Opening Remarks

• The Honorable John McCain
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  Opening Remarks

  The Honorable John McCain

  · Today, the Committee examines various policy proposals designed to hasten the completion of the transition to digital television. The end of this transition will mark the beginning of a new age in wireless communications. The liberation of this spectrum will unleash a multitude of new commercial wireless services and new opportunities for enhancing public safety. · By facilitating more broadband deployment and competition, freeing the spectrum would allow us to rely more heavily on the market, rather than government, to regulate telecommunications. Moreover, transmissions at the spectrum’s frequency range pass easily through walls and trees, and therefore could jumpstart the deployment of more affordable broadband in rural areas. · This point was underscored by former FCC Chairman Reed Hundt who told the Committee earlier this year that we are now entering “the decade of wireless broadband,” and called the broadcasters’ analog spectrum “ideal” for deploying these services. Mr. Hundt said “the transformation of the use of that spectrum means for the economy literally hundreds of billions of dollars of extra growth and hundreds of thousands, if not ultimately millions, of new jobs – provided it were done quickly.” · We must recognize, however, that there are still many households that rely on over-the-air television signals. Let me be clear that any proposal to accelerate the digital television transition is incomplete unless it ensures that consumers may continue to use their existing television sets to view over-the-air broadcast signals. We must not leave these consumers out in the digital cold. · The good news is that the benefits from more efficient use of this spectrum should dwarf the cost of ensuring that these consumers can continue to use their old televisions. The proceeds received from auctioning even a small portion of the spectrum should easily cover this cost. In an April hearing, an entire panel of telecommunications experts, from conservative to liberal, agreed that such an approach makes perfect sense. · Let us not forget another important beneficiary of the liberation of this spectrum: public safety. The government has committed a significant portion of this spectrum to public safety organizations. We need this important asset to facilitate interoperable communications systems between federal and state organizations and between multiple jurisdictions. · It is clear to me that now is the time for Congress to act to expedite the completion of this transition. And it appears that I am not alone. Last week, House Energy and Commerce Chairman Barton questioned why the transition could not be completed by 2006 in order to retrieve this valuable spectrum for other consumer and public safety uses. I look forward to working with Chairman Barton on this issue. · Finally, I note that I have repeatedly criticized the broadcasters during this transition for failing to meet their commitments to broadcast digital signals. Although many were inexcusably late in meeting their obligations, I recognize that the vast majority of broadcasters are now doing so. Commercial broadcasters are critical stakeholders who deserve a voice in this discussion, so we invited the National Association of Broadcasters and the networks to offer a broadcast executive to testify today. Unfortunately, they chose not to accept. I encourage them to participate in this process in the future. · I thank the witnesses for being here. Before the panelists begin, I am pleased to welcome Congresswoman Harman to the Committee. # # #

• The Honorable Jane Harman
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  Opening Remarks

  The Honorable Jane Harman

Testimony

• Mr. John Lawson

  Executive Vice President

  ION Media Networks
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  Testimony

