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P4  [#Xm2PG;4XP# Remarks of Commissioner Susan Ness >oDTV Supersession Consumer Electronics Show <QLas Vegas, Nevada  KJanuary 8, 1999  R_'  PH'  Delivering on the Promise of Digital Television   +& }.  6g +& }. (As prepared for delivery)  \ It is a great pleasure to join you again at the Consumer Electronics Show my second in as many years. Gary, you have put together a terrific exhibition. Digital convergence has arrived. The consumer electronics industry is in the midst of an exciting transition. So is the FCC. Ours is due to a move. After decades at 1919 M Street, the FCC is finally moving its headquarters an event that has taken longer and has had more twists and turns than the introduction of digital television. As I left Washington, D.C. last evening, I closed my office door for the last time. On Monday, my colleagues and I will be working from our new home in a building called the Portals. Over the past 30 or so years, many decisions of critical importance to the consumer electronics industry were rendered from 1919 M St., including the introduction of mobile telephony, paging, mobile satellites, spectrum for unlicensed devices...and yes, digital television.  P 4 The Launch of Digital TV There are few transitions now underway that will have a greater impact on the American consumer than television's historic shift from analog to digital technology. How far have we come? A year ago when I addressed CES, we were still ten months away from DTV being a commercial reality. After years of hard work by so many people, would the launch of broadcast DTV be successful? Well, the launch was a success. By the way, Gary, I know you are good, but how did you get NASA to schedule the shuttle launch to coincide with the launch of broadcast digital television? Many Americans will remember John Glenn's historic return to"(0*0*0*A'" space as the first time they saw DTV. That's awesome. In the days immediately following the launch, there was a string of announcements from stations around the country. Fortytwo stations - almost double the number that originally volunteered - announced plans to commence DTV broadcasts. Twentyeight stations in sixteen cities from Hawaii to Boston are on the air with final operating authority, and several others have experimental licenses. Notably, it's not just the biggest players in the biggest markets that are among the DTV vanguard. A number of stations in medium and smaller markets - cities such as Columbus, Madison, Charlotte, and Honolulu - have decided that digital is the way of the future, and that early introduction is the best way to embrace that future. So we have reached a milestone - DTV is real, it's in the market, and consumers are interested.  Py4 Industry Cooperation Before we turn our attention to the next set of DTV milestones, we should recognize that the launch of DTV has been the result of remarkable cooperation and coordination among different industries.  R4X Television stations have made required investments. They've built towers, installed transmitters, and purchased new equipment;(#  R4X Cable operators have expended billions of dollars to upgrade their systems to offer digital programming; (#  Ri4X Broadcast and cable networks have begun to make DTV content available;(#  R=4X DBS providers ĩ digital from inception have made early commitments to provide nationwide high definition programming;(#  R4X Equipment suppliers have developed professional products and are helping station engineers install, integrate, and operate new equipment;(#  R!4X Consumer electronics manufactu rers have delivered the first generation of DTV receiving equipment; (#  Rt$4X Computer industry members have positioned computers to receive and display digital television broadcasts, and to offer interactive content with broadcasts;(# "1'0*((%"Ԍ R4X Retailers ĩ together with manufacturers and programmers have arranged exciting educational displays and events to introduce consumers to DTV.(# We at the FCC have continued to do our part, as well:  Rx' "4XWe are addressing tower and antenna siting issues, working collaboratively with  "broadcasters, DBS providers, and local governments to expedite DTV operations and to ensure that consumers can receive video transmissions;(#  R ' "XWe are coordinating with our counterparts in Mexico and Canada to approve digital frequency assignments whose signals spill across national borders;(#  R ' "XAnd as I promised last year, we have adopted DTV implementation rules including  "channel allotments, interference rules, and streamlined construction permit processing.(#  xuIn short, it took a collective effort to enable a successful broadcast DTV launch. I congratulate all who labored on this historic liftoff.  P64 The Challenges Ahead  xAs we enter the first full year in which DTV is a commercial reality, it is useful to be  xpmindful of the challenges that remain. Broadcast DTV has just cleared the launch pad, but there's a long journey ahead. Our goal is to achieve widespread acceptance of digital television.  R~' xIt is incumbent on industry to spark the demand for DTV. DTV may radically change  Rg' xEthe way people use television. But we should never forget that consumers must do  RP' x something to get DTV - they must buy a new DTV receiver or decoder box, or subscribe to a multichannel service that will provide DTV signals.  