(As Prepared for Delivery) The Increased Importance of the Digital Revolution Keynote Address By Dale N. Hatfield Chief, Office of the Office of Engineering and Technology Federal Communications Commission At the Broadcast Engineering Conference NAB 2000 Las Vegas, NV April 9, 2000 Thank you very much for the kind introduction. I am very pleased to be here today to participate in the Year 2000 version of your Broadcast Engineering Conference. I have titled my remarks here this morning as, simply, "The Increased Importance of the Digital Revolution." Before I turn to that topic, I want to commend the broadcast industry, in all of its dimensions, for bringing broadcast services to nearly every American household. As a recent article reminded me, what other industry can you think of that charges ordinary people exactly what it did when it started operations in the 1920s? Not only has the price not increased, even better, over-the-air service is still free to the end consumer. At the same time, the price of receivers has declined to the point that even our poorest households can afford them -- as demonstrated by the remarkable market penetration you have achieved. The resulting "universal service" is indeed a remarkable accomplishment. It is one for which engineers can justifiably feel proud of for their role. Before I continue, I offer the standard disclaimer that the views I express here this morning are my own and may not reflect the views of the Federal Communications Commission, any individual Commissioner, or any other Commission staff member. Being among engineers, there is no need for me to dwell at length on the advantages of representing, storing, processing and transmitting signals using the digital format. These include such advantages as: · the greater robustness of digital signals, · the ease with which transmission errors can be detected and corrected when they do occur · the ease with which digital signals can be encrypted · the ease with which the signals can be manipulated or processed using modern computer techniques and, especially, the associated ability to take advantage of the greater computing power and falling costs associated with Moore's Law · the ease with which different types of signals or services can be multiplexed or provided on a common transmission facility This latter advantage -- the ease with which all types of signals, audio, data, image, and video can be conveyed on a common platform -- is, of course, the basis for "The Convergence Marketplace" which is the theme of your convention this year. For these and other reasons, the arguments for converting to the digital world are now very compelling. Of course, just getting basic digital connectivity to every home, office, and mobile/portable customer is not enough. As engineers, we understand that the ultimate goal must be not just digital facilities but, rather, broadband facilities and, in interactive applications, low latency digital connectivity. But, focusing for the moment on the shift to the digital world, I believe that, with few exceptions, we are making good progress in that direction. For example, in the traditional telephone network, the long haul and metropolitan area portions of the network are now digital. In terms of the last mile/first mile the local loop -- larger businesses are commonly served by digital facilities running on fiber or twisted-pair cable (e.g., T1 facilities). Likewise our data networks tend to ride on digital transport facilities. The exception, of course, is for smaller businesses and residential customers who still tend to be dependent upon analog twisted pair copper loops. But even there, things are beginning to look up, with the emergence of competition between Digital Subscriber Line (DSL) and cable modem services providers. Multichannel Multipoint Distribution Service (MMDS) providers are in the process of shifting from analog to digital technology, as they refocus their attention from providing wireless cable services to Internet access. Likewise, other emerging providers of fixed wireless access services such as Local Multipoint Distribution Service (LMDS) companies are utilizing all-digital networks. Turning to mobile services, cellular providers have been in the process of shifting from analog to digital transmission for some time, initially to increase capacity but more urgently these days to support Internet access and advanced data services. To the best of my knowledge, Personal Communications Service (PCS) networks in the 1.9 GHz spectrum have all been digital from the outset. Cable television systems are going through a massive upgrade to the Hybrid Fiber- Coax (HFC) architecture with additional entertainment programming being delivered in the digital format. As mentioned previously, the cable industry is using their upgraded platforms to offer high data rate cable modem service for Internet access. They are also offering traditional telephony services using digital transmission techniques. The cable industry's upgrades to the HFC architecture and to digital transmission are being driven in no small part by additional competition from the Direct Broadcast Satellite (DBS) service. Likewise, new providers of Digital Audio Radio Services (DARS) are expected to begin offering their all-digital, satellite delivered programming in the very near future. Viewed against this backdrop, I am convinced that broadcasters must make the transition from analog to digital transmission. I am convinced for three basic reasons. First, as I noted at the outset, from a technological perspective the overall advantages of converting from analog to digital transmission are now overwhelming. All other segments of the telecommunications industry have made -- or are in the process of making -- the conversion. I know of no significant exceptions. If the broadcast industry - - your industry -- is going to capture the full benefits of the digital world, it too must make the conversion. This is the affirmative or "offensive" case. The conversion is needed to allow broadcasting to reach the next level of technical capabilities in "The Convergence Marketplace." Second, many of the other segments of the telecommunications industry which I identified as already being digital -- or transitioning to digital -- are either (a) direct competitors with over-the-air broadcasting -- for example, DARS -- or (b) indirect competitors in the sense that they represent alternative