  Mr. John Lawson

  Thank you Mr. Chairman. I am John Lawson, president and CEO of the Association of Public Television Stations, the national representative of our nation’s local public television stations. I emphasize the word local because, however one feels about increasing media concentration, one thing is clear: Local public television stations are and will remain locally controlled, operated, and programmed. Historic Leadership from the Senate Commerce Committee Let me begin by thanking you, Mr. Chairman, for your leadership in convening this hearing. Completing the digital transition is not just important for the communications industry, but for the economic competitiveness of our country as a whole. You are a real driver in getting this transition completed, and I appreciate your inviting me to testify today. I also want to acknowledge the long history of bipartisan support that public broadcasting has enjoyed from members and leaders of the Senate Commerce Committee, including Senators Warren Magnuson and Barry Goldwater. They played key roles in building Public Television into a unique institution of public service that reaches and has been welcomed into nearly every home in America. This long history includes current leaders such as Senators Ted Stevens and Daniel Inouye. And I especially want to acknowledge, upon his pending retirement, the leadership of Senator Hollings. He has supported public broadcasting from his governorship of South Carolina, my native state, through today. I want to thank you, Senator Hollings, for all you have done for locally-controlled, noncommercial media in this country. Innovation with New Digital Services Mr. Chairman, Public Television is bullish on DTV. Since 1996, our stations have raised over $1 billion for digital conversion, the majority of which has come from non-federal sources. This is $1 billion over and above what we have to raise each year for programming and operations. When economic pressures caused state and private funding to decline early in this decade, Congress stepped up federal funding, which has been crucial for many of our stations’ getting on the air with a digital signal — currently 248 stations, or 70 percent of all public stations. Our embrace of digital technology goes well beyond meeting a federal mandate. In fact, it is no exaggeration to say that our local stations view digital as their greatest opportunity ever to serve the public. Our stations have continuing infrastructure investment needs. Nevertheless, many are beginning the actual deployment of exciting new digital services. We are entering a time of great innovation and experimentation with digital technology, and the early results are very encouraging. Most stations are broadcasting high-definition television, especially in primetime. During the daytime, many are broadcasting new, multiple standard-definition channels, which are expanding citizens’ access to quality children’s and educational programming and public affairs coverage. The South Carolina Channel from SCETV, for example, is a new digital channel that provides gavel-to-gavel coverage of the state legislature and other local and statewide programming. Many of our member stations are using some of their digital bandwidth for datacasting, another service made possible by DTV. Datacasting uses a station’s digital signal for sending high-end video, audio, text, and graphics, directly to personal computers – wirelessly. Several stations are datacasting standards-based content directly to school computer networks to boost academic achievement. This is one way that stations are fulfilling their voluntary commitment of one-quarter of their digital bandwidth for education. Notably, many of our stations also are providing DTV datacasting to improve emergency communications and enhance our homeland security. The June 7 issue of Broadcasting and Cable magazine (see Appendix B) reports on a soon-to-be-finalized agreement between the Federal Emergency Management Agency at the Department of Homeland Security, the Association of Public Television Stations (my association), local public station WETA, and the Public Broadcasting Service (PBS). The project will pilot DTV as a backbone of emergency communications for the National Capital Region and could be rolled out nationally after that. I encourage members of the Committee to examine Appendix C of my testimony. It lists just some of the examples of how local public television stations are pushing the envelope in the use of digital broadcasting in real ways to help real people. Stations are launching new initiatives every day. Clear Choice for the Federal Government However, despite recent progress in the DTV transition, the nation remains a long way from achieving the full benefits of digital. Carriage of the digital signals on cable and satellite is still uncertain for most stations. Broadcasters and elected officials are in the same boat when it comes to serving households with over-the-air analog television sets: we cannot just turn off people’s access to free, broadcast television. And for public television, especially, we must find a way to fund the production of digital content that will help drive consumer acceptance of DTV. The implication of the status quo in government policy is clear: without bold government and industry action to quicken the transition’s pace, the benefits of digital television will remain beyond the reach of most households for an unacceptably long period of time. Furthermore, the current analog broadcast spectrum that is to be returned to the government for other uses will likewise remain unavailable for the same unacceptably long period of time. Clearly, it is time for a bold initiative to unleash digital. We applaud the work of the FCC’s Media Bureau in developing a proactive framework for completing the transition. We continue to have questions about some elements of the plan as it has been crafted to date, but we appreciate the bureau’s continued willingness to work with us. I would note that one key element of the Media Bureau’s draft plan is a national “hard date” of January 1, 2009 to turn off analog broadcasting. The plan that we in public television are developing would free up considerable blocks of analog spectrum well before 2009. At the same time, we have an obligation to ensure that viewers who only own analog TV sets will not be stranded by the imposition of a hard deadline. We take our universal service obligations very seriously. Public stations hold licenses to 21 percent of the nation’s broadcast spectrum. They know that they hold spectrum in trust, and that the government will reclaim the analog spectrum at some point. However, there is great disparity about when stations believe conditions will be in place that will allow them to switch off analog broadcasting and achieve what we call DOB—Digital-Only Broadcasting. In February, a survey of our member stations found that, assuming the status quo, 86 percent of stations do not believe conditions will be in place for DOB by 2009, the hard date proposed by the Media Bureau plan. This is the bleak DTV transition scenario with which we are all too familiar. It led us to ask: What would it take to change that scenario? So we asked the question again, this time proposing three reforms to take place: · first – ensuring full post-transition cable and satellite carriage of digital broadcast signals, including multicasting; · second – ensuring the availability of low-cost, digital-to-analog set-top converter boxes for serving households that rely upon free, over-the-air television; and, · third – creation by Congress of a new funding stream, such as a digital content trust fund, for the production and distribution of a new generation of digital educational content to drive market acceptance of DTV. The results were astonishing: 81 percent of stations indicated that with implementation of these important reforms, the conditions would exist for voluntary surrender of analog by the end of 2007, a year earlier than the Media Bureau would require. (See Appendix A) Public Television’s DTV Blueprint Mr. Chairman, we think we are on to something here, and we would like to offer a blueprint today that would accomplish the triple goals of returning a significant amount of spectrum to the government in the next four years, providing a market-based boost for the transition and – most important – delivering new digital services, in the truest sense of the word, to consumers. Let me note that the plan we are presenting is still a work-in-progress, and much is dependent upon Congressional and FCC action. But we appreciate the opportunity to share our thinking with the Committee today. First, we ask that the Commission adopt rules providing for full post-transition digital carriage rights, including multicasting, for local broadcast signals on cable and satellite, and that individual stations be accorded those rights when they surrender analog. We would rather negotiate these agreements with the cable and satellite industries, but it is critical that the Commission and/or Congress be prepared to weigh in if necessary. We have shared our views with the Committee regarding carriage provisions in the reauthorization of the Satellite Home Viewer Improvement Act. Second, we propose that Congress create a trust fund, based upon auction revenues that would support the creation of digital education content by public stations and our partner institutions. The idea of a public broadcasting trust fund has been around since the 1960’s, but this one is different. It is limited in scope, is highly targeted toward education and, we believe, will help unlock tremendous economic benefits for the country. Under our plan, public stations would be permitted to surrender their analog spectrum – on a market-by-market basis – almost immediately, if the policy changes we have outlined are instituted. It is important that this be a voluntary plan. Stations in Roanoke, Virginia; Houston, Texas; Anchorage, Alaska; and Tucson, Arizona; have indicated they might be ready for Digital-Only Broadcasting by an early date if the above conditions are met. However, we need to protect consumers in states like Montana, Oregon and North Carolina where some believe that DOB may take much longer. Our plan is based on the notion that it is not necessary or even desirable for all spectrum – public and commercial – to be returned at once. Moreover, all spectrum, like all politics, is local. Wireless service providers or others who want access to UHF and VHF spectrum might find it advantageous to market test new applications in specific markets before rolling them out nationwide. Here is a hypothetical example: If ten public stations were willing to surrender analog by the end of 2005 or even sooner, some of the new wireless applications we have heard so much about might be tested in those markets, to be rolled out more broadly as spectrum became available. We would expect that wireless broadband companies would seek to work with stations in those markets to speed the process: For instance, might a wireless company be willing to help underwrite set-top boxes in a particular market if it knew it would gain access to the spectrum sooner? No Viewer Left Behind This last point addresses the need for protecting universal access for consumers who rely upon over-the-air television, either exclusively or for second and third sets in the home. Taking care of these citizens is a prerequisite for completing the digital transition. There may be, therefore, a need to subsidize digital-to-analog set-top converter boxes for some Americans, perhaps on a means-tested basis. However, we believe most consumers can be motivated to buy set-top boxes or new digital sets. The key is rolling out and marketing new, over-the-air digital services to consumers. The success of the Freeview service in Great Britain is very encouraging in this regard. Perhaps in America, there is an opportunity to re-brand and re-launch broadcast television as “wireless TV” for new generations who have known only cable. Trust Fund for a New Generation of Digital Education Content The next step under our proposal is for stations electing DOB and an early return of analog to file a “universal service plan” with the Commission outlining how they would serve their over-the-air analog consumers in a digital-only world. Again, presumably, they would likely have the assistance and support of commercial entities in crafting these plans. Upon acceptance of the plan, analog spectrum would be surrendered and – this is crucial – stations would be eligible for grants from a new federal digital educational services trust fund. This fund would not replace the current appropriation to the Corporation for Public Broadcasting; it would instead provide a new, targeted source of funding for Public Television educational digital content, paid for by future auction revenues. Because stations would be unlikely to participate in this plan if they were forced to wait years for spectrum auctions, we propose that this fund be created by an initial appropriation. The Treasury then would be reimbursed later by the proceeds of the spectrum auctions but, in the meantime, local stations could begin immediately to deliver new digital educational content. Mr. Chairman, I realize that much of the focus on the return of analog television spectrum has centered on auction revenue for the government. However, we believe there are much greater economic benefits at stake if the analog spectrum is freed up sooner rather than later. If the wireless industry is correct, their use of vacated spectrum will lead to a great deal of new economic activity. This means equipment orders, jobs, and tax revenue to the government. The establishment of a digital educational services trust fund itself will have important economic benefits for the nation. The fund would support the creation of a new generation of education and training content and services, and the link between education and economic growth is well known. A trust fund would allow for the localization of educational content and services; universal access to education; meeting the training needs for tomorrow’s workforce; building richer digital libraries; and finally, fulfilling public television’s original mission to provide quality educational services to the American public. A Market-Based Solution In sum, the Public Television digital transition plan, still in development, builds on ideas raised by the Media Bureau plan, such as full post-transition carriage rights, including multicasting, and goes a couple of steps further. We believe the voluntary, market-based solution we propose will free up large blocks of spectrum much earlier than would otherwise be the case with minimal consumer disruption. Furthermore, our plan would rely upon market forces and the involvement of future spectrum beneficiaries in ensuring universal service and the provision of set-top converter boxes rather than relying heavily on a federal subsidy. The new educational content services that would flow from the creation of a dedicated fund would represent true digital public service that otherwise might not happen. And very importantly, our plan accelerates the day that public safety agencies will have access to the spectrum they sorely need. Mr. Chairman, we believe this is a win-win-win proposal that will advance the transition, begin to unleash the economic potential of the now-bottled up analog broadcast spectrum, and finally, deliver a new generation of digital educational services to our communities. With the expectation that this Committee will consider reauthorizing the Public Broadcasting Act this summer, we believe there is no better time to launch an initiative such as this. We hope you will give this proposal your serious consideration and work with us to develop it. Thank you for the opportunity to be here today, and I look forward to responding to your questions. # # # Appendix A Question A: If you knew that cable would carry your digital signals when you switch off analog, that low cost digital-to-analog set-top boxes were available to consumers, and that Congress would establish a trust fund tied to the return of PTV’s analog spectrum, how soon would your station be willing to turn off analog? n End of 2004 or sooner. (11%) n End of 2005. (20%) n End of 2006. (37%) n End of 2007. (13%) n End of 2008. (5%) n End of 2009. (0%) n End of 2010. (7%) n End of 2011 or later. (7%) Question B: Without cable carriage, low cost d/a set-top boxes, or a trust fund, how soon would you expect your station to turn off analog? n End of 2006 or sooner. (5%) n End of 2008. (9%) n End of 2010. (19%) n End of 2012. (12%) n End of 2014. (12%) n End of 2016 or later. (43%) Source: APTS Online Member Consultation, February 2004 Appendix C How Public Television Stations Use Datacasting in the DTV Transition One promise of the digital transition is the ability for stations to implement datacasting – using digital TV bandwidth to deliver data in many locations throughout the broadcast area of a local public television station. Much like a TV program is broadcast to many television receivers, datacasting delivers digital content – video, audio, data files – to local content servers. Datacasting provides significantly superior quality and reliability with several advantages over satellite or Internet mediums, such as: · Datacasting is inexpensive compared to satellite transmissions. · Datacasting in not dependent on large data pipes the way streaming is. · Datacasting will not bottleneck limited network resources. · Datacasting provides copyright protection to streaming. Many APTS member stations are developing applications for datacasting that range from homeland security uses to education and workforce development as a vital part of the digital transition. Following is a sample of local station innovation in datacasting. Homeland Security/Emergency Preparedness · The New Jersey Network (NJN) was the first in the nation to utilize public digital television to enhance emergency preparedness for nuclear power plants. NJN uses its broadcast signal to send emergency messages at high speeds to desktop computers at New Jersey Office of Emergency Management (OEM) sites around the Oyster Creek Nuclear Generating Station. This is yet another example of NJN's pioneering work in digital transmission technology and will serve as a model for other communities. · KLVX/Las Vegas has worked with the Clarke County Emergency Preparedness office to take advantage of the system KLVX has in place to transmit video and other information to the 300 schools in the region currently linked to KLVX. Current emergency plans from the county designate the public schools as safe evacuation sites and KLVX can communicate with these centers in case of emergency. KLVX is now working to leverage the same technologies to provide for communication links to rural communities and the protection of incoming water supplies to the area. KLVX is also using their television technology to help Las Vegas public safety personnel get up-to-the-minute information that can help them respond to emergencies. KLVX can use a portion of its digital television signal to beam information – such as building blueprints or video and audio files – directly to first responders’ computers or mobile data terminals. The information can be received using a traditional television antenna that is connected to a special receiver that plugs into a computer or mobile data device. Through the over-the-air digital signal, emergency workers can receive files just as they would with an Internet connection. Because datacasting only uses excess parts of the spectrum, it doesn’t interfere with the station’s normal HDTV broadcasts. · In partnership with the University of Texas Medical Branch-Galveston, the KERA/Dallas Homeland Security system can deliver crisis communications to discrete or general audiences, including simultaneously sending different messages to health departments, DMAT teams, hospitals, law enforcement/fire safety, and general public. The University of Texas Medical Branch-Galveston is the largest telemedicine provider in the nation and the only academic campus in the U.S. with a maximum CDC-related biological containment laboratory (BSL4 research laboratory). · The Kentucky Network (KET) is capable of datacasting significant amounts of information over the airwaves through their digital transmitter network in what could be called the "wireless portion of Kentucky's information highway." This digital datacasting capability will enable emergency and other high priority information to be delivered to computers around the state on a moment's notice. KET is working with partners such as the Dept. of Public Health, Kentucky State Police, Emergency Management, NDS, Inc., and several others to develop the potential of this new service. · Thirteen/WNET in New York City is developing a program to test and analyze end-to-end communication with first responders over the station's digital broadcast spectrum. A prototype of the Smart Dissemination Networks Project (Smart Nets) is currently being tested. Smart Nets will incorporate a sensor network to collect local data, integrate, disseminate and display video, other sensor data, and multi-source national intelligence data related to special operations for urban environments, perimeter defense, homeland defense, emergency response systems, emergency broadcast systems, and mobile command and control. Covering a 50-75 mile urban area, the system would also receive return requests for information in the same broadcast channel ("in-band return path"). The unique aspect of this system is that the architecture turns a traditionally one-way communications stream into a two-way band. In the event of a failure of cellular and landline communications during a catastrophe like that of 9/11 or the blackout of August 2003, Smart Nets would enable first-responders on the scene to remain in continuous contact. “The FDNY is very excited about the kinds of capabilities that Smart Nets will provide our units in the field,” said Deputy Fire Commissioner of Support Services Milton Fischberger. “We have taken significant steps in improving our communications infrastructure since 9/11. The addition of Smart Nets will only further increase the scope of our ability to communicate to our members, and in turn, the ability to efficiently operate at emergencies.” Education · KERA/Dallas uses a local content server to receive and store transmitted information, which maximizes the available DTV bandwidth because information can be received 24 hours a day. Data transmissions can occur at anytime and are then stored for use at a school’s convenience. Beyond equipment, the KERA datacasting program includes installation, technical training and support, opportunistic bandwidth management (scheduling and capacity maximization), customer installations and front-line support, and the development of broad content networks to provide a wide range of quality titles and enriched content to the schools. The real value is to the teacher and ultimately the students. Most content is readily accessible from the KERA on-site content library. At the user interface, teachers can easily search the large library by grade, subject, title or indexed learning objectives. Teachers spend less time acquiring and manually manipulating the video segments and more time enriching their lesson plans. The students get more information in a more interesting and entertaining format, which increases the probability of connection and information retention. · KCPT/Kansas City, in partnership with three other Missouri stations (KMOS/Warrensburg-Sedalia, KETC/St. Louis and KOZK/Springfield), the adult education division of the Missouri Department of Education, and the state library system are looking to use datacasting to train librarians in local libraries to mentor students taking GED courses for certification. This project is in the discussion phase, but builds on a successful datacasting pilot project with two local colleges and one area middle school to test the educational and practical applications of this enhanced service. This proposal offers a unique solution for those living in rural areas. Trained librarians, who will act as facilitators for the students pursuing a GED certificate, help make up for the shortage of money to pay teachers. Situating the “study groups” in libraries makes it more readily available to adult students who may get cold feet having to enter a classroom setting again after years of being away from this environment. Study groups will meet at the library to watch videos and use workbooks from GED Connection that will be located at the sites along with curriculums. Librarians will connect students, via phone or Internet, with tutors when needed. Workforce Development · New Jersey Network (NJN) is working with the N.J. Department of Labor, other state agencies and community-based organizations to provide workforce development services through the “New Jersey Workplace Literacy Program.” NJN is using a variety of technologies to deliver workforce training materials to welfare recipients, dislocated workers and other job seekers at 14 sites across the state. This program fully incorporates the Workplace Essential Skills video and web-based instructional system to teach individuals at the pilot sites basic skills needed for workplace success. A crucial element of the program is that it enables participants to address their own employment and skills issues at their own place. The videos teach basic reading, writing and math skills in the context of real-life work settings. At the same time, important concepts such as making a good impression, employee dependability, making the most of introductory training and growing within the job are reinforced. · WHYY/Philadelphia has been involved in a two-year datacasting pilot project to digitize most of the GED Connection and Workplace Essential Skills content from PBS LiteracyLink. WHYY made this instructional content and accompanying print materials available at 20 locations in four counties, including a homeless shelter, job centers and two community colleges. The pilot project focuses on adult basic education: preparing the entry-level worker to enter the workplace and increase the number of residents in Pennsylvania completing their high school and college educations through distance learning. WHYY is participating in this pilot project to demonstrate the effectiveness and potential digital broadcast-based delivery to help bridge the digital divide and deliver training where people need it most.

