucher
    [chairman of the subcommittee] presiding.
        Present: Representatives Boucher, Markey, Eshoo, Doyle,
    McNerney, Welch, Stearns, Shimkus, Buyer, and Bono Mack.
        Also Present: Representative Latta.
        Staff Present: Roger Sherman, Chief Counsel; Tim Powderly,
    Counsel; Greg Guice, Counsel; Shawn Chang, Counsel; Amy Levine,
    Counsel; Michiel Perry, Intern; Sarah Fisher, Special
    Assistant; Neil Fried, Minority Counsel; Will Carty, Minority
    Professional Staff; and Garrett Golding, Minority Legislative
    Analyst.

      OPENING STATEMENT OF HON. RICK BOUCHER, A REPRESENTATIVE IN
               CONGRESS FROM THE COMMONWEALTH OF VIRGINIA

        Mr. Boucher. The subcommittee will come to order. Good
    morning to everyone. Today the subcommittee considers the steps
    that will be necessary in order to enable television viewers to
    go to electronic stores and shop for set-top boxes, much the
    way that people shop for television sets today. The set-top
    boxes would be made by a variety of manufacturers who would
    compete with each other and operate various features such as
    digital video recording or Internet-based functionality.
    Competition would also be based on the price of the box. Some
    of the more capable devices could become the hubs for a home
    entertainment center, switching information of all kinds
    throughout the household. The boxes, whether simple or
    sophisticated, would all have the key capability that is not
    present today, and that is the ability to receive the input of
    television channels from any cable or satellite company and
    then display those channels on television sets.
        If that capability is assured, set-top boxes will become
    competitively available and a tremendous amount of innovation
    would then occur in the design, the manufacture, and the
    marketing of set-top boxes. TV viewers will be able to make a
    one-time purchase of a set-top box and then keep it in service,
    even if they switch their cable provider.
        We have long tried to achieve the goal of making what we
    call navigation devices competitively available. In fact, our
    effort dates from the Telecommunications Act of 1996 in which
    we directed the FCC to adopt rules to assure plug-and-play
    capability between competitively available set-top boxes and
    all cable systems. Now, almost 15 years later, that plug-and-
    play capability remains an elusive goal.
        This morning we consider the next steps that should be
    taken to help us achieve it. In the National Broadband Plan
    recently released by the FCC, the Commission appropriately
    highlighted the need for a direct to consumer market for
    navigation devices and the benefits that devices with both TV
    inputs and Internet access can bring to our overall effort to
    enhance broadband adoption.
        I was pleased that the FCC published a notice of inquiry as
    a first step in assuring that by the end of 2012, all cable and
    satellite TV providers include with their services a simple
    gateway device that converts the cable or satellite company's
    TV signal into a common output that then could be processed by
    whatever set-top box the viewer may own. In the shorter term,
    the Commission is proceeding with a notice of proposed
    rulemaking with the goal of addressing the shortcomings in the
    existing CableCARD program as an interim measure until gateway
    devices are widely deployed.
        The CableCARD is used by TiVo which is the major provider
    of digital video recorders that today are available at retail
    for conditional access to cable programs. A workable CableCARD
    system could bring other providers into this market as well. To
    date, the CableCARD regime has been riddled with complications.
    First, the installation of CableCARDs typically involves
    several multiple-hour visits by sometimes untrained
    technicians. Secondly, pricing of the CableCARD has been
    inconsistent and is often very expensive. Third, some cable
    operators have been moving programming to switched video
    platforms to make more efficient use of their bandwidth.
        But a CableCARD-enabled device cannot access switched
    digital video without substantial and somewhat awkward
    motivations that are difficult to achieve. Revised CableCARD
    rules are therefore needed for the near term as the Commission
    moves to implement the gateway device proposal by the end of
    2012.
        Our witnesses today will speak to the barriers that we must
    overcome for TV viewers to realize the benefits of true set-top
    box plug-and-play capability. I want to thank each of them for
    joining us here this morning. We will turn to your testimony
    shortly. That concludes my opening statement. And I am pleased
    to recognize now the ranking Republican member of our
    subcommittee, the gentleman from Florida, Mr. Stearns.
        [The prepared statement of Mr. Boucher follows:]

        [GRAPHIC] [TIFF OMITTED] T6572A.001

        [GRAPHIC] [TIFF OMITTED] T6572A.002

     OPENING STATEMENT OF HON. CLIFF STEARNS, A REPRESENTATIVE IN
                   CONGRESS FROM THE STATE OF FLORIDA

        Mr. Stearns. Good morning and thank you, Mr. Chairman. And
    I welcome all of our witnesses this morning. The FCC issued
    their broadband plan, which is almost 400 pages. The font was
    about 8 points. Say you go to page 49, there is a little
    paragraph called 4.2 devices. So you read through that, get a
    little further along, you get to the recommendation, 4.12, 12.
    Now, you don't think too much about it, but you read through it
    and you realize it has huge implications. And that is why our
    witnesses are here and this is why this morning we are having
    this hearing.
        The video marketplace is completely different today than it
    was when we passed the original set-top box provisions in 1992
    and 1996. Back then, my colleagues, cable providers served
    between 90 and 100 percent of subscription TV households. Today
    there is a robust video competition as evidenced by the fact
    that satellite and phone companies now serve one-third of
    subscription TV households. And the video market is only
    getting more and more competitive.
        Congress and the FCC need to be careful as it looks to
    impose the new regulations, and perhaps some of the
    recommendations are outlined in this recommendation 4.12. Being
    able to access the Internet from a television is certainly an
    appealing idea to many consumers. As such, the market already
    seems to be delivering this service without any government
    assistance. According to the Consumer Electronics Association,
    in the next couple of years, every TV will be able to connect
    to the Internet wirelessly. In addition, industry analysts
    predict that more than 70 million Internet-connected TVs will
    ship in 2012, up from 15 million in 2009. And the number of
    such TVs in the U.S. will reach 80 million by the year 2013.
        Furthermore, we have seen that the reverse, people using
    their computers to watch TV shows and movies, is already a
    booming industry. Hula.com, for example, had almost a million
    videos viewed just in February. Congress and the FCC need to
    tread very carefully, in my opinion, when attempting to impose
    technology mandates. Let the past be our guide.
        The FCC has been unsuccessful trying to artificially create
    set-top box competition through technology mandates for almost
    20 years. Despite all of their regulatory efforts, the FCC
    concedes that attempts to manufacture a third-party device
    market have failed. Cable operators have been required to foist
    approximately 20 million CableCARDs at a cost of more than $1
    million on subscribers that elect to use operator-provided
    devices. Subscribers, on the other hand, have chosen to use
    only 500,000 CableCARDs with third-party devices.
        In response, most manufacturers have decided not to develop
    CableCARD devices. Part of the problem is that the subscription
    TV and device markets continue to develop rapidly. This has had
    two interrelated consequences.
        First, technology has outpaced the rules, making the
    inflexible CableCARD regime less than useful. Second, rather
    than buy set-top boxes and risk obsolescence, most customers
    rent from the cable operator and simply upgrade when cable
    operators roll out their new features, such as high definition,
    video on demand, and interactive services.
        Trying to artificially create set-top box competition by
    forcing subscription TV providers to support one-size-fits-all
    gateway devices is unlikely to fare any better than similar
    attempts by the FCC through their technology mandates for the
    past 20 years.
        What the FCC could not accomplish when subscription TV was
    an analog cable-centered linear video platform will only be
    harder for a digital, interactive, Internet-enabled video
    platform that is populated by diverse cable satellite and phone
    company architectures.
        While the gateway device proposal stems from a national
    broadband plan recommendation, the question is how this mandate
    promotes broadband is not quite clear. Since most subscription
    TV households likely already have broadband.
        Making the government a gateway between providers and the
    customer is unlikely, in my opinion, to be productive; at best,
    micromanaging the devices' providers will increase costs for
    consumers, hinder investment, and slow innovation. At worst, it
    is a veiled attempt to advance network neutrality and other
    regulations of that sort.
        The lack of set-top box competition in the past was not
    caused by a market failure, but because there was no market.
    With the rise of alternative subscription TV providers in the
    Internet, consumer needs are evolving; the market for third-
    party video devices is following suit. The FCC would do better
    to avoid mandates and allow current innovation to simply
    continue and to flourish.
        Thank you, Mr. Chairman, for this hearing. I look forward
    our witnesses.
        Mr. Boucher. Thank you very much, Mr. Stearns.
        The gentlelady from California, Ms. Eshoo, is recognized
    for 2 minutes.

     OPENING STATEMENT OF HON. ANNA G. ESHOO, A REPRESENTATIVE IN
                 CONGRESS FROM THE STATE OF CALIFORNIA

        Ms. Eshoo. Thank you, Mr. Chairman, for holding this
    hearing on another important recommendation contained in the
    FCC's National Broadband Plan. As you know, I represent the
    heart of Silicon Valley, and it is a place where many companies
    and industries live by the mantra ``innovate or die.''
        The issues of innovation and competition in the plan
    reflect the legislative initiatives that I pursued on behalf of
    my district for many years. In 1996, when Congress passed the
    Telecommunications Act, I partnered with my great pal, Ed
    Markey, on including a provision, section 629, to encourage
    innovation through competition in the set-top box market. In
    the 14 years since, we have only seen minor steps forward in
    creating new technologies.
        It is true that the cable industry did take it upon
    themselves to create CableCARD as a follow-up to the FCC's
    order to implement section 629. But as the FCC recognizes in
    its National Broadband Plan, quote, despite congressional and
    FCC intentions, CableCARDs have failed to stimulate a
    competitive retail market for set-top boxes.
        The FCC's recommendation to address this assessment is to
    have all multichannel video programming distributors install a
    gateway device in subscribers' homes by December 31, 2012. In
    the interim, they also recommend that cable operators fix the
    problems associated with CableCARD no later than October of
    this year. And that is not that far away.
        So I am encouraged by consumer principles recently released
    by the cable industry and their announced commitment to work
    with the FCC and the set-top boxes industry to create consumer
    choice and drive innovation.
        I am interested to hear how the rest of the panel that is
    here today think these principles will be applied. We haven't
    discussed CableCARDs, set-top boxes in this committee for a
    number of years. I remember the issue well. I had just come on
    to the committee. So it is important to revisit it so that we
    can leapfrog into the future.
        So I look forward to hearing from all of the witnesses.
    And, Mr. Chairman, again, thank you for these hearings on the
    FCC's National Broadband Plan. Thank you.
        Mr. Boucher. Thank you very much, Ms. Eshoo.
        The gentleman from Illinois, Mr. Shimkus, is recognized for
    2 minutes.

      OPENING STATEMENT OF HON. JOHN SHIMKUS, A REPRESENTATIVE IN
                  CONGRESS FROM THE STATE OF ILLINOIS

        Mr. Shimkus. Thank you, Mr. Chairman. I am still trying to
    figure out the problem. We have a National Broadband Plan. We
    need to map those areas that are unserved or that are
    underserved, and we need to use the market and our capabilities
    to make sure that everybody has at least a level of high-speed
    Internet access. And I don't get what the frustration or the
    misunderstanding of the capitalist market is all about.
        It is the consumers who drive demand; business then fills
    to meet the demand. It is a system that works. Every time we
    intervene and try to push a service on the public through
    government, we fail. Listen, we have got video on watches, we
    have got videos in automobiles, we have got video on phones. We
    get video over copper, we get video over cable, we get video
    terrestrially, we get video over the satellite. We ought to be
    focusing on getting high-speed Internet access to unserved
    areas and underserved areas. That is where our focus should be,
    and let the competitive marketplace meet the demand that the
    public wants to be met and not use government to force a demand
    in an area where the public is not going.
        Thank you, Mr. Chairman. I yield back.
        Mr. Boucher. Thank you very much, Mr. Shimkus.
        The gentleman from Pennsylvania, Mr. Doyle, is recognized
    for 2 minutes.

