Microsoft, Compaq Aid Cable in Must-Carry Fight

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If there are no standards, the FCC might decline to impose digital must-carry.

Washington -- As federal regulators prepare to craftdigital must-carry rules, the cable industry has picked up two key allies in the pendingstruggle with the nation's broadcasters: Microsoft Corp. and Compaq Computer Corp.

Microsoft and Compaq lobbyists have been working the hallsof the Federal Communications Commission, telling officials that if the FCC imposesdigital must-carry, the agency in no way should accompany the mandate with technicalrequirements.

"Those are formidable allies in the fight," saida Washington cable attorney who asked not be identified.

The cable industry flatly opposes digital must-carry in anyform, which is not the position of Microsoft and Compaq. The two companies believe thatthe FCC has authority to impose digital must-carry on cable operators.

But the interests of cable operators, Microsoft and Compaqconverge on the issue of technical standards associated with digital must-carry. Putanother away: If there are no standards, the FCC might decline to impose digitalmust-carry in the first place.

That would be a victory for cable operators, Microsoft andCompaq, and a defeat for broadcasters, particularly for independent TV stations thatcannot leverage retransmission consent to secure cable carriage of their digital signals.

In coming weeks, the FCC is scheduled to launch the digitalmust-carry rulemaking. Cable and FCC sources have said that the agency has a range ofoptions before it, including doing nothing and letting cable operators and TV stationsresolve the issue themselves.

But many feel that such an outcome is unlikely, given thefact that the TV-station lobby will fight hard for extending analog must-carry rules totheir digital bandwidth.

In their visits to the FCC, Microsoft and Compaq urged thecommission not to issue rules specifically relating to the types of resolution andmodulation that define a digital-television picture.

It is not the first time that the computer-industry giantsmade that plea. In 1996, Microsoft and a large group of its data-communications andentertainment-industry partners successfully lobbied the FCC on the same points.

"We think that they should do the same thing in thecable arena," said a computer-industry source who is familiar with the talks.

FCC sources said they were unsure whether the standardsissue would become central in the debate.

"It's very early in the process, so I can'ttell you which ones are going to be controversial," said an FCC source who has metwith Microsoft and Compaq lobbyists.

As must-carry regulations for digital-video broadcastsloom, Microsoft and Compaq are concerned that the computer industry's preferreddigital-television-resolution format -- known as 480p, a progressive-scan technique --will be ousted in favor of the 1080i, interlace approach that broadcasters use.

"If the commission goes and makes technical mandatesas part of must-carry, they are, in essence, cutting out the free-market choice in thecable digital-broadcasting arena that they have given in the over-the-air-broadcastingarena," the computer-industry executive said.

The companies also argued that the imposition of technicalrules as a part of digital must-carry would create a large number of technical issues thatare better sorted out in the open market.

Reaction from cable-industry executives to theMicrosoft-Compaq moves was mixed.

One called the moves "a way for them to cozy up tocable," while another said the computing duo could have reason to worry, becausebroadcasters "are trying to stave off death by 1,000 cuts by making it hard foreveryone else."

In January, when Microsoft signed its letter of intent withTele-Communications Inc. for 5 million copies of the Windows CE operating system,executives from both companies lauded the 480p method -- which Microsoft calls HD-0 -- asa way to provide a better-quality digital signal to the millions of existing analog TVsets.

The Consumer Electronics Manufacturers Associationsubsequently attacked TCI in a press release, saying that by endorsing 480p instead of1080i, which packs more information into a TV picture, the public would be deprived of atrue high-definition signal.

FCC commissioner Susan Ness raised similar concerns.

CEMA vice president Jonathan Thompson said his group, whichrepresents TV-set makers, wants the cable operator to deliver a 1080i signal tosubscribers if that's the type of signal that the broadcaster is transmitting.

"Any signal degradation of the originally sentbroadcaster signal we believe would be contradicting the law," Thompson said.

Is a 1080i broadcast signal that arrives in cable homes asa 780p or 480p signal a violation of the law?

"We think that it should be consistent. If thebroadcaster sends 1080i or 720p, the consumers should be able to see it," Thompsonsaid.

But by urging the FCC to eschew technical standards,Microsoft and Compaq, in the view of some, would greatly enhance cable's positionbefore the FCC, where regulators might decide that they won't impose must-carry if itrequires the FCC to mandate cable transmission of 1080i, 480p, or both to theirsubscribers.

"I think that it will become a central point in thedebate only to the extent that the commission will use it as an excuse to postponemust-carry," a Washington cable lawyer said. "They just hate coming up withstandards."

The FCC is reluctant to impose technical standards becauseif its standards fail, the agency takes the blame, the lawyer added.

"They don't have to take responsibility if itdoesn't work," the lawyer said.

The lawyer pointed to the stalled rulemaking where the FCCis supposed to issue rules promoting the commercial availability of set-top boxes. But theFCC has urged private parties to sort out the technical issues on signal security amongthemselves.

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