• Dr. Thomas W. Hazlett
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  Testimony

  Dr. Thomas W. Hazlett

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• Mr. Patrick P. Gelsinger
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  Mr. Patrick P. Gelsinger

  I am Patrick Gelsinger, Chief Technical Officer of Intel Corporation. Today, I want to address four topics: the coming revolution in radio technology, the need for spectrum policy reform, the value of TV spectrum for wireless broadband applications, and three possible ways of making TV spectrum available for new uses. The Coming Radio Revolution. Moore’s Law is going to revolutionize Marconi’s transmitter. Phenomenal “silicon” improvements will produce two profound effects in radio technology. First, radios will continue to get “digitized.” The result will be that every electronic device will include a radio and more importantly there will be an explosion in the number of wireless devices used for communication, commercial, medical, entertainment and numerous other purposes. Radio communication, like music files or video DVDs, will become another function on your computer. Second, additional processing power will make radios much smarter and more flexible. Once the radio itself is primarily digital, it will be able to change radio air interface standards by downloading different software. One new radio technology Intel is particularly excited about is WiMAX, an IEEE standard (802.16-REVd) that has been architected to cost effectively deliver broadband services. The Need for Spectrum Reform. The biggest obstacle facing the coming radio revolution is artificial spectrum scarcity created by over reliance on “command and control” spectrum management. Two promising spectrum management techniques can serve as a guide for reform— the grant of increasing flexibility to exclusive licensees and the creation of largely unregulated, unlicensed bands. The flexible licensed approach fostered enormous innovation and investment on the PCS spectrum and unlicensed use created the Wi-Fi revolution at 2.4 and now 5 GHz. These techniques have succeeded because they give users more freedom to innovate and respond to changing market forces without seeking government approval. Intel actively supports both types of reform. The value of TV Frequencies. The ability to use TV frequencies would accelerate the growth, expand the reach, reduce the cost and improve the quality of broadband wireless service. Even when compared to the 2.5 GHz frequencies—the best alternative available to WiMAX in the U.S.—the TV frequencies make it far more economical to serve rural areas and to compete with wireline broadband alternatives in urban areas. For a given level of quality to a given coverage area, the TV frequencies require fewer antennas and use less power than 2.5 GHz frequencies. To cover the same geographic area we estimate that using 2.5 GHz frequencies would approximately result in an 11db drop in signal strength. (For non engineers, a simple rule of thumb is that every 3 dB of additional loss represents a factor of two difference in signal strength.) This drop in signal strength would require 4 to 5 times as many base stations to achieve equal geographic area coverage, for a given air interface and bandwidth. Of course, one could “make up” for this loss by introducing innovative antenna enhancements or increasing the transmit power at 2.5 GHz. The former is being done in the WiMAX standard but at increased system costs. The latter—a greater than ten-fold increase in transmit power--is not feasible. Receiving devices would have to exceed FCC power limitations to successfully transmit back to the base station. Also, because TV frequencies better penetrate walls, they would be less dependent on line of sight transmission to outdoor antennas. Besides the value that consumers could derive from portability, indoor use would also facilitate self-installation, avoid expensive truck rolls and make it attractive to launch market wide marketing and advertising campaigns. And indoor service to untethered laptops will accelerate the integration of WiMAX radios into microprocessors thereby generating the efficiencies from Moore’s Law. Three Possible Reforms of the TV Spectrum. If the United States were to move forward expeditiously to make this spectrum available for new wireless broadband services, the resulting gains to American consumers, especially in rural areas, would be stupendous and U.S. based companies would achieve important first to market advantages. 1. Intel supports the FCC’s recently opened Notice of Proposed Rulemaking considering unlicensed use on vacant television channels. Given the current limitations of television receivers, most of the TV channels in any geographical area are unused. Advanced radio techniques, however, permit unlicensed use, without any adverse impact on the broadcasters. Indeed, because the channels “in use” seldom changes, agile radios may be able share these frequencies. Intel has and continues to do extensive due diligence to demonstrate exactly how unlicensed devices can access vacant TV channels with no significant risk to over-the-air broadcasters. 2. Intel believes that the Mass Media Bureau has proposed a very constructive plan. It would enable consumers and a myriad of other affected interests to plan towards a certain end date, January 1, 2009. It would also free valuable spectrum. Channels 52-69 represent 108 MHz in the 700 MHz band—24 MHz for use by public safety and 84 MHz for use by advanced wireless services. Indeed, if I were to recommend any change to the Mass Media Bureau plan, it would be to move the date certain forward. 2009 is almost five years away. 3. Intel believes that the FCC should explore giving broadcasters incentives to turn back their channels in advance of the 2009 for a pro rata share of the auction proceeds. This approach would compensate broadcasters for clearing before they would be compelled to return their analog channels. Under this approach, they would have strong incentives to voluntarily clear their channels early. Their compensation would be set by the marketplace. If the Mass Media Bureau plan is the “stick,” a linked auction could be the “carrot.” The two approaches could be highly complementary. Before the Committee on Commerce, Science, and Transportation United States Senate “Completing the Digital Television Transition” Statement of Patrick P. Gelsinger Chief Technical Officer Intel Corporation June 9, 2004 Introduction I am Patrick Gelsinger, Chief Technical Officer of Intel Corporation. Intel is the world’s largest semiconductor manufacturer and a leader in technical innovation. Intel is also a leading manufacturer of communications and networking chips. Our mission is to accelerate the convergence of computing and communications through silicon-based integration. I manage much of Intel’s research and development activities including those targeted at developing radio innovations. During my 24 years at Intel, I have worked in a variety of areas including microprocessor and computing platform (PC) design and the development of wired and wireless communications technologies. As CTO I also head Intel’s technology policy and standards activities including content protection and digital rights management and spectrum policy and planning. It is an honor to appear before this Committee to testify on whether and how the digital television (DTV) transition should be expedited. Let me begin by saying that Intel has long recognized the great potential of DTV and has invested significant R&D in DTV including the development of DTV tuners for PCs. In 1998 Intel and the PBS teamed up to deliver “Frank Lloyd Wright”—the first digital television trial that allowed viewers to obtain Web-based content while watching TV. Also, Intel’s experimental station KICU, broadcasting from Intel’s headquarters in Santa Clara, was one of the first over-the-air DTV broadcasters in the Bay area. Today, I want to address four topics: · The coming revolution in radio technology, · The need for spectrum policy reform, · The value of TV spectrum for applications such as wireless broadband, and · Three possible ways of making TV spectrum available for new uses. Moore’s Law and the Coming Radio Revolution Moore’s Law is going to revolutionize Marconi’s transmitter. Over 30 years ago, Intel founder Gordon Moore predicted that the density of transistors would double roughly every 18 months. These improvements in density increase speed and reduce cost. In the past 30 years, microprocessors have increased 1,000 times in speed and decreased 100 times in cost. If Moore’s Law continues to hold, as we expect it will, by 2010 a single microprocessor will contain ten billion transistors and process a trillion instructions per second. These phenomenal “silicon” improvements will produce two profound effects in radio technology. First, radios will continue to get “digitized.” Increasingly, radios will encode information digitally, increasing the robustness of its transmission and allowing it to be processed by general purpose microprocessors. Radio communication, like music files or video DVDs, will become just another standard function on your computer. As Moore’s law produces still more powerful chips, the percentage of the chip needed to provide radio communications will become trivial. Only somewhat facetiously, I call it “Radio Free Intel.” The result will be that every electronic device will include a radio and more importantly there will be an explosion in the number of wireless devices used for communication, commercial, medical, entertainment and numerous other purposes. Second, additional processing power will make radios much smarter and more flexible. Separate circuits will not be needed to decode an AM, FM, GSM, CDMA, NTSC or DTV signal. Once the radio itself is primarily digital, these functions can be added by downloading different software. The FCC recognized this eventuality when it enabled these flexible “Software Defined” radios or SDRs. In addition to making radios more flexible, additional processing power will enable radios to alter their operating parameters to make the most efficient use of the available frequencies. Today’s cell phones can scan multiple frequencies, switch from GSM or CDMA air interfaces and when roaming choose which carrier offers the best business arrangement. Verizon states that its “CDMA transmitters adjust power levels 800 times per second—to ensure that only the minimum power necessary is used to maintain a connection.” One new radio technology Intel is particularly excited about is WiMAX. Like Wi-Fi (802.11), WiMAX is an IEEE standard (802.16-REVd) that is expected to be accepted as a global standard. WiMAX is expected to be deployed for both licensed use (like Cellular) and unlicensed (like Wi-Fi) applications. With the latest in modulation techniques (such as OFDM) and antennae techniques (such as MIMO) WiMAX has been architected to cost effectively deliver broadband services. Before yearend we expect to see radios using the WiMAX to provide wireless broadband access to fixed locations and in 2005 we expect the mobile version of the specification (IEEE 802.16e) to be complete. It will be deployed for Line of Sight at ranges of 50 kilometers or more and non-Line of Sight applications at somewhat shorter ranges. A wireless ISP using a small 802.16 installation could provide sufficient shared data rates (up to 75 Mbps) to simultaneously support more than 60 businesses with T-1 style connectivity and hundreds of homes DSL-speed connectivity. In 2006 WiMAX will begin to be deployed in laptops. Intel has announced that it intends to put WiMAX radios in its chipsets by 2007—just as it has done with Wi-Fi in its Centrino ™ chipsets beginning in 2003. WiMAX is expected to improve bandwidth and service while radically reducing radio costs. The result WiMAX should dramatically spur wireless broadband deployment as a third broadband pipe augmenting DSL and Cable. It holds special promise in rural areas or developing markets where service providers haven’t deployed wired infrastructure. Countries around the globe are already beginning pre-standard trials of WiMAX. General Spectrum Reform The biggest obstacle facing the coming radio revolution is artificial spectrum scarcity created by over reliance on “command and control” spectrum management. The current system is cumbersome, litigation-prone and politicized. Its tendency to “lock in” inefficient uses and technologies has become more costly with the burgeoning demand for diverse wireless uses and the increased ability of technology to minimize interference. The FCC’s Spectrum Policy Task Force identified two promising spectrum management techniques that can serve as a guide for reform— the grant of increasing flexibility to exclusive licensees and the creation of largely unregulated, unlicensed bands. The flexible licensed approach fostered enormous innovation and investment on the PCS spectrum, e.g., the creation of 147,719 cellular base stations. Unlicensed use created the Wi-Fi revolution at 2.4 and now 5 GHz. In the fourth quarter of 2003 alone, worldwide Wi-Fi sales exceeded half a billion dollars—16 percent growth over the previous quarter. These techniques have succeeded because they give users more freedom to innovate and respond to changing market forces without seeking government approval. Importantly, these reforms need not be mutually exclusive and should be considered simultaneously. Some advocates of spectrum reform espouse a “property-rights” approach. They believe that we should spend all of our efforts in creating a license structure that better emulates markets for other resources such as land. Other spectrum reformers espouse only unlicensed reforms. These advocates of so-called “spectrum commons” believe unlicensed