Click here for video of this hearing.
Chairman Stevens’ Opening Statement
This second session of the DTV hearing will focus on the use of the analog spectrum by public safety and high tech groups. It will also consider consumer education about the DTV transition. And, last we’ll examine how a subsidy program for set top boxes should be designed and what it would cost. We have six witnesses, but before we start I want to begin with a demonstration of the set-top boxes, which Mike Kennedy from Motorola has agreed to demonstrate for us.
Chairman Stevens Questions & Answers with Witnesses July 12, 2005 - DTV Transition-Hearing II
Chairman Stevens: Mr. Shapiro, I want to get back to this TV sets question. Now, I was told categorically there are no television sets manufactured, ready for sale, in the United States totally. You say there is a large percentage. Aren’t you telling us that the components that consumer electronics are added to some of these boxes? Are you really producing, from ground up, more than half of televisions sets in this country?
Mr. Shapiro: I didn’t mean to imply that, Senator. I don’t believe we are. As I’ve indicated, the manufacturing is shifting rapidly from Mexico to China. I think the Mexicans are very upset about that. But the fact is that some of the chips in some TV sets are made in the U.S. and I’d be happy to follow up specifically after this hearing with details.
Chairman Stevens: I don’t want to bug you. It is very important because I think we’re seeing something develop up here this afternoon that I didn’t anticipate. I think Senator DeMint has a point about these set-top boxes. Is there anyone manufacturing set-top boxes in this country today?
Mr. Shapiro: Well, there are two major producers of set-top boxes, Motorola and Scientific Atlanta; two U.S. companies. Indeed, Motorola is one of the patent holders, I believe, of the specific ATSE standard that will be part of not only set-top box, but everything having to do with HDTV getting that over-the-air signal.
Chairman Stevens: What’s the production of your line there, Mr. Kennedy?
Mr. Kennedy: That’s right. I don’t have that figure available. I would just comment, manufacturing, unfortunately, there is no easy, simple answer here. As Mr. Shapiro said earlier, it’s a complicated answer. I mean, the design and development is often done in the United States.
Chairman Stevens: You built this box, didn’t you?
Mr. Kennedy: Yes we did. Yes.
Chairman Stevens: What does it cost?
Mr. Kennedy: We can sell it for $50. It cost something less than that. Again, I don’t have that at my fingertips.
Chairman Stevens: You know, I’ve got our place up in Alaska. We are there about 12 nights a year and I’m paying twice the cost of a set-top box now just to keep that thing on when I’m not there. I’d love to have a couple of set-top boxes. I think Senator DeMint has got a point. We may have missed that point, and it’s a very good one. Many people may like to convert back to over-the-air if they had the set-top boxes. I wish you could tell us what the production capability is. Suppose we picked Mr. McEwen’s date, two years, and say it’s a firm, absolute date. It’s going to take two-thirds to change it or something like that. Now, are there going to be boxes available? When are they going to be available?
Mr. Kennedy: Sure, we need 12 to 18 months to gear up a production run sufficient to meet the demand that we see out there now. Now, if some of the Senators are right, and people start to shift back to over-the-air television, that would create more demand for the product. But when we look at the number of sets that are out there now, the number I have is actually 20 million sets. When we look at those sets we need 12 to18 months to gear up in time to…
Chairman Stevens: We’re going to get a transcript of this hearing to CBO and ask them to review their past findings in terms of the amount that’s going to come in from spectrum. Mr. Townsend, you may get that call after all. I do think, if you’re right Mr. Townsend, and Senator DeMint has a point, we ought to consider listening to Senator McCain even more and bring the date closer rather than taking it out. We were taking it out a little bit primarily because of revenue. We had to have the revenue. We were mandated to bring in $4.8 billion in this bill. We have to be sure we get at least that much. I think some of you ought to give some idea about how to help on that. I do worry a little bit though about the problem of those people who are out there who cannot afford the boxes. And that’s added on to that $4.8 million so much as those boxes will cost, as I understand it. I do believe we have the basis for change in this bill. You had a question there you wanted to ask Senator Burns, is that right?
Senator Burns: I just had one question. Can we do the same thing dealing with translators?
Mr. Kennedy: Yes, translators would be just be broadcasting over the air in analog signals, so I think the same box would work with translators.
Senator Burns: Okay.
Chairman Stevens: Let me get back to one thing that bothered me this morning, and I think he’s doing a fine job for his association, Mr. McSlarrow. Kyle said that they preferred to downgrade the signal when it came in so that the people who use the analog sets on there system could get the over-the-air broadcasting on their existing sets. Is there anyone manufacturing a box that could go the other direction? Is that possible? Could I have an analog set and buy a box that would convert it up to the digital signal?
