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Witness Testimony
Mr. Edward O. Fritts
Advancing the DTV Transition: An Examination of the FCC Media Bureau Proposal
Thank you, Mr. Chairman, for the opportunity to appear today on the issue of advancing the digital television transition, and in particular, the Media Bureau's proposal for completing the transition. My name is Eddie Fritts. I am President of the National Association of Broadcasters. Broadcasters appreciate the efforts of Mr. Ferree and his staff to think creatively about ways to speed the DTV transition. We are also grateful for the Bureau's attempts to revise its thinking to address some of the plan's defects identified by broadcasters and others. For example, we support the Bureau's decision to move the target date for its plan to end the transition back from 2006 to 2009, thereby acknowledging the enormous dislocation and viewer disenfranchisement that the earlier date would have triggered. Nevertheless, we remain concerned about other elements of the plan, specifically because it mandates the down-conversion of broadcasters' digital signals at a cable or satellite operator's headend. This is a fundamental flaw since the plan not only sanctions cable operators' degradation of broadcasters' digital signals - in violation of the Communications Act - but it would also thwart the many benefits that digital service will deliver to consumers. In addition, the plan would block Congress' overarching goal for the digital transition, which is to assure the universal availability of digital services to the American public. Finally, the Ferree plan, by forcing broadcasters to choose between carriage of their full signals or serving their entire audience, would leave them second-class citizens in a digital world, instead of taking advantage of digital technology to strengthen free television service. Our understanding of the Bureau plan is as follows: In the 2009 must-carry-retransmission consent election cycle (October 1, 2008 deadline for carriage beginning January 1, 2009), television stations would have must-carry rights only for their digital signals. For stations electing must-carry, cable operators would be required to make broadcasters' digital signals "available" to subscribers by: (1) down-converting a single digital stream from each broadcaster to analog at the cable operator's headend; or (2) passing through broadcasters' digital signals, where all subscribers have the ability to receive and display digital signals (e.g., through a converter box or a digital plug-and-play set). Broadcasters would be allowed to negotiate for other carriage rights, such as for HDTV programming, as they do today. Under this scenario, the Media Bureau claims that cable's carriage of a single digital stream, even if down-converted at the cable headend, would satisfy the requirement under Section 309(j)(14)(B)(iii)(I) that an MVPD must carry "at least one DTV program channel of each station in the market that is on-air in DTV." Thus, the approximately 68 percent of television households that receive television service over cable subscribers, and 10 percent who do so via satellite, would count towards the 85 percent statutory threshold for when the transition will end. Combining these households with those who will receive DTV over-the-air would mean that the transition will end soon after the Bureau's proposal became effect. In markets where the penetration threshold is met, analog broadcasting would cease and the government would reclaim the analog spectrum. At that time, a second election would occur and broadcasters could choose to have their digital signals, including any multicast channels, passed through to subscribers' homes rather than down-converted at the headend. Cable and satellite systems would have no obligation to ensure that subscribers without DTV receivers could see local broadcast signals. Let's examine some of the consequences of the Ferree plan. As Congress contemplated in the 1997 Budget Act, when analog broadcasting ends, 15 percent of all TV households - about 16,200,000 homes - will lose all television service until they purchase a DTV converter or a new set. We commend the FCC for its recent request for comments on how to avoid this disruption. Of course, analog sets in homes with DTV receivers will also lose service. But, under the Bureau proposal, a second transition will occur shortly after the FCC deems the 85 percent threshold to be met. At that time, the Bureau says broadcasters will have a second election between cable and satellite carrying their down converted signals or carrying their now-digital signals in digital form. If they choose the latter path - in order to obtain the benefits of digital technology that Congress wanted to achieve - millions of more cable and satellite homes without DTV receivers or converters will lose local broadcast service unless their cable or satellite provider voluntarily provides either a converter or agrees to carry a down-converted signal in addition to the digital signal. These homes will lose access to local news, local political broadcasts, local emergency announcements, publicity for local charities and community groups and all the other services local stations provide. Thus, while the prospect of losing local service for some consumers was always part of Congress' plan to transition to digital, the Ferree plan multiplies the number of consumers who will lose access to local broadcasting. Consumers under this plan will pay a high - and totally unnecessary - price. I am not here just to criticize. To the contrary, broadcasters applaud the Commission, and especially Chairman Powell, on the great strides it has taken so far towards completing the digital