spectrum can meet most if not all of society’s spectrum needs. Intel does not take an “either/or” approach. In fact, you might say we are in the “and/both” camp. The reality is that over 80 percent of the radio spectrum from 300 to 3,000 MHz is managed under the “command and control” approach. Less than 10 percent is devoted to what could be called flexibly licensed and less than 10 percent is allocated to unlicensed. What we need are significant increases in the amount of spectrum available to exclusive but flexible use and unlicensed use. Intel has been active on both fronts. I would like to give you an example of each kind of reform. On the licensed front, Intel supports reform of the 2.5-2.7 GHz frequencies under consideration in the MMDS/ITFS proceeding that the FCC has scheduled for consideration tomorrow. Currently, these frequencies are primarily allocated to 1-way video services by industry (MMDS) and educational (ITFS) licensees. While most ITFS spectrum is leased to commercial interests, the fragmented band plan has impeded developing new more valuable uses. Hopefully, the FCC will restructure the band to create contiguous blocks of spectrum—132 MHz in total—that could be used for several purposes including WiMAX. Intel has also aggressively supported unlicensed reforms. For example, we were active in NTIA and FCC deliberations about whether the 5 GHz mid-band frequencies could be made available to Wi-Fi use. Intel and other high tech companies worked closely with NTIA to set parameters that would assure that a Wi-Fi system would reliably identify when a military radar begins to operate in its channel and rapidly move its operation to a different unused channel. Ultimately, this approach was adopted at the June 2003 World Radio Conference. Reform of the TV Spectrum The focus of today’s hearing is whether and how the DTV transition can be expedited so that the analog channels currently used by broadcasters can be returned to the FCC and put to valuable new uses. I want to address how valuable this spectrum could be for wireless broadband service—a likely new use for the returned analog TV channels. I also want to speak briefly in favor of 3 possible reforms which could accelerate improved use of this spectrum. 1. The Value of the TV Spectrum The television spectrum would offer enormous advantages for wide area wireless broadband services. The frequencies currently available for wireless broadband are up in the 2.5, 3.3 and even 5.8 GHz region. In contrast, TV channels are much lower in frequency—from 700 MHz all the way down to 76 MHz. It is true that technology has continually improved our ability to feasibly use higher frequencies. In Marconi’s day, very low frequencies around 100 KHz were preferred because they hugged the earth. As technology advanced, it was discovered that short-wave frequencies, from about 2 to about 30MHz, could bounce off the ionosphere, giving them dramatically greater distance. In 1962, conquering distance changed again with the introduction of geostationary telecommunications satellites that use frequencies in the GHz range. Notwithstanding these improvements, lower frequencies still travel farther at given power. This simple fact enables VHF television licensees to provide a better quality over the air signal with less power than its UHF television counterpart. Similarly, a cellular system operating at 800 MHz can provide better coverage than a PCS system operating in the 2 GHz range. The ability to use TV frequencies would accelerate the growth, expand the reach, reduce the cost and improve the quality of broadband wireless service. Even when compared to the 2.5 GHz frequencies—the best alternative available to WiMAX in the U.S.—the TV frequencies make it far more economical to serve rural areas and to compete with wireline broadband alternatives in urban areas. For a given level of quality to a given coverage area, these frequencies require fewer antennas and use less power. Chris Knudsen of Vulcan Capital estimated the capital and operational costs of providing wireless broadband service in Bellevue/ Seattle, Washington using 2.6 GHz. Then he estimated what happened to the capital and operating costs of providing wireless broadband service to the same territory using 700 MHz. He found that using TV frequencies required only 1/3 to ¼ of the cell sites. Even more importantly, it required about only ½ to 1/3 of the capital to reach positive free cash flow. For purposes of this testimony, we did our own analysis of the advantages of 700 MHz vis a vis 2.5 GHz frequencies. Our results were similar to those of Vulcan Capital. For a given level of quality to a given coverage area, the 700 MHz frequencies require fewer antennas and use less power than 2.5 GHz frequencies. To cover the same geographic area we estimate that using 2.5 GHz frequencies would approximately result in an 11db drop in signal strength. (For non engineers, a simple rule of thumb is that every 3 dB of additional loss represents a factor of two difference in signal strength.) This drop in signal strength would require 4 to 5 times as many base stations to achieve equal geographic area coverage, for a given air interface and bandwidth. Of course, one could “make up” for this loss by introducing innovative antenna enhancements or increasing the transmit power at 2.5 GHz. The former is being done in the WiMAX standard but at increased system costs. The latter—a greater than ten-fold increase in transmit power--is not feasible. Receiving devices would have to exceed FCC power limitations to successfully transmit back to the base station. Also, because TV frequencies better penetrate walls, they would be less dependent on line of sight transmission to outdoor antennas. Besides the value that consumers could derive from portability, indoor use would also facilitate self-installation, avoid expensive truck rolls and make it attractive to launch market wide marketing and advertising campaigns. And indoor service to untethered laptops will accelerate the integration of WiMAX radios into microprocessors thereby generating the efficiencies from Moore’s Law that I discussed at the outset. While perhaps obvious, the cumulative impact of these differences on the feasibility of providing wireless broadband in rural areas bears emphasis. The upshot for some rural areas is that opening the TV frequencies to wireless broadband use would likely make the difference between a high quality wireless broadband alternative and none at all. In simple terms, frequencies below 1GHz are premier beach front property. We believe the allocation of these frequencies for licensed and unlicensed use could dramatically accelerate broadband deployment with nationwide benefit but particular benefit toward rural and underserved areas. 2. Permit Unlicensed Use of Vacant TV Channels Policymakers should consider three possible reforms that could increase the use of the TV spectrum. First, the FCC recently opened a Notice of Proposed Rulemaking considering unlicensed use on vacant television channels. Given the current limitations of television receivers, most of the TV channels in any geographical area are unused. Advanced radio techniques, however, permit unlicensed use, without any adverse impact on the broadcasters. Indeed, because the channels “in use” seldom changes, agile radios may be able share these frequencies. The technology required to use these frequencies without interference to existing stations is comparable to what is deployed in today’s cell phone. Even inexpensive TV sets have the ability scan for over-the-air channels as part of their set-up routine. Intel has and continues to do extensive due diligence to demonstrate exactly how unlicensed devices can access vacant TV channels with no significant risk to over-the-air broadcasters. Another method under consideration is to use Global Positioning System receivers built into the unlicensed devices to determine the device location relative to fixed broadcast transmitters. Again, rural communities could especially benefit from this approach. They have the greatest number of vacant TV channels and fewer wireline broadband alternatives. Rural deployments might also be accelerated by allowing somewhat higher power levels to increase coverage with minimal capital costs required. Ironically, by creating the incentive for millions of devices to be able to scan TV channels, unlicensed use of vacant TV channels could create, as Chairman Powell stated, “potentially an enormous opportunity for broadcasters.” Indeed, making it possible for millions of devices to interact with on air broadcasters could promote the FCC’s second initiative in this area: the DTV Transition. 3. Expedite The DTV Transition Currently, each broadcaster has two 6 MHz channels—one channel for analog distribution and one for digital distribution. Congress established a DTV transition plan that in essence requires a broadcasters return its analog channel to the FCC by 2006 or when 85% of the households in its market can receive digital television, whichever occurs later. The Mass Media Bureau has proposed a plan that would accelerate this transition and provide a date certain by which broadcasters would return their analog channels. There are many details in the Bureau’s proposal and I do not purport to be expert on “must carry” and other regulation. Essentially, it provides that broadcasters’ must-carry rights on cable systems would switch from their analog signals to their digital signals on January 1, 2009. At the same time cable operators would be required to make the digital must-carry signals available to all subscribers. They would have a “down conversion” or an “all digital option.” Satellite operators in “local-into-local” markets would have analogous requirements. The cumulative reach of cable and satellite providers together with the impact of the FCC’s DTV tuner mandate and new “plug-and-play” DTV sets would almost certainly assure that the 85 percent metric would be met everywhere by January 1, 2009. Intel believes that the Mass Media Bureau has proposed a very constructive plan. It would enable consumers and a myriad of other affected interests to plan towards a certain end date. It would also free valuable spectrum. Channels 52-69 represent 108 MHz in the 700 MHz band—24 MHz for use by public safety and 84 MHz for use by advanced wireless services. In channels 2-51, the analog channels would be available for auction. As I indicated above, the benefits from making this spectrum available for wireless broadband could be enormous. Indeed, if I were to recommend any change to the Mass Media Bureau plan, it would be to move the date certain forward. 2009 is almost five years away. 4. Move Forward with Auctions of Channels 52-69 That brings me to my third proposal. Once the date certain is set, it may be possible to provide incentive for broadcasters to vacate their channels even earlier. The FCC might be able to spur their movement by simply moving forward with the spectrum auctions of the unassigned spectrum for channels 52-69. The auction winners would have strong incentives to buy these broadcasters out and help them move to their digital channels. When the FCC proposed to auction these channels a few years back, several broadcasters appeared ready to move to their digital channels and vacate their analog channels earlier than they would have been required to under the law in exchange for compensation. Now it may possible to structure the auctions to induce the broadcasters to voluntarily clear these channels much earlier than 2009. For example, FCC could give broadcasters incentives to turn back their channels in advance of the auction for a pro rata share of the proceeds. This approach would compensate broadcasters for clearing before 2009—the new date by which they would be compelled to return their analog channels. Under this approach, they would have strong incentives to voluntarily clear their channels early. Their compensation would be set by the marketplace. If the Mass Media Bureau plan is the “stick,” a linked auction could be the “carrot.” The two approaches could be highly complementary. I have not worked out all the details. Nor have I fully considered all the legal ramifications. I leave those to the FCC and to the members of this Committee. But I do think this approach is worth considering. In fact, I am confident that if there is the will, a way could be found. In the end I keep coming back to the benefits to our country of clearing this spectrum in 2005 instead of 2009 or beyond. Even if limited to channels 60-69, the benefits from clearing the 24 MHz that has been allocated for public safety use and the 30 MHz that could be used for wireless broadband use would be stupendous. A Final Thought I want to close by returning to the potential benefits of clearing the TV spectrum for new uses such as WiMAX. There could be significant first mover consequences in this market. If the United States were to move forward expeditiously to make this spectrum available for new uses, it could start a bandwagon effect. I believe the benefits of the new wireless broadband services would be so compelling that a critical mass of other countries would quickly move to clear spectrum in this range. The resulting gains in economies of scale would give American consumers still lower prices and U.S. based companies important first to market advantages. On the other hand, the U.S. does not have a monopoly on spectrum reform. In particular, emerging countries have a special interest in developing wireless broadband alternatives because they have less wireline infrastructure. Also, they frequently face fewer transition costs because they have fewer broadcasters and other incumbent users. In short, the opportunity is great and the challenge is equally great. The time to begin reform is now. Thank you.