    OPENING STATEMENT OF HON. MICHAEL F. DOYLE, A REPRESENTATIVE IN
             CONGRESS FROM THE COMMONWEALTH OF PENNSYLVANIA

        Mr. Doyle. Thank you, Mr. Chairman. Well, I will give you a
    little known fact about myself. I like bands like Earth, Wind
    and Fire. And I am going to tell you another secret. Kenneth
    likes to watch Soul Train reruns, complete with vintage Johnson
    Hair Care Products advertisements on demand. And much to our
    delight, our respective cable companies offer those services.
        But the only way I can fill my house back in Pittsburgh
    with the hippest trip in America is with a cable box provided
    by the cable company, not from a box or a TV I can purchase at
    retail, even if I think that box gives me a better user
    experience and has features that I find useful, like maybe
    Internet connectivity.
        Now, according to the Census Bureau, 30 percent of
    Americans have never used the Internet, but 99 percent of
    Americans have a television and over 85 percent of Americans
    have some form of pay TV service. Those numbers overlap. I
    agree with Chairman Boucher on this issue, and appreciate and
    respect his leadership, which is why I am glad that the FCC's
    National Broadband Plan identified this as an issue that could
    help drive demand for Internet access.
        I look forward to a final rule fixing some issues with
    CableCARD technology, and I look forward to all of the
    witnesses today talking about the FCC's notice of inquiry about
    how all devices can work with all video providers in the
    future.
        And with that, Mr. Chairman, I will yield back.
        Mr. Boucher. Thank you very much, Mr. Doyle.
        I haven't had to worry about hair care products in quite
    some time now, but I am glad that you are still concerned.
        The gentleman from Michigan, Mr. Upton, is recognized for 2
    minutes. Oh, he is no longer with us.
        The gentleman from Indiana, Mr. Buyer, passes and will have
    2 minutes added to his questioning time.
        And the gentlelady from California, Mrs. Bono Mack, is
    recognized for 2 minutes.

     OPENING STATEMENT OF HON. MARY BONO MACK, A REPRESENTATIVE IN
                 CONGRESS FROM THE STATE OF CALIFORNIA

        Mrs. Bono Mack. Good morning, Chairman Boucher, Ranking
    Member Stearns and distinguished panel. The subject matter
    before us today is highly complex. We are confronting issues
    surrounding how video entertainment is delivered to the
    American consumer and an increased use of our television as a
    means of accessing the Internet. Both involve capital-intensive
    areas of our economy, and I think the FCC and Congress should
    proceed with extreme caution.
        At the outset, I would like the record to express my
    support for policies that provide individuals and companies
    with the freedom to innovate. Such freedom allows bright minds
    to develop products like video on demand and DVR. Therefore,
    beyond the equal application of existing laws and regulations,
    I am wary of the government mandating technical standards
    beyond section 629 or the regulations surrounding the
    Commission's implementation of that law.
        In addition to my concerns surrounding technical mandates,
    I also would like to remind the committee about the importance
    of content protections. Few people are investing in set-top
    boxes to watch hearings like this one on C-SPAN, no matter how
    exhilarating we might think this discussion ultimately is,
    especially with Mr. Doyle's admission of Earth, Wind and Fire.
    But consumers want a complete viewing experience that maximizes
    the capabilities of the technology they have purchased.
        The viewing experiences of the consumer are the work of a
    large number of people who have to get paid. The only way they
    get paid is when their content is protected and sold, not
    stolen. As such, the manufacturers of set-top boxes play a
    vital role in the delivery and protection of content.
        I believe that no matter how we ultimately move forward,
    the protection of content should remain a high priority. To
    further make this point, I would like to submit a letter from
    the Motion Picture Association of America.
        Thank you, Mr. Chairman. I look forward to today's
    discussion and I yield back the balance of my time.
        Mr. Boucher. Thank you very much, Mrs. Bono Mack. And
    without objection, the letter you have mentioned will be made a
    part of our record.
        [The information appears at the conclusion of the hearing.]
        Mr. Boucher. The gentleman from Massachusetts, Mr. Markey,
    is recognized for 2 minutes.

    OPENING STATEMENT OF HON. EDWARD J. MARKEY, A REPRESENTATIVE IN
            CONGRESS FROM THE COMMONWEALTH OF MASSACHUSETTS

        Mr. Markey. Thank you, Mr. Chairman, very much. And thank
    you for your leadership on this issue. Back in 1993 when I was
    chairman of the subcommittee, I worked with Jack Fields on the
    National Communications Competition and Information
    Infrastructure Act, H.R. 3636. And like the National Broadband
    Plan's recommendation on set-top boxes, our bill was designed
    to unleash competition and innovation in the retail
    marketplace, enabling consumers to buy the set-top box of their
    choice independent of their network provider.
        The bill passed the House overwhelmingly in June of 1994,
    423-to-4. But it wasn't until the next Congress that the set-
    top box language was included as a Bliley-Markey amendment
    incorporated into the 1996 Telecommunications Act, becoming
    section 629 of the statute.
        In the age of the smart phone, we can think of these
    devices now as smart video boxes, the converter boxes, set-top
    boxes, modems consumers use daily, the devices that ideally
    would help them navigate to the video and information sources
    of their choice.
        Fourteen years is an eternity in telecommunications policy.
    We might as well be talking about the Peloponnesian laws or the
    last time the Bruins won the Stanley Cup. But it is clear,
    however, that over the last 14 years, the promise of the smart-
    phone box provision has not been fulfilled.
        While there have been tremendous innovations in two of the
    three main devices for connecting to broadband service, smart
    phones and personal computers, the set-top box has been the box
    that time forgot. It is simply not as smart or as available as
    it should be for consumers. And that is about to change with
    the April 21st issuance of the notice of inquiry and a further
    notice of proposed rulemaking, as recommended by the National
    Broadband Plan.
        The FCC is now beginning to seek ways to effectively
    implement section 629 from 14 years ago, to give greater choice
    to consumers and increase broadband adoption. So this is going
    to be a huge change; it will make the consumer king, which
    should be our goal. Just get out of the way, let them have a
    technology that lets them go anywhere they want to go, do
    anything they want to do.
        Thank you, Mr. Chairman, for having this hearing. We are on
    the dawn of a brand new and I think best era we have ever had
    in telecommunications.
        Mr. Boucher. Thank you very much, Mr. Markey.
        The gentleman from Vermont, Mr. Welch, is recognized for 2
    minutes.
        Mr. Welch. Thank you, Mr. Chairman. I will pass.
        Mr. Boucher. Thank you very much, Mr. Welch. And we will
    add 2 minutes to your time for questioning our panel of
    witnesses today.
        All members have been recognized for their statements. And
    we are now pleased to turn to our panel of witnesses and we
    thank each of you for your attendance here this morning.
        Mr. Michael Williams is the Executive Vice President and
    General Counsel of Sony Electronics.
        Mr. Kyle McSlarrow is the President and Chief Executive
    Officer of the National Cable and Telecommunications
    Association.
        Mr. Matthew Zinn is the Senior Vice President, General
    Counsel and Chief Privacy Officer for TiVo.
        Mr. Eric Shanks is the Executive Vice President of
    Entertainment at DirecTV.
        Mr. Harold Feld is the Legal Director for Public Knowledge.
        And Mr. David Young is the Vice President of Federal
    Regulatory Affairs at Verizon.
        Each of these gentlemen is deeply knowledgeable about the
    matter we are discussing here this morning. And we want to
    thank all of you for coming and joining us and sharing your
    views with us.
        Without objection, your full prepared written statements
    will be made a part of our record. We would welcome your oral
    presentations and ask that you try to keep those to
    approximately 5 minutes, and that will give us ample time to
    exchange ideas and ask questions of you.

    STATEMENTS OF MICHAEL T. WILLIAMS, EXECUTIVE VICE PRESIDENT AND
       GENERAL COUNSEL, SONY ELECTRONICS, INC.; KYLE McSLARROW,
       PRESIDENT AND CHIEF EXECUTIVE OFFICER, NATIONAL CABLE AND
       TELECOMMUNICATIONS ASSOCIATION; MATTHEW ZINN, SENIOR VICE
      PRESIDENT, GENERAL COUNSEL AND CHIEF PRIVACY OFFICER, TIVO;
    ERIC SHANKS, EXECUTIVE VICE PRESIDENT, ENTERTAINMENT, DIRECTV;
      HAROLD FELD, LEGAL DIRECTOR, PUBLIC KNOWLEDGE; AND DAVID E.
       YOUNG, VICE PRESIDENT, FEDERAL REGULATORY AFFAIRS, VERIZON

        Mr. Boucher. Mr. Williams, we will be happy to begin with
    you, and I would ask that you hold your microphone as close to
    you as you can. I think even closer than that would be good. We
    can hear you much better. Be sure you have turned it on. Thank
    you.

                    STATEMENT OF MICHAEL T. WILLIAMS

        Mr. Williams. Good morning, Chairman Boucher, Ranking
    Member Stearns, and distinguished members of the subcommittee.
    Thank you for allowing Sony Electronics this opportunity to
    testify on this very important issue. Sony is here today to
    lend its support to the FCC's National Broadband Plan and
    specifically to the gateway device proposal it describes. When
    implemented, it will bring consumers better value and a nearly
    infinite number of choices for news, information, and
    entertainment. The gateway device will allow true competition
    among content owners, service providers, and device
    manufacturers like Sony. And we all know where there is true
    robust competition, prices drop and services improve.
        The concept of an MVPD gateway is not something new or
    revolutionary. In fact, this service model has been discussed
    among device manufacturers in the MVPD community for many
    years. The gateway concept is a natural evolutionary step in
    the progression of television viewing.
        For the first 50 years, what we might call TV 1.0,
    consumers received video through one national standard that
    applied to all over-the-air broadcasters. It was easy to use,
    it worked well and it allowed for a host of innovation and
    competition in the television receiver market.
        Starting in the 1970s, we entered into TV 2.0, the MVPD
    age, first through cable, then satellite and, most recently,
    telephone companies. TV 2.0 expanded consumer choice from a
    handful of channels to hundreds, and the technology has evolved
    from one to many, but it came with a price--the lack of
    interoperability.
        Now we are at the dawn of TV 3.0, a confluence of the
    Internet and traditional MVPD services. TV 3.0 will leverage
    the power of the Internet to enable consumers to tailor their
    television viewing in ways we can only imagine. It will enable
    viewers to interact with the program they receive and with each
    other. More importantly, it will give consumers the tools they
    need to man their programming choices to get what they want,
    when they want it, and to decide where they will view it.
        Now, you may ask, What does this new TV 3.0 world have to
    do with set-top boxes; why do Congress and the FCC need to be
    involved? The answer, we look back when we changed from TV 1.0
    to 2.0. Over-the-air broadcasts relied on a single nationwide
    standard to transmit a television signal from the station to
    the viewer.
        In the MVPD age, there is no single nationwide transmission
    standard. Every cable operator, every satellite operator uses
    something different. Consumers simply subscribe to one MVPD
    provider, and they don't want to spend the extra money to buy a
    device that can receive every one of these many different
    signals. The genius of this universal gateway device in this
    approach is that it combines the best of both worlds. It
    dramatically facilitates the integration of Internet-delivered
    video and data along with traditional MVPD services.
        Simply put, the gateway device is a translator. It takes
    the transmission signal from the service provider and
    translates it into an output signal that all retail consumer
    devices can understand.
        Now, there are other elements that are necessary for the
    gateway approach to work. First, consumer devices such as
    televisions need to operate on a level playing field against
    each other, which requires the use of a common national
    standard.
        Second, in order to provide an innovative consumer
    experience, the device needs to be able to tell the consumer
    what content is available and to access it.
        Third, the output from the gateway device must be simple
    and open, like the existing Wi-Fi or USB standards. This output
    standard should not come with extraneous licensing or technical
    obligations that would hinder innovation, impair widespread
    implementation and offer consumers little value. It is clear
    there are details that need to be filled in, but the committee
    should understand that the technologies necessary to implement
    this gateway device are in wide use today and they existed for
    many years.
        Sony believes that the gateway device is a workable
    solution to implement the congressional mandate contained in
    section 629. All of us, this committee, the FCC, the service
    providers, content providers, manufacturers and consumers have
    a stake in bringing television into its third age. Sony is
    convinced that the Commission's gateway proposal can and will
    succeed for all stakeholders. And we look forward to joining
    these stakeholders to make TV 3.0 a reality. Thank you very
    much.
        Mr. Boucher. Thank you, Mr. Williams.
        [The prepared statement of Mr. Williams follows:]

