Earlier this week, the House Energy and Commerce subcommittee on telecommunications and the Internet held a hearing: “Status of the DTV Transition: 154 Days and Counting.” As a reminder that the Digital TV Transition is about over-the-air broadcast TV stations, one could note some of the issues raised in press coverage.

• Lawmakers See Challenges for TV Transition (WaPo)
• Early Digital-TV Switch Has Flaw: Viewers Could Lose Certain Channels on Permanent Basis (WSJ)

Some viewers had issues in Wilmington with over-the-air reception of the new DTV signal; some had problems setting up converter boxes with their analog TV sets.

NCTA President & CEO Kyle McSlarrow had a little different perspective, as he testified at that hearing. He focused on the issue of retransmission consent and how it would be effected by the transition. This FCC fact sheet covers the details, but suffice to say that retrans (and the related term “must carry”) refer to how cable operators can carry broadcast stations.

Here is some of the coverage of his testimony:

• Retranmission Deals May Get Derailed by DTV Transition, Cable Operators Warn (TV Week)
• McSlarrow: Retrans Uncertainty Creates Cable ‘Storm’ (MediaDailyNews)
• DTV “quiet period” debate gets noisy in Congress (Ars Technica)

Here is a link to the text of McSlarrow’s comments and I’ve embedded the audio below (which runs just under six minutes).

 

 McSlarrow Testimony 9/16/08: Play Now | Play in Popup | Download

To help you understand this, you need to understand that retrans and must carry play a critical role in ensuring you can see your local broadcast stations as part of your cable lineup.  Some of the existing deals will lapse around the end of the year, right before the Feb. 17 transition date.

Last month, the NAB Board of Directors pledged to identify a Retransmission Consent Quiet Period. NCTA issued this statement:

“In recent months, we have discussed with NAB the need to recognize the potential for consumer confusion and disruption involved with retransmission consent disputes that might arise as we approach the broadcasters’ digital TV transition on February 17, 2009. We appreciate NAB’s acknowledgment that this is a very real concern, and continue to support efforts to minimize potential consumer confusion through the adoption of a quiet period. But the reality is that many outstanding retransmission consent agreements expire by the end of 2008. Any voluntary quiet period that does not begin before the agreements actually expire – or which is too brief to preclude potentially confusing messages about broadcast carriage during the time of the actual DTV transition – represents the illusion of a commitment and does not serve the consumer.”

As reported earlier, there was the first major test of the DTV Transition in Wilmington on Monday. Things largely seemed to go well, with a few exceptions. Ironically, since cable was originally built on delivering better reception, people seemed to have had some issues with clear reception of digital television.

Here is some of the coverage:

• Charlotte Observer
• Light Reading’s Cable Digital News
• Elon University’s The Pendulum

One takeaway from the event was that there seemed to be very high awareness of the transition, but there also continues to be some confusion between the digital transition involving over-the-air broadcast stations and the digital transition that cable operators have been conducting for a few years.

For example, here’s a recent post from the Cultured State blog: The 2009 Digital TV Transition: Flirting With Disaster. The author insists that “the cable television industry isn’t telling the whole truth on what’s about to happen to your cable service.” The false charge is leveled that you won’t be able to continue to receive your cable signal unless you have a set-top box or a Digital Cable Ready TV. Proof is offered in the form of a July article from MSNBC’s Bob Sullivan.

As it so happens, I’ve already addressed Sullivan’s piece:

Bob Sullivan, senior writer for MSNBC.com’s Technology section, posted an article today entitled “The ‘Other’ Digital TV Conversion Might Cost You,” which purportedly attempts to clear up some confusion about the coming Digital Television transition. In fact, it simply sows more confusion. Sullivan has tried to establish (falsely) a direct relationship between the upcoming “DTV Transition” and efforts by cable operators to expand their video offerings and enhance other services.

Read the whole thing for the full explanation, but suffice to say that cable needs to manage its bandwidth, which is why we see things like switched digital video or channels being moved from analog tiers to digital. This has been going on for some time and has nothing to do with the Digital TV Transition of next February.

A sinister portrait is painted of the cable industry’s intentions regarding set-top boxes. I will simply refer you to comments I made to the TV Barn blog:

“If you switched to DirecTV or Dish, you have to have a new box. If you switch to Verizon FiOS or AT&T’s U-verse, you have to have a new box. It baffles me to no end why there are four companies competing with cable and nobody has ever complained that you have to have a set-top box for them.”

