‘FOURTH S’ WILL MEAN DIGITAL REBOUND FOR COMMUNICATIONS, FCBA IS TOLD

Jeffrey Eisenach, exec. vp of CapAnalysis and co-founder of The Progress & Freedom Foundation, said the information technology industry was on the verge of a tremendous surge. Pointing to bursts of IT industry growth brought about by the introduction, in turn, of the IBM PC (1980), the Windows 3.0 operating system (1991) and the browser-accessible Internet (1997), he said digital content would drive the “4th S.” His term referred to the characteristic graph of consumer adoption of new technologies: It starts slowly, then takes off due to a “network effect,” then flattens out as only skeptics remain to become buyers. Eisenach suggested several candidates for the kinds of content that would bring about what he predicted would be a steep adoption curve, including online gaming and licensed video and music download services, although he declined to pick any favorites. He also pointed to rapidly declining costs of plasma TVs and other enabling digital technologies as fueling the resurgence. Also getting a major boost will be merger and acquisitions activity, he said, as capital is “reallocated” to companies that can meet the new consumer demands.

On the regulatory front, FCC commissioners and senior staffers also spoke of a rebound based in large part on the nation’s broadband digital future. Comr. Abernathy predicted a “gradual increase in the strength of the [telecom] sector” since “consumers don’t say they want slower” data delivery. Comr. Adelstein saw a return to realism after investors went from “exaggerated optimism to exaggerated pessimism.” He agreed with an earlier comment by Chmn. Powell’s Chief of Staff Marsha MacBride that “investors come and talk to us all the time” and that the Commission has “a relationship with Wall St. we didn’t have before.” However, Adelstein seemed not to endorse the relationship as fully as MacBride.

On a legislative panel, House Commerce Committee member Boucher (R-Va.) summarized the status of the digital TV transition bill expected from Committee Chmn. Tauzin (R-La.) this month. Among provisions he said were “probable": (1) The codification of the plug-&-play agreement between the cable and consumer electronics industry. (2) A requirement for local network affiliates to pass through all network high-definition programming. (3) TV set labeling: “Very few sales people really understand what they're selling.”

Despite his “reservations” about technology mandates, Boucher said of a broadcast flag provision that “there is a need to do something” and it wasn’t clear the FCC had the authority to do it without legislation. “I guess it will be part of the bill.” He also said the bill probably would mandate only a “soft date” for stations to surrender their analog spectrum. Saying that 40% of his constituents received their TV over the air, he said: “If I disenfranchise several thousand of my constituents, I'm gonna get disenfranchised, too.”

Boucher also touted his proposed Digital Media Consumer Rights Act (HR-107), which would allow consumers to bypass copyright protection measures -- prohibited by the Digital Millennium Copyright Act -- for the purpose of exercising their fair use rights. “This is a real economic stimulus bill,” he said, since he predicted it would add value to copyrighted material purchased by consumers. “We are going to pass this bill [although] it might take a couple of Congresses for the wisdom of this to become apparent.”

Rep. Goodlatte (R-Va.), with Boucher a co-chmn. of the House Internet Caucus, said he didn’t “believe there is a simple legislative solution” to the spam problem. Although legislation was a “a critical component,” he said, “technology is going to play the leading role.” He said legislation needed to be “steering toward the bad actors rather than all spam.” A markup is expected sometime in May on the “CAN SPAM” Act (S-877) anti-spam legislation from Senate Communications Subcommittee Chmn. Burns (R-Mont.) and Sen. Wyden (D-Ore.). Goodlatte said of possible anti-child porn legislation that “we need to get the First Amendment issues right.” On Internet gambling, he said the major issues were credit card restrictions and international cooperation.

Most speakers at the seminar were asked to discuss the FCC’s upcoming rulemaking on broadcast ownership, and commissioners and staff left little doubt that the June 2 deadline set by Powell would hold. Said Abernathy: “The task doesn’t get any easier with delay.” She also pointed out that as soon as the Commission issued new rules, it would have to begin its next biennial review process to study them, a legislative requirement that MacBride said was “destabilizing.” As for Powell’s “diversity index,” MacBride said: “It’s a tool, not a rule.” She told lawyers that the index would allow the Commission “to show [the appeals court and others] that we have rules… that are based on research and numbers.” But she also said the index wouldn’t introduce unnecessary regulatory complexity. There’s “not a lot of math” but “a lot of common sense.”