        [GRAPHIC] [TIFF OMITTED] T6572A.003

        [GRAPHIC] [TIFF OMITTED] T6572A.004

        Mr. Boucher. Mr. McSlarrow.

                      STATEMENT OF KYLE McSLARROW

        Mr. McSlarrow. Thank you, Mr. Chairman, Ranking Member
    Stearns and distinguished members of the subcommittee. First
    let me just state at the outset that we are very supportive of
    the direction the FCC is going both with its notice of inquiry
    and the NPRM. We think what they presented is a very thoughtful
    case for innovation that ties together really 2 strands that I
    think it is worth taking just a moment to unpack. The first
    strand, as you have identified, Mr. Chairman, and others, goes
    back to section 629, which is how do you create a competitive
    retail market for devices. It is not just set-tops. It could be
    televisions or other navigation devices. That marketplace
    hasn't taken off. It hasn't taken off principally for two
    reasons: one, CableCARDs were functionally deployed in one-way
    devices at a time when the world was turning two-way. So you
    have one-way devices with CableCARDs and there really is no
    consumer demand for one-way devices. Really at this moment in
    time, TiVo is really the only remaining successful player in
    that field.
        The second reason it didn't take off is pretty obvious.
    Right now CableCARDs, with the exception of Verizon, are only
    used by cable companies; and therefore if you buy a device that
    is a CableCARD device, you can't actually take it to another
    competitor. In today's world, in 2010, four out of ten
    consumers take a multichannel video service from somebody other
    than a cable company.
        The second strand is what was really identified in the
    broadband plan, which is totally apart from whether or not
    there is a retail market: What do we do, what are the
    opportunities and challenges of integrating television and
    video on the Internet? And I think what we tried to do is put
    those two together in a way that we are actually very intrigued
    by.
        Now, I think there are a lot of unanswered questions. And
    to be fair to the FCC, they have teed up most of those
    questions which is why they started with an NOY. But I think
    our role in terms of the cable industry is to think about not
    so much the past, but what the opportunities are for the
    future. And to that end, as Ms. Eshoo said, we actually
    submitted to the FCC and to this subcommittee a set of consumer
    principles. What are the goals here?
        Now, we have identified a couple that we think everybody
    should be able to sign up to. One, we do think consumers ought
    to be able to connect devices to their multichannel video
    service without at least a set-top box. They ought to have a
    retail market. Number two, we think that consumers ought to be
    able to take those devices they do purchase at retail and move
    them from one provider to another, which promotes competition.
    Third, we think that consumers should have the option of being
    able to access Internet; in particular, to access Internet
    video. Fourth, we think, more than that, they ought to have the
    ability to search across all of the platforms so that they can
    identify video on whatever the multichannel service is
    providing, whether it is video on demand or a linear channel or
    YouTube or Netflix or some other service that is emerging on
    the Internet platform.
        Now, the caution we have is that we are skeptics of
    government technology mandates. But that doesn't mean that we
    shouldn't be at the table doing the hard work necessary to try
    to achieve those goals. And we have committed to the FCC and we
    commit to you that we will do that.
        There is still a host of issues that are unanswered. We
    actually conceptually talked about ideas like the gateway
    device that Mike was just talking about a moment ago. I am not
    sure a gateway device is fully fleshed out right now. At a
    conceptual level there should be some interface that we ought
    to be able to work toward that allows us to accomplish those
    goals. But there are still enormous issues related to content
    protection, a lot of the promotional, transactional, and
    advertising issues surrounding each of these platforms.
        We have other providers here today. We have different
    technology platforms. How we make that seamless is still a
    challenge. But I think, as Mike said a moment ago, the
    technologies probably exist. And if there is a will for all of
    the providers, the CE manufacturers, the content providers to
    work together with the FCC, I think we can achieve them. Thank
    you, Mr. Chairman.
        Mr. Boucher. Thank you very much, Mr. McSlarrow.
        [The prepared statement of Mr. McSlarrow follows:]

        [GRAPHIC] [TIFF OMITTED] T6572A.005

        [GRAPHIC] [TIFF OMITTED] T6572A.006

        [GRAPHIC] [TIFF OMITTED] T6572A.007

        [GRAPHIC] [TIFF OMITTED] T6572A.008

        [GRAPHIC] [TIFF OMITTED] T6572A.009

        [GRAPHIC] [TIFF OMITTED] T6572A.010

        [GRAPHIC] [TIFF OMITTED] T6572A.011

        [GRAPHIC] [TIFF OMITTED] T6572A.012

        [GRAPHIC] [TIFF OMITTED] T6572A.013

        [GRAPHIC] [TIFF OMITTED] T6572A.014

        [GRAPHIC] [TIFF OMITTED] T6572A.015

        [GRAPHIC] [TIFF OMITTED] T6572A.016

        Mr. Boucher. Mr. Zinn. And please pull that microphone very
    close.

                       STATEMENT OF MATTHEW ZINN

        Mr. Zinn. As far as it can go. Chairman Boucher and Ranking
    Member Stearns, thank you for inviting TiVo to discuss device
    competition and the National Broadband Plan. Consumers love
    TiVo products because they combine the ability to find, record,
    and play cable programming with the ability to find, record,
    and play broadband programming, Netflix, Amazon, Blockbuster,
    YouTube all in one easy-to-use user interface.
        TiVo puts the consumer in charge of its own viewing
    schedule while respecting the rights and concerns of copyright
    holders. TiVo's ideas have been copied, though never equaled,
    by video service providers in their own lease boxes, yet TiVo
    boxes have never been placed on an equal footing with leased
    boxes in terms of access to programming, pricing, installation
    and support.
        The CableCARD was designed by the cable industry itself so
    that the consumer need only turn on the product, read two sets
    of numbers on the screen, and call them into his local cable
    operator. These are being supported this way in a few systems
    around the country. But by and large, installation and support
    have been woefully inadequate. And even when CableCARD-reliant
    devices have been supported, cable operators have been making
    channels unavailable to consumers who rely on these devices.
        Let me show you what I am talking about in terms of access
    to cable programming. Here is a Web site showing a channel
    lineup for a cable operator system in Utica, New York.
        [next slide]
        You can clear the Web site and then you can search by
    programming package.
        So the next slide shows that we have searched by the
    programming package entitled ``Not Available on CableCARD.''
    Funny title for a programming package that contains over 200
    channels that are not available on CableCARD according to this
    Web site.
        [Slide shown.]
        The next slide shows what is in that package. Well, there
    are a lot of movie channels that consumers are being told are
    not available on CableCARD.
        [Slide shown.]
        No hablo espanol on CableCARD.
        [Slide shown.]
        HD movies. If you buy an HD box or you have an HDTV, you
    kind of want HD movies. Not available on CableCARD.
        [Slide shown.]
        Anybody like sports? Not available on CableCARD.
        [Slide shown.]
        Twenty-one of the top 25 top-rated channels in HD are not
    available on CableCARD according to the Web site.
        My point is not to pick on a particular cable operator
    cable system only to graphically show the unequal competitive
    situation for retail set-top boxes. The fact is most of these
    channels may be accessed by TiVo boxes using a tuning adapter.
    Yet there is no mention of that here, no mention of digital, no
    mention of tuning adapter. All the consumer sees is ``not
    available on CableCARD,'' and most consumers would look at that
    and say, I am not going to buy a retail box.
        Is it any wonder why more people lease boxes than buy
    retail boxes when confronted with this situation?
        And even if you get past the programming issue, then you
    have pricing issues: How much is a CableCARD, do I have to pay
    for a lease box and a CableCARD? And then there are
    installation issues which are now legendary. Faulty cards;
    untrained installers; installers who fail to bring CableCARDs
    who are not familiar with them; multiple truckloads to do a
    signal install, and so on.
        Fortunately, Congress anticipated the video service
    providers might foreclose device competition and innovation.
    The Consumer Electronics Availability Act of 1995 directed the
    FCC to assure in its regulations the commercial availability of
    competitive devices for multichannel video programming
    providers. This subcommittee's bill became section 629; in
    1996, the Telecommunications Act.
        After many years of intermittent and inconsistent efforts
    to foster video device competition, Chairman Genachowski
    proposes to really advance the ball here in two proceedings.
    First is a rulemaking to allow products such as TiVos, which
    rely on CableCARDs, to work on cable systems free of technical
    handicap. And the second is notice of inquiry to consider a
    gateway for competitive and innovative products to operate on
    cable, satellite, telephone video systems as much as personal
    computers and portable products, operable Wi-Fi connections
    today.
        My earlier slides show that cable operators have recently
    made ordinary subscription channels unavailable to competitive
    products, even though our customers must continue to pay for
    them. Cable operators do this with a switch digital technique
    in which certain of these channels must now be electronically
    requested from the head end. TiVo devices have the capability
    to send the necessary requests to the head end using broadband.
        But TiVo's license from cable labs does not allow our
    products to be configured to make these simple requests, and
    cable systems currently are not set up to receive them. A
    regime in which a cable subscriber is required to use an
    operator-provided set-top box to receive a significant amount
    of programming is the very antithesis of what a competitive
    set-top box policy is designed to achieve.
        We are encouraged that the NCTA has recognized this in its
    statement of principles to Chairman Genachowski, and we look
    forward to working with cable to address this critical issue.
    We applaud Chairman Genachowski for proposing these solutions.
        In summary, Mr. Chairman, CableCARD is not hard to fix and
    we are not asking for much. We are asking for installation
    support, which is in the law. We are asking for pricing
    transparency and nondiscrimination, and we are asking for
    upstream signaling so that retail boxes have regular cable
    programming without an operator-provided set-top box. All of
    these are what was supposed to be provided by the plug-and-play
    agreement that was signed into law in 2003. Thank you.
        Mr. Boucher. Thank you, Mr. Zinn.
        [The prepared statement of Mr. Zinn follows:]

        [GRAPHIC] [TIFF OMITTED] T6572A.017

        [GRAPHIC] [TIFF OMITTED] T6572A.018

        [GRAPHIC] [TIFF OMITTED] T6572A.019

        [GRAPHIC] [TIFF OMITTED] T6572A.020

        [GRAPHIC] [TIFF OMITTED] T6572A.021

        [GRAPHIC] [TIFF OMITTED] T6572A.022

        [GRAPHIC] [TIFF OMITTED] T6572A.023

        [GRAPHIC] [TIFF OMITTED] T6572A.024

        [GRAPHIC] [TIFF OMITTED] T6572A.025

        [GRAPHIC] [TIFF OMITTED] T6572A.026

        Mr. Boucher. Mr. Shanks.

