CEMA President Gary Shapiro Testifies on HDTV Spectrum Policy Before Congressional Subcommittee

Chairman Fields and Members of the Subcommittee:

My name is Gary Shapiro, President of the Consumer Electronics Manufacturers Association (CEMA), a sector of the Electronic Industries Association. The Electronic Industries Association is the premiere association representing manufacturers of electronics products in the United States.

As Secretary Ron Brown stated this week, electronics manufacturing is the largest manufacturing sector in the U.S. economy, accounting for some 1.7 million jobs and $381 billion in factory sales in 1995. Electronics also represents a large and growing portion of America's exports, reaching $125 billion in 1995. Consumer electronics manufacturing in the U.S. employs some 170,000 people, contributes significantly to 5.6 million retail jobs and provides $8 billion in wages to the U. S. economy.

The products manufactured by member companies of CEMA add to the enjoyment, enrichment, and quality of life for Americans. They include TV's, VCR's, DBS, home theater, radios of all sorts, wired and wireless audio, camcorders, CB's, cordless phones, cellular phones, PC's, personal digital assistants, printers, calculators, set-top boxes, car alarms, baby monitors, home automation products, and many others. The list seems never-ending as entrepreneurs, scientists and engineers daily discover new and exciting technologies to make life better.

Spectrum Policy is Important

Consumers have an enormous investment in products using spectrum. The average household owns 11 different products using spectrum. Each year Americans spend roughly $30 billion on products which utilize spectrum.

Indeed, the total consumer investment in spectrum products is nearly one quarter of a trillion dollars. Most of this investment is in products for which no monthly fee is charged!

HDTV

While some define this as an issue involving broadcasters and other licensed providers, we hope it is viewed as what best serves the American public.

We are concerned about short-term revenue-driven proposals to auction spectrum previously designated for HDTV to the highest bidder. We believe these proposals would be penny wise and pound foolish. They would throw away our nation's lead in HDTV; violate the compact between industry and government in creating HDTV; turn over-the-air broadcasting into an inferior entertainment medium; and deprive the next generation of benefits made possible through the reallocation of the spectrum now being used for NTSC broadcast - benefits, services and technologies which we can barely imagine today.

Congress has the opportunity at this juncture in time to either allow for the introduction of HDTV - an incredible cutting-edge video technology - into all American homes or to disenfranchise a large portion of the viewing public from the improved picture quality and CD sound HDTV offers. But the effect of Congress' decisions will have still greater ramifications. Many thousands of American workers will either benefit from HDTV or be robbed of high-wage, high-tech jobs in the production and support of this state-of-the-art video technology.

The proposed HDTV system offers capabilities that were unimaginable when the FCC's process began just eight years ago. HDTV offers extraordinarily crisp and clear video performance, providing approximately six times the spatial resolution of current NTSC sets. With the pictorial acuteness of digital transmission, "ghosts" and other annoying broadcast picture artifacts will become mere memories.

The system supports two formats of video display: interlaced and progressive. This dual mode capability allows HDTV to function interoperably with computer systems, CD-ROMs, and multimedia applications as well as television receivers. HDTV also brings CD quality sound.

In addition, the HDTV system can be used to transmit massive amounts of digital data to the home. HDTV receivers will be able to pick up electronic newspapers, stock prices, two-way paging systems, or interactive games just as easily as the Super Bowl or Movie of the Week. HDTV offers unprecedented flexibility in the use of video, audio, and data. The proposed system supports multiple formats, frame rates, and production standards.

Most importantly, this is an American technology success. This Subcommittee first focused on HDTV eight years ago. The major concern then was that the U.S. was behind the rest of the world in this technology. Indeed, it was of such grave concern that some in Congress advocated a government-funded entity to invent a U.S. HDTV standard. That proved to be unnecessary. Industry stepped forward on its own. American companies and researchers working in the U.S. designed a state-of-the-art broadcast system and leapfrogged the world in broadcast video technology without a single dime of government funds. Only action by Congress and delay by the FCC threatens this lead.

This lead is important to our nation. Advanced television technologies such as HDTV will make a significant contribution to the U.S. economy. Television sets to display HDTV, as well as components such as semiconductors and glass tubes will be manufactured in America by

American workers. Both Thomson (RCA) and North American Philips (Magnavox) have pledged to manufacture HDTV receivers in the United States. These two companies are the largest producers and sellers of TV's in the United States today.

