FCC ORDERS SET MANUFACTURERS TO INCLUDE DTV TUNER

CEA Pres. Gary Shapiro said his association was conferring with its members and weighing its options. He said decision was wrong because 90% of Americans didn’t need tuners because they received their broadcast signals through cable or satellite: “This is not something consumers are choosing to buy, so the government is making them buy it.” FCC Chmn. Powell called CEA’s protestations were “ridiculous,” including its ads this week criticizing Commission for imposing what it said was “TV tax.” He said he was 100% confident that “in an extraordinarily short amount of time” additional costs associated with tuners would be “relatively marginal in the minds of consumers.” Decision resembles “voluntary” measures Powell had called for in spring, except that schedule was pushed back by year, to 2007 from 2006.

Comr. Martin, who was sole dissenter, said he favored market-based forces over govt. intervention, particularly “when regulation imposes a cost to consumers or requires consumers to purchase a product they may not use.” Republican said all consumers would bear cost for device that would benefit only few who relied on over-the-air broadcasting. Martin said Commission should turn its attention to cable interoperability and cable carriage issues that, once resolved, would benefit far more consumers since 70% of them received their TV from cable.

Powell said he hoped action would revive broadcast as strong distribution network for new services, saying that digital would allow consumers to receive “crystal clear” pictures over the air. However, Shapiro said Powell was propping up industry that already was squatting on public spectrum worth $70 billion and needed no more favors. Shapiro said FCC was forcing consumers to pay some $250 extra for sets with DTV tuners and predicted that actually would delay HDTV deployment because consumers would resent paying extra for something they never would use. FCC majority said they expected cost of tuners would become virtually invisible to consumers by 2007 because of drop in prices for both tuners and sets. Mark Cooper, dir.-research at Consumer Federation of America (CFA), which backed CEA on issue, said idea that putting tuner in TV sets would drive creation of more digital programming was “silly” and said imposing additional costs on consumers was “outrageous.”

Saying he would hold no victory dance, Fritts said this was only first step and Commission now should address cable carriage questions and cable compatibility. “One down, two to go,” he said. Nevertheless, he said FCC’s decisions “represent the most important action on digital television since adoption of the DTV standards in 1996.” Fritts also expressed hope that DTV tuner mandate would revive broadcasting as transmission medium: “If you see digital television, over-the-air television, you will find that it is of better quality than once it’s filtered through cable or satellite. Once you see it, you want to buy it.”

Despite outcome, both Powell and FCC Comr. Abernathy expressed some discomfort at voting for govt. intervention, with Powell conceding move was “industrial policy.” Both Republicans said that on balance, regulation was necessary because they were under statutory mandate from Congress to push DTV transition forward and because they believed move would mitigate costs to consumers in long run. “Adopting a tuner requirement will limit the number of new sets being purchased today that will become obsolete at the end of the transition,” Abernathy said, “and for me that was very telling because I believe that most consumers are unaware that when they go and buy an analog set today that they may very well have to replace that set in the not-too-distant future.” Abernathy said 1/3 of TV sets in U.S. got their signal from over-the-air broadcast. Comr. Copps said order would drive price for TV sets down, making them more affordable more quickly than absence of regulation. “Each time a consumer purchases an analog-only set, we move further from reaching… the congressional objective,” he said.

Order requires all TV receivers with screen sizes greater than 13” and all TV receiving equipment, such as VCRs and DVD players/recorders, to be capable of receiving DTV after July 1, 2007. Under phase-in schedule: (1) 50% of TVs 36” and larger must include tuners by July 1, 2004, and 100% of them by July 1, 2005. (2) 50% of TVs 25” to 35” must have tuners by July 1, 2005, 100% of them by July 1, 2006. (3) 100% of TVs 13"-24” must include tuners by July 1, 2007. (4) 100% of TV interface devices such as VCRs and DVD players/recorders must include DTV tuners by July 1, 2007.