Michael Marcus at the Spectrum Talk blog also has concerns: 6 Months to Go and Some DTV Confusion Continues. He tries to wade through a variety of website, but concludes, “…if you have your analog TV set connected directly to the cable system and select channels directly with your TV set tuner, you might be in trouble in the near future.”

What he’s referring to is that cable operators have offered to carry local broadcast signals on analog tiers for three years, unless the cable system goes all-digital. This does not seem to be sufficient for him:

Note that the FCC requirement only deals with local over-the-air signals (e.g. signals from NAB and MSTV members), not C-SPAN, CNN, The Food Network, etc. So the quote from the DTV Transition Coalition above (actually linked through the NCTA site) that says “TV sets that currently receive programming through cable or satellite are not likely to be affected by the transition to digital.” is at best a half truth. So is the FCC quote, “Analog TVs will continue to work with cable, satellite, VCRs, DVD players, camcorders, video games consoles and other devices for many years”. But if your idea of TV is limited to what the 15% of American homes without cable or satellite actually see, then the information is correct.

Once again, we’ve got apples and oranges. The Transition is about over-the-air broadcast stations. If cable channels have to be moved from analog to digital, that is a completely separate issue.

As you’ve probably read, the Federal Communications Commission chose the Wilmington, NC market as the first test case for the Digital Television transition (Here’s the story from the local paper, the Star-News). The switch was flipped at noon on Monday - a literal giant switch handled by Wilmington Mayor Bill Saffo and FCC Chairman Kevin Martin.

Several of my colleagues were down for the event and one captured this video.

In that video, there were four TV sets displayed, but you can only see the two on the right. Of those two, the one on the left is hooked up to a digital TV converter box and is receiving the digital signal. The one of the right is receiving the analog signal. Once the switch is thrown, the screen first goes black and then shows a message telling viewers that they need to do something to receive the digital signal.

And here’s a  more detailed report from NCTA’s Rob Stoddard:

By all measures, the Wilmington trial was, technically, a success. The full-power commercial broadcast stations in the market were successful in pulling down at 12:00 noon Eastern Time all of the network, syndicated, and local programming they were broadcasting in analog – leaving viewers entirely dependent upon those broadcasters’ digital signals. Cable operators in the market, and presumably the satellite providers that also serve viewers there, were successful in accommodating the digital-only scenario, as well as in processing the hundreds of requests for new service or service upgrades that came in the days preceding and during the cut-over.

All major stakeholders – broadcasters, cable operators, and government officials at the national, state and local level – also appear to have been successful in collaborating on solutions that would best serve consumers. That collaboration left a halo of good feelings, in that the various groups, which more frequently are competitive and adversarial, were almost surprised to discover that they could work closely together within tight time constraints to resolve all of the issues implicit in the cut-over.

What we’ve actually learned from the trial, so far at least, is more an affirmation than new knowledge:

People will (and do) wait until the last possible moment. According to published reports, cable operators reported a flurry of consumer calls; supplies of pertinent consumer electronic devices (converter boxes, antennas, etc.) were stretched; and local officials reported a run on applications for government discount coupons, meaning that some consumers would be waiting to receive coupons well after the cut-over date – all in the hours leading up to the actual cut-over. And this in a market in which NAB reported 97 percent awareness in the week prior to the cut-over.

The “digital cliff” effect does take a toll. Published reports also say that local TV stations received, collectively, hundreds of calls right after the cut-over, many from people who had obtained and properly installed the government-certified digital-to-analog converter boxes for their over-the-air analog TV sets, but who for a variety of reasons could no longer see some or all local TV signals. We can assume that some people needed new or better antennas; others had failed to program their new boxes by scanning for available digital channels; still others just aren’t in a good place to receive local digital TV signals.

And, many people needed help from others to get over-the-air converter boxes hooked up and working properly. The City of Wilmington was persuaded to take action less than a week prior to the cut-over, to make firefighters and emergency responders available upon request, to help hook up a box, re-position an antenna, or provide other assistance to citizens who needed it.

It remains to be seen how these learnings can be applied to the nationwide cut-over that will occur February 17. However, the trial was successful in identifying the kinds of issues that tangibly could be addressed by all communities and stakeholders in the weeks ahead.