Transition

Early on it was recognized that the transition to digital television would have to be a step by step process. A plan was needed that would allow the public to adopt the new technology at a gradual pace, while not disenfranchising the owners of the 250 million analog receivers. The only way to ensure a gradual conversion is for local broadcasters to assume the cost of simultaneously broadcasting their signals in HDTV and analog NTSC to their audiences for the length of the transition.

With the bipartisan support of Congress and the Administration, the FCC decided to temporarily loan local broadcasters a second channel on which to broadcast HDTV while maintaining analog service on the existing channel. At the conclusion of the transition to digital broadcast, service on the analog channels would cease and the spectrum returned to the government for auction or other use.

The loan of an additional 6 MHz channel is necessary for a seamless transition to digital advanced television because the analog NTSC signal requires all of the current 6 MHz now being used for over-the-air broadcast. So-called inband transition which has been suggested by some is technically impossible. Furthermore, an improved advanced television video experience - i.e. more lines of resolution and better sound - means that more information is being transmitted. Therefore, only with digitization can the increased information be squeezed into the same size channel now used for today's analog picture.

Were we transitioning to an analog advanced television service, as is now being used in a few other countries, we would need more than 6 MHz. The breakthrough realized by the American technological success allows us to maintain the same amount of spectrum for each video signal while improving the quality of the picture and sound and reducing the need for unused buffer spectrum. Essentially, we get more for less (spectrum), and consumers can still receive undisturbed FREE over-the-air TV.

While CEMA anticipates that ATV receivers will be popular at a very early stage in the transition process, ATV will take time to establish itself in the marketplace. Even after ATV broadcasting is widespread and substantial numbers of consumers own ATV receivers or converters, there will remain an embedded base of NTSC products that will continue to be used with cable, satellite services, camcorders, VCR's, etc. The public interest would not be served by setting a date certain now for the cessation of NTSC broadcast.

That does not mean that a date certain should not be set, nor does it mean that CEMA believes the transition will be protracted. On the contrary, we believe in the attraction improved pictures and sound will have on consumers as well as consumers' desire to "trade up" to the new technology. Our suggestion is to wait until some point after the transition begins in order to afford the opportunity to better gauge the penetration rate of the new technology as well as the number of households still relying on the old technology.

Auctions

Some in Congress now propose that this carefully conceived spectrum loan plan be abandoned. Instead, they suggest that the spectrum which had been allocated for the digital transition be put up for auction to the highest bidder. Auction of the digital transition spectrum would be based on mistaken assumptions, constitute bad public policy, and significantly delay, if not kill, the introduction of HDTV in the United States.

Allowing local broadcasters the temporary use of spectrum does not constitute a "giveaway" of a public resource. The analog spectrum cannot be retained by the broadcasters, and will be returned to the government at the end of the transition. Throughout the transition process, the government will fully control the spectrum. In the end, the government will have exchanged pieces of currently unusable spectrum for a solid block of highly valuable spectrum, and the public will receive a revolutionary upgrade in television service.

CEMA does not oppose auction of spectrum. CEMA members believe that auction of the returned spectrum used for broadcast of the analog television signal will be far more valuable and will bring in far more funds for the federal treasury. Once the analog stations go dark, the broadcast spectrum can be repacked, leaving large, more valuable, nation-wide blocks of spectrum for auction. Furthermore, because the HDTV technology is more efficient and less "noisy" than the analog broadcast signal, the new channels can be packed in a smaller overall band, thus leaving an even larger amount of spectrum available for auction-150 MHz instead of 80 MHz.

Because the analog signal takes more power and is more noisy than the digital signal, buffer spectrum is necessary to avoid degradation of today's TV signals. It is precisely into these buffer holes where the initial digital licensees will go. Exactly because they serve as buffers for NTSC broadcast, these bits of spectrum are currently of little or no use for anything other than the temporary broadcast of digital HDTV. Thus, auction in the near-term of these channels would not provide the greatest and most efficient use of spectrum, nor would it provide the most effective and lucrative source of funds for the federal treasury.