• Mr. Michael Calabrese
  Read statement

  Testimony

  Mr. Michael Calabrese

  Good morning. My name is Michael Calabrese, Vice President and Director of the Spectrum Policy Program at the New America Foundation, a nonpartisan public policy institute here in Washington. Thank you, Mr. Chairman and members of the Committee, for this opportunity to testify today. I will focus on our proposal for a consumer subsidy that can bring the long-stalled DTV transition to a swift conclusion while also ensuring that no American loses their access to “free” over-the-air programming. There is a general consensus that rapidly completing the digital TV transition – thereby freeing up the 108 MHz of “beachfront” spectrum corresponding to TV channels 52-to-69 – is clearly in the public interest. Because wireless signals at this frequency range pass easily through walls and trees, the 700 MHz band could jumpstart the deployment of more affordable wireless broadband connections, particularly in rural areas. Although Congress has already reallocated a portion of these TV channels for public safety agencies (to address interoperability problems) and for auction to licensed cellular services (which could yield $30-to-$40 billion in federal revenue), the DTV transition is badly stalled. There is no fixed deadline for redeploying these precious frequencies from analog broadcasting for the few to productive broadband for all. And, as FCC Media Bureau Chief Kenneth Ferree testified before the House Commerce Committee last week, under current law it could take decades before these economically critical frequencies are cleared for wireless broadband and other emerging technologies. The controversial question is how to end analog broadcasting without stranding the roughly 15 percent of consumers who still rely on analog over-the-air reception for their “free” TV. How U.S. Households Receive Television, Comparing 1993 and 2003 TV Households in United States Dec. 1993(millions) June 2003(millions) Change(%) Over the Air Only 33.9(26%) 12.5(11.7%) -63% MVPD Subscribers* Cable 57.2 70.5 DBS .07 20 Other 3 3.4 Total Subscription MVPD 60.3(64%) 93.9(88.3%) 37% *MVPD = Multichannel Video Programming Distributors are Cable, Direct Broadcast Satellite, and other service providers. Last month the FCC’s Media Bureau floated a new DTV transition plan that represents a fairly radical departure from the government’s current approach. Rather than relying on additional subsidies to broadcasters, the “Ferree Plan” recognizes that the real DTV transition is taking place not over the air, but over the cable and satellite systems that already provide the primary TV service to at least 85 percent of U.S. households. By counting all cable households as capable of receiving digital broadcasts, the FCC could declare that the statutory 85 percent threshold of DTV-capable homes in each market has been reached – and on that basis schedule the termination of analog broadcasting, and the reallocation of the spectrum used by TV Channels 52-to-69, for January 1, 2009. Unfortunately, while the Media Bureau plan is a step in the right direction, it is insufficient. By focusing solely on meeting the 85 percent statutory threshold for ending analog broadcasting, it ignores the far more relevant obstacle to redeploying the 700 MHz band to public safety and wireless broadband: the 17 million consumers who continue to rely on over-the-air analog TV. The switch from analog to digital-only broadcasting would currently force millions of households to purchase a digital TV, to purchase a digital-to-analog converter (so that their current TV still functions), or to subscribe to a paid cable or satellite service. It is true that product obsolescence is an everyday fact of life for Americans. Every year Americans throw away tens of millions of perfectly usable computers and mobile telephones because new technology comes along that makes them obsolete. Yet the potential backlash from consumers who continue to rely on terrestrial (over-the-air) broadcasting means the Ferree Plan is unlikely to succeed without a one-time consumer equipment subsidy. We believe it is necessary for Congress to step in and fix the problem it created when it loaned broadcasters, with no strings attached, a second free channel of spectrum in the 1996 Communications Act. At a cost equal to about 10 percent of the likely revenue the government can receive by reassigning Channels 52-to-69, a consumer subsidy can facilitate a two-year switchover from analog to DTV. By January 1, 2008 the DTV transition can be completed, the 108 MHz of channel 52-to-69 spectrum can be re-purposed to public safety and wireless broadband, tens of billions of dollars of new federal revenue can be collected, and the FCC’s costly DTV tuner mandate can be repealed if Congress chooses to earmark a fraction of the spectrum auction revenue (between 5 and 15 percent) for a tax credit to offset the cost for consumers who still rely on analog over-the-air broadcasting. A rapid and smooth DTV transition along these lines was completed last year in Berlin, Germany – and can likewise be successful here. Summary of New America’s DTV Transition Proposal We believe that that this Committee can best serve the public interest by adopting an enhanced version of the Media Bureau’s plan that emphasizes two goals: First, to protect consumer choice and consumer access to local broadcast programming. It’s important to note that preserving every American’s current ability to view their local OTA channels is not the same thing as requiring every American to watch digital-quality pictures. Second, to quickly clear and reallocate Channel 52-to-69 spectrum for both unlicensed and licensed wireless broadband, which will generate even greater economic and social gains in the long-term than the spectrum auction revenues generated in the short-term. We recommend that Congress both accelerate and improve upon the Media Bureau’s DTV transition plan by adopting the following provisions: 1. Fixed Turn-off Date: Announce a January 1, 2008 deadline for analog turn-off and spectrum clearance. 2. Reschedule Auctions: Schedule auctions for assignment of licensed portion of the returned spectrum for 2006 (ideally only the initial license term would be auctioned, specifying an annual user fee to compensate the public thereafter). 3. Consumer Converter Subsidy: Using a fraction of auction revenues, authorize a refundable tax credit available to consumers during a 12-month period (calendar or fiscal year 2007) to offset the cost of converting from analog to DTV reception. 4. Consumer Choice: Give consumers the flexibility to apply the credit to a digital-to-analog (D-A) converter boxes, a new DTV set, or for initial satellite dish or cable set-up costs. 5. Revoke the DTV “Tuner Tax”: Reverse the FCC’s 2003 DTV tuner mandate, which seeks to reach the statutory 85% DTV threshold by requiring manufacturers to integrate over-the-air digital reception in every set over 13 inches by 2007 – increasing the cost to consumers by at least $1.4 billion annually – despite the fact that the 85 percent of consumers who receive TV by cable or satellite may not need or want an OTA tuner. 6. Spectrum Reallocation for both Unlicensed and Licensed Wireless: In addition to the 24 MHz allocated for public safety, divide the remaining 84 MHz equally for use by licensed and unlicensed wireless broadband providers. 7. Switch from Analog to Digital Must-Carry: Upon return of their analog channel license, a broadcaster should be allowed to choose single channel digital must-carry (with no signal degradation); after Jan. 1, 2008, cable systems must pass through broadcasters’ primary digital signal, but can choose to cease down-converting the digital signal for analog reception. 8. Update the DTV Public Interest Obligations: The obligations of broadcast licensees should be extended to all “free” over-the-air programming streams and expanded to air each week the lesser of 3 hours, or 3 percent of programming time, of local civic and electoral programming (half of this in prime time). 9. Earmark spectrum revenue to capitalize a PBS trust and DOIT: A portion of the spectrum auction revenue should be earmarked for investment in the future of public television and digital education, capitalizing a trust fund for the future of PBS and/or a Digital Opportunity Investment Trust. Time to Shift from Broadcaster to Consumer Subsidies There are two general approaches to speeding up the DTV transition. The first is what we call the “Broadcaster Subsidy Model.” This is the approach America has taken to date. The second approach, implemented successfully last year in Berlin, Germany, is the “Consumer Subsidy Model.” This latter approach is premised on earmarking roughly 10 percent of the auction value of just a portion of the channel 52-to-59 spectrum to give every U.S. household (not just low-income households, as they did in Berlin) the option to claim a tax credit to offset the cost of converting from analog to digital reception. During the past 15 years, local TV broadcasters have lobbied for and won a myriad of government subsidies justified by the federal industrial policy in favor of transitioning to DTV while preserving “free” (ad-supported) over-the-air TV. The most valuable of these include: Ø “Free Spectrum Loan” – An indefinite, interest-free loan to existing broadcast TV licensees of a second 6 MHz channel with no fixed termination date. Ø “Spectrum Flexibility” – Rights to use new digital technology to transmit ten or more standard definition TV programs (or two or more high definition TV programs) in the 6 MHz of spectrum that could previously only transmit one standard definition analog program. Ø “Pay TV over Public Airwaves” – Rights to use as much as 90% of the DTV spectrum channel for pay TV or other pay data services, the revenue from which is supposed to subsidize ad-supported (“free”) broadcast DTV services (subject to a 5 percent ancillary services fee to the government). Ø “DTV Tuner Mandate” – Last year the FCC adopted an OTA tuner mandate – which begins phasing in next month (for high end TVs) and applies to all new sets by July 2007 – prohibiting consumers from purchasing a new TV set without a broadcast digital TV tuner inside it, even though the vast majority of TVs will never be used OTA. Ø “Broadcast Flag” – A requirement that all consumer electronics devices include a “broadcast flag” to prevent retransmission of an FCC licensed broadcast signal out-of-the-home without payment to the broadcaster. Ø “Plug and Play” – A requirement that all set top boxes sold for cable TV include built-in compatibility with broadcast DTV. Ø “More Eyeballs” – Expanded geographic and household coverage for existing broadcast TV licensees. After more than six years of this DTV industrial policy, the Consumer Electronics Association projects that only 53 percent of U.S. households will receive digital signals by 2007, the target date for the end of the 10-year transition adopted in 1996. The overwhelming majority of these digital signals will be received by cable and satellite subscribers until many years after the government’s DTV tuner mandate becomes fully effective in 2007. This is a primary rationale why many savvy insiders believe that the broadcast DTV transition, as defined under current law, won’t be complete until 2025 at the earliest. ‘The Last Granny Rule’ In addition to the tens of billions of dollars in costs imposed on consumers – both directly and because the spectrum is not available for advanced wireless services – the basic premise of the broadcaster subsidy is a fraud: Although current law assumes TV licensees will return their analog channel when 85% of the households in their market are capable of receiving digital signals, the political reality is that neither broadcasters nor the government will order the unplugging of analog broadcast TV when as many as 15% of Americans who rely exclusively on analog TV will lose at least partial access to their local TV stations. This is an unwritten obstacle to ending the DTV transition that we call “The Last Granny Rule.” The Consumer Subsidy Model The theory behind the Consumer Subsidy Model is that if granny needs to be subsidized to speed the DTV transition, why not subsidize her directly rather than indirectly via handouts to producers? The Consumer Subsidy Model is derived from the successful broadcast DTV transition completed in the Berlin-Brandenburg area of Germany (henceforth “Berlin”). A similar model was briefly proposed but not seriously pursued by the Clinton Commerce Department in 1996 during the debate over the 1996 second (DTV) channel giveaway. This testimony suggests a number of changes to the Berlin Model to fit U.S. circumstances better. The Berlin Transition On February 13, 2002, the Berlin-Brandenburg, Germany regulatory authority known as MABB (the FCC-like regional regulatory agency) ruled that the digital TV transition would begin on November 1, 2002 and be complete by August 4, 2003. According to all reports, the Berlin DTV transition went smoothly. As a result, very similar transitions will soon be implemented in half dozen other states in Germany. The Berlin transition was very much a win-win proposition for consumers and industry alike. Consumers in general benefited because, thanks to the wonders of digital compression technology, they could receive approximately four times as many free (i.e., 100% ad-supported) standard definition TV programs after the transition as they could with analog broadcast TV before the transition. In addition, they could receive new types of data services such as on-demand news and weather reports. In Berlin, only 7.4% of households were primarily reliant on free, broadcast TV. The rest chose to receive their TV from cable or satellite TV. However, the government didn’t want low-income individuals to face the burden of either purchasing a digital TV set or doing without free (ad-supported) TV. So it purchased digital-to-analog converter boxes for 6,000 low-income individuals. Broadcasters benefited because whereas before the transition they were only able to provide one standard definition TV program, after the transition, thanks to digital compression, on the same spectrum space they are able to provide additional channels of programming plus other types of services. In addition, the government mandated that after the DTV transition, cable TV companies continue with the status quo requirement that they broadcast analog versions of local TV broadcasts. Thus, cable subscribers were not affected by the transition. Cost of a One-Time Consumer Tax Credit Subsidy In Berlin, only low-income households received subsidies to purchase digital to analog converter boxes. However, although low-income homes have a greater need for a converter subsidy, because “free” TV has taken on the nature of an entitlement in American culture – and legislation that makes analog