transition. In 2001, the Commission adopted revised build-out rules that have been extremely successful in getting TV stations on air in digital. In 2002, Chairman Powell introduced his plan that recognized the key fact that all parts of the television industry - programmers, stations, multichannel video programming distributors and manufacturers - must play an active role in the transition to digital. The Powell Plan also recognized the importance of the availability to consumers of high definition signals in high definition format. Then, in 2003, the Commission adopted vital rules addressing plug and play and the broadcast flag, as well as rules mandating that all new television sets have a DTV tuner. Each of these steps has helped move the DTV transition towards a rapid conclusion. Indeed, we are almost there. Broadcasters sincerely believe that with the steps the Commission has taken so far, and a few additional steps designed to address the remaining issues, as discussed below, we will reach the end of the DTV transition in most markets by 2009 without the need to go outside the statutory framework, as would be the case under the Bureau's proposal. Broadcasters and others already have entered into the Commission's record several proposals with the potential to rapidly resolve the few remaining issues and bring a prompt end to the transition within the statutory framework. Even without the final pieces of the puzzle in place, evidence of the remarkable progress made so far can be found everywhere, due in no small measure to broadcasters' commitment and actions. Our industry has spent enormous sums of money and undertaken extraordinary steps to implement the transition, and I am pleased to report that these efforts are paying off. Broadcasters have built - and are on air with - DTV facilities in 207 markets that include 99.69% of all U.S. TV households. Midway through the transition, almost three-quarters - 73.7% - of U.S. television households have access to at least six free, over-the-air digital television signals. Nationwide, at least 1411 television stations in 207 markets are delivering free, over-the-air digital signals today. Currently, more than 70 million households receive six or more DTV signals; 49 million households receive nine or more DTV signals; and a full 30 million households receive 12 or more DTV signals. More and more digital stations are overcoming their unique obstacles and going on air almost daily. The digital transition is working and moving ahead quickly, and any claims to the contrary are simply untrue. In the top ten markets, covering 30% of U.S. households, all top four network affiliates are on-air with digital signals, and in markets 11-30 (24% of U.S. households), all 79 top four affiliated stations are on-air. Thus, all ABC, CBS, Fox, and NBC affiliates in the top 30 markets, representing 53.5% of all U.S. households, are on air with DTV. Even smaller stations in these markets and in smaller markets are making terrific progress, with at least 1292 out of a total 1524 stations currently on air in digital, / and this despite the far fewer resources of these stations. In fact, many firms have been forced to mortgage their stations to afford the equipment needed to implement the transition, and without any immediate prospect of revenues to offset these huge investments. On the programming side, both networks and local stations are providing an extraordinary amount of high-quality DTV and HDTV programming, as well as a growing number of valuable multicast channels, to entice viewers to join the digital television transition and purchase DTV sets. For example, three networks currently offer virtually all their prime time programming in HDTV, along with high-profile specials and sporting events like the Academy Awards and the Grammy's, the Masters, and playoff games in all the major professional sports leagues. Local stations are also doing more all the time to supplement the network HDTV and multicast fare, at an enormous cost for full local HD production facilities. Examples of local HDTV programming abound, including WRAL-TV's (Raleigh, NC) daily local newscast, the broadcast of America's Thanksgiving Day Parade by Post-Newsweek's station in Detroit, and KTLA's (Los Angeles, CA) broadcast of the Rose Parade in a commercial-free HD broadcast that was simulcast in Spanish and closed captioned and distributed on many Tribune and other stations, not to mention the large quantity of children's education, foreign language programming and gavel-to-gavel coverage of state legislatures provided by non-commercial DTV television stations nationwide. Indeed, the FCC's recent localism hearing in San Antonio was provided to local viewers in full on a multicast channel of Belo's San Antonio station. All of these developments demonstrate that broadcasters are more anxious than anyone to get the transition over and done with. Broadcasters have no interest in shouldering the enormous costs of operating dual facilities any longer than absolutely necessary to avoid disruption to consumers. Building a second transmitter, and then maintaining and powering two transmitters for any period of time is extremely expensive, especially since there will be no opportunity to recover much of these costs. Similarly, any need to repair or replace analog equipment now is little more than wasted resources. Indeed, by the time the transition is over, broadcasters will spend between $10 and $16 billion to fully convert to digital, and we simply cannot afford to strand this investment, or accept any further delays in our ability to provide new digital services to recoup at least some of this investment. The purpose of the transition is to convert the American system of