                        STATEMENT OF ERIC SHANKS

        Mr. Shanks. Good morning. I am Eric Shanks, Executive Vice
    President of Entertainment at DirecTV. And thank you for
    allowing me to testify today.
        To foster innovation and increase broadband adoption, the
    FCC is considering a plan to stimulate a retail market for
    smart video devices. While DirecTV supports the goal of
    innovation and broadband adoption, we have concerns with this
    proposal. Specifically the FCC may require cable, satellite,
    and other video providers to develop an all-video adapter whose
    sole function is to connect its service with third-party
    devices. The manufacturers of these devices could strip out our
    service and replace it with their own.
        This government intervention is both unnecessary and
    harmful. Innovation and the convergence of broadband in TV are
    prevalent in the market today and growing. DirecTV is driving
    this effort by including Ethernet ports on all of our HD boxes
    and access to some of the most popular Internet sites like
    Flicker, Facebook and Twitter. By ignoring what is occurring in
    the market today, the proposal will have the opposite effect of
    what it intends. It could give cable a clear competitive
    advantage. It would place our innovative services at risk and
    result in increased costs and inferior customer service.
        We built our business nearly 20 years ago through
    innovation. And it is imperative that we do even more today to
    remain competitive. In the last 15 months alone, we have
    downloaded 76 new features to our set-top box. We do more than
    simply transmit plain vanilla programming. The features and
    services you are about to see create the video experience that
    is unique to DirecTV.
        Please roll the video. Should I go on and come back to the
    video later? There we go. I assure you we do give our customers
    audio.
        Ms. Eshoo. Just not Congress, huh?
        [Video played.]
        Mr. Shanks. So everything you just saw resides in our set-
    top box. Under the proposal, however, we cannot ensure that
    these features or any future innovations would work with third-
    party boxes. Thus consumers are left with three choices: one,
    pay for a new box from DirecTV; two, settle for an incomplete
    service that they expect to get; or three, switch to a provider
    whose technology is more suited to an all-video device.
    Although we don't advocate an all-video adapter mandate for any
    service provider, cable's two-way architecture allows it to
    place its intelligence in the head end rather than the home.
    This means its services will still work with third-party
    devices. This, however, is not an option for satellite. Thus
    the proposal would skew the competitive landscape towards
    cable, undermining the government's longstanding efforts to
    stimulate competition.
        In addition, allowing third parties to strip out our
    services that you just saw and develop their own user interface
    will diminish the industry-leading customer service they expect
    from DirecTV.
        When DirecTV first launched, there were hundreds of models
    of set-top boxes, each with their own controls and features.
    And frankly, we struggled to help subscribers handle even the
    most basic functions when they called us, such as setting
    parental controls or turning on closed captioning.
        This proposal would turn back the clock, leaving no clear
    lines of responsibility for customer service. We receive 140
    million customer phone calls a year, including a great number
    regarding the set-top box. Who will take these calls and, more
    importantly, who will solve the customers' problems?
        We believe there are better ways for the FCC to achieve its
    goals without the potential harm to innovation, competition and
    customer service.
        And, fortunately, the FCC is willing to consider
    alternatives. DirecTV is already implementing one such
    solution. The RVU Alliance is a consortium of over two dozen
    distributors and manufacturers that have developed an open
    standard for in-home networking capabilities that allow
    subscribers to watch content anywhere in the home on any
    device, whether from any paid TV provider or the Internet. With
    RVU, everyone is free to innovate and provide unique services
    which accomplishes our shared goals. It fosters innovations,
    integrates broadband and video, eliminates the need for
    multiple set-top boxes, and creates devices that can work with
    different video providers.
        DirecTV is eager to work with the FCC and with Congress to
    achieve the shared goals of innovation and broadband adoption.
    Thank you, and I look forward to your questions.
        Mr. Boucher. Thank you very much, Mr. Shanks.
        [The prepared statement of Mr. Shanks follows:]

        [GRAPHIC] [TIFF OMITTED] T6572A.027

        [GRAPHIC] [TIFF OMITTED] T6572A.028

        [GRAPHIC] [TIFF OMITTED] T6572A.029

        [GRAPHIC] [TIFF OMITTED] T6572A.030

        [GRAPHIC] [TIFF OMITTED] T6572A.031

        [GRAPHIC] [TIFF OMITTED] T6572A.032

        [GRAPHIC] [TIFF OMITTED] T6572A.033

        [GRAPHIC] [TIFF OMITTED] T6572A.034

        [GRAPHIC] [TIFF OMITTED] T6572A.035

        Mr. Boucher. Mr. Feld.

                        STATEMENT OF HAROLD FELD

        Mr. Feld. Thank you, Mr. Chairman, Ranking Member Stearns,
    and members of the subcommittee. My name is Harold Feld and I
    am Legal Director for Public Knowledge. My organization, joined
    by other consumer and public interest groups as the FCC is part
    of the National Broadband Plan to adopt a universal gateway for
    set-top boxes and video devices. Two of those organizations,
    Consumers Union and Media Access Project, joined us in the
    written testimony submitted today, describing how a universal
    video gateway referred to in the FCC proceeding initiated last
    week is a set-back box, or AllVid device, will benefit
    consumers and further our National Broadband Plan. We believe
    that such a device applied across all MVPD platforms would
    promote innovation in the device and service market, enhance
    competition among MVPDs and help spur adoption of broadband by
    increasing the value proposition of broadband to consumers.
        We also believe that the circumstances in today's market,
    as MVPDs are increasingly offering triple-play packages of
    video and voice and data, cable is undergoing a digital
    convergence and the ferment of VC interest in making online
    video available on every screen creates a perfect opportunity
    for the FCC to reboot its implementation of section 629.
        As the FCC recognized in the recent notice of inquiry, the
    proposed AllVid approach could do for this generation of
    devices what the FCC's historic Carterfone decision and
    subsequent rulemaking did for the phone network, saving
    consumers monthly rental fees, opening up a new universe of
    equipment choices and, finally, creating the opportunity for
    unforeseen innovations such as the modem and the dial-up
    Internet.
        I want to make three points. Choice and competition in
    video devices is good policy. As everyone knows, you can attach
    any device and run any application on your broadband connection
    at home. Whether it is an Apple, a Dell, an HP or an energy-
    saving device that lets me adjust my home thermostat remotely,
    I can attach it to my home broadband connection. My mother and
    my mother-in-law can have video calls with what I believe is
    their favorite grandson, and it doesn't matter that I have
    FiOS; my folks have RCN and my in-laws use Comcast. The
    equipment all functions the same.
        This didn't happen by accident or because providers wisely
    arrived at this result through self-regulation. It happened
    because more than 40 years ago, the FCC announced a decision
    called Carterfone, that customers had a right to attach devices
    to the phone network. By setting a few simple ground rules, the
    FCC created the world of today in which consumers enjoy devices
    and services impossible to have imagined when it decided
    Carterfone.
        With this experience in mind, Congress first in 1992 and
    then in 1996 required the FCC to create such ground rules for
    video devices. Nearly 15 years later, consumers are still
    waiting.
        My second point. The FCC's attempt to implement the law
    through CableCARD has not worked. CableCARD has not lived up to
    its promise. Others here can speak more directly to why
    CableCARD failed in that promise. In general, we believe, as
    the name CableCARD implies, the FCC simply delegated too much
    to the cable industry. CableCARD works for cable. It does not
    plug-and-play for consumers. It does not work with U-Verse or
    other IPTV. It is not required on DBS. And it does not play
    well with FiOS.
        The FCC further undercut CableCARD adoption by granting
    countless waivers, including waivers for so-called low-cost,
    low-functionality boxes that undercut adoption.
        As a first step, the FCC needs to fix CableCARD. Many
    consumers and competitive devices rely on it, but we need a
    fresh approach that is easy to use for consumers and promotes
    competition and innovation.
        My third point. The video gateway is the best solution to
    implement the law, promote consumer choice, and promote
    broadband. All MVPD should provide consumers with a simple
    device that communicates with the MVPD network and makes MVPD
    services available to third-party devices. This will bridge the
    gap between closed MVPD networks and open home media
    ecosystems. It will open up all subscription TV networks to
    device competition. It is a win for consumers, for consumer
    electronics and retail industries, and ultimately for the MVPD
    industry as well.
        As we saw with Carterfone, opening up the phone network for
    new devices created new opportunities for the telephone network
    providers to sell new services that they would never have
    developed without device entrepreneurs stimulating demand.
        Only the video gateway model will help fulfill the goals of
    the National Broadband Plan in promoting adoption as well as
    just deployment. As Mr. Doyle observed earlier, between 85
    percent and 90 percent of Americans rely on some form of MVPD,
    and almost all Americans have a television set, but only 60
    percent of Americans have broadband in their homes.
        By approaching broadband adoption through the media device
    most familiar to all Americans, their television set, we can
    help bridge the digital divide and make broadband for all
    Americans a reality. Thank you.
        Mr. Boucher. Thank you very much, Mr. Feld.
        [The prepared statement of Mr. Feld follows:]

        [GRAPHIC] [TIFF OMITTED] T6572A.036

        [GRAPHIC] [TIFF OMITTED] T6572A.037

        [GRAPHIC] [TIFF OMITTED] T6572A.038

        [GRAPHIC] [TIFF OMITTED] T6572A.039

        [GRAPHIC] [TIFF OMITTED] T6572A.040

        [GRAPHIC] [TIFF OMITTED] T6572A.041

        [GRAPHIC] [TIFF OMITTED] T6572A.042

        [GRAPHIC] [TIFF OMITTED] T6572A.043

        [GRAPHIC] [TIFF OMITTED] T6572A.044

        [GRAPHIC] [TIFF OMITTED] T6572A.045

        [GRAPHIC] [TIFF OMITTED] T6572A.046

        [GRAPHIC] [TIFF OMITTED] T6572A.047

        [GRAPHIC] [TIFF OMITTED] T6572A.048

        [GRAPHIC] [TIFF OMITTED] T6572A.049

        Mr. Boucher. Mr. Young.