TV sets obsolete will be keenly felt even in middle-class homes as a type of “taking” – the combination of modest cost and the ability to pay for it with a fraction of the likely auction revenues from the band suggest that a limited but universal subsidy should be employed. As explained just below, a refundable tax credit would provide the most efficient and flexible means to distribute the subsidy, while enforcement issues would be minimized by making eligibility as broad as feasible. Another difference with the Berlin experience is the nature of the subsidy. In Berlin, the government purchased and distributed DTA converters directly to 6,000 very low-income households. In the U.S. context we believe that a one-time tax credit that reimburses consumers a flat dollar amount (e.g., $75) would be far more efficient and flexible. To simplify IRS implementation, the tax credit should be available only during a 12-month period corresponding to a single tax year (i.e., 2007). Although the government could certainly procure converter boxes in bulk at a wholesale price, the administrative costs of a government distribution could be excessive and unpredictable. A tax credit streamlines the process and makes the public cost more predictable. As a matter of equity, it is important that the tax credit be “refundable,” which means that if a family has no income tax liability during that particular tax year, the subsidy would still be paid as a refund (the federal Earned Income Tax Credit works this way). Considering the public purpose of the converter subsidy, there seems to be no reason to deny its benefits to a household – most typically a very low-income household – that cannot offset an income tax liability that particular tax year. The Cost of Four Options for a DTV Transition Consumer Subsidy Household eligibility based on reliance on over-the-air (OTA) TV NumberOf Credits(TVs Eligible) RefundableTaxCredit(Subsidy/Converter) Total Cost(100% Subsidy) Total Cost(Progressive Subsidy) Option #1:Only low-income OTA exclusives; Limit one set/hh 7.7 m(44% of OTA Only HH) $75 $578 m $578 m(100%) Option #2: All exclusive OTA hh; Limitone set/hh 17.4 m $75 $1.3 B $942 m(100% credit for low-income; 50% for all others) Option #3: All TV hh; Limit one set/hh 62.5 m(17.4 + 50% of 90.1 million non-OTA hh) $75 $4.7 B $3.4 B(100%, low- income; 50% others) Option #4 (NAB Scenario ): OTA sets in all hh; No limit on sets/hh 82 m $75 $6.2 B $4.4 B(100%, low income primary set; 50% others) Sources: Options #1 and #2, Options #3 and #4 The Table above shows estimates of the cost associated with a range of eligibility options for a one-time $75 refundable tax credit to offset the cost of a digital-to-analog (D-A) converter, or other qualifying device. Currently, because few are produced, the price of a D-A converter with the capacity to down-convert high-definition broadcast signals for display on an analog set is between $200 and $250 each. However, the price of D-A converters, like other computer products, will fall substantially over time and with economies of scale. If the government creates a market for five million or more D-A converters, analysts at the Consumer Electronics Association estimate that the cost should fall into the $50 to $100 range. Although the FCC’s Media Bureau and the Association of Public Television Stations use a $50 estimate, the cost estimates here are based on a more conservative $75 per converter, consistent with preliminary electronics industry projections. Option #1 would limit the $75 refundable credit to the approximately eight million households that rely exclusively on OTA reception and have incomes under $40,000. This means-tested approach would cost roughly $578 million – less than 2 percent of the value of the returned spectrum based on recent transactions for cellular licenses. A second, more obvious option would be to extend the subsidy to all 17.4 million households that rely exclusively on OTA reception, regardless of income level. Assuming each taxpayer/family is limited to a single converter credit, the cost would be approximately $1.3 billion. While Options #1 and #2 would each cost the government less than 5 percent of the returned spectrum’s likely auction value, the tax credit would be denied to a household that subscribes to cable or DBS, but which also owns a secondary analog set that is used OTA only. Equity aside, it would be difficult if not impossible to enforce a rule limiting the tax credit to households that do not already subscribe to a paid TV service, since the IRS has no way to know how particular taxpayers receive their TV signals. Thus, a third alternative (Option #3) would permit all TV households to claim a single credit for the purchase of qualifying DTV equipment. We assume that only 50 percent of households already subscribing to cable or DBS will bother to retrofit a secondary analog set and claim the credit, which puts the likely cost at $4.7 billion – roughly 10 percent of the returned spectrum’s market value. Qualifying DTV Devices: If Congress authorizes a consumer subsidy, we believe there is no reason to limit consumer choice to a D-A converter box. A refundable tax credit could as easily allow consumers to choose to apply their rebate to reduce the cost of a new DTV set, or to the equipment costs for a new cable or DBS subscription. Moreover, whereas a D-A converter simply preserves the consumer’s ability to watch analog TV, greater choice will lead many consumers to make the switch to high-definition platforms. Other Key Elements to Complete America’s DTV Transition A Fixed Deadline for Analog Turn Off. In Berlin, the total time from passage of the law to completion of the transition was approximately 18 months. The transition began nine months after the law was passed and was completed nine months after that. In contrast, the Media Bureau plan would drag the transition out more than four more years, until 2009. Assuming Congress can complete action by the end of its 2005 session (by November 2005), we believe that a two-year transition period would be more than adequate. Both consumers and manufacturers would then also know more than a year in advance of the coming 12-month window (presumably corresponding to fiscal or calendar/tax year 2007) for the procurement of digital-to-analog converters. Consumers need this time to be educated about the need to purchase either a D-A converter or a new digital TV set, and manufacturers need time to ramp up mass production. Any auction for the reallocation of returned spectrum could occur in 2006 – and fetch full value thanks to the certainty of the January 1, 2008 turn-off and clearance deadline. Phased in Transition: According to the Television Bureau of Advertising, thirty markets have 10 percent or fewer households that rely on over-the-air reception. In nine markets, the percentage is even lower than in Berlin. An even earlier (2007) transition in some of these markets – as trial markets – has some advantages in terms of reducing public education costs, increasing lead times and competition among manufacturers, and learning from experience. Allowing Down Conversion for Analog Cable Subscribers. The cable DTV transition should be viewed as a completely separate issue from the broadcast DTV transition. The key question is whether cable TV’s transition should be market-based or not. We believe it should, since pay TV customers can always choose to receive their local TV stations over-the-air. Moreover, the cable TV industry has strong motivations to transition to digital because it can then use its bandwidth far more efficiently. By transitioning from analog to digital, a cable system opens up capacity for hundreds of new DTV channels and allocates more spectrum for next-generation broadband service. This allows cable to charge for additional services as well as better compete with both satellite and telephone competitors. On the cost side, digital conversion over cable can be accomplished by adding a $25 chip to a standard set top box, or by providing customers with a $75 standalone converter box. When this cost is amortized over the lifecycle of a set top box or cable subscription, its cost per month is expected to be negligible compared to the benefits it provides. One major cable company, Charter Communications, has already converted to DTV all its subscribers in Long Beach, California. In short, although this Committee may want to extend the one-time consumer credit to cable households, whether a cable customer ends up watching in analog- or digital-quality should not be dictated by the government. For this same reason – and because a consumer equipment subsidy would make the statutory 85 percent analog turn-off threshold irrelevant – we urge the Committee to repeal the FCC’s digital tuner integration mandate, thereby saving pay TV subscribers at least $1 billion annually. It is the height of regulatory arrogance for the government to force manufacturers to charge non-OTA households extra to integrate a piece of equipment that consumers have overwhelmingly demonstrated they do not want or need. Allocation of Spectrum After the Transition. Currently, public safety is promised 24 MHz (channels 63, 64, 68, and 69) of the 108 MHz (channels 52-69) available after the broadcast DTV transition. We recommend that Congress reallocate the remainder of the cleared 700 MHz band so that it is evenly divided (42 MHz and 42 MHz) between licensed and unlicensed spectrum, with the licensed spectrum auctioned to the highest bidder. We also urge the Congress to earmark a larger portion of the spectrum revenue from Channels 52-to-69 to address the distinctive information market failures of our information age, with 50% of the proceeds used to fund the public TV trust fund proposed by the Association of Public TV Stations and 50% used to fund the Digital Opportunity Investment Trust Act (S. 1854) introduced by Senators Snowe, Dodd and Durbin. An Opportunity to Expand Unlicensed Wireless Broadband In addition, guard band and unassigned channels in each market below Channel 52 should be opened up as soon as practicable for unlicensed providers of local wireless broadband networks. Wi-Fi is just beginning of a wireless paradigm shift – a radio revolution premised on shared, unlicensed access to the airwaves that will determine if the U.S. will be a leader or a laggard in the next generation of network technologies. While the Wi-Fi boom has been about short-range mobility, more than 1,500 wireless Internet service providers (WISPs) already are using unlicensed spectrum to offer high-speed broadband to homes and businesses up to 30 miles from the Internet backbone. This is particularly important for rural areas, where wired connections are unavailable or unaffordable. WISPs such as AMA*TechTel and Prairie iNet are building wide area networks on unlicensed frequencies that cover 20,000 square miles or more in rural and small town Texas, Oklahoma, Iowa and other states. As a national goal, we need to think and plan not merely in terms of universal broadband access, but in terms of pervasive connectivity. We can try to do this by relying on a pair of regulated monopolies – one cable, one copper – to trench fiber into every home and small business. We also could wait for a few national wireless carriers to invest tens of billions to blanket the nation with a thick quilt of cell towers needed to extend high-speed connections everywhere. Alternatively, we can spread our bets by promoting competition in the last-mile by opening more spectrum to thousands of entrepreneurial WISPs and nonprofit community access networks that are already offering last-mile connections on unlicensed frequencies. Unlicensed access is especially important for connecting rural and low-income areas. We urge the Committee both to reallocate a portion of Channels 52-to-69 for unlicensed wireless broadband and to express support for the rulemaking the FCC opened last month, in which it proposes to open empty TV channels below Channel 52 for unlicensed broadband. DTV Public Interest Obligations for Local Civic and Electoral Programming. Perhaps the most neglected aspect of the DTV transition is an updating of the public interest obligations of local DTV broadcast licensees in exchange for the tremendous increase in broadcasting capacity they receive in the switch from analog to digital. As the age of DTV multicasting dawns, Congress and the FCC has a fresh opportunity to create meaningful public interest obligations for broadcasters. Licensees should be required to use DTV’s enormously increased capacity to expand the coverage of diverse viewpoints and of local civic affairs and election contests. We urge the Committee to include in any DTV transition legislation a provision that adopts the local civic and electoral programming obligation proposed by the Public Interest, Public Airwaves Coalition. In April the Coalition presented the FCC with a proposed “processing guideline,” modeled after the FCC’s guideline on children’s educational programming, that allows for expedited license renewal for stations that air a minimum of three hours per week of local civic and electoral affairs programming on the most-watched channel, with at least 50 percent aired between 5 and 11:35 p.m. Additional hours of civic affairs and election coverage – no less than 3 percent of the aggregate hours multicast – would be required on licensee’s additional “free” (ad-supported) OTA programming streams. Strengthened disclosure requirements would also help the public determine whether this obligation and others was being faithfully fulfilled by individual stations in individual markets. Conclusion The producer subsidy model has been a dismal failure. Local TV broadcasting, perhaps the most profitable legal business in America today, has arguably received the largest government subsidies in U.S. history. Yet there is no end in sight to the OTA digital transition. Every year this delay imposes an opportunity cost of tens of billions of dollars on taxpayers and consumers who are deprived of both payment for commercial use of the public airwaves and the economic value that spectrum-starved wireless broadband services providers could provide more efficiently at low frequencies. We urge Congress to earmark a portion (roughly 10 percent) of the federal revenue likely from reassignment of TV Channel 52-to-69 spectrum for a one-time refundable tax credit to enable the remaining 17 million households relying on analog OTA reception to switch to digital-only – and to deal address the social dimensions of the DTV transition by extending TV licensees’ public interest obligations and by earmarking spectrum revenue to invest in the digital future of public broadcasting and education technology. Thank you again for this opportunity to testify. I will be most happy to respond to any questions or to assist staff as the Committee develops its own solution to this important problem.