Coverage of today’s meeting and some reaction to the decision…

• Richard Bennet of Broadband Politics: A sad day for the Internet
• Randolph J. May of the Free State Foundation: Hard Cases Make Bad Law: On Regulatory Bits and Torrents–Part II
• Barbara Esbin of The Progress & Freedom Foundation: Legally and Procedurally Suspect and Misguided as a Matter of Policy
• Scott Cleland of The Precursor Blog: Takeaways from FCC Decision on Reasonable Network Management
• Cynthia Brumfield at IP Democracy: FCC’s Copps: Apply Net Neutrality Principles to Wireless Carriers
• Stacey Higginbotham at GigaOM: FCC Punts on Network Neutrality
• Matthew Lasar at Ars Technica: Reactions to FCC’s Comcast decision come fast and furious
• Drew Clark at Broadband Census: FCC Hammers Comcast For Deception and Unreasonable Internet Practices

UPDATE: Will Richmond at VideoNuze: The FCC’s Comcast Sanction: More Problems, Fewer Solutions Ahead

During an Opening Meeting this morning, the FCC issued an adjudication in the matter of “Formal Complaint of Free Press and Public Knowledge Against Comcast Corporation for Secretly Degrading Peer-to-Peer Applications.” The FCC said that Comcast’s “degrading” of certain Internet content was in violation of “federal policies” and were against the policy of reasonable network management.

In response, the NCTA  has released the following statement from Kyle McSlarrow, our President & CEO:

“One need look no further than today’s FCC decision for proof that engineering challenges on the Internet should be solved by engineers, not government officials. In second-guessing reasonable network management techniques (with no notice or guidelines in place) that benefit the overwhelming number of broadband subscribers in America, the FCC has inexplicably elevated the interests of a few bandwidth hogs over everyone else.”

As we further digest the decision, we will be following the reaction from others in the telecom policy sphere and will comment further and share what others are  saying.

Given the FCC approval of the XM – Sirius merger, and the release of the “voluntary commitments and other conditions” that sealed the deal, one natural question that has arisen is “If satellite radio can do a la carte, why can’t cable providers do it?”

The answer, of course, is buried in the details.

To understand the answer, you need to understand several major differences between cable providers and satellite radio.  Some of these include:

• Ownership of content
• Advertising support and business models
• Delivery and ease of reproduction/pricing

Most XM/Sirius channels are produced and owned by XM/Sirius so they do not compete with each other for listeners or access to the satellite radio lineup because the company only produces channels that they launch.  In the video world, most channels are not owned by the distributor so they compete against each other for access to viewers, ratings and advertising dollars.  In an a la carte world, this competition would require each video channel to spend significantly more money on marketing and promotional costs to attract viewers, driving up the cost of that programming to the subscriber.

In addition, satellite radio was founded on the notion that most of its channels would be commercial free or have very limited advertising.  Unlike video programming which relies heavily on commercial advertising, XM/Sirius programming is supported almost entirely by subscriber fees.  So with each channel relying on little or no advertising support, applying an a la carte model to satellite radio would not require each channel to boost its price (or reduce its quality) to make up for lost advertising revenues.  In the video world, that is exactly what would happen.

You also must consider the programming.  While satellite radio does have a respectable diversity of programming, each of the channels is essentially a technical reproduction of the other and the cost of production (which largely consists of recorded music and other material) is lower than video production and generally does not vary widely. Obviously attracting well known personalities like Howard Stern can affect costs (including potential litigation costs), but generally speaking, music and talk programming are fairly consistent.

In the video world, however, the cost of producing channels varies greatly and the cost gaps continue to widen with the growth of high-definition and more and more original programming. For instance, it costs more to produce an episode of Burn Notice than it costs to produce How Do I Look? So, while XM/Sirius may be able to offer customers the opportunity to purchase any fifty of its music channels at the same per-channel price, it is impossible for cable operators to offer video channels in this manner.

Finally, aside from the structural business issues mentioned above, it’s also important to understand that what Sirius-XM has agreed to is not actually ”a la carte”. Despite the marketability of attaching the words “a la carte” to their new options, according to their channel lineup and pricing document, XM and Sirius are offering consumers the opportunity to purchase smaller bundles.  You can choose either 50 channels from ONLY one provider (out of a total of 100 possible choices) or 100 channels combined from both.

The pricing document makes it clear that the “a la carte” option will not be available for a year, and will require new equipment.

A la carte programming will be available beginning within one year following the merger, and the other programming options will be available beginning within six months following the merger… A la carte programming will only be available for subscribers using new radios, which will be developed following approval of the merger.