                      STATEMENT OF DAVID E. YOUNG

        Mr. Young. Chairman Boucher, Ranking Member Stearns and
    members of the subcommittee, thank you very much for the
    opportunity to speak with you on what is obviously a very
    important issue to the chairman and this subcommittee, and has
    been for a long time. And the reason I believe it has been
    important is because this is an issue that you believe will
    drive competition, innovation, and consumer choice, which was
    certainly desperately required when first visited in 1992 and
    even again in 1996.
        But a lot has changed since then. It has been less than 5
    years that Verizon first began offering FiOS TV service to the
    residents of Keller, Texas. And our 3 million subscriber base
    is small compared to our cable and satellite competitors, but
    we are playing big. And our innovations in the marketplace are
    forcing our larger competitors to respond to us.
        We have spent $23 billion building an all-fiber-to-the-home
    network that is capable of delivering the fastest broadband
    speed, and we have integrated the best of digital cable
    technology with Internet protocol to provide the best video
    experience possible.
        We have also introduced a number of service innovations. We
    were the first multiroom DVR. We were the first to provide a
    media manager service that allowed content from your PC,
    pictures, and music to be played through your television set.
    And we brought something to the market called widgets. And
    these widgets are applications that run on our set-top boxes.
        The first ones that we brought were traffic and weather.
    These are still very popular ones. But we were the first to
    bring Twitter and Facebook to the TV. And these turn television
    watching into a true social media experience.
        We have brought other ones like the NFL Red Zone that
    allows you to have an interactive multimedia sports experience
    rather than just watching programming on the TV. And just this
    week, we announced our YouTube and iheartradio apps, so that
    you can access all of the YouTube content or tune into hundreds
    of radio stations from across the country. And all of this is
    through the leased set-top boxes that our customers have today.
        But we are not the only ones doing this. You walk into any
    Best Buy or other big box store, you will find lots of
    innovative, smart video devices available. These are devices
    like the XBox or the Wii or the PlayStation. There are smart
    TVs. There are Blue Ray players. There are specialized boxes.
    Some call them Internet media adapters or net-top boxes like
    Apple PD or Roku and, of course, PCs, laptops, netbooks and
    tablet computers. All of these are able to access video content
    over the Internet and bring that experience to a customer's
    television set. And so from these devices you can access
    Netflix, you can access YouTube, Amazon, Major League Baseball
    and more.
        So there is actually a robust retail navigation device
    market. The problem is that these same devices can't be used to
    access your subscription TV program, and that is what we are
    all trying to figure out. That, of course, was the vision
    behind section 629. It is the vision behind the FCC's notice of
    inquiry, and it is the reason that we have been reaching out to
    our CE partners and trying to demonstrate proof-of-concept
    prototypes that demonstrate that their CE devices could work
    with our service without the need for a leased set-top box. It
    is also why Verizon has taken a leadership position in a number
    of standard setting bodies to help develop the standards to
    make all of this possible.
        We believe that this is achievable, but we have concerns
    about the specific proposal. We think that a gateway model
    imposed on all technologies is not necessarily the best way to
    go. It is certainly not the only way to go. And we think that
    it risks repeating some of the mistakes that were made in the
    past in the implementation of CableCARD.
        Mr. Young. So what is the right way to achieve success? Any
    policy framework needs to recognize consumer choice. Some
    consumers prefer to lease a box and let somebody else buy it
    and maintain it and take care of it. Others would prefer to buy
    the box and own it themselves. And so, any solution should
    ensure both of those things.
        Any solution should encourage collaboration. Collaboration
    between the device makers and the service providers is
    important because it can improve the experience for the
    customer. It can help avoid problems by making sure that every
    detail is taken care of in advance. And if things do break, as
    they often do, it ensures that there is a way of getting that
    problem resolved without leaving the customer stuck in the
    middle with two parties pointing fingers at each other.
        We have to ensure that the MVPD experience is delivered to
    the customer the way the customer expects it to be delivered
    and that they are getting everything that they pay for.
        And then, finally, I think all of this goes to creating the
    right framework that will promote continued innovation,
    competition, and consumer choice without repeating the mistakes
    of the past.
        Thank you.
        [The prepared statement of Mr. Young follows:]