broadcasting to digital, ultimately for the benefit of the American consumer, not the broadcaster or the cable operator. Congress sought to achieve three overarching goals in the DTV transition: (1) Bring the benefits of digital technology with its potential for more programming options and advanced services to consumers; (2) Avoid the loss of free television to large numbers of consumers stranded with analog-only receivers; and (3) Reclaim channels 52-69 to be reallocated for other purposes. The Commission's actions under the Powell Plan have put the DTV transition on the right track towards completing the DTV transition. On the other hand, the Media Bureau's plan would knock the transition off course by focusing the Commission's attention solely on the third goal above, while essentially ignoring the first goal, and either punting on the second or perhaps making it harder to achieve. The Commission, however, may not pick and choose among the goals Congress established for the transition; rather, it must treat them all as equally important. The plan's emphasis on reclaiming spectrum as soon as possible is misplaced. For example, Congress's rejection in the Auction Reform Act of band clearing plans that would reduce the level of free television service clearly shows that early return of spectrum at the cost of television service is contrary to Congressional intent. The Bureau's plan conflicts with both Congressional intent and the Communications Act, and would undermine the economic incentives of consumers, set manufacturers and broadcasters to expedite the transition and achieve the consumer benefits of digital television. First, the Bureau plan violates Congress' vision for the DTV transition. The crux of the plan is to count cable and satellite homes as "digital" when, in reality, these households would receive only down-converted analog versions of digital signals; that is, the same analog quality they received before. Nevertheless, the Bureau would count all cable and satellite homes in a market toward the 85 percent benchmark for purposes of declaring the digital transition complete. However, in passing Section 309(j)(14), Congress intended that consumers would set the course for ending analog broadcasting, and not just watch from the sidelines while cable drives the pace car. Specifically, Congress recognized "that not all consumers and broadcast stations will convert to the new digital services format at the same time," and thus acted to ensure that "a significant number of consumers in any given market are not left without broadcast television service" at the end of the transition. The statute is squarely focused on the percentage of consumers who can actually receive and view digital signals in their homes, so that analog broadcasting may not end until it means that substantial numbers of consumers will not lose service. The number of digital signals delivered to cable or satellite operators is irrelevant. The Ferree plan, by focusing only on the provision of Section 309(j)(14)(b)(iii)(I) that refers to carriage of a digital programming channel, entirely reads out of the statute the next subsection. Section 309(j)(14)(b)(iii)(II), provides that, in addition to carriage of a digital programming channel from each local DTV station, analog service should continue until 85 percent of TV homes in a market have either a DTV receiver or at least one DTV converter. Note that Congress - with laser-beam precision - required DTV reception capability at the home, not at a cable or satellite headend. Thus, the Ferree plan simply misreads the FCC's governing statute. Congress thus intended for consumers to have the choice of viewing local broadcast signals in digital format over new receivers or in analog format with converters attached to their old analog sets. The distinction between conversion at the headend or at a consumer's home is critical. In the latter case, while not being able to view HDTV, consumers could still have access to the full range of other broadcast digital services. Under the Bureau Plan with conversion at the headend, consumers would receive only a version of what they get today, without any of the benefits of digital. However, for consumers to have a meaningful choice about the way they will receive DTV, local broadcasters' digital signals must be delivered all the way to the television sets in consumers' homes, not just to the cable or satellite provider where they will be converted back to analog. Nothing in the statute or its legislative history contemplates counting cable and satellite subscriber without digital receive technology towards the 85 percent benchmark. Down-conversion of broadcasters' digital signals at the headend also directly violates the Communications Act's bar on material degradation of local broadcast signals. Specifically, pursuant to section 614(b)(4)(A) of the Act, the Commission's rules must make sure that, "to the extent technically feasible, the quality of signal processing and carriage provided by a cable system for the carriage of local commercial television stations will be no less than that provided by the system for carriage of any other type of signal." The Commission has recognized this mandate, stating in the DTV Must-Carry First Report and Order that "the issue of material degradation is about the picture quality the consumer receives and is capable of perceiving . . . ." The Commission went on to recognize specifically that, "in the context of mandatory carriage of digital broadcast signals, a cable operator may not provide a digital broadcast signal in a lesser format or lower resolution than that afforded to any digital programmer . . . carried on the cable system, provided, however, that a broadcast signal