• Mr. Kenneth Ferree
  Read statement

  Testimony

  Mr. Kenneth Ferree

  I. Introduction It wasn’t too long ago that using a phrase like “timely and successful” in connection with the DTV transition would have been considered a non sequitur. No longer. The DTV transition is beginning to gain momentum; we are witnessing one of the most dramatic marketplace shifts in recent memory. There is plenty of credit to go around. Each of the affected industries – broadcasters, cable and satellite operators, content providers, consumer electronics manufacturers and retailers – deserve some credit for bringing us to this juncture. They are the ones who developed the business plans, put the capital at risk, and are bringing the benefits of digital television to American consumers. Government deserves some of the credit as well. Over the past few years, both Congress and the FCC, under Chairman Powell’s leadership, have created a renewed sense of urgency regarding the DTV transition, doing whatever was needed to get the transition moving. Often informal tools were used, like the industry roundtable discussions convened by the House Energy and Commerce Committee that helped define and focus the issues, or the “Powell Plan” that resulted in voluntary industry commitments to advance the transition. When necessary, more formal regulatory tools were used, such as the DTV tuner mandate, rules for “plug and play” television sets, and the adoption of the “broadcast flag” system to protect digital broadcast content from widespread piracy over the Internet. It goes without saying that our work is far from done. Indeed, we are in the midst of an incredibly busy period at the FCC on issues relating to digital television, and we hope to act on several major proceedings in the near future, including the procedures for final channel allotments and deadlines for broadcasters to operate at full power. So why turn our attention to the end of the transition when we still have work in front of us? Because now is the time to start looking ahead and planning if we want the transition to end smoothly for the American public. Up to now, most of our efforts have been focused on getting the transition off the ground. But now that the wheels are finally lifting off the runway and the transition is pointed skyward, we can and should begin turning our attention to our destination, and how we will land this transition as quickly and as safely as possible. Put differently, it is no longer a question of whether the transition will occur, but when – and how we can make the final digital switch-over as smooth as possible for consumers. This emerging reality led Chairman Powell to direct the Media Bureau to develop a bold framework that would provide a soft landing and clear conclusion for the DTV transition. The framework is outlined below in some detail but, at this point, it is still a work-in-progress. No formal recommendations have been made to the full Commission, although we have discussed the framework with each of the Commissioners’ offices, just as we have discussed it with Hill staff, industry, consumer groups, and others. One of the most important and difficult issues remaining to be solved is how to address those consumers who rely on over-the-air analog television when the transition is complete. On May 27, 2004, the Media Bureau issued a Public Notice to help us learn more about these consumers and to explore potential options for helping them make the transition with as little disruption as possible. II. The Media Bureau’s Objectives In developing our framework for completing the digital television transition, the Media Bureau had the following objectives: Bring the transition to a timely and predictable conclusion A timely and predictable end date would benefit all those with a stake in the transition to digital television, including the public, broadcasters, consumer electronics manufacturers and retailers, public safety officials, as well as advanced wireless service providers and their customers. Consumers would have fair warning of when analog broadcast signals will be terminated and can begin preparing themselves. Broadcasters would know precisely how long they will be required to run side-by-side analog and digital facilities and can make budget and maintenance decisions accordingly. Consumer electronics manufacturers and retailers would know when they will no longer need to produce, market, and support analog equipment. Public safety officials and advanced wireless providers waiting for broadcasters to vacate the 700 MHz band would know with certainty when they will be able to begin operations. Reclaim valuable spectrum The spectrum that will be recovered at the end of the transition will bring tremendous benefits to consumers and the U.S. economy. As an initial matter, 24 MHz of spectrum will be used to address the critical needs of first responders and other public safety needs. The remaining 84 MHz in the 700 MHz band already has been or will be auctioned for use by cutting-edge wireless services. This is “beachfront” spectrum, with propagation characteristics that make it ideal for providing wireless broadband access through foliage and building walls. Not only would the immediate revenues from an auction of this spectrum potentially be enormous (the value substantially increased by a date certain when the spectrum will become available) but, more importantly, the advanced services that will be introduced in this spectrum could provide continuing benefits many times greater in terms of the economy, jobs, and international competitiveness. The opportunity costs of keeping this spectrum “bottled up” by analog broadcasting grows higher and higher with each passing day. Minimize disruption to consumers Whenever the transition ends, consumers who rely on over-the-air television and do not yet have a DTV receiver will be faced with a choice: purchase a digital TV set, purchase a digital-to-analog converter, or subscribe to a multichannel video provider such as a cable or satellite operator. Our goal is to minimize the number of consumers forced to make that choice and to ensure that digital-to-analog converter equipment is affordable for the average consumer. Maintain consumer access to HDTV and other digital services Today consumers have access to a growing level of compelling digital content – particularly high-definition (“HDTV”) content – over the broadcast, cable and satellite television platforms. That access should be maintained and encouraged under any proposal to advance the DTV transition. Comply with Constitutional and statutory requirements Whatever solution is decided upon must be sustainable in court. Some broadcasters have suggested, for instance, that cable television operators should be required to carry both the analog and the digital signals of every broadcast station in the market (i.e., “dual carriage”) until cable systems have converted to all digital transmission. In 2001, the Commission tentatively concluded that such a requirement would be an unconstitutional abridgement of cable operators’ First Amendment rights. Based on the evidence submitted in the must-carry docket, the Bureau is convinced that the Commission’s tentative conclusion was correct. In constitutional parlance, a dual carriage requirement clearly imposes a greater burden than necessary to further any discernible government interest at stake. Indeed, I am concerned that the imposition of a dual carriage requirement would, in the inevitable judicial review that would follow, place the whole must-carry regime at risk. III. The Media Bureau’s Proposal The current Media Bureau proposal has the following essential points: 1. On a fixed date no later than January 1, 2009, broadcasters’ must-carry rights on cable and satellite would switch from their analog signals to their digital signals. 2. Cable operators would be required to make the digital must-carry signals available to all subscribers by either: (a) down-converting a single digital broadcast stream from digital to analog at the cable head-end so that all subscribers, including analog-only subscribers, can continue to view the programming; or (b) passing through the digital must-carry signals to subscribers’ homes, where the system has converted to “all digital” transmission and all subscribers have the ability to receive and display the digital signals (either on a digital set or down-converted by a set-top box for display on an analog set). 3. Similarly, satellite operators in local-into-local markets would be required either: (a) to carry one standard-definition digital programming stream from each broadcaster in the market (down-converted from HDTV to standard-definition, if necessary); or (b) to pass through the digital broadcast signals to subscribers’ homes, where all subscribers have the ability to receive and display the programming. 4. In addition to any digital streams that are down-converted to analog, broadcasters electing must-carry may negotiate for cable pass-through of their HDTV, multicasting, or other high-value digital programming. Broadcasters electing retransmission consent will continue to negotiate for cable carriage of their broadcast signals in digital and/or analog. As of March 2004, cable systems carried 382 local digital broadcast stations – 239 of which are owned by commercial entities other than one of the top four broadcast networks – all pursuant to marketplace retransmission consent agreements. Nothing in this proposal would negatively affect the continued availability of this or additional HDTV programming to consumers. 5. The statutory 85 percent threshold for ending the transition could be met nationwide on January 1, 2009: · All cable households (almost 70% of TV households nationwide) will count towards the 85 percent threshold in each market. · All satellite households in local-into-local markets that receive the local broadcast package, and all satellite households with HDTV service, will count towards the 85 percent threshold in those markets. · All households that purchased a new television set covered by the FCC’s DTV tuner mandate will count towards the 85 percent threshold. It is possible that the DTV tuner mandate alone could result in the 85 percent threshold being met in some markets by this timeframe. Sole reliance on the tuner mandate, however, would result in a spotty transition with a lack of predictability and advance notice for consumers and the industries involved. · All households that purchased a new “plug-and-play” DTV set, the first of which will be introduced this year, will count towards the 85 percent threshold. 6. As soon as possible after January 1, 2009, the FCC will make the appropriate findings that the 85 percent threshold is met in the relevant markets and reclaim the analog broadcast spectrum. There may be anomalous markets in which the 85 percent threshold is not met immediately, but it is expected that the proposal effectively will result in a nationwide transition on January 1, 2009. 7. By January 1, 2009, the number of households that potentially could lose television service with the end of analog broadcasting should be well under the statutory maximum of 15 percent in many markets. Indeed, cable penetration alone exceeds 85 percent in several markets. In addition, the FCC’s digital tuner and “plug and play” mandates – together with the incentives provided by a hard transition date – will ensure that a substantial number of viewers that rely on over-the-air broadcasting will have purchased digital receivers in the preceding five years. 8. The digital tuner and “plug and play” mandates will drive down the cost of digital-to-analog converter equipment for those over-the-air viewers who have not invested in digital equipment by 2009. The Bureau and Commission are prepared to provide assistance to Congress in determining whether and how to assist these viewers in obtaining digital-to-analog converter boxes. On May 27, 2004, the Media Bureau issued a Public Notice seeking comment on those consumers that rely on over-the-air broadcast television service and potential options for addressing those over-the-air viewers with analog-only sets when the transition is complete. 9. When a broadcaster turns off its analog signal and is broadcasting only in digital (whether because the 85 percent threshold was met and the analog spectrum was reclaimed, or voluntarily prior to that date), the broadcaster may choose to have its digital signal passed through to subscribers’ homes rather than being down-converted to analog at the cable head-end. Such a selection may be made at any time with notice to the cable operator and, in such circumstances, the cable operator would be required to notify subscribers that the digital signals are available if they obtain the necessary equipment from the cable operator or at retail. The cable operator would not be required to provide the equipment for subscribers to view the digital programming. 