x&Who better than this audience understands the importance of sparking demand for DTV?  x" The amazing products displayed on the convention floor are testament to the creative efforts to develop, design, and market products that resonate with consumers.  xMarketplace competition has spawned a wide range of DTV approaches by  x manufacturers, from component television receivers to new ideas for feature-rich set-top  xboxes. Truly, you have the ability to spark demand for DTV and to respond effectively to consumers.  xWBut the consumer electronics industry cannot do it alone. As I noted, industry  xcoordination was needed to launch broadcast DTV service. Even greater cooperation"%'0*((9%"  xamong these industries broadcasters, cable and DBS operators, programmers and  xservice providers, Silicon Valley, consumer electronics manufacturers and retailers is necessary if you are to win the hearts and pocketbooks of consumers.  xEach of these industries is successful only if it attracts consumers. As I will discuss  xcmomentarily, there are still significant open issues among industry players. But if each  R_' xsector focuses squarely on what is best for the consumer, these issues can be resolved expeditiously.  xIn order for the conversion to digital television to succeed, you need a critical mass of  xyconsumers who have access in one form or another to DTV. And it is the symbiotic  xrelationship between these industries that will provide the marketplace for consumers to decide.  P 4 Conditions for Success  xThere are three conditions driving consumer adoption that I will be monitoring closely as the first full year of DTV unfolds:  R4' "zXDigital equipment must work well as intended and be compatible with other television services equipment; (#  R'XThere must be compelling content; and(#  R'XDigital television must be affordable.(# Let's look more closely at each of these factors:  Pe4 Consumer Equipment Must be Compatible  R7' xFirst, consumers need to be educated about the benefits and new capabilities and  x limitations of digital products. They will demand choices in digital television products and services. And they will demand compatibility and simple "plug and play" interoperability.  xpConsumers want complete solutions and - quite frankly - most don't want to know the  xdetails of 1080i vs. 480p; or "5C" vs. XCA copy protection; or 1394 vs. component video  xconnections. They just want sets that work, that are easy to use, that are affordable, and that are compatible with current and future choices in video entertainment.  xIf consumers have a lot of trouble getting a signal or accessing their preferred sources of programming they will be turned off to digital television.  xI'm therefore encouraged by the efforts of retailers to assist early adopters to achieve"#'0*((9%"  xpthe best possible overtheair reception. Antenna reception issues must continue to be  xaddressed. In addition, DTV receivers must be designed to maximize receipt of quality, interferencefree, over-the-air DTV signals.  +& }/   xlDBS signals are ubiquitous. I applaud the commitment of DBS operators to provide  xpprogramming in high definition. Now consumers throughout the country, in towns large  xand small, can sample high definition and enhanced digital programming. It's not just  R_' xlthe top ten cities anymore. I also want to see all fifty states not just the lower 48  RH'have access to DBS.  x+DBS subscribership is growing at a healthy pace. But DBS would be an even more  xattractive option for consumers if its subscribers could easily receive local signals,  xNincluding local DTV signals. That's why I am heartened by the availability of DTV  xreceivers with integrated DBS capability, and I encourage all of the industry groups to  xwork with Congress to resolve copyright and other issues so that local signals can be retransmitted by DBS.  xSome observers believe that DBS's superior picture quality has spurred cable operators  xto make digital upgrades. Consumers will benefit from this emerging digital foot race, which likely will involve cable, DBS, broadcasters as well as video-capable computers. ` `  xCable system compatibility with digital broadcasting is a critical component of a smooth  xtransition to digital. Over two-thirds of Americans rely on cable to receive local stations.  x +& }0 Consumers should not have to choose between their digital television sets and cable.  xIn any event, early DTV adopters are likely to be among a cable operator's most  xpvaluable customers - and attractive prospects for DBS operators as well. These early  xadopters will demand access to DTV programming, including broadcast DTV signals. So it is in the best interests of cable operators to resolve rapidly the compatibility issues.  x}I'm therefore pleased with the recent efforts of consumer electronics makers and cable  xoperators to resolve the many compatibility issues. The recent agreement on a baseline  xlIEEE 1394 standard was completed swiftly a clear demonstration of inter-industry cooperation.  x4I also understand that the industries are collaborating on specifications for digital  xIcable-ready sets. Cableready sets must be available as a choice for consumers who  xcjust don't want to be "boxed in." I want to hear from our next panel on the topic of cable compatibility solutions, and in particular on the outlook for digital cable-ready sets.  x<And I also believe that it is not enough that cable subscribers merely be able to receive  xlocal digital signals. By cable compatibility, I mean that consumers should be able to  R:&' xreceive