delivered in HDTV must be carried in HDTV." The Bureau's proposal, however, would reverse that conclusion. Indeed, the Bureau's plan not only permits, but requires cable operators to do exactly what the Communications Act prohibits: carry local broadcast signals in a degraded fashion (i.e., down-converted) such that cable and satellite subscribers will receive digitally broadcast signals in a lesser format, while cable digital signals would be distributed as is. Consumers with digital receivers or converters should be able to receive television service through their cable or satellite provider that, at a minimum, is equal in quality to what they can obtain over-the-air. NAB can find no other reasonable way to read Section 614(b)(4)(A). Third, the Bureau's proposal undercuts the economic incentives of almost all the relevant parties to advance the transition. The fact that cable and satellite households would count as digital households under the plan, even though they will not actually receive digital television service, will reduce consumer demand for new digital television sets. Cable and DBS subscribers who recently purchased digital capable sets certainly will be upset to discover that their investment was for naught, since they still we be unable to view their local stations in digital, or access the additional local public interest programming and services that broadcasters will provide on multicast channels. It follows that word-of-mouth interest in digital programming will slow, as people with digital sets will not receive any programming or services they might praise to their friends or neighbors. Furthermore, people not yet interested in upgrading their television sets will find it more difficult to sample the benefits of digital service. In turn, the Bureau's proposal would stall the development of new and innovative free broadcast services that optimize consumer benefits, including not only HDTV, but also novel multicast services, many of which will deliver programming on local public affairs, or in Spanish and other languages, local weather and traffic, and other community-oriented fare. The opportunity for these new universal free services was one of the key reasons that Congress authorized the DTV transition, and it is simple economics that the consumer appeal of the HDTV/multicast mix will help drive the transition. However, the Bureau's plan would undercut broadcasters' incentives to invest in the creation of these new services. Indeed, the Bureau's proposal may better suit a digital-to-analog transition than the analog-to-digital transition envisioned by the Congress and the American public. Moreover, with respect to broadcasters, the Bureau's must-carry provision offers local television stations an impossible "Hobson's Choice." That is, the plan would give broadcasters the right, after their analog signals are shut down, to choose between down-conversion of their digital signals to analog at the cable headend, or cable's pass-through of broadcasters' digital signals, without any provision requiring cable systems to make them viewable on analog receivers. Thus, a broadcaster could choose down-conversion of its signals at the cable headend, and thereby block the delivery of HDTV or any other digital service to the many consumers who already have invested in digital television sets. Or, a broadcaster could have its digital signals passed-through, and thereby cut off service to the millions of households that still have analog receivers. The Bureau's plan is a no-win proposition for consumers. Mr. Chairman, the purpose of the transition is to convert the American system of broadcasting to digital, ultimately for the benefit of the American consumer, not for the benefit of the broadcaster or the cable operator. Congress directed the FCC to craft rules to ensure that cable subscribers get access to broadcasters' digital signals, whether HDTV or multicast or a mix. However, the Bureau's proposal would sacrifice that goal to focus exclusively on the goal of reclaiming the spectrum for new purposes. Indeed, the Bureau's idea not only would fail to advance, but also would retard, the primary goal of the transition: to deliver improved digital signals to the public and replace viewer reliance on analog service. Several specific harms to consumers would result: " No assured HDTV for cable viewers with digital sets: Cable homes with digital sets would not be assured of access to HDTV or multicast services because cable operators would down-convert broadcast digital signals at the headend, unless television stations elected to pass-through their digital signals at the cost of disenfranchising MVPD subscribers with analog sets. " No assured HDTV for DBS viewers with digital sets: DBS systems could presumably downconvert broadcasters' HDTV services pursuant to the Bureau's proposal indefinitely into the future, so that even DBS homes with DTV sets would not receive HDTV service. " Stalled access to affordable digital sets: Cable subscribers with analog sets will have reduced incentives to purchase digital sets because they would have no assurance of receiving broadcasters' digital signals after making that investment. As a result, the price for digital sets would remain high, thereby discouraging adoption by American viewers. " No television service of any kind for analog over-the-air households, including many rural and poor viewers: Over-the-air viewers with digital sets would continue to receive service after 2009, but over-the-air viewers with analog sets, unless they purchased set-top boxes, would lose service. Many rural viewers and the poor would be disenfranchised, and broadcasting would lose its proud achievement of providing universal service. In addition