Don't you just love the way Congress fixes things? Listening to the politicians, the pundits and the mass media, you'd think that our elected representatives have the unique ability to gather a sense of what best serves the public interest and then to codify this into legislation that will fix any problem. Of course, you'd be wrong.
Take campaign finance reform, for example. This legislation was supposed to close the door on soft money, which was being funneled through the political parties. We were told that it would help curtail the dramatic growth in spending on political campaigns. Just a few election cycles back, we crossed the billion-dollar threshold on spending for congressional and presidential races. In 2000, we passed the $2 billion milestone. In 2004, according to USA Today (see Web links), we passed the $3 billion milestone — actually $4 billion when all election costs are counted. This includes more than $400 million in soft money funneled through the 527 loophole. Guess it's back to the drawing board for campaign finance reform.
Ditto for telecommunications reform. Congress “fixed” it in 1996 with the most comprehensive overhaul of telecommunications regulations since the original Telecommunications Act was written in 1939. The 1996 act authorized the FCC to loan broadcasters a second channel for the transition to digital television. It also instructed the FCC to establish regulations for the DTV transition, including a schedule to assure the timely return of the analog spectrum — valuable spectrum that is to be used to enhance public-safety communications and to be auctioned for new telecommunications services when broadcasters are forced to give it back.
A resolution with no definition
It should come as no surprise that things did not work out as planned when Congress overhauled the Telecommunications Act in 1996. We've got tons of dark fiber in the ground, but the last mile is still copper. The attempt to open up local exchanges to create more local competition for traditional telephone and new high-speed data services failed. The cable industry has resisted attempts to un-bundle the set-top boxes needed to access new digital TV services, and cable rates keep climbing faster than inflation rates. The politicians are no closer to getting the analog TV spectrum back from broadcasters than they were in 1996.
As expected, the cries to get the spectrum back are growing louder now that the election is over. The FCC has been working on a revised plan, acknowledging the reality that the analog spectrum will not be returned on Dec. 31, 2006 — the deadline they set in 1997 when they launched the DTV transition plan. It now appears, however, that the FCC is going to dump this one back in the lap of Congress, which has announced its intentions to look at telecommunications reform, again, during the next session. Just for dramatic effect, Congress attached a “Sense of Congress” resolution to the intelligence reform bill passed by the lame duck Congress in December. The resolution calls on broadcasters to meet the Dec. 31, 2006, deadline set by the FCC. Unfortunately, this resolution provides no definition as to how this is to happen; it does not enjoy the same force of law as the little rider they put on the Balanced Budget Act of 1997.
Just months after the FCC set the DTV transition schedule, those sensible folks in Congress “fixed” it. No broadcaster would be forced to return the analog channel until 85 percent of the homes in their market were capable of receiving the DTV signals of every broadcaster in the market. To be included in that 85 percent, the home would need to have at least one set with an off-air DTV tuner, or a digital multichannel service that carries the DTV signals of all of the broadcasters in that market.
Have our elected representatives lost their senses? Do they understand that they have the power to put the teeth back into the 2006 deadline by simply repealing the 85 pecent rule that Congress passed in 1997? Of course they do. Do they have the resolve to do it? No way. They have another expensive election to pay for in 2006.
Two more years!
There's no reason to get too excited about DTV reform. Mark your calendars: Congress will pass another major telecommunications reform bill in the summer or fall of 2006. The next year-and-a half will be marked by numerous Congressional hearings, while the FCC continues to interpret the divergent views of Congress and federal appeals courts on issues too numerous to enumerate here. For broadcasters, the top issues are:
- Digital must-carry of the entire 6MHz DTV program multiplex without downconversion.
- Ownership caps and media cross-ownership issues.
- Delaying FCC plans to allow spectrum sharing for low-power WiFi devices in the TV spectrum.
- Leveling the playing field with respect to indecency limits.
- Implementing the Broadcast Flag and limits on consumer video recording rights.
The FCC may try to move on some of the issues listed above this year. A federal appeals court just ordered the FCC to explain why it has not issued its final rules on DTV carriage by cable systems. It is likely that whatever the FCC decides, it will face immediate legal challenges. Any move by the FCC will frame the key issues. But, ultimately, Congress will need to legislate a solution to address the issues raised by the courts.
In March, the Supreme Court will hear a controversial case to determine whether file-sharing software companies can be held legally responsible for copyright infringement on their networks. The case focuses on Morpheus and Grokster, each of which are popular peer-to-peer, file-swapping applications that are widely used to trade movies, music and software.
At the core of the case is an interpretation of the 20-year-old Sony-Betamax decision that made VCRs legal despite their ability to copy TV shows and movies. That decision set out rough guidelines under which devices used to make illegal copies of copyrighted material could be distributed without the manufacturer being responsible for the resulting piracy, as long as the product was also capable of “substantial non-infringing uses.”
Based on this precedent, the lower courts have ruled in favor of new consumer digital technologies ranging from CD burners to portable MP3 players. In choosing to hear this case, the Supreme Court has opened the door to speculation that it might modify the personal recording rights established by the Sony-Betamax decision. Or the court could decide that file-sharing networks must block the sharing of copyrighted files in a manner that parallels the Broadcast Flag, which limits the ability of consumers to make and share copies of free-to-air digital TV broadcasts.
In December, FREEVIEW, the free digital service that provides more than 30 free digital TV channels, broke into the top 10 of all DTV deployments in the world.
In December, Senator Daniel K. Inouye (D-Hawaii) told the Honolulu Star-Bulletin that he and Ted Stevens (R-Alaska) will hold six meetings across the country to let the public weigh in on possible changes to the Telecommunications Act. As the ranking democrat and chairman, respectively, of the Senate Commerce Committee, they will preside over the planned rewrite of the act.
Also in December, President Bush told the Commerce Department to create a spectrum task force that will have one year to produce a report on how to improve the management of the nation's airwaves.
Meanwhile, the real DTV transition will continue. Cable will push customers into digital services as they attempt to limit the loss of subscribers to DBS. HDTV programming will continue to proliferate on cable, DBS and HD-DVD. Consumers will continue to buy new HD-capable displays and will continue to show little interest in receiving HDTV off air. And broadcasters will continue to protect the NTSC “sacred cow” while they look for a business model that can survive the DTV transition. That business model should be obvious. It's called free TV.
In December, FREEVIEW, the free multichannel successor to the failed On Digital subscription DTV broadcast service, broke into the top 10 of all DTV deployments in the world. The other nine are paid multichannel services including large cable systems in the U.S. and DBS systems around the world. About 25 percent of the FREEVIEW set-top receivers being sold are for second sets.
Unfortunately, the notion of free-to-air digital multichannel services has gained little traction with U.S. broadcasters. USDTV recently announced that it has 10,000 subscribers in three U.S. markets for its multichannel DTV subscription service, which costs $20/mo. At NAB2004, Emmis Communications announced that a coalition of 12 broadcast groups would work together to pool DTV spectrum to deliver a $25/mo. subscription service package to compete with USDTV. The coalition has invited other broadcasters to join, but the initiative has failed to gain traction with broadcast networks and groups.
Craig Birkmaier is a technology consultant at Pcube labs, and he hosts and moderates the OpenDTV Forum.
Web links
USA Today on 2004 election costs:
www.usatoday.com/news/politicselections/nation/2004-11-02 election
costs_x.htm?POE=NEWISVA FREEVIEW DTV service:
www.freeview.co.uk
Send questions and comments to:cbrikmaier@primediabusiness.com.
