‘PLUG AND PLAY’ AGREEMENT ON DIGITAL TV IS HAILED AS LANDMARK

FCC Chmn. Powell, who was briefed on proposed package of regulations by industry leaders immediately after Washington news conference, commended both industries for reaching agreement. “Plug and play will be good for the future of these industries, good for the digital transition and, most importantly, good for consumers,” he said. Powell said Commission would “act expeditiously” on requests for regulation by industries after other parties had opportunity to comment. “This shows what progress can be made when both sides are committed to finding solutions rather than jockeying for regulatory advantage,” Powell said.

Executives of cable and CE industries used abundant superlatives in praising long-awaited agreement to submit proposed cable-DTV interoperability standard to FCC. Agreement on plug and play standard was hailed by CEA Pres. Gary Shapiro as “biggest announcement” on HDTV “since the creation of the Grand Alliance.” Mark Coblitz, Comcast senior vp-strategic planning, and cable industry’s lead negotiator, said 6 months of grueling talks had yielded agreement that was “win-win-win” proposition for cable and CE industries and for consumers.”

Agreement terms in memorandum of understanding (MOU) signed by 14 CE companies and 8 major cable operators. Cable companies signing MOU were Advance/Newhouse, Cable One, Cablevision, Charter Communications, Comcast, Cox Communications, Insight Communications, Time Warner Cable. CE signatories were Hitachi, JVC, Matsushita, Mitsubishi, Philips, Pioneer, Runco, Samsung, Sharp, Sony, Thomson, Toshiba, Yamaha, Zenith. CE signatories were said to represent majority of HDTV set sales in U.S. Joint recommendations include agreement on: (1) Technical standards for cable systems and cable-ready DTV products. (2) Establishment of “regulatory framework” for supporting DTV receivers and digital recorders with secure interfaces, and other devices. (3) Draft security technology license to assure content could be transferred securely in home network. (4) encoding rules to resolve home copying and content protection issues.

Under MOU, cable companies agreed to support recordable IEEE-1394 connectors on HDTV set-top boxes. In return, CE companies agreed to back FCC labeling requirements that specified DVI-HDCP (or ultimately HDMI-HDCP) copy-protected interfaces. Cable and CE executives said encoding rules were consistent with provisions in Digital Millennium Copyright Act and under agreements signed several years ago by major Hollywood studios and “5C” coalition on data transmission content protection (DTCP).

Mitsubishi Vp Mktg. Bob Perry, lead CE negotiator in talks, said most important “takeaways” from agreement were proposals to establish plug and play standard that would be truly national and content encoding rules that would preserve consumers’ “reasonable and normal expectations” about ability to record over-air programming. Perry said lack of national standard had meant sets purchased in one part of country wouldn’t be compatible with cable system in another, like “buying a toaster in Detroit that didn’t work in St. Louis.” He said 3rd important takeaway was agreement with cable industry to avoid selectable output controls, which he and others said would assure that legacy devices “wouldn’t go dark” with establishment later of new copyright commands. Latter provision was hailed by Home Recording Rights Coalition (HRRC). It said failure to do otherwise would have meant consumer who purchased HDTV display might not have had access to some HDTV programming because interface would have been turned off remotely “for purported copyright reasons.”

NCTA Pres. Robert Sachs said when interoperability agreement was fully implemented, cable industry “for the first time will enjoy a prominent retail presence” at chains such as Best Buy, Circuit City, Sears. Coblitz agreed that for cable industry, “retail is just a place where we have to be” to compete with other forms of multichannel video delivery such as satellite.

Shapiro said relationship between cable and CE industries before agreement was like that of “2 ships passing in the night.” New-found cooperation, he said, would prove crucial in ironing out technical details that remained unfinished and promoting proposed standard through FCC and possibly in Congress.

Shapiro told us announcement wouldn’t affect CEA’s lawsuit against FCC over agency’s DTV tuner mandate. “We are still challenging the jurisdiction of the FCC on that particular narrow issue. It does make it more palatable to us, but the suit will go forward.” If, however, FCC acts on what 2 industries have recommended, suit “becomes a little bit less important,” he acknowledged.

Agreement announced is limited to unidirectional set-top boxes and DTV receivers. Perry said first talks are set for Jan. on standards for interactive bidirectional devices. Those would allow advanced interactive services that currently require set-top box. In interview later, Coblitz acknowledged that announcement probably wouldn’t help high- end user of video-on-demand or other interactive services today who didn’t want separate set-top box, but called pact solid start on what cable operators hoped would be foundation for future announcements.

Reaction was uniformly positive in CE community. Thomson, typifying others, said agreement removed “one of the biggest roadblocks in the digital TV transition.” It said following months of negotiations, agreement was “profoundly good news” for consumers and for content and cable industries.

Rep. Boucher (D-Va.) said he was pleased industries came up with encoding rules to protect rights and expectations of consumers to make recordings for personal use. But Boucher, House Internet Caucus co-chmn., said he still was concerned that, with exception of free TV broadcasts, issue of “down- resolution” (intentional degradation of an HDTV signal when sent through some home interfaces) was left to FCC determination without any joint recommendation and that new “DFAST technology license” apparently wouldn’t be made available to CE manufacturers by CableLabs until FCC had acted on recommended package. “I am concerned that manufacturers who wish to begin lengthy product design and manufacturing cycles in anticipation of implementation of the package agreement might not have an option besides the harmful PHILA license to obtain the necessary authorization to proceed,” Boucher said. He also noted that solutions contemplated were for cable systems that had been upgraded to greater than 750 MHz. “Unfortunately, not all of cable systems in the United States have been upgraded to this capacity,” he said.

“This will be a great Christmas present for consumers,” said Ken Johnson, spokesman for Rep. Tauzin (R-La.), chmn. of House Commerce Committee. “The devil is always in the details and we're still reviewing the agreement, but if it plays out the way we think it will, this should be a huge step toward breaking the digital logjam.” Johnson said staff was briefed about package Tues. and committee was prepared to act if it must to ensure that FCC had jurisdiction it needed to adopt new rules. Johnson also said staff still must meet with satellite and content companies to ensure all players were moving in right direction. But he said Tauzin was “very encouraged” by agreement, having spent last year prodding industries to reach compromise on their own or threatening that his staff would draft legislation making it so. “It’s amazing what people can accomplish when you tell them, ‘You do it or we'll do it for you,'” Johnson said. House Telecom Subcommittee Ranking Democrat Markey (Mass.) said recent GAO report on DTV transition shows plug-and-play technology for TV establishes “important, pro-consumer capability that may help to accelerate the digital transition. I am eager to review the agreement, especially the legal and regulatory recommendations it contains, to further understand its implications for consumers, innovation and competition.”

MPAA Pres. Jack Valenti said he and his colleagues had not yet reviewed agreement and therefore couldn’t comment on its substance. However, he did express some optimism that developments would be seen as boost to broadcast flag. “Although we question the wisdom of mandatory encoding rules, we are pleased that the CE industry agrees that the FCC has jurisdiction in this area which, contrary to opinions voiced by that sector less than 2 weeks ago, would certainly encompass the broadcast flag,” Valenti said.

CableLabs said agreement represented significant advance for cable industry. “Our industry’s ability to deploy new digital technologies has gotten a lot easier as a result of this agreement,” CableLabs Pres. Richard Green said. Agreement defined roles for CableLabs in supporting agreement, including interoperability testing and continuing maintenance and enhancement of technology standards. “We have in place the expert personnel and laboratory facilities necessary to fully support these roles,” Green said. Besides making proposals, cable operators and CE companies agreed to work together to set guidelines and standards for future interactive digital cable TV products.