means of delivering entertainment and other content to end users. Internet radio is an obvious example of the latter. That's a major consequence of convergence as well -- other people getting into your business. Over-the-air broadcasting must make the conversion from analog to digital transmission in order to remain competitive in the long run. And, as we all recognize, in Internet time the long run is not necessarily all that long. In short, it is my belief that the broadcast industry must make the conversion to digital for both "offensive" and these "defensive" reasons. But the broadcast industry -- and I am speaking now primarily about the television industry -- must make the conversion from analog to digital for a third reason as well: because the public interest demands that spectrum be used more efficiently. I would like to expound briefly on this point. I head the Office of Engineering and Technology (OET) at the Commission. That office has a number of responsibilities, one of the most fundamental being to handle spectrum allocation matters within the Commission. From that perspective, I see first- hand the problem of increasing demand for a scarce national resource, the radio spectrum. This increasing demand, which is particularly intense in the range from roughly 300 MHz to 3,000 MHz, is propelled by a number of developments. These developments include not only the rapid growth in traditional (voice) commercial mobile radio services, but also intense interest in providing (a) advanced data communications services, including Internet access, to a host of portable end user devices, and (b) more generally, competition with the emerging DSL and cable modem services I described earlier. Commissioner Ness called attention to the problem of increased spectrum demand in her speech at the Consumer Electronics Show here in Las Vegas in January. And Chairman Kennard, in his speech at the Cellular Telecommunications Industry Association convention in New Orleans late in February, noted that "we are running out of new spectrum, particularly in the valuable range below 3 GHz." We need a successful transition of television broadcasting from analog to digital to free up spectrum for other uses as determined by the marketplace. We need it sooner rather than later. As engineers, we know that you can do much more with a 6 MHz channel than just Standard Definition Television. We must act accordingly. The Commission certainly would be interested in hearing from you about creative ways, such as facilities sharing, that could speed build-out of DTV and the consequent freeing up of spectrum for the benefit of the American consumer. Note that I am not arguing that the public interest requires that television broadcasters convert to digital in order to deliver High Definition Television (HDTV), to deliver multiple streams of Standard Definition Television, or to deliver some combination of these along with providing datacasting or other new services. I am not making that argument because technological developments -- including better digital compression and modulation techniques -- have given us the luxury of having our cake and eating it too. We can have exciting new broadcaster-provided services while freeing up spectrum for other valuable uses, including increased local loop competition. The key question, then, is how to speed the transition from analog to digital transmission. I'd like to spend my remaining time discussing three issues with which I have been personally involved and which touch significantly on this transition. First is the issue of compatibility between digital television receivers and digital cable television services. If the digital transition is to be successful, consumers have to be confident that their newly purchased digital television receiver will function properly when connected to a digital cable television service. The necessary compatibility specifications were, however, slow in coming from industry. Consequently, in his speech at CES here in Las Vegas in January, Chairman Kennard announced that if the industry did not reach a voluntary consensus, the Commission would act promptly to adopt compatibility rules to protect the public interest. Fortunately, we have seen some real progress in the resulting negotiations. The Consumer Electronics Association (CEA) and the National Cable Television Association (NCTA) several weeks ago announced that agreement had been achieved in two important areas. The first area of agreement was on the technical requirements for the network interface specifications that permit direct connection of consumer digital receivers to cable television systems. The second area of agreement dealt with the carriage of Program and System Information Protocol (PSIP) data on cable systems to support the navigation function in digital receivers. While this is great news for consumers and for the development of digital television, we remain concerned about the lack of an agreement on the appropriate labeling of television sets to indicate their capability to operate with cable television systems. and of licensing terms for copy protection technology. Consequently, a proposed rulemaking item that will address these remaining issues was placed on the Commission's "Sunshine Agenda" last Thursday. This means that, unless there is some last minute industry consensus, the proposed rulemaking item will be considered at the Commission's regular meeting later this week. The second topic impacting the transition to digital television is the issue of the transmission standard. As you know, in February the Commission denied the Sinclair Broadcasting Group's request that that we modify our rules to allow broadcasters to transmit DTV signals using COFDM modulation in addition to the current Advanced Television System Committee (ATSC) 8-VSB modulation standard. Sinclair had raised questions regarding the adequacy of 8-VSB reception with simple indoor antennas in a station's core business area under complex multipath conditions. The Commission noted that it believed what Sinclair had highlighted was a shortcoming of early DTV receiver implementation, rather than any basic flaw in the ATSC standard or an indication that NTSC service replication is unachievable with the 8-VSB standard. The Commission also noted that receiver manufacturers and their chip-suppliers were aware of the problem and were aggressively taking steps to resolve the multipath