        [GRAPHIC] [TIFF OMITTED] T6572A.050

        [GRAPHIC] [TIFF OMITTED] T6572A.051

        [GRAPHIC] [TIFF OMITTED] T6572A.052

        [GRAPHIC] [TIFF OMITTED] T6572A.053

        [GRAPHIC] [TIFF OMITTED] T6572A.054

        [GRAPHIC] [TIFF OMITTED] T6572A.055

        [GRAPHIC] [TIFF OMITTED] T6572A.056

        [GRAPHIC] [TIFF OMITTED] T6572A.057

        [GRAPHIC] [TIFF OMITTED] T6572A.058

        Mr. Boucher. Thank you very much, Mr. Young.
        And thanks to all of our witnesses for your thoughtful and
    informed comments this morning. We have benefited in our
    understanding of the issue from the information you have
    provided.
        Mr. Shanks, let me begin my question with you. You
    represent DirecTV this morning. And I hear two basic concerns
    being expressed by you. Let me see if there is a way to address
    these consistent with the FCC's proposals.
        The first thing that I have heard you say is that you are
    concerned that you are in a very different situation from
    cable; that cable can place a lot of the functionality
    interfaces in the local cable headend. You have to build those
    into your box because, given the constraints of a satellite,
    you can't place those interfaces in the satellite, so you have
    to do that in the box itself. And you are concerned that, if it
    is not exactly your box that your consumer is using, some of
    that functionality could be lost.
        Would it serve your purpose and satisfy that concern if you
    were able, under the FCC's eventual order, to be able to build
    the essential functionality that you have to have into your
    gateway device?
        You could still keep it simple. The primary goal of the
    device would be the standardized output signal that could be
    received by and processed by competitively available navigation
    devices. But you could enhance it to the extent necessary in
    order to include that vital functionality that you have to
    provide for your consumer experience.
        Is that a possible solution?
        Mr. Shanks. As we understood it today, no, in the sense
    that the third-party devices at the handoff point of a gateway
    can pick and choose what to do with the content. So----
        Mr. Boucher. Well, I think you are going to the second part
    of your concern. Let's stick with the first part. I am going to
    address the second part in just a moment.
        So the first part is simply this. If you put that
    functionality that you have to build into your boxes today into
    the gateway device itself, why doesn't that solve the problem?
        Mr. Shanks. That gateway device would be our set-top box.
        Mr. Boucher. Well, it wouldn't necessarily have to go that
    far. I mean, it wouldn't have to do all the various things that
    your set-top box does at the moment. It would just be the
    essential things that the cable company builds into its headend
    that you, by necessity today, have to put into the set-top box.
        Mr. Shanks. I believe that the service that is sold from
    DirecTV--which is a service which is comprised of all of the
    things that, you know, we displayed in the video. The only way
    that satellite can actually get that service is by a completely
    seamless and disaggregated chain of satellite, set-top box,
    remote control to the television set.
        So that gateway would have to include--I mean, we actually
    don't build unnecessary things into our set-top box because we
    don't want to increase cost. So it is as simple as we can make
    it today.
        Mr. Boucher. Well, all right. I hear what you are saying.
        Let me ask that you give serious consideration to this
    possibility. Because the Commission is on track, and I think
    properly, and many of the witnesses here have said properly, to
    develop the gateway box as the bridge, as the way to make sure
    that you really can have this competitive market for set-top
    boxes. And it seems to me that if you enhance that set-top box
    with whatever is absolutely essential for you to have in it,
    comparable to what the cable company puts in its local cable
    headend, and leave all the other functionality for the
    competitive set-top box itself, that the problem potentially is
    solved. And I would just ask that you give careful thought to
    it, going forward.
        Mr. Shanks. Yes, sir.
        Mr. Boucher. The second part of your concern was this. You
    said that you are concerned that some of the unique
    functionality that you offer that makes DirecTV special could
    be stripped out by that competitive provider of a navigation
    device and, therefore, deprive your customer of that unique
    experience.
        Would it not be a simple answer to that concern if the FCC,
    as part of its rule, basically says that all of the services
    provided by the multichannel video distributor would have to be
    passed through and processed by and made available to the
    consumer from these competitively available navigation devices?
        Mr. Shanks. There are two concerns with that.
        Number one, that innovation is clearly happening today.
    Sony Bravia television, we hand off our signal. The complete
    DirecTV service is included in the Sony Bravia television----
        Mr. Boucher. Well, let me just see if I can get a direct
    answer to the question, because my time is limited.
        Mr. Shanks. OK.
        Mr. Boucher. Would that not be a satisfactory way to handle
    it?
        The Commission would require that the very concern you are
    expressing here, in fact, not become a reality, because that
    box would have to process and make available all of your
    functionality.
        Mr. Shanks. So that would just get to my second point,
    which is----
        Mr. Boucher. Well, that is the second point.
        Mr. Shanks [continuing]. Customer service. Exactly. Which
    is, you know, the ability to be able to troubleshoot, and who
    is going to call DirecTV if the interface is completely
    hijacked from DirecTV. And that is a problem that we have had
    in the past.
        Mr. Boucher. OK. Thank you.
        Mr. McSlarrow, let me turn to you. Thank you very much for
    cable's very constructive statement of principles. Those have
    been presented very well by you this morning. And I want to
    just make reference to the first one for purposes of the
    question to you.
        That first principle says that consumers should have the
    option to purchase set-top boxes at retail that can access
    their cable company's video services without having to have a
    set-top box that is supplied by that cable provider. And that
    certainly speaks directly to the goal that we are here trying
    to achieve this morning.
        Can I read that statement as suggesting that the cable
    industry would also support taking the steps that are necessary
    to make sure that the switched video services, the digital
    switched video services that many cable companies are now
    beginning to offer--with, as Mr. Zinn suggested, hundreds of
    channels now being provided and switched digital video that
    cannot at the present time be accessed through cable cards--
    would you support the steps, consistent with this first
    principle, that would enable those switched digital video
    services to be accessed through cable cards so that companies
    like TiVo would be in a position to record those programs as
    well as others?
        Mr. McSlarrow. Yes. And, in fact, in 2007, Tom Rogers, the
    CEO of TiVo, called me and asked me to help him address this
    issue. And, in fact, at the end of 2007, Tom and I made an
    announcement where the cable company made a commitment to
    supply tuning adapters to any TiVo customer so they could
    access switched channels. Now, it is not a perfect system, but
    we have already shown our willingness and our commitment to
    meet that obligation.
        Mr. Boucher. I appreciate that statement.
        Let me just suggest that the way that I think it is being
    done today is somewhat awkward. And it involves using a bulky
    tuning adapter, which is, itself, as large as a set-top box,
    and it is difficult to connect and utilize.
        What Mr. Zinn is proposing is that the cable company allow
    a request to be sent upstream by way of the broadband network.
    And it would seem to be a fairly simple matter for the cable
    company to accept that request and have it acted upon
    electronically. Would you agree that that is an appropriate
    request, and would your companies honor it?
        Mr. McSlarrow. So I would have described the tuning adapter
    as ``miniscule and elegant.'' But----
        Mr. Boucher. I have actually seen one, and it is as big as
    a set-top box. At least the one I saw was.
        Mr. McSlarrow. OK, large and elegant.
        Mr. Boucher. Yes. I think Mr. Zinn has one here, by the
    way. He can show us just how large it is.
        I am sorry. Go ahead.
        Mr. McSlarrow. All right, go ahead. Have your field day.
        See, it is actually smaller than a set-top.
        The IP back channel is a legitimate issue. The problem we
    have right now, at the moment, is that what TiVo has asked for
    is a proprietary IP back channel solution, where they are
    working with SeaChange.
        We are actually open to and have told the FCC we are open
    to exploring IP back channel so you could signal upstream to
    the headend that is an open standard, that would be available
    to any consumer electronics manufacturer who wants to avail it,
    not just one company
        Mr. Boucher. All right. My time has long expired. And the
    chair will be generous with other Members as they propound
    their questions.
        Thank you very much to all of you for those answers.
        The gentleman from Florida, Mr. Stearns.
        Mr. Stearns. Thank you, Mr. Chairman.
        Let me just ask each of you a question. Just give me a
    ``yes'' or ``no'' answer.
        Should the FCC adopt a current gateway mandate as currently
    proposed?
        Mr. Williams, yes or no?
        Mr. Williams. Yes.
        Mr. Stearns. Mr. McSlarrow?
        Mr. McSlarrow. I don't know.
        Mr. Stearns. Just ``yes'' or ``no.''
        Mr. McSlarrow. There is no gateway proposal. It is a
    concept. I don't know.
        Mr. Stearns. Well, do you support the FCC's commission? Do
    you think they are on the right track?
        Mr. McSlarrow. I think they are on the right track. But
    they are exploring it. It is just an NOI.
        Mr. Stearns. So you think they are on the right track.
        Mr. Zinn? The first question is, should the FCC adopt the
    current gateway mandate as currently proposed, yes or no?
        Mr. Zinn. I agree that they are on the right track. I also
    agree with Kyle that it is an NOI and there is no concrete
    proposal at the current time.
        Mr. Stearns. So you think, when they talk about the
    recommendation of 4.12, that is not a proposal?
        Mr. Zinn. It is a concept, and I agree with the concept. So
    my answer is yes.
        Mr. Stearns. So you don't see it as a mandate at all?
        Mr. Zinn. Actually, I don't see it as a tech mandate. I see
    it as a request for standardization. So it is a definitional
    question: Is a standard a tech mandate, or is a standard a
    standard?
        Mr. Stearns. So you don't see the FCC's recommendation as
    any mandate at all. It is just talking about apple pie and
    cherry pie, apple pie and goodness, huh? That is how you see
    it?
        Mr. Zinn. Yes.
        Mr. Stearns. OK.
        Mr. Shanks?
        Mr. Shanks. No, sir.
        Mr. Stearns. OK.
        Mr. Feld?
        Mr. Feld. Well, to the extent that they ask whether----
        Mr. Stearns. Just a ``yes'' or ``no.''
        Mr. Feld. We filed a petition asking for a rulemaking on
    this, and they put that out as part of the NOI comments. So we
    support that.
        Mr. Stearns. So you are a yes.
        Mr. Young?
        Mr. Young. No, I don't think the gateway proposal as it
    stands is----
        Mr. Stearns. OK. I think it is important, just first of
    all, to find out where you are on this basic question here. I
    noticed that two of you here wouldn't give me an answer, and it
    seems a little more political, your answer, frankly. I would
    think, if you back to your association members, I think they
    are going to give you an answer to this and not quite as
    equivocal as the two of you just gave.
        Mr. Young, the National Broadband Plan calls for a gateway
    mandate to kick in on December 31, 2012.
        Mr. Zinn and Mr. McSlarrow, it is 2012, so that is a
    mandate, in my opinion.
        But, anyway, Mr. Young, so the question to you is, when do
    you think your companies will be accessible on third-party
    devices?
        Mr. Young. We are working very aggressively to make that
    happen well in advance of the 2012 deadline. And we believe
    that it can be done without the gateway as proposed by the FCC.
    So we are encouraged that the NOI looks for alternative
    approaches because we believe we have one.
        Mr. Stearns. Do you think there could possibly be a risk
    that the 2012 mandate will slow down your existing work?
        Mr. Young. That is certainly a possibility. If the gateway
    approach must be adopted in a particular way by all providers
    regardless of whether it is necessary, that would certainly
    slow down our work.
        Mr. Stearns. OK.
        Mr. Shanks, the same question to you is, when do you think
    your company is going to be accessible on third-party devices?
    And is there a risk, possibly, that this government mandate of
    2012 will slow down your existing work?
        Mr. Shanks. First of all, the DirecTV service is available
    through open standards called DLNA today. So you can watch
    DirecTV on a PC or on a phone or any DLNA-enabled devices.
        Mr. Stearns. You can do it on a PlayStation? XBox?
        Mr. Shanks. If they are a DLNA-compliant, open standard----
        Mr. Stearns. Handheld wireless devices, too?
        Mr. Shanks. Yes, sir.
        Mr. Stearns. Digital recorders?
        Mr. Shanks. Yes, sir.
        Mr. Stearns. OK. iPad?
        Mr. Shanks. The iPad I don't think is DLNA. But our Sunday
    Ticket application will work on an iPad, yes.
        Mr. Stearns. OK.
        And then I guess, Mr. McSlarrow, just the same question to
    you, possibly.
        Mr. McSlarrow. So I could probably meet your needs here. We
    are not for a mandate. We are willing to explore these
    concepts. So----
        Mr. Stearns. But the 2012--your company will be accessible
    on third-party devices by 2012?
        Mr. McSlarrow. We are already accessible to third-party
    devices. I think the question is whether or not there is going
    to be a marketplace that it is a two-way marketplace.
        Mr. Stearns. OK.
        Mr. Shanks, can you explain why you believe the gateway
    device mandate will hurt your ability to innovate and compete?
        Mr. Shanks. You know, DirecTV as a service includes
    everything that you just saw. And we set customer expectations,
    and I think that that has been a big part of our success.
        The issue we have with this is, number one, obviously, it
    does give a clear advantage to cable because of their two-way
    pipes, and we only have a very large one-way pipe.
        Secondly, you know, would in the proposal any third-party
    device have to have, kind of, a litany of exceptions of things
    that they don't get when they are buying the DirecTV brand?
    Because, you know, that box is obsolete the day that you buy
    it, and we continue to upgrade, like I said, 76 features in the
    last 15 months.
        And, you know, as Sony and other CE manufacturers know, 3-D
    is the next big thing, apparently. We have given a free upgrade
    to all of our HD customers that will allow them to watch the
    World Cup in 3-D starting June 11th. And a third-party device,
    we have no assurance whether that customer who thinks they are
    getting DirecTV would actually be able to see 3-D. And who
    would they call? It would be just confusion on a customer
    service level.
        Mr. Stearns. Mr. Young, let's take a hypothetical. What
    happens if someone wants to introduce some sort of
    functionality that the FCC has failed to consider, for example,
    or doesn't work with the gateway mandate? Do you perceive that
    you will need FCC permission to change? I mean, how would that
    work?
        Mr. Young. That is actually what I think is one of the
    significant flaws with the proposal as it was written. And it
    is basically that all of the intricate functionality involved
    in providing our services would have to be standardized so that
    they could be made available through this gateway.
        That means that us and DirecTV and the cable companies
    would all have to do all of our services exactly the same way,
    and that would be locked in. And then there would be no ability
    to innovate or bring new capabilities to our products because
    there would be no way of introducing new functionality outside
    of that standard that had been mandated.
        Mr. Stearns. Mr. Shanks, do you agree? Or would you like to
    comment?
        Mr. Shanks. No, I think we actually agree on most of those
    points.
        Mr. Stearns. Mr. McSlarrow?
        Mr. McSlarrow. I agree.
        Mr. Stearns. OK.
        Mr. Chairman, thank you very much.
        Mr. Boucher. Thank you very much, Mr. Stearns.
        The gentlelady from California, Ms. Eshoo, is recognized
    for 5 minutes.
        Ms. Eshoo. Thank you again, Mr. Chairman.
        And I want to thank all the witnesses. This has been an
    instructive panel, in terms of your testimony and your answers
    to the questions that Members have already posed.
        I just want to make an observation, and that is that I have
    read what the FCC is trying to do is simply establishing a
    standard protocol and that that is not a mandate. And it seems
    to me that there is consensus on this panel, with the
    exception, I think, of Mr. Shanks. I hope I am characterizing
    it correctly. But I think that is important to be stated.
        I don't think anyone here has been directly or indirectly
    involved--members, that is, of the committee--in mandating
    technologies. But standards are very important. And I think
    that when that is clear, that serves people of the country
    well. And so I just want to start out with that.
        I apologize that in my opening statement I didn't make a
    special fuss in welcoming Matt Zinn, who is my constituent. And
    I am proud that he is here and testifying and value his
    service.
        So let me start with you, Mr. Zinn. You have worked hard to
    make your technology compatible with what the cable companies
    have developed. Can you tell us about either your positive
    views of what you have heard Kyle McSlarrow talk about today?
    Or are there still some lingering issues relative to TiVo and,
    you know, the plans for improving the cable card? Because I
    heard that that is where you have had problems.
        Mr. Zinn. Right. I think the biggest issue is, as I showed
    in the slides, access to switched digital programming directly.
    You know, I showed the tuning adapter. It is a set-top box. It
    was supposed to be a little dongle, but it turned out to be a
    set-top box. And a competitive box policy that requires a
    consumer to get a large number of channels by using a cable
    set-top box is the antithesis of a competitive set-top box
    policy.
        Ms. Eshoo. But in terms of what you have heard today in the
    discussion, does that clear away some of the weeds relative to
    what you just said?
        Mr. Zinn. If there is follow-through from the cable
    industry on creating an IP back channel solution that is not
    proprietary, that would help greatly.
        And then if there is follow-through on clearing away some
    of the installation support issues--self-installation goes a
    long way. In California, in your district, Comcast actually
    does a pretty good job of allowing consumers to self-install
    cable cards. And it is not that complicated.
        Ms. Eshoo. Right.
        Mr. Zinn. I think there are ways to address this----
        Ms. Eshoo. I have even done it myself.
        Mr. Zinn. There you go.
        And then pricing. Most cable programming is sold in
    packages, and in the packages a set-top box is included. Now,
    if you bring your own set-top box, there is no discount from
    bringing your set-top box.
        So I think that, like cable modem service, a cable company
    either lets you lease a cable modem or, if you buy a cable
    modem, they don't charge you for the cable modem.
        Ms. Eshoo. Right. I am running out of time.
        To Mr. McSlarrow, do you want to respond to that?
        I want to take this opportunity to thank you for what you
    are doing, because you recognize that there are problems with
    the cable card. You are committed to changing that.
        Do you want to respond to some of Mr. Zinn's comments?
        Mr. McSlarrow. First, thank you. But just to play off of
    that----
        Ms. Eshoo. And I think the principles that you have come up
    with, as the chairman said, is really helpful.
        Mr. McSlarrow. Well, thank you.
        I think, as Matt was just talking about, we live in a cable
    card world today. There are issues that we need to address. We
    are committed to addressing them.
        But I think what is important in the take-away of this
    hearing is, what is the future like? How do we get out of that
    world? There is going to be a natural transition. It is going
    to be a two-way interactive world. It is going to integrate
    television and the Internet.
        So we are committed to doing both, addressing the near-term
    fixes that need to be addressed while we work on the future.
        Ms. Eshoo. Good.
        Let me just make another observation, since I have 19
    seconds left. And that is that I have no doubt that the October
    2010 date and what has to take place between now and then will
    happen. It is what comes around the corner from that. And I
    think that is where most of the work lies and the cooperation
    has to take place.
        So, Mr. Chairman, thank you.
        And, again, to all the witnesses, thank you for what you
    are doing. And I couldn't agree more with Mr. Markey, that this
    is one of the most exciting times for us. And I look forward to
    people all over the country being part of that excitement and
    the services. Thank you.
        Mr. Boucher. Thank you very much, Ms. Eshoo.
        The gentleman from Illinois, Mr. Shimkus, is recognized for
    5 minutes.
        Mr. Shimkus. Thank you, Mr. Chairman.
        And I don't know any Member of Congress who has more guests
    announced in a telecommunications high-tech committee than Anna
    Eshoo.
        It seems like every time we have a high-tech hearing, Anna,
    you have a constituent here. It must speak to your district, I
    would say.
        Ms. Eshoo. It does. Thank you. Good guess.
        Mr. Shimkus. So, welcome.
        And I think what I just keyed on--and I am not going to
    spend a long time--the two-way interactive world. And the basic
    question is, who drives that the quickest? Government
    mandates--not a mandate, but government standards, which then
    moves to a mandate, versus the market. That is all.
        Now, we believe the market. I think when you look at
    handsets, the telecom bill that was passed that kind of
    released innovation, that is why we all have a multitude of
    things on our hips that can do a gazillion things that no one
    ever dreamed of. If we had stayed controlled, we would have
    stayed rotary. So that is kind of the same thing.
        Now, I have teenagers, so I am experienced in how these
    kids are way advanced. And I don't understand how any of this