Mr. Shapiro: You really need the digital TV set to appreciate that. An analog set will only be as good as an analog set can be. And as I think you just saw demonstrated, almost anything digital is better. But you always have a system that is only as strong as its weakest component and today the weakest component would be the analog picture.
Chairman Stevens: But I can’t buy a box to put on my set to pick up? They’re going to be broadcasting over-the-air digital now. I can’t use that to go up, though. I can only still convert it back to analog for me for my set. Is that right? It’s not technically possible to go the other way?
Mr. Kennedy: Senator, what this box does is it takes the over-the-air digital signal and converts it to an analog signal so it can be displayed on a conventional analog television set. I’m not aware of how you would go, in a sense, to do that in the other direction.
Senator Burns: You’ve already got a digital set, so you don’t have to convert it the other way.
Chairman Stevens: No, I’ve got an analog set but I want the digital signal and not just the…
Senator Burns: And you’re gonna get it.
Chairman Stevens: …converted signal to analog.
Mr. Kennedy: Yes, yes. Senator Burns is right.
Chairman Stevens: Correct me if I’m wrong, Mr. Shapiro. Am I wrong?
Mr. Shapiro: Part of it you can think of like, if you can think back black-and-white sets, you can never get color on a black-and-white set because the system doesn’t allow it. You have to buy the color TV set to get the color.
Chairman Stevens: Well that gets me back to the sets again. Part of this equation has to be that we stops sets coming in that are going to require people to convert. What is wrong with the suggestion that was made that would require anyone producing a set after, say, what, November 15th in this country or selling it, has to have a chip in it that converts it?
Mr. Shapiro: I think what is wrong with that is you take a $70 13-inch set and you would add another $150 or so of cost to it, and consumers would go and say, “What happened to the price of the TV set?”
Chairman Stevens: The chips in this thing don’t cost that much money.
Mr. Shapiro: In three or four years they may not. But today, to add that integrated feature to a TV set, it costs a minimum of $100 to $200, if not more. It’s a very sophisticated, almost first or second generation process now.
Chairman Stevens: Well, how do we get away from the point that…
Mr. Shapiro: But the box costs that amount of money. Someone has to pay for that.
Chairman Stevens: How do we get away from the point that we’re going pass a law that says that this is the absolute drop dead date? But meanwhile, the country gets flooded with these things that are going to require set-top boxes to enjoy the signal?
Mr. Shapiro: But 9 out of 10 of those are not even being used for analog, for an over-the-air signal.
Chairman Stevens: You said one out of four people are buying a new TV set.
Mr. Shapiro: Just one out of four families every year, if not more.
Chairman Stevens: I gotta tell you, they must be producing kids then, because they still got those sets out there, don’t they?
Mr. Shapiro: Well, My point…
Chairman Stevens: Those sets are just another added on set to the analog area, is what I’m telling you. They are not coming in digital.
Mr. Shapiro: Well now we are selling more digital sets than we are analog, and that trend is going to increase. If Congress sets a hard deadline, that will increase even quicker and more. Once we.’re able to say the law is that these sets will no longer get a signal after 2008, the consumer is going to start thinking about it. Today forcing consumers to think about it when they see two sets side-by-side, one is great with a picture but is several hundred dollars more than the old analog one. But they may want to use that old analog for DVD, for video games. That’s what these sets are really being used for. Broadcasting now is a very minor use of a television set.
Chairman Stevens: I’ve told this to my colleagues, before -- I don’t like to confess my stupidity. But I was convinced a year ago that the set I bought was digital. It’s analog.
Mr. Shapiro: Well, I would like to show you our real digital set.
Chairman Stevens: Its says right on the case, it says digital. But it’s not digital ready, they told me.
Mr. Shapiro: Well, once you experience HDTV I think you’ll remember it, because it has a great big wide picture…
Chairman Stevens: I understand that, but I don’t want that experience for other people - buying a set they think is digital and it’s not.
Senator Burns: No, but listen. I’ll tell you what, there is a difference though, Senator, between a digital TV set and a high definition TV set. Remember that.
Chairman Stevens: What would it take to have people agree they put that on the set?
Senator Burns: I’m going to confuse you a little more.
Chairman Stevens: I believe that if we set a date, let’s take the original date, 2006, okay? Suppose we set the country would still be flooded with those sets that won’t pick up the signal.
Mr. Shapiro: That would allow manufacturers to put labels saying as of 2006 you will not get a signal on this. Essentially, you are buying a monitor. You are buying something usable for video games, or for cable, or satellite. That would allow that. But we are supporting a hard deadline of almost any date as long as there is a hard deadline. We want to see that. That allows us to tell consumers that Congress has said this will happen.
Chairman Stevens: I think it should have a double whammy, and that is we won’t allow a set to be sold after a certain date that’s not digital, but we won’t provide a set top-box for any TV that’s bought after a date closer to us. I just don’t think we should do that.
Mr. Shapiro: Senator, the FCC has done that. There are dates that say you cannot sell an analog set alone. And we did that.
Chairman Stevens: They did that but I don’t think it’s very enforceable.
Mr. Shapiro: No, for larger TV sets. No, you cannot buy a larger analog set.
Chairman Stevens: That’s the large one.
Mr. Shapiro: And it’s going down, next year it will be almost everything.
Chairman Stevens: Well, we want to bring it closer to us. Let me take the last comment in privilege. You mentioned the German experience. Just keep in mind that my state alone is bigger than Italy, Germany, France, and Spain. We’ve got a different country here. You can’t learn much from what goes on on another continent. I really think we ought to think very seriously about what happens to rural America in terms of this legislation. All of us represent portions of rural America. So, I think we will reflect it in the Committee. Anybody else have any question? Yes, Mr. Kennedy?
Mr. Kennedy: Senator, I just wanted to add to Senator Inouye’s discussion about education. I think that’s very important. I think that to date the debate has been mischaracterized. It’s been mischaracterized largely, I have to say, by the broadcasters as turning off television. I think what we have tried to show today is that it’s not about turning off television; it’s about releasing spectrum for commercial and first responder purposes. TV viewers, over-the-air viewers, with the right converter box are going to get more choice; they are going to get better pictures. So, I think to underscore the educational need here, to kind of make sure everybody understands what the real debate is about. Thank you.
Chairman Stevens: I hope you will be willing to answer questions of some of the people who have got very technical questions. Mr. Townsend.
Mr. Townsend: Senator, your point about the rural areas, I think has been a little misconstrued in some circles. I think the rural areas are going to be the big benefactors here. And the reason is, even though everybody thinks they are the people who receive over-the-air television, that’s not true. The rural areas generally have much a lower number of over-the-air television sets than the metropolitan areas do because of the satellite receivers. For example, in Montana, which I think you would definitely classify as rural, there are under 10 percent of over-the-air sets that are receiving TV over the air. I think the big benefit is going to be, taking Montana or Alaska or any of these states really, is that if you do the DTV transition you are going to have very few rural people affected by the over-the-air sets and tons of able them to get rural broadband. So they are not going to much downside from watching TV, but they are going to have an enormous upside by getting rural broadband.
Chairman Stevens: I hope you are right. Those rich ranchers up there in Montana, they can afford it. I’m not sure the reindeer herders can. Thank you all very much.
Opening Statement - Senator Conrad Burns
Welcome to all of you, and thank you for taking the time to appear today. I look forward to hearing from each of you on the digital TV transition. This morning, we heard about some of the difficult issues associated with turning off the analog broadcast signals. They are complex and I hope we have the wisdom to listen carefully to all affected parties, most notably the ordinary consumer.
But this afternoon’s hearing is about a happier subject, which is what we should do with the spectrum that will be freed up. I am very excited about this once-in-a-generation opportunity for Congress to facilitate new, advanced, wireless services, including broadband wireless services, and of course to help our friends in the public safety community to get the additional spectrum they need to protect us all and save lives in the future. I look forward to hearing from you all detail about the possibilities for new wireless services, and what, if any, additional support from Congress you might need as we get closer to actually auctioning the spectrum.
But back on the tough stuff from this morning: I see that Gary Shapiro from the CEA is here, and, although I expect you have something to tell us about the use of the over-the-air spectrum, I hope that you will also tell us a little bit about the set-top converter box issue, including the likely ultimate cost to the consumer of these converters, and the role your organization should play in educating consumers about the digital transition. The point of sale for a new TV is one of the most important places consumers will learn about this, and I hope your members feel the obligation to provide them with the most accurate and helpful information possible.
Thank you all again for coming and I look forward to hearing from you all this afternoon.
Witness Panel 1
Mr. Gary ShapiroPresident and Chief Executive OfficerConsumers Electronics Association
Mr. Harlin R. McEwenChairmanCommunications and Technology Committee, International Association of Chiefs of Police
Mr. Michael CalabreseVice President & DirectorWireless Future Program, New American Foundation
Mr. Mike KennedySenior Vice PresidentMotorola
Mr. Charles TownsendPresident & CEOAloha Partners