handling problems that Sinclair had raised. In taking the action, the Commission urged parties to provide additional information on the topic in the context of the agency's formal periodic review of the progress of the analog-to-digital conversion. We will use that mechanism to monitor the progress being made by receiver manufacturers and others to improve indoor DTV reception under the existing standard. Using the resources of our own Laboratory in Columbia, Maryland, we are undertaking our own field tests to further assure ourselves of such progress. We are also encouraged that the ATSC DTV Task Force has recently committed to look at the issues related to transmission and reception of DTV and to make any appropriate recommendations. Hopefully, taken together, these governmental and industry actions will continue to reduce any concerns regarding the choice of the modulation technique and will allow the conversion to move forward with confidence. The third topic impacting the transition to digital television relates to the magnitude of the opportunity currently before you. The bigger that opportunity, the faster the transition should occur. Let me say at the outset that I remain very bullish on the long-term future of HDTV. Since the first demonstrations I saw many years ago, I have been convinced that HDTV fundamentally changes the nature of the viewing experience and that it will ultimately be very successful in the marketplace. I am also very bullish on the future of datacasting. I base this on the advantages of the traditional broadcast architecture coupled with the advantages produced by the conversion from analog to digital transmission. Broadcast's strength, from an architectural standpoint, lies in the ability of television stations, both individually and collectively, to distribute popular content that large numbers of people want to receive simultaneously (for example, the Super Bowl) or have available simultaneously for viewing at will (for example, stock quotes). High power broadcast stations providing coverage over thousands of square miles represents an extremely efficient way of delivering such content. Said another way, it is a very efficient architecture for one-to- many communications. On the other hand, that architecture is not as efficient for delivering larger volumes of unique content to individual receivers -- that is, for one-to-one communications. For one-to-one communications, a cellular architecture that allows the same bandwidth to be reused to transmit different information in each cell is more efficient. As the name suggests, this is the architecture used by traditional cellular mobile radio systems and which will be used by third generation (3G) cellular data service providers. The architecture of the Internet is similarly efficient for the provision of one-to-one services, such as e-mail and traditional Web browsing. But when you look at what is happening in the Internet, it turns out that entrepreneurial companies are using satellite systems and other techniques to move popular content to the edge of the network, near the end user -- for example, to be cached by a local Internet Service Provider (ISP). That accomplishes two things. It eliminates the cost of repeatedly and/or simultaneously downloading identical content across the Internet backbone from a distant server, and it greatly improves performance by avoiding congestion and associated delays (latency) in the public Internet. If my view of Internet space is accurate, then television broadcasters are in an extremely good position not only to transmit traditional entertainment video services in digital format, but also to use the powerful multiplexing capabilities of digital transmission to deliver frequently accessed Internet content as well. That is, broadcasters are in a good position to carry locally stored information the final distance to be cached in a storage device owned by the end user. Properly designed, this can be virtually seamless to the end user, with content automatically delivered in the most efficient way and with extremely high performance. It is my understanding that Geocast and others are designing and deploying such systems with the cooperation of local television broadcasters. I think that is an exciting development. As I envision it, the possibility exists to take this development even further. Based upon our discussions with industry related to the upcoming auctions of the spectrum in television Channels 60-69 (and I might add of relevance to the planned auction of Channels 52-59), there is a lot of interest in using this bandwidth to provide high speed, two-way Internet access using a cellular configuration. There is an opportunity to combine the efficiencies of the one-to-many architecture of digital broadcasting seamlessly with the efficiencies of these new one-to-one architectures. By combining the two, popular and frequently viewed content could be delivered using the broadcast configuration, while less frequently requested content and one-to-one communications could be handled in the cellular configuration. This would allow broadcasters not only to capture additional advertising dollars for widely distributed content but also to gather, for example, fees for delivering unique, high value content or facilitating subsequent e- commerce transactions. Thus, it's possible that DTV broadcasters could actually bid on the Channel 60-69 spectrum in order to provide innovative services under our rules, or enter into some type of joint venture with potential bidders under an arrangement that would allow such a seamless configuration. I am confident that the combination of the digital broadcast spectrum, coupled with the growth of the Internet and the availability of additional spectrum in the Channel 60-69 range and later the Channel 52-59 range, present an enormous opportunity. It is not only an enormous business opportunity but also an opportunity to deliver new and improved services to the American public, to increase competition in the last mile, and to make more efficient use of the precious radio spectrum resource. If I have convinced you of nothing else, I hope you walk away with renewed appreciation that to stand pat here is to fall behind. You must recognize and aggressively seize the increased importance of the Digital Revolution. I look forward to all the amazing services you can provide in such a Convergence Marketplace. Thank you very much.