    stuff works, and I have been on the committee 14 years. But I
    do know, we have an XBox 360, and we know that gaming has
    pushed new technology. And then the market placed a demand for
    interactive gaming online worldwide. So when one of my sons is
    playing Modern Warfare 2 or whatever these great games are,
    they are amazing, but when they team up, they could be playing
    with kids in Japan or South Korea.
        Now, Mr. McSlarrow, this is over our coaxial cable. Does
    the cable industry get any revenue other than the basic service
    fee for the cable connection?
        Mr. McSlarrow. In most cases----
        Mr. Shimkus. No. I don't see it.
        Mr. McSlarrow. I mean, I can't think of one.
        Mr. Shimkus. You buy the XBox 360, you hook it up, and you
    can interact worldwide in a gaming situation.
        Now, the FCC didn't intervene, didn't tell the online game
    world and the high-tech community from Anna Eshoo's district,
    ``Make this happen.'' It was the consumer demand of gaming
    worldwide.
        And I would just end on that. I think it is a compelling
    argument to remember that, if we want to innovate, we let the
    market push us. And when we start dictating, we slow up the
    process, we don't speed up the process.
        And thank you, Mr. Chairman. I will yield back.
        Mr. Boucher. Thank you very much, Mr. Shimkus.
        The gentleman from Pennsylvania, Mr. Doyle, is recognized
    for 5 minutes.
        Mr. Doyle. Thank you, Mr. Chairman.
        You know, there is a difference between a tech mandate and
    tech standards. A tech mandate is seen as onerous, as you hear
    from several of my friends over there. A tech standard is a set
    of rules that lets others play on a common playground. So a
    tech standard is like the plain telephone jack that allowed my
    young daughter to want a Mickey Mouse phone.
        So, Mr. Zinn and Mr. Williams, are you looking for a
    standard similar to that? Or are you looking for a mandate?
        Mr. Zinn. If I could just chime in on that, what I would
    have liked to say to Mr. Shimkus before he took off was: The
    reason that his children can do that is because of the Internet
    Protocol standard. And that is the same standard that the FCC
    is talking about for set-top boxes.
        Mr. Williams. And, Congressman Doyle, absolutely, it is the
    standard. And you have hit the nail right on the head here.
    Because, as we know from the past, if we study the past, we
    know from the national standard--it was the National Television
    Standard Committee, when we had an over-the-air broadcasting,
    didn't mandate the technology of how the signal was processed.
    That was up to an individual station or broadcaster. What it
    allowed is everyone had the same standard to transmit. We had
    CBS, ABC, NBC compete with each other on the nightly news. And
    now we are going to have the same thing in TV 3.0, the national
    standard.
        But, again, how Sony is going to render the video content
    on the Internet or allow you to take the Internet and that data
    and interact with the services that you are buying from DirecTV
    or AT&T or Verizon, that is the brand-new world that we want to
    see developed through this standard, not a technology mandate.
    We are not here for that.
        Mr. Doyle. Very good.
        Mr. Feld, I am curious about something that Mr. Young from
    Verizon raised in his testimony, that we can achieve
    compatibility through open standards with a set of protocols
    that will allow retail devices to access video services from,
    you know, either a cable or satellite company. How do you react
    to that?
        Mr. Feld. What we have seen historically is that we have
    the greatest potential to achieve that when the FCC plays the
    role of an honest broker, able to bring the industry together,
    avoid holdouts, push people, nudge, and stand above the
    financial interests that every vendor and every provider has.
        The Internet Protocol and the success we have had with that
    goes back to the dial-up modem, which goes back to the original
    Carter phone decision and the rulemakings that set that very
    basic standard. We have seen the same thing in television,
    digital television.
        The wireless devices that Mr. Shimkus spoke of are all
    certified by the FCC. When the FCC does its job right and acts
    as an honest broker among the industry and makes it clear that
    there is no value in holding out for a proprietary or industry-
    specific solution, we are able to have these sort of protocols,
    and the industry is then able to build on that so that, having
    established the cooperation, the next generation comes much
    more easily to the industry.
        But it is getting over that hump to get the parties
    together, to push them to rise above their different interests
    and create a standard that really serves the consumers and
    industry both and allows the market to develop where the FCC
    plays such an important role.
        Mr. Doyle. Thank you.
        Mr. Chairman, I don't have any other questions. I will
    yield back.
        Mr. Boucher. Thank you, Mr. Doyle.
        The gentleman from Ohio, Mr. Latta, is recognized for 5
    minutes.
        Mr. Latta. Well, thank you very much, Mr. Chairman. I
    appreciate you holding these hearings.
        You know, it is one of those things, I think, that Mr.
    Shimkus brought up. When in doubt, I have a 16-year-old and an
    18-year-old I call my kids, because they are a lot more tech-
    savvy than us. And it is hard to explain to them the years of
    growing up in northwest Ohio when we had two channels and some
    days you got them and some days you didn't. And with all the
    different things that are out there today, it is absolutely
    phenomenal what is out there.
        And I guess one of the things that I would just like to
    ask: You know, right now we have a lot of the consumers out
    there that look forward to purchasing and then installing the
    different video navigation devices. But what about the
    consumers that, again, aren't as technically savvy and just
    want the cable/telephone/satellite company to provide and
    install the navigation device?
        And, as you know, when we completed the DTV transition, we
    spent millions making sure that people could install and set up
    and use their converter boxes. You know, I still go in a lot of
    houses today that the microwave light is blinking and that the
    VCR is still blinking. So there are a lot of folks out there,
    again, that aren't quite as tech-savvy as some of the kids out
    there.
        And so I guess, if I could ask Mr. Young, is the FCC's
    AllVid proposal too focused on the technical elite at the risk
    of the rest of the population, especially some of our older
    Americans who are not as proficient in adapting to the new
    technology that is provided to them?
        Mr. Young. I think that there is certainly a risk of that,
    if it goes a certain direction. I am hopeful that the FCC will
    not go in that direction in the NOI. But the mandates that come
    along with the FCC's AllVid adapter proposal--and it does go
    beyond just the standard. There are mandates there that say the
    vid adapter must do this, must not do that. And so, if that was
    adopted like that, it would have a very negative consequence
    for that group of people.
        Mr. Latta. Well, let me follow up with that, then. If
    something like this would be adopted, how do we get it out
    there for those individuals that need help? Because, again, as
    we watched what happened with the transition not too long ago,
    we were sending out all this information on TV about when
    things were being changed over with signal and letting folks
    know they would have to have a converter box just, you know, if
    you want to get your regular antennas to work.
        But how would you foresee that we could actually get out
    there and do something?
        Mr. Young. I think the best way to do that is to not
    disrupt what they are already buying and enjoying. I think that
    we can add support for these new devices without having to
    disrupt the lease model that many people prefer.
        And so any solution, I think, should allow the customer to
    choose which they prefer. And some customers will have a
    mixture of both, and that is a good thing.
        Mr. Latta. Thank you.
        Mr. Chairman, I yield back.
        Mr. Boucher. Thank you very much, Mr. Latta.
        The gentleman from Massachusetts, Mr. Markey, is recognized
    for 5 minutes.
        Mr. Markey. Thank you, Mr. Chairman, very much.
        And, yes, this really does go back to the Carter phone era
    and our attempts to make sure that consumers are not denied the
    opportunity to go out and buy their own phone. I remember when
    the CEO of AT&T sat down here in 1979 and told us that if
    someone could go out and buy their own phone that wasn't a
    black rotary dial phone and plug it into that phone jack, it
    could bring down the whole phone system of Massachusetts. And I
    actually did, I turned to Al Gore and I said, ``We've got to
    break these people up. This is ridiculous.''
        ``How long will it take, Mr. Chairman, for you to be able
    to figure that out?'' ``Well, about 10 years. Maybe in 10 years
    we will be able to have other phone companies able to have
    phones that plug into our phone jacks.''
        So that was, like, a frightening thing to me, because we
    were all renting that black rotary dial phone for $3 a month.
    Our mothers had done it for, like, 40 years. Three bucks times
    12, 36 times 40 years. That is like $1,400 to rent that black
    rotary dial phone, with no new device you can plug in yourself
    that you control.
        So we come to this point now where we have this great
    opportunity that make it work. Right? That consumers can plug
    their own devices in and make it work.
        So what do you think, Mr. Shanks? What are the chances here
    that you are going to be able to work this out so that people
    can buy a device that plugs into your device and still allows
    you to provide first-class quality service for DirecTV
    customers?
        Mr. Shanks. Mr. Markey, maybe I am the only one in the room
    that sees at least one big elephant, and it is the fact that,
    no matter what television you buy today, you can plug it in to
    make sure it works, whether it is with Verizon or Comcast or
    Adelphia. There is a standard there. And the televisions now
    made by Panasonic, LG, Vizio, I looked up on Amazon today, 300
    of them, they are all touting millions of Web sites that you
    can go to while you are watching DirecTV. With Panasonic even,
    you can Skype with your grandma while you are watching DirecTV.
        Mr. Markey. You know what, though? Here is my point. I am
    kind of a technological agnostic. I have no idea. OK?
    Congressional experts are only experts compared to other
    congressmen, but not real experts, OK? That is just an
    oxymoron, ``congressional expert,'' you know, like ``jumbo
    shrimp'' or ``Chevy Chase nightlife.'' OK? There is just no
    such thing.
        So we need to make sure that, you know, we just have the
    most imaginative 17-year-old out there coming up with new
    ideas. Which might not be Mr. Panasonic, it might not be Mr.
    anybody else. That is the beauty of this incredibly short road
    that we have traveled in the last 15 years.
        And as the author of Section 629, I have been waiting for
    the day where we are all liberated totally and we can just go
    down and buy the box of our choice and just plug it in there
    and make it work.
        So are you going to work here with the FCC to make this
    possible for people to be able to have more control so it is
    just not, you know, kind of an impossible technical difficulty
    for you to be able to overcome?
        Mr. Shanks. Yes, sir. I mean, we obviously are embracing
    open standards, broadband connectivity to our boxes, to
    televisions, so that anywhere in the chain you can absolutely
    insert what television manufacturers are doing.
        I actually was in Silicon Valley the other day. I saw an
    amazing set-top box from a very large Silicon Valley company
    which was taking the DirecTV signal in via standard HDMI port.
    They put a complete browser over the top of it. And the cool
    thing with that was, when the browser crashed, right--which
    browsers we all know do, and you get that waiting for an
    hourglass----
        Mr. Markey. But you will work it out, though?
        Mr. Shanks. That is exactly----
        Mr. Markey. Yes. As I said, there are going to be a lot of
    technical difficulties.
        Let me just move on quickly here. We are coming up to the
    20th anniversary of the Americans with Disabilities Act. And
    there were some other impossible things that we just built into
    that law out of this subcommittee, including closed captioning
    for all television sets, back in 1990.
        You should have heard the consumer electronics industry on
    that one. My God, that was going to add $25 or $30 to every
    television set. ``Just very, very difficult. You have no idea,
    Congressman, how hard it will be to build that little thing
    in.'' And now, you know, in bars across America, how could
    guys, you know, talk to women and watch the game if they didn't
    have closed captioning today? I mean, it is an essential part
    of our society. And who would ever think of having a TV set
    without it in?
        So, as we are moving forward--I actually, you know,
    introduced the Video Accessibility Act, kind of, on this 20th
    anniversary to, kind of, totally modernize the access the
    disabled community would have to all this video/voice data.
        So what do you think about that? You guys are familiar with
    the bill as I have introduced it. Mr. Young, can we incorporate
    that as part of this process that we are looking at right now?
        Mr. Young. You raise a very important point. Because, as
    video service providers, we have responsibilities, and we have
    to ensure that those responsibilities are met regardless of the
    device that is used to access our service. And so, yes, that is
    something that definitely needs to be considered.
        Mr. Markey. Great.
        Do you agree with that, Mr. McSlarrow?
        Mr. McSlarrow. I do.
        Mr. Markey. And can we do that as part of this process?
        Mr. McSlarrow. I think so.
        Mr. Markey. Do you agree with that, Mr. Shanks?
        Mr. Shanks. Yes, sir.
        Mr. Markey. Mr. Williams, could you get that done?
        Mr. Williams. Yes.
        Mr. Markey. OK. That is beautiful.
        And Mr. Zinn?
        Mr. Zinn. I have no objection to that.
        Mr. Markey. No objection. Beautiful.
        And Mr. Feld?
        Mr. Feld. I would just like to add that bringing the
    inventiveness of the thousands of potential entrepreneurs and
    developers who could come up with solutions in this through a
    gateway so that we have all sorts of solutions, whatever works
    best for the disabilities community I think is an important
    part of opening up the set-top box, as well, to make things
    like this happen.
        Mr. Markey. So you are saying the more open the set-top
    box, is the more likelihood that thousands of people maybe with
    disabilities will start to think about how they can use that
    device to help millions of people across the country better
    access all of this information.
        Mr. Feld. The more people working on a problem and the
    easier it is for people to adopt the solution that other people
    develop, the more likely that problem is to be solved.
        Mr. Markey. With the exception of the United States Senate,
    oK? And I agree with that. All general rules have exceptions.
        So I do think that we are really at the dawn of a
    tremendous era here.
        And especially you, Mr. Shanks, I would appreciate it if
    you could bring flexibility here to this process. It has been a
    long, long time. And I think it would be great if consumers
    could just go down to their store and buy the device that they
    want.
        And just to make sure--and, obviously, we want to have
    service and maintenance issues dealt with by the service
    companies. But, at the same time, the consumer is king and
    queen, and the more that they are allowed to do more that, I
    think the better off the whole industry is. I just think the
    more of these devices that will get sold and the more
    programming that will get watched, and the more revenue that
    each of your companies will be able to garner.
        So thank you so much.
        Mr. Boucher. Thank you very much, Mr. Markey.
        The gentleman from California, Mr. McNerney, is recognized
    for 5 minutes.
        Mr. McNerney. Thank you, Mr. Chairman.
        And thank you, Mr. Markey, for some interesting remarks
    there.
        Mr. Markey. I will take that as a compliment, I hope.
        Mr. McNerney. Mr. Williams, I was wondering, what is the
    state of affairs with regard to a universal gateway device? I
    mean, Sony must be developing something like that. Are the
    challenges mostly technical or regulatory? Where do we stand on
    that?
        Mr. Williams. The challenges are, in the sense, the current
    operating environment from the past where not all MVPD
    providers were required to address the solution.
        The elegance and the beauty of this proposal that the
    notice of inquiry embraces is that it is an all-MVPD solution.
    Telecos, satellite, cable are all at the table with the CE
    manufacturers and other groups. And the Internet, because it is
    open standards, it is well-received, you know, everyone
    understands the concept of common standards that allows the
    innovation to take place, it is moving along.
        But we need the framework to ensure that everyone has to
    play on the same field by the same rules. And that will allow
    innovation for all those people to figure out how is the best
    or the coolest way for you to interact with the TV programming
    that you are purchasing, be it from AT&T, Verizon, DirecTV, or
    Comcast.
        Mr. McNerney. Well, this reminds me a little bit of
    football. I mean, you want a level playing field and you want
    rules that everybody understands so that people don't get hurt,
    so that the game can be played fairly. I mean, I think that is
    where we need to go. And what you are telling me is that, once
    we get those sorts of rules in place, then the technology ought
    to take off.
        Mr. Williams. Absolutely. And we just have to look to--when
    I was a child, we had three stations in Boston, Massachusetts,
    but they all broadcast on the same standard. They competed on
    content.
        On the television side, we all had to receive the same
    signal, but we went from tube TVs to transistorized TVs. One
    company decided to go with RCA color mask for color TVs. We at
    Sony went a different way; we went Trinitron. So no one
    mandated, you have to use this technology to render color
    video. We developed it, innovated, and competed. And what
    happened? The price of televisions went down over time, and
    they are still going down.
        Mr. McNerney. OK. Thank you.
        Mr. McSlarrow, you gave a list of four goals. They seem
    pretty laudable. Are those widely shared, in your opinion, the
    four goals that you mentioned? There ought to be retail
    devices; the devices should be transferable; they should have
    access to Internet videos; and there should be search
    capabilities. Are those, in your opinion, universally shared
    goals?
        Mr. McSlarrow. It depends which industry. I mean, I think
    the goals--it is are probably hard to disagree with them. I
    think the proof of the pudding is going to be in what
    requirements are placed on different actors in the system to
    accomplish those goals. You know, we have been basically
    debating that point this morning.
        But I think the one great opportunity that we have that is
    new today that wasn't present when the original 629 was enacted
    is that we live in a broadband age. And the convergence is
    taking place. And there are--as others have made this point--
    you can go to Best Buy today, and you can see devices today
    that do a lot of these things.
        So, to some extent, we are accomplishing these goals today.
    It is probably also true that working together--and, again, it
    doesn't necessarily require a mandate--but working together as
    providers, manufacturers, content creators, we might be able to
    come up with some kind of interface that makes this even easier
    and deploys even more quickly.
        Mr. McNerney. Thank you.
        Mr. Zinn, what specific proposals would you offer to
    benefit customers to have an early implementation in a short
    time frame?
        Mr. Zinn. I am not sure I understood the question.
        Mr. McNerney. Well, let's see here. Well, you expressed
    concern that it would take too long to arrive at solutions that
    will be amenable to independent providers. I was wondering what
    specific proposals you might have to offer that would benefit
    customers.
        Mr. Zinn. Well, my view is--and I think it is borne out by
    this panel--is, there is not a broad consensus on the gateway
    approach. Right? Mr. Shanks is going to need a lot of
    convincing. Mr. Young is going to need some convincing. The
    cable industry is more on board than the rest. Sony is on
    board. But, you know, my experience in this industry over 20
    years is that things take a lot longer than we think they are
    going to take. And the FCC may say 2012, but I don't believe
    it.
        And, in the interim, cable card is what we rely on. The
    TiVo box does not work if a cable card does not work, end of
    story. And we are the only people who depend on it. So we need
    to make it work today, this year. And we are glad that the FCC
    is determined to make that happen.
        So, you know, we need access to programming, installation
    has to work, and we have to end this pricing discrimination.
    That is what we need today.
        Mr. McNerney. So you are saying that the best thing to do,
    then, is to go after cable cards, make them work, as soon as
    possible.
        Mr. Zinn. Yes.
        Mr. McNerney. OK.
        Mr. Chairman, if you will allow me, one more question?
        Mr. Boucher. One more question, Mr. McNerney.
        Mr. McNerney. OK, thank you.
        Mr. Shanks, you certainly seemed to voice concern about the
    bias in the current program. Do you think a universal gateway
    device can be developed that would be unbiased, that would
    allow you to offer services that can be available by the
    universal gateway device?
        Mr. Shanks. I do believe that there are major concerns on
    our part when it comes down to the economics of a gateway and
    the advantage that cable would have over satellite and,
    therefore, you know, what that would do to the marketplace of a
    gateway and third-party devices.
        Mr. McNerney. OK. Thank you.
        Mr. Boucher. Thank you very much, Mr. McNerney.
        And thanks to all of our witnesses for your outstanding
    testimony here and what has been a very interesting
    conversation back and forth with you today.
        We are going to keep the record of this hearing open for 3
    weeks. And, during that period of time, Members may well be
    propounding in writing some additional questions to you. When
    you receive those, please respond as promptly as you can and
    help illuminate our record of this hearing with your answers.
        Our thanks to each of you for taking time with us today.
        And this hearing stands adjourned.
        [Whereupon, at 11:47 a.m., the subcommittee was adjourned.]
        [Material submitted for inclusion in the record follows:]

