DTV Tuner Rule Makes Cable See Domino Spots

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In the 1950s, President Eisenhower told critics of his foreign policy in southeast Asia that if they didn't believe in the domino theory, they should chat with a few of the dominos.

Last week, the Consumer Electronics Association became the first domino to fall as a result of Federal Communications Commission chairman Michael Powell's plan to force the TV industry and every U.S. viewer to switch from analog to digital television as quickly as possible.

Much like the CEA, the cable industry is trying to fend off a batch of burdensome DTV regulations advocated by the National Association of Broadcasters. With this Republican-controlled FCC apparently at ease with regulatory solutions in a crunch, the cable industry has got to be wondering whether it is the next digital domino in the agency's path.

But one cable-industry source, who asked not to be identified, said cable lobbyists are holding their own against the NAB.

"CEA didn't fall because of NAB. CEA fell because they didn't play ball with Powell," the cable source said. "We are playing NAB to a draw."

PHASED IN

In a 3-to-1 vote, the FCC last Thursday adopted a rule — over the CEA's boisterous objections — that requires the inclusion of off-air DTV tuners in nearly all new TV sets by July 2007.

The phase-in starts in July 2004, when half of all sets with screens 36 inches or larger must have DTV tuners. Tuners must be included in all sets 13 inches and larger by July 1, 2007. The tuner mandate also extends to VCRs and DVD recorders and players, also by July 1, 2007.

The plan is so comprehensive, it even applies to personal computers.

"If you sell a personal computer bigger than 13 inches with a tuner card, it's a TV and should be able to receive off-air DTV signals," FCC engineer Alan Stillwell said.

The tuner debate once again divided the FCC's GOP majority. Democrat Michael Copps voted with Powell and Republican FCC member Kathleen Abernathy.

But Republican Kevin Martin objected, claiming the costs of the tuner mandate would be shouldered by all TV-set buyers for the benefit of a small segment of the population that is solely reliant on broadcasting.

Nevertheless, the FCC majority said it acted in order to expedite the transition to all-digital broadcasting, and to begin the process of terminating the sale of analog-only TV sets that will one day be obsolete.

CEA: 'TV TAX'

Earlier in the week, the CEA placed advertisements in The Washington Post
and a Capitol Hill publication. They claimed the FCC was imposing a "TV tax" that would cost consumers between $5 billion and $7 billion a year, with the per-set cost of a DTV tuner running an average of $250.

The CEA also claimed that first addressing the off-air DTV tuner issue was irrational, because the government was forcing about 90 million households that rely mainly on cable and direct-broadcast satellite to buy a DTV set feature they were unlikely to ever use or need.

Instead, the CEA said the FCC would get a bigger bang for the regulatory buck if it had first dealt with unresolved compatibility issues between digital-cable technology and DTV receivers.

The NAB claimed that the CEA was grossly exaggerating tuner costs and failed to acknowledge that millions of households, including cable and DBS homes, have TV sets that rely solely on off-air antennas.

The NAB said roughly one-third of all TV sets in the field — 81 million in all — are broadcast-only.

Powell, widely described as a free-market advocate, said government intervention in the DTV transition was needed because the transition was initiated and designed by the federal government, which has an obligation to see it succeed.

"We can wring our hands all day about how we got here. Bottom line is: We are here," Powell said. "The idea of talk of going back in anyway is absolutely ridiculous and frivolous."

As for the needling over instituting a "TV tax," Powell dismissed the charge. He claimed consumers would be better off under the FCC's rule, because a DTV tuner would represent an upward quality adjustment in the unit and would more than offset the cost.

"The HDTV cost will be slightly higher, but so will be the increased capabilities that those sets are capable of performing," Powell said.

SPECTRUM WANTED

Under federal law, TV stations may retain both their analog and digital license until 85 percent of households in a market have the ability to receive off-air DTV signals. The federal government wants the analog spectrum back for auction to the wireless phone industry.

FCC officials said that without a DTV tuner mandate, the date for hitting the 85 percent mark would be pushed further and further into the future.

Last year, 28 million TV sets were sold in the U.S., but only 1 percent of them contained DTV tuners, according to CEA. The trade group also said 14 million personal computers were sold in 2001. According to another industry source, 1.4 million PC tuner cards were sold last year in the U.S.

National penetration of digital equipment that helps meet the 85 percent threshold is advancing, though. Cable operators have 15 million digital boxes in homes, while DBS providers have about 18 million.

But FCC officials and Capitol Hill lawmakers tend to measure progress in terms of the number of TV sets that have been sold with digital tuners.

"On tuners, we were waiting for the market to work, waiting for the market to operate. Tuners were not being incorporated in any large scale into high-end receivers now," said FCC Media Bureau chief Kenneth Ferree.

In April, Powell unveiled a DTV transition plan that called for the industries to take voluntary action. But the non-mandatory nature of the plan was immediately called into question when Ferree issued a blunt warning to the cable industry on embracing Powell's proposal.

Ferree later recanted most of what he said, and Powell and his chief of staff, Marsha MacBride, went to great lengths to stress the plan's voluntary nature.

Except for the CEA, the affected industries vowed support for Powell's plan. Powell publicly scolded the consumer-electronics trade group for not playing ball, and within a few weeks, he scheduled a vote on mandating tuner inclusion in DTV sets.

"It went from voluntary to mandatory very quickly," said CEA lawyer Michael Petricone.

At a press conference after the vote, Ferree admitted that the CEA's reaction revved up the FCC's regulatory machinery.

"I think it would be naïve to think that there is no relationship between the two," Ferree said.

NAB WANTS MORE

The NAB's regulatory agenda at the FCC travels way beyond DTV tuners, reaching deeply into the cable industry's core business. In fact, the NAB has two cable dominoes it would like to see tumble.

The NAB wants the FCC to green-light a policy that requires cable carriage of analog and digital TV signals until analog broadcasting terminates, as well as a policy that requires cable systems to carry all free content within the digital-video bit stream, whether that's one channel or a dozen.

"Cable carriage and other issues still need attention to ensure that consumers have access to local digital and high-definition broadcast signals," NAB president Edward Fritts said in a statement.

National Cable & Telecommunications Association spokesman Marc Osgoode Smith appeared hopeful the FCC wouldn't yield to NAB's pressure on dual must-carry.

"The FCC has already made a tentative decision on dual must-carry, which is that they don't think it would survive constitutional scrutiny," Smith said.

Assuming defeat on that issue, the NAB's fallback position holds that cable operators should carry all free digital programming streams from DTV stations that are eligible for must-carry after the transition.

This would require the FCC to redefine "primary video" to mean multiple DTV signals, instead of just one.

Powell voted for the "one-signal" policy, but top aide MacBride claims Powell believes it was the wrong policy outcome.

CEA: WE'LL SUE

CEA is promising to fight the FCC in court. The agency imposed the DTV-tuner mandate under the All-Channel Receiver Act, signed into law by President Kennedy on July 10, 1962, in an effort to ensure that TV sets could receive UHF signals.

While Ferree said the FCC's legal authority to impose a DTV tuner mandate was clear, the CEA contends that DTV was not on the minds of the lawmakers who wrote the tuner law 40 years ago.

Because whatever the FCC does on the DTV transition is expected to be litigated, House Energy and Commerce Committee chairman Billy Tauzin (R-La.) is planning to introduce DTV legislation next month.

Tauzin spokesman Ken Johnson refused to say whether Tauzin would propose a dual must-carry mandate.

"Clearly, we have been encouraging the FCC to help get the transition jump started. While this [tuner mandate] is an important first step, we intend to move forward with comprehensive legislation this fall," Johnson said.

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