Commission refrained from adopting labeling requirements that would make clear to consumers buying analog-only sets that those devices would become obsolete. Instead, it said it would monitor marketplace and determine later whether such labeling was necessary. Abernathy expressed some concern, saying it was important that consumers knew what they were buying. “That’s clearly an issue,” FCC Media Bureau Chief Kenneth Ferree said, saying his staff would be examining issue more deeply in coming weeks and months during next DTV periodic review. But he also said he believed CE manufacturers have no interest in selling products that would become obsolete without consumers’ realizing that. Commission said it would address possible adoption of Advanced TV System Committee’s (ATSC) DTV standard in its forthcoming 2nd Review of its policies for DTV transition. In interim, it included ATSC’s “Program System and Information Protocol” (PSIP) in its rules as document that licensees could consult for guidance.

Commission denied petition for reconsideration requesting that FCC consider imposing minimum performance standards for DTV receivers. Competitive forces are best way to ensure that DTV receivers perform adequately and are of high quality, agency said. Ferree said Commission chose to push deadlines for manufacturers back to 2007 after examining market and manufacturing cycles. “I think the dates that are set forth in the items are the ones that the Commission viewed as reasonable and do-able,” he said. Ferree said FCC concluded it had jurisdiction and authority to mandate DTV tuners under 1962 All-Channel Receiver Act (ACRA). CEA’s Shapiro said ACRA affected UHF and VHF and said Commission had no legal authority “to regulate how TV sets are built.”

In separate but related action, Commission began rulemaking exploring whether FCC could and should mandate use of copy-protection mechanism for digital broadcast TV and what impact such regulation would have on consumers. In presenting item to Commission, Ferree said industry Broadcast Protection Discussion Group had reached consensus on “broadcast flag” to protect content from unauthorized copying and redistribution. However, he also said group had stalled on several critical issues, including use and implementation of flag, as well as enforcement. Notice of Proposed Rulemaking (NPRM) asks comment on, among other things, whether FCC has jurisdiction in this area, whether agency should intercede and, if so, how it should resolve outstanding issues. Other questions include whether FCC should mandate that CE devices recognize broadcast flag, where copy protection should begin, would such system be effective and what effects such protection technologies would have on CE devices and other, newer technologies. Comments are due Oct. 30, replies Dec. 13.

Copps expressed some dismay over NPRM’s question about whether FCC had authority to act on issue, saying he firmly believed Commission did and said asking question was just inviting trouble. His comments followed letters from Sen. Hollings (D-S.C.), and Reps. Tauzin (R-La.), Dingell (D- Mich.) and Markey (D-Mass.), saying they believed Commission had ancillary authority to act unilaterally to speed DTV transition and should do so. Meanwhile, Tauzin has asked his staff to draw up omnibus bill for introduction in fall that would mandate broadcast flag. Tauzin aide Ken Johnson called FCC’s action “an important first step” but said Tauzin intended to move forward with his bipartisan, omnibus legislation. “Our proposed legislation will include everything from DTV cable carriage, to DTV cable compatibility, to over-the-air DTV tuners to digital content protection.” He said FCC’s decisions in fact would help Congress to “see where some of the land mines are buried” on those issues. Spokesmen for Hollings, chmn. of Senate Commerce Committee didn’t return phone messages seeking comment. Markey, ranking minority member of House Telecom Subcommittee, in written statement praised Commission for its actions, particularly with regard to DTV tuners. “Today’s FCC decision to phase in digital television tuners by 2007 represents an important step in jump-starting the digital television transition and I am pleased that the Commission is finally taking this action,” he said. Ferree said agency felt compelled to move forward whether or not Congress took action, saying there was no guarantee that Tauzin’s legislation would pass and that Commission didn’t want to leave issues lingering indefinitely.

Home Recording Rights Coalition, which also is led by Shapiro, said it welcomed FCC’s concern on broadcast flag but worried that any govt. mandate might impede on “consumer sovereignty” with regard to fair use and stifle innovation.

All 4 commissioners said they realized that transition also depended largely on “plug-and-play” interoperability on cable systems and said they would turn their attention to that issue quickly. Ferree said he hoped in coming weeks to hold another of his series of “hoe-downs” with industry leaders to address plug-and play issues as well as address conflicts over POD-Host Interface Licensing Agreement (PHILA). Ferree said he hoped CEA, “rather than devoting their energy and resources to attack ads, would work with us on those other pieces of puzzle.”