        [GRAPHIC] [TIFF OMITTED] T6572A.059

        [GRAPHIC] [TIFF OMITTED] T6572A.060

        [GRAPHIC] [TIFF OMITTED] T6572A.061

        [GRAPHIC] [TIFF OMITTED] T6572A.062

        [GRAPHIC] [TIFF OMITTED] T6572A.063

        [GRAPHIC] [TIFF OMITTED] T6572A.064

        [GRAPHIC] [TIFF OMITTED] T6572A.065

        [GRAPHIC] [TIFF OMITTED] T6572A.066

        [GRAPHIC] [TIFF OMITTED] T6572A.067

        [GRAPHIC] [TIFF OMITTED] T6572A.068

        [GRAPHIC] [TIFF OMITTED] T6572A.069

        [GRAPHIC] [TIFF OMITTED] T6572A.070

        [GRAPHIC] [TIFF OMITTED] T6572A.071

        [GRAPHIC] [TIFF OMITTED] T6572A.072

        [GRAPHIC] [TIFF OMITTED] T6572A.073

        [GRAPHIC] [TIFF OMITTED] T6572A.074

        [GRAPHIC] [TIFF OMITTED] T6572A.075

        [GRAPHIC] [TIFF OMITTED] T6572A.076

        [GRAPHIC] [TIFF OMITTED] T6572A.077

        [GRAPHIC] [TIFF OMITTED] T6572A.078

        [GRAPHIC] [TIFF OMITTED] T6572A.079

        [GRAPHIC] [TIFF OMITTED] T6572A.080

        [GRAPHIC] [TIFF OMITTED] T6572A.081

        [GRAPHIC] [TIFF OMITTED] T6572A.082

        [GRAPHIC] [TIFF OMITTED] T6572A.083

        [GRAPHIC] [TIFF OMITTED] T6572A.084