Spectrum Efficiency

Much is made in the current debate over the "efficient" use of spectrum, suggesting that a strict marketplace decision (i.e. sale of all spectrum) will promote its most efficient use. Moving forward with digital HDTV broadcasting and then repacking the broadcast spectrum is THE MOST EFFICIENT use of that spectrum. If you maintain the current swiss cheese assignment of broadcast spectrum - made necessary by today's technology - you not only set in stone a broadcast technology which will become the dinosaur of video delivery, you also doom the intervening spectrum to continued use as buffer zones which are of little use for other technologies because of the attendant "noise" and potential interference from and to the broadcast video signal.

Flexibility

As part of the Telecommunications Act of 1996, Congress has given broadcasters the opportunity to utilize the ATV spectrum for ancillary and supplementary services as long as they do not derogate the advanced television video signal. CEMA is supportive of the flexibility Congress has afforded broadcasters on the digital channels. We congratulate you on your foresight and grasp of the need for flexibility which will help advertiser-supported broadcasting remain competitive in the digital era.

We urge Congress to stay the course and maintain the priority on the ATV spectrum for HDTV and advanced television services over the various ancillary and supplementary services. We also agree that it is appropriate to charge broadcasters fees for use of the spectrum when subscription fees and charges are levied by broadcasters for services.

Some policy makers have indicated their concern that the loan of spectrum is valuable "in and of itself" especially since broadcasters now have additional flexibility. These policy makers maintain that rather than a trade of one video channel for another, the broadcasters are now receiving a "trade up" of sorts from a channel on which they may provide only one video signal to consumers to a channel with a variety of service (and revenue) options. Given that this is a concern, you may wish to consider requiring that during the transition to digital broadcast, i.e. while the broadcasters have two 6 MHz channels to use, broadcasters may only provide advanced video signals over the loaned spectrum. This will not only prevent any unintended windfall to the broadcasting community from the loan of spectrum by the government, it will also encourage a speedier transition to advanced television broadcast. Consumers, too, will likely adopt the new television format at a more rapid pace with its increased availability on the new channels.

More importantly, however, it is necessary to maintain the priority for video delivery on the ATV spectrum by establishing a minimum amount of HDTV broadcast on the new channels. Without at least a minimum of HDTV broadcast, consumers may never have the opportunity to experience this incredible new technology.

HDTV Standard

CEMA supports the approval by the FCC of the HDTV broadcast standard developed by the Grand Alliance and endorsed unanimously by the multi-industry Advisory Committee on Advanced Television Service (ACATS). It is important to note that approval of this standard by the FCC does not require broadcasters to use this technology, but provides the opportunity for nationwide efficiencies benefiting consumers, broadcasters, and manufacturers alike.

Adoptionof the ACATS HDTV standard allows:

1. A national market for television receivers.

2. Price efficiencies on receiving and production equipment for both consumers and service providers.

3. Plug and play capability as consumers move from one locale to another in the U.S.

4. "Universal service" in video delivery of entertainment, news and emergency information across the country.

5. Compatibility with both traditional video reception and recording equipment as well as computers and computer displays.

The adoption of the HDTV standard does not represent the continuation of an old big government, big brother paradigm. Instead, it provides a new level playing field within the context of state-of-the-art high definition television for all participants while not precluding

Home Recording Rights Coalition; Home Theater Magazine; International Brotherhood of Electrical Workers (IBEW); International Society of Certified Electronic Technicians; International Union of Electronic and Electrical Salaried Machine and Furniture Workers (IUE); National Consumers League; National Council of Senior Citizens; National Electronics Service Dealers Association; National Independent Appliance Services; North American Retail Dealers Association; Professional AudioVideo Retailers Association and Widescreen Review Magazine.

Conclusion

In conclusion, Mr. Chairman, Auctioning the spectrum set aside for HDTV will not accomplish the best and highest use for that bandwidth. It will violate the pact between government and industry and threaten the American lead in HDTV. American technology and American jobs hang in the balance. Our lead, our jobs, our momentum now are in the hands of Congress. As the FCC looks to you for signals and guidance, we ask you to cross the final bridge and urge the FCC to accept the ACATS recommendation, adopting the Grand Alliance system.