to the consumer harms described above, the Bureau's proposal would also harm the public interest: " Harm to the DTV transition: The incentive for consumers to obtain DTV receivers or converters would decline, delaying or preventing the benefits of digital technology flowing to consumers. The consumer benefits of the Commission's tuner and plug and play decisions would largely be lost since most consumers would receive only analog versions of DTV signals. " Harm to manufacturers: Set manufacturers would suffer because the plan would discourage the demand for digital sets and for new digital features that receiver manufacturers have been mandated to produce in increasing volume. " Harm to diversity: Cable programmers would not have the greater access to cable carriage that would result if cable systems were to transmit broadcasters' digital signals from their headends, which would free up 50 percent of the capacity that cable systems currently devote to carriage of broadcast signals. Also, programmers seeking access to consumers over broadcasters' multicast services would be thwarted because there would be no assurance that consumers could receive them. " Harm to localism and public service: By not being able to deliver HDTV and multicast services to cable and DBS subscribers with HDTV sets, broadcasters would be relegated to second-class status. After analog broadcasting ends, many cable households would lose access to local signals and their essential services altogether. Avoiding these results and strengthening the free, over-the-air system were the reasons the Commission and Congress supported the DTV transition in the first place. Broadcasters' efforts to deliver localized multicast services (local news and weather and local sports coverage, for example), as well as multicast services offered by independent programmers, would be aborted. As noted above, the broadcasting industry sincerely believes that the Commission under the Powell Plan is on the right track towards an end to the transition. The Commission has taken several successful actions to expedite the conclusion, including rules governing cable compatibility, the broadcast flag and tuner requirements, and with a few more steps designed to address the remaining issues, NAB is convinced that the digital transition will reach a natural conclusion in most markets on its own by 2009. It is simply unnecessary to adopt a proposal that violates the Act, Congress' intent, and consumers' interests, in an ill-conceived attempt to accelerate the transition. First, and most significantly, the Commission must deal with the issue of cable carriage of digital signals. This question continues to stall what has been the Commission's otherwise constructive implementation of Congress' will. NAB and MSTV have already placed in the Commission's record a reasonable, middle ground position that will advance the transition consistent with the Act and not harm consumers. Specifically, MSTV and NAB proposed in November 2003 that a cable system be permitted to "terminate carriage of a station's analog channel if the cable system (a) passes through the station's digital signal to all digital television receivers and (b) down-converts the digital signal for receipt at no extra charge on all analog-only receivers for carriage on the analog basic tier." Such a rule would: " Ensure that all non-subscription content in digital signals are passed through to subscribers' homes without material degradation; " Allow MVPD households with analog sets to continue to receive local broadcast signals by down-converting at the home; and " Count toward the 85 percent threshold only those households that receive un-degraded digital signals. Other steps that the Commission must take to bring the transition to an end by 2009 include rapidly resolving long-pending negotiations with Canada to provide interim DTV channels for all U.S. stations. The Commission also should initiate discussions to develop a final DTV channel agreement with Canada and Mexico. Further, the Commission should require stations with analog and DTV assignments in the "core" to make a channel election in 2005. All of these steps are essential to developing a final channel assignment plan, something that must be completed well before the end of the transition so that stations can construct and move to new digital facilities. Broadcasters already have discussed with Commission staff a repacking plan that represents industry-consensus on how to address the many thorny, technical relevant issues. To date, however, the Commission staff has not been receptive to industry's efforts, although we remain committed to cooperating with the Commission to craft a workable repacking plan that addresses all of the Commission's concerns. Mr. Chairman, the Commission and the country are on the threshold of achieving the primary goal of the digital transition: the ubiquitous availability of HDTV (and multicast services) to all Americans on television receivers that are becoming increasingly affordable and of higher quality. NAB believes that the Commission under the Powell Plan has brought us to the cusp of success, and that the prompt resolution of a few remaining issues will ensure a natural end to the transition before the end of 2009. On the other hand, the "short cuts" offered in the Media Bureau's plan will stall, if not nullify, all of the efforts already made by the Commission, broadcasters, cable operators, manufacturers, and most importantly, the American public. NAB believes that the Commission instead should remain faithful to the path that Congress envisioned and correctly believed would best serve consumer interests. Related Documents |
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