10. If true digital must-carry meant that broadcasters were entitled to carriage of all free broadcast streams, including free broadcast HDTV and/or “multicast” programming, it would give broadcasters additional incentive to return their analog licenses in a timely manner. This proposal combines moving more quickly and certainly to the end of the transition, which both hastens the broadcasters' spectrum return and provides them opportunities to offer more programming to viewers. Cable operators claim it is a burden to carry multiple broadcast streams, but the Bureau believes the net result will be less cable capacity required to be devoted to broadcasters' programming as the transition moves more rapidly to all digital cable systems. The digital carriage obligations for satellite operators will be determined in a proceeding at the FCC examining alleged capacity constraints and potential technological solutions. However, the issue of “multicasting” does raise some Constitutional issues, as well as potentially providing a disincentive for broadcasters to develop more HDTV programming. The Commission previously declined to provide multicasting carriage rights, but the issue is currently being reviewed on reconsideration. IV. Benefits of Media Bureau Proposal As a result of the Media Bureau’s proposal, the public will reclaim, on January 1, 2009, a significant amount of spectrum throughout the country that will yield great benefits to our citizens, economy and the industries involved in the digital television transition. The public interest benefits include advances in homeland security, broadband deployment, economic growth and job creation and the consumer adoption of digital television. The result of the Media Bureau’s construct is that these substantial public interest benefits will be realized at minimal cost to the public and the various industry segments driving the digital transition. As the government reclaims broadcasters’ analog spectrum and reclaims it for other uses on behalf of the public, consumers will reap the rewards in several areas of national importance, including: · Homeland Security—the Media Bureau proposal will vastly increase the amount of spectrum available to public safety officials across the country. This additional spectrum will be especially useful in improving communications systems and the ability to deploy forces for first responders during national and local emergencies. The need for this spectrum is greatest in many of our nation’s major metropolitan areas currently suffering from spectrum shortages. · Broadband Deployment—the proposal will free up spectrum that can be used for wireless broadband services. Chairman Powell has identified the deployment of broadband infrastructure as a central communications policy. In addition, there is strong bipartisan support in both the House and the Senate to make broadband deployment a national policy objective. This plan will further those national broadband ambitions. · Economic Growth and Job Creation—the Media Bureau plan will spur the development and the deployment of broadband technology as well as other new and improved wireless communications services. In turn, this activity will help drive overall economic growth through productivity gains, increased investment and the creation of new businesses and jobs, particularly in the small business sector. · Consumer Adoption of Digital Television—the Media Bureau proposal will help drive the consumer adoption of digital television. Last year, approximately 25 million analog television sets were sold. By adopting a clear date for the end of analog broadcasting, we can help shift the sales from analog to digital sets. Publicity over the next five years in advance of the 2009 date for the DTV switchover will combine with our recent tuner and plug-and-play mandates and increased production of HD programming to quicken the pace of consumer purchases of digital televisions. · Industry Benefits—the certainty of 2009 would provide benefits to those that have a stake in an orderly transition, including broadcasters, public safety authorities, advanced wireless service providers, consumer electronics manufacturers and retailers. Advanced wireless service providers, for instance, could begin to develop business plans, place equipment orders and participate in auctions knowing that the 700 MHz band will become available on a nationwide basis in 2009. Retailers and consumer publications will have a date-certain for describing when analog-only televisions will need additional equipment and when it is time to buy digital equipment. Broadcasters will be ensured continued access to all cable subscribers, unless they voluntarily choose not to be down-converted after the transition is over and not all subscribers have the equipment necessary to view the digital signal. · Survival of Over-the-Air Broadcasting—the Media Bureau proposal will foster diversity and localism by protecting broadcasters, particularly those in smaller markets. All broadcasters will avoid the costs of running both analog and digital broadcasting, freeing up capital to invest in their digital services and programming to better compete in the marketplace. These substantial public interest benefits will come at little cost to the public and the industries with a stake in the digital television transition. By January 1, 2009, the actual number of consumers dependent solely on analog broadcasting may be far less than the 15 percent statutory maximum. For those remaining analog broadcast viewers, the FCC’s digital tuner and “plug and play” mandates will help to drive down the costs of digital-to-analog converters. Cable and satellite television subscribers would experience a seamless transition under the Bureau’s proposal. During the transition, they will continue to have access to at least one programming stream from every must-carry broadcaster. Moreover, the growing levels of HDTV and other value-added digital programming to which these subscribers have access based on voluntary agreements will not be affected. Finally, no additional capacity burdens will be imposed on cable television systems, either during or after the transition. This is in stark contrast to the questionable constitutionality and inherent legal risk of the “dual carriage” proposal advocated by some. V. Conclusion After many long years of hard work by all involved, the end of the DTV transition is now in sight. The Media Bureau recognizes that some Members of Congress have expressed specific concerns, particularly regarding those consumers who rely on over-the-air television service. We share those concerns and look forward to working with Congress to bring the transition to a successful conclusion that will benefit all consumers and the national economy. ATTACHMENT DA 04-1497 May 27, 2004 MB Docket No. 04-210 MEDIA BUREAU SEEKS COMMENT ON OVER-THE-AIR BROADCAST TELEVISION VIEWERS Comment Date: July 12, 2004 Reply Comment Date: August 5, 2004 Section 309(j)(14) of the Communications Act sets forth the conditions under which analog television broadcasting will end in the United States. Those conditions could be met as early as December 31, 2006, although the statute provides for extensions of that date if certain marketplace criteria have not been satisfied. As contemplated by Section 309(j)(14), up to 15 percent of television households in a given market could lose television service altogether if they rely exclusively on over-the-air broadcasting and have analog-only sets when the transition ends. In the remaining households, analog sets that are not connected to a pay television service could lose service as well. In this Public Notice, we seek comment on options for minimizing the disruption to consumers when the switch-over to digital broadcasting occurs. We are primarily concerned with those households that rely exclusively on over-the-air broadcasting for their television service, but we seek comment more broadly on minimizing the impact on all consumers. First, we seek comment on the identity of those consumers that rely on over-the-air television broadcasting and why they do not subscribe to a pay television service. Second, we seek comment on potential options for minimizing the impact on these and other consumers when broadcasters are operating solely in digital. Given the statutory directives and the nature of the potential solutions, we anticipate that the data submitted will be used primarily to help formulate possible recommendations to Congress. The Commission may, however, take other steps as appropriate. Over-the-Air Television Viewers We seek quantitative data on consumers who watch over-the-air broadcast television, including: (1) The number of households that rely solely on over-the-air broadcasting (“over-the-air households”) for their television service; (2) The number of households that subscribe to a multi-channel video service provider (“MVPD”) and have one or more television sets that rely on over-the-air broadcast service; (3) The number of analog-only television sets in use by the households identified in (1) and (2), above; (4) The number of digital television receivers in use in the households identified in (1) and (2), above, that are capable of receiving over-the-air digital broadcast television signals; (5) The demographic characteristics of over-the-air households, including age, race or ethnicity, and education and income levels; (6) The geographic characteristics of over-the-air households, including urban/rural and regional disparities; (7) Data on why over-the-air households do not subscribe to an MVPD service, including specific data on: (a) the number of over-the-air households that would like to subscribe but cannot afford it, (b) the number of over-the-air households that could afford to subscribe to an MVPD service but choose not to, and (c) the number of over-the-air households that would like to subscribe and could afford it but their MVPD service of choice is not available in their community (e.g., no cable system or no satellite provider with local-into-local service). Options for Addressing Analog-Only Television Sets We also seek comment on options for addressing the potential disruption to consumers with analog-only television sets when the transition is complete. As an initial matter, we seek comment on the extent to which market forces can be expected to deal with this problem – e.g., consumers voluntarily buying digital-to-analog converter boxes before the end of the transition, cable or satellite providers that carry all of the local digital broadcast stations connecting additional sets in subscribers’ homes to their networks, and broadcasters, wireless auction winners or others voluntarily subsidizing or deploying converter boxes in order to accelerate the transition. If marketplace forces alone cannot be counted on to address this issue, can and should the affected industries be required to take steps to minimize the potential for consumer disruption? If government action is warranted, we seek comment on the nature and scope of such involvement. Should the government subsidize consumers’ purchase of digital-to-analog converter boxes, or should it procure and distribute the equipment itself? In either event, what minimum technical capabilities should the converter boxes have? What do converter boxes cost today and what are they expected to cost in the future? If a subsidy is appropriate, we seek comment on the type and amount of subsidy that should be considered. For instance, we seek comment on whether the subsidy should be in the form of a tax credit, a refundable tax credit, or a voucher. We also seek comment on whether the subsidy should be available for consumers who wish to purchase a digital television set in lieu of a digital-to-analog converter, or for those who wish to purchase a multi-channel video service from providers that carry all the local digital broadcast signals. We seek comment on the scope of any potential government action. Who would qualify for the government subsidy or other program? If the subsidy or other program is means-tested, what test should be used? We also seek comment on the number of devices that the government should subsidize. For instance, is one digital-to-analog converter box per household sufficient, or should the government subsidize the conversion of additional analog-only sets in consumers’ homes? Should the government subsidize conversion equipment for over-the-air households that have at least one digital receiver and one or more analog-only sets? Should the government subsidize conversion equipment for MVPD subscribers who receive all the local digital broadcast signals on the television(s) hooked up to the pay service, but who have one or more analog-only sets not hooked up to the pay service? Finally, we seek comment on how a government program would be financed and administered. For instance, in bands where we intend to auction new licenses for spectrum freed up by the digital conversion, we seek comment on whether, under Section 309 and our precedent, we could require as a condition of the license that auction winners pay for conversion of analog-only equipment as part of a mandatory band-clearing mechanism. We note that in other auctioned bands, we have required new entrants to bear the costs to retune existing equipment to new bands or replace such equipment. We also seek comment on whether a government subsidy program could be financed directly through auction revenues, spectrum license fees, or other funding mechanisms, although we note that some of these options would require legislation. Procedural Matters Comments should be filed on or before July 12, 2004 and reply comments should be filed by August 5, 2004. Comments and reply comments may be filed using the Commission’s Electronic Filing System (“ECFS”) or by filing paper copies. See Electronic Filing of Documents in Rulemaking Proceedings, 63 Fed. Reg 24121 (1998). All comments should reference MB Docket No. 04-210. Comments filed through the ECFS can be sent as an electronic file via the Internet to . Generally, only one copy of an electronic submission must be filed. In completing the transmittal screen, commenters should include their full name, U.S. Postal Service mailing address, and the applicable docket or rulemaking number. Parties may also submit an electronic comment by Internet e-mail. To get filing instructions for e-mail comments, commenters should send an e-mail to ecfs@fcc.gov, and should include the following words in the body of the message, “get form.” Parties who choose to file by paper must file an original and four copies of each filing. Filings can be sent by hand or messenger delivery, by commercial overnight courier, or by first-class or overnight U.S. Postal Service mail. The Commission’s contractor, Natek, Inc., will receive hand-delivered or messenger-delivered paper filings for the Commission’s Secretary at 236 Massachusetts Avenue, N.E., Suite 110, Washington, D.C. 20002. The filing hours at this location are 8:00 a.m. to 7:00 p.m. All hand deliveries must be held together with rubber bands or fasteners. Any envelopes must be disposed of before entering the building. Commercial overnight mail (other than U.S. Postal Service Express Mail and Priority Mail) must be sent to 9300 East Hampton Drive, Capitol Heights, MD 20743. U.S. Postal Service first-class mail, Express Mail, and Priority Mail should be addressed to 445 12th Street, SW, Washington, D.C. 20554. All filings must be addressed to the Commission’s Secretary, Office of the Secretary, Federal Communications Commission. In addition parties should serve a copy of each filing via e-mail or one paper copy to John Berresford, Suite 3-A662, Media Bureau, FCC, 445 12th St., S.W., Washington, D.C. 20554. Comments, reply comments, and other submissions will be available for public inspection during regular business hours in the FCC Reference Center, Federal Communications Commission, 445 12th Street, S.W., CY-A257, Washington, D.C. 20554. These documents also will be available electronically from the Commission’s Electronic Comment Filing System. Documents are available electronically in ASCII text, Word 97, and Adobe Acrobat. Copies of filings in this proceeding may be obtained from Qualex International, Portals II, 445 12th Street, S.W., Room, CY-B402, Washington, D.C., 20554, telephone (202) 863-2893, facsimile (202) 863-2898, or via e-mail at qualexint@aol.com. To request materials in accessible formats for people with disabilities (Braille, large print, electronic files, audio format), send an e-mail to fcc504@fcc.gov or call the Consumer and Governmental Affairs Bureau at 202-418-0531 (voice), 202-418-7365 (TTY). For further information contact Rick Chessen, Media Bureau at (202) 418-7200. By the Chief, Media Bureau ----------------------------------------------------------------------------------------------------------------------------- - FCC -