There is no opportunity to buy only 1, 3, 5 or 6 channels.  You have to start with at least 50 channels.  That’s not what most people describe when they talk about a la carte.

There’s no comparison between cable’s business model of delivering ad-supported television purchased from multiple competing providers and satellite radio’s model of delivering ad-free content of their own design.  People may try to make such a comparison in order to argue that since XM and Sirius have agreed to provide “a la carte,” cable must be able to do it, too.    Unfortunately, as study after study has shown, the facts just don’t support the fiction.

This Friday, the FCC will hold an Open Meeting and the first agenda item is the complaint by Free Press and Public Knowledge against Comcast. According to an article in the Wall Street Journal today, the agency “will rule that the cable giant violated federal policy by deliberately preventing some customers from sharing videos online via file-sharing services like BitTorrent…”

As I wrote just last week, it’s critical that we can all agree with the principle that “some kind of network management is necessary to ensure a quality experience for our customers.” Once we get past that concept, we can discuss and debate what’s the best way to achieve the goal of a quality Internet experience, but we can hopefully also agree that the government is not the best body to make these decisions.

In this morning’s Washington Post, FCC Commissioner Robert M. McDowell poses the question: Who Should Solve This Internet Crisis? He outlines past network challenges and describes how “engineers, academics, software developers, Web infrastructure builders and others” came together to find solutions. He then answers his own question.

The Internet has flourished because it has operated under the principle that engineers, not politicians or bureaucrats, should solve engineering problems.

P2P apps present particular challenges for network managers, as McDowell acknowledges, and just building bigger pipes doesn’t fix the problem. That’s not to say that this challenge (and others) can’t be addressed. McDowell points out that we need to avoid creating a bigger problem.

Our Internet economy is the strongest in the world. It got that way not by government fiat but because interested parties worked together toward a common goal. As a worldwide network of networks, the Internet is the ultimate “wiki” environment — one that we all share, build, pay for and shape. Millions endeavor each day to keep it open and free. Since its early days as a government creation, it has migrated away from government regulation.

If we choose regulation over collaboration, we will be setting a precedent by thrusting politicians and bureaucrats into engineering decisions.

There’s a very amusing picture painted of NCTA on Ars Technica, literally Shakespearean in nature.

“Once more unto the breach, dear friends, once more,” cried William Shakespeare’s Henry V in the play so titled. “Or close the wall up with our English dead!” Perhaps in said spirit did the National Cable and Television [sic] Association (NCTA) veep Michael Schooler and Insight CEO Michael Willner march up to the eighth floor of the Federal Communications Commission on the ninth of July to plead the cause of ISP “network management”…

Taken in conjunction with yesterday’s post on DSL Reports, it sounds like we painted a portrait of Biblical apocalypse. NCTA’s own Michael Schooler and Insight’s Michael Willner supposedly warned of “the impending destruction of the Internet by P2P users.” Or else we said “that the Internet would all but collapse.”

Wow! That sure sounds scary. But since neither Karl Bode nor Matthew Lasar was actually at that meeting, they instead apparently based their accounts on a letter we filed. If you read it for yourself, you find that four points were made.

• Network management is necessary to prevent serious congestion.
• Service for customers would be degraded without such management.
• Network upgrades alone won’t solve problem.
• The government should not pre-determine the tools and technology to be used for network management.

So I ask: Which of these four points are in contention? The DSL Reports post even says “Most techs don’t oppose reasonable network management (booting extreme gluttons, some QOS and prioritization)…” So, we can start by agreeing that reasonable network management is a good thing. Without some kind of management, problems will arise.

Let’s look at service degradation. Was complete congestion claimed? The phrase used is “can cause substantial (and sometimes complete) congestion of the system’s upload capacity.” Let’s emphasize three key words: can, sometimes and upload. This is critical, because peer-to-peer applications are the focus of attention.

This goes to the point about simply upgrading a network. A peer-to-peer application looks for users with the best upload connection. Building a bigger pipe does not eliminate the necessity of network management.

Finally, is the federal government really the best body to judge what network management tools are appropriate? I’m not convinced it is. Nor am I convinced that the answer is a big dumb pipe that treats all bits equally, whether it’s a phone call, streaming video, a P2P download, an e-mail, or a Web page request. And anybody who actually understands how networks work wouldn’t either.

Both of these posts claim that we are crying “Armageddon!” for nefarious reasons. But should nothing be done at all? We want to give our customers the best Internet experience possible, now and in the future, and we need network management to accomplish that goal.

[Ed. Note: This is in response to a post on Verizon's Policy Blog, by Tom Tauke.]

Tom, I have great respect for you but your blog this morning was a little over the top.

“Thwart consumer choice?” C’mon, Tom. This is really about Verizon trying to thwart competition . . . again.

Here is what is really going on. For the first time in history, Verizon’s entrenched incumbent position in the phone marketplace is being challenged successfully by cable competitors providing digital phone service, a relatively new marketplace development that gives consumers more choice, better value, and — according to J.D. Power and Associates — provides consumers greater satisfaction in every region of the United States. Not to put too fine a point on it: Verizon is losing customers.

Naturally, you’ll do everything you can to retain them. I get that. But, the law is very clear: Verizon can market to its heart’s content 362 days of the year to its customers. However, when customers make a decision to leave you, you are obligated to honor their decision to request that their phone number be transferred to their new provider, and respect their privacy by porting their current number within 4 days without harassing them with marketing retention calls. Congress, on a bipartisan basis, and the FCC have previously recognized that integrity in the number porting process is essential for true competition to flourish.

You are right that this is about consumer choice . . . but when consumers have made a choice, they deserve to have their choice implemented. That’s why there are rules preventing you from undermining that choice by invading their privacy.

You also call this an “intriguing” development. You refer of course to a decision that has not yet been announced (although there have been press reports). I agree that it is “intriguing.” First, this is a rare “restricted” proceeding. That means no one is supposed to speak to anyone at the FCC about this proceeding unless all parties to the complaint are present. It’s “intriguing” that someone in the FCC apparently leaked a decision that apparently goes against Verizon. And it is “intriguing” that the leak was apparently choreographed in a way that gives Verizon a shot at debating this in the press and the blogs.

One solution we should all agree on is to reduce the “porting interval” – the period of time it takes to shift a phone number from the losing provider to the winning provider, regardless of whether it is a shift from a phone provider to a cable provider or the other way around. That’s what consumers really want and deserve. And, the temptation for mischief is reduced. I invite you to work with us to ensure the FCC actually makes a decision soon to shorten the ridiculously long 4 days that consumers are forced to tolerate for simply making a choice in favor of the competition.

One other thing: you make the usual “apples to oranges” argument that because cable is engaged in win-back marketing when a cable video customer decides to switch to FIOS service, Verizon should be able to market during the porting interval for phone service. Oh, and you also throw in the same old tired refrain of “rising cable prices.” Are you really unaware that Verizon’s video service is priced about the same as cable providers? Did you miss the press release where Verizon announced perhaps the greatest video price hikes in the country last year? And, of course, what you also leave out is that a FIOS customer won’t cancel service until Verizon has already wired up the house and is ready to turn on (or has turned on) the service. So, it’s a done deal at that point. Of course the cable company may try to win back the customer. But it’s not doing it with inside information.

Intriguing? You bet.

It’s been expected for a while that a city might serve as a test case for the coming Digital Television Transition (scheduled for Feb. 17 next year). It’s now been announced that Wilmington, NC will be that test market.

From this morning’s L.A. Times:

The Federal Communications Commission plans to announce today that broadcasters in the coastal city of about 96,000 — the nation’s 135th-largest media market — will turn off their analog signals permanently on Sept. 8. That is about five months before the government-mandated switch-over in the rest of the country Feb. 18.

“We think it’s going to be a good thing for the community and it will pave the way for the rest of the country,” said Wilmington Mayor Bill Saffo.

FCC Commissioner Michael J. Copps had proposed a test market so officials could work out technical glitches and outreach problems with the digital transition, which will render older TVs that use antennas useless unless they’re outfitted with special signal converter boxes.

“It’s just nonsensical to think you can go into a transition like this and pull the lever one time for the entire country and not expect to have real consumer confusion,” Copps said Wednesday. “Even Broadway plays open on the road and you get the kinks out.”

The FCC confirmed the announcement today.

We issued a statement this afternoon from our President & CEO Kyle McSlarrow:

NCTA has previously indicated our support for the concept of a test market, and the cable industry has been working closely with broadcasters and other stakeholders to ensure that the February 2009 transition is seamless for television viewers. We applaud Commissioner Copps for proposing the concept of a market trial, and we look forward to working closely with the FCC so that local cable operators are able to help make the Wilmington test pilot – and the full February 2009 broadcast transition – a good experience for consumers.