POWELL AT CES EXPRESSES RELUCTANCE TO MOVE TO PROMOTE DTV

Powell repeatedly lauded success of 1996 Telecom Act in promoting deregulation and unleashing market forces, saying (1) no govt. policy could have kept pace with rate of change caused by digitization of telecom, (2) there’s “a burden of proof against regulatory intervention” and (3) “markets are proconsumer.” He also said he was “not necessarily the biggest fan” of “industrial policy” in promoting DTV transition. DTV didn’t fail, Powell said, but expectations of speed of transition were just wrong since no consumer electronics product ever had achieved 85% penetration as rapidly as Congress projected for DTV.

Asked by Shapiro whether FCC would act to speed transition, Powell said DTV “will work when consumers figure out that the value [of DTV] is worth the expense.” He said he was “very skeptical of attempts to overly shove [DTV] down the throats of consumers” who “weren’t even at the table” during industry-to- industry negotiations. Powell acknowledged that broadcasters had responsibility to speed transition, but said same was true of consumer electronics and other segments of industry: “Everyone says it’s up to someone else… People are wasting too much energy on figuring out how to divert blame.” He said broadcasters needed to transition to digital and begin offering programming, and CE companies had to “drive down the price points” and develop chips to solve multipath problems.

FCC is likely to act soon on DTV must-carry, Powell said, but “whether you will like [FCC action] remains to be seen.” DTV must-carry is “not a trivial constitutional question,” he said, and Supreme Court already has raised questions about it. It’s also “easy to diminish the technical question” of cable systems’ passing through DTV signals, he said, and there’s still question of when and whether timing would be right for imposing transitional must-carry. “'Transitional’ is the key word,” Powell said.

There’s room for compromise between broadcast and cable on DTV must-carry, Powell said: “Everyone is playing for their own protection. That won’t work in this exercise. Everybody has to go first.” He said industries could “find a transitional mechanism” that would allow at least brief period of DTV must- carry: “There are lots of variables that they could play with as the makings of a compromise.” He said he saw signs of compromise activity by both sides.

Asked whether HDTV is “inevitable,” Powell said: “DTV is inevitable. What quality level still is debatable.” Best technology often doesn’t win, he said. He said DTV was competing with many other technologies for consumer dollars, including multiple wireless phones per family, multiple personal computers, broadband access and personal digital assistants, all of which are “wrestling for the hearts and minds of consumers.”

Shapiro pressed Powell for FCC action to preserve “fair use rights” of consumers to record programming using new technologies such as DFAST cable box, but Powell repeatedly asserted that copyright issues weren’t FCC responsibility, saying Commission role in such issues was “extremely limited, if at all… This is an issue best left to the industries and others unless the Congress directs otherwise.” In earlier keynote, Shapiro said “protecting home recording rights… remains a priority for CEA… We will be fighting hard on Capitol Hill and beyond to prevent a rollback of home recording rights.”

On proposal to revisit current 8-VSB standard for DTV, Powell said there was “a presumption against change” because of impact it would have on transition and lack of assurance that new standard would be significantly better. If current system is “clearly and demonstrably flawed I would rather fix it than ram it down the consumers’ throats,” he said, “but the burden is high to change horses this late.”

FCC’s role in “social policy” issues such as objectionable content is “whatever Congress tells us.” He said he was “not a fan of affirmative use of regulatory authority for social policies.” Limited FCC role doesn’t mean policies aren’t important, Powell said, but “the debate is best left to institutions that directly represent the public.” He said it was better that “a decision that reverberates throughout the nation” be made by majority of 535 federal legislators, acting on bill signed by President than that decision be made by 3 FCC commissioners. Powell acknowledged that he might object to programs such as Howard Stern radio show, but “as long as I have the tools to protect my family from it, I don’t have a problem with those who choose to listen, for whatever reason.”

Meanwhile, it’s time for FCC to begin looking at spectrum management, Senate Communications Subcommittee Chmn. Burns (R- Mont.) said. He said it could be “a big issue in this Congress” since there’s “never been a national policy on spectrum management.” However, he said that he was reluctant to put limits on how broadcasters used DTV spectrum, saying “once you own spectrum you have property rights and the government shouldn’t dictate what you can do. All the FCC can do is make sure you stay in your lanes.” FCC Comr. Ness said spectrum management was “very complex” because spectrum was used more intensively in U.S. than elsewhere. She said FCC needed assurance from Congress that it had “the technology resources and engineers to be able to effectively referee” spectrum issues.”

Retirement of House Commerce Committee Chmn. Bliley (R-Va.) will have big impact on potential for broadband legislation, Telecom Subcommittee member Ehrlich (R-Md.) said. He said Bliley was “not a big fan of the RBOCs,” in contrast to new Chmn. Tauzin (R-La.), so “I expect a broadband bill to move very early in Congress.” As Commerce Committee sets subcommittee assignments, views on broadband may be “a determining factor,” Commerce Committee member Barton (R-Tex.) said. Burns agreed that broadband bill would move, but said it was likely to be later in session because details are “still being worked out.” -- Michael Feazel

CES Notebook…

Both Microsoft Chmn. Bill Gates and Intel CEO Craig Barrett in keynotes at CES postulated role for PCs as what latter called “the center of the digital universe.” Gates demonstrated several prototypes of products as small as alarm clock/radio that would be connected to PC via wireless technology. Barrett said new wireless peripherals would “expand the universe around the PC, and compound the capability of the PC in the process. The PC is the digital brain, capturing information in one place and delivering it in another.”

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Internet-enabled TV receivers were much in evidence at show, despite relative lack of success of WebTV. Zenith showed Web- enabled interactive TV that would come with free Internet access. Zenith said its 27” set came with integrated Web capability without need for set-top box. New company, EspriTV, said its 27” flat-screen TV with integrated Web access would be available in stores this summer at $998. Fuze 3 Technologies of San Jose offered line of Internet-enabled analog TV sets, Panasonic showed 32” analog set with TeleCruz chip for Web connectivity, Philips offered AOLTV terminal. Nokia said its first consumer electronics product, other than wireless phones, would be Media Terminal, which combines DTV and Internet access.

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Growth in wireless communications is indicated by CEA decision to form new Wireless Communications Div., equivalent to its existing Video and Audio Divs. CEA said decision was based on group’s expanding wireless membership. “Wireless is one of the fastest growing areas of the consumer electronics industry as consumers continue to demand access to anytime/anywhere information and entertainment,” CEA Pres. Gary Shapiro said. Projects are to include developing retail training, creating industry database, special events. Div. will be represented on CEA board.

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HDTV is “still a very early adopter market,” said Mark Snowden, senior analyst with Gartner Dataquest at CES session. He said early adopters enjoyed talking about technical details, but said HDTV wouldn’t become mass market product until consumers didn’t need to know details. He also said DTV transition had been slowed by wave of other new technologies competing for consumer attention. For example, he said interactive TV could generate $4 billion incremental annual revenue by 2004, mostly from ads and from commissions on sales via interactive TV, which he said could generate $11 billion in sales by 2004. Agreement with AOL and Time Warner indicated that FTC “really gets it, finally” about importance of interactive TV, Snowden said: “It means that interactive TV won’t operate without an overseer. If the industry doesn’t cooperate, it runs the risk of having an interactive TV czar” at FTC. ----

In-band, on-channel digital audio broadcasting (DAB) developer iBiquity said latest round of field tests showed that system was “extremely robust,” even in face of high levels of multipath interference. Field test data were gathered from DAB service on KWNR(FM) Las Vegas, it said. Ibiquity said tests also showed DAB caused no noticeable interference to analog radio stations.

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There’s a “big opportunity” for new broadband wireless services because 95% of office buildings in U.S. aren’t connected to fiber, said Stan Bruederle, chief analyst for Gartner Dataquest. He said new 3G technologies hade some advantages, but also had disadvantage of shared capacity, meaning high-data-rate consumers used disproportionate share. Satellite-based broadband systems will have role, he said, but suffer from latency. LMDS also has good opportunity, Bruederle said, but must start from small base. He predicted wireless broadband would achieve only 12.8% of broadband market by 2004, growing to 20% by 2010, because of fiber’s inherent advantage, but said it still was “a good business to be in.”

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Music is just first market to get lot of attention on digital rights management (DRM) because of Napster, InterTrust Mktg. Vp Mark Sarbiewski said: “The same principles and business models apply well beyond music.” He cited demand of movie industry to generate new revenue streams and of publishing industry to distribute to new markets. DRM isn’t where it needs to be, Sarbiewski said, but “dollars involved are huge, and the opportunities beyond music are so huge that we will find solutions.” He predicted DRM would be widely available for PC market this year, with portable devices soon behind. Within 10 years, he predicted, “just about every consumer device will have DRM baked into it, and it will be completely transparent to the user.” To date, security has been focus instead of consumer experience, LockStream Chmn. Scott Searle said. He said focus had to shift to making user experience acceptable, as long as security was adequate and affordable. “Big test” for DRM will be in wireless devices, eMotion CEO Bob Griffin said. Once information gets into “untethered” devices, he said, it “raises a lot of new issues.”

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Cal.-based Wherify Wireless showed wristwatch-sized personal location system, with product due to be in stores in summer. Unit combines Global Positioning System location system with PCS mobile phone in 2-oz. package, company said. Wherify said key markets would be parents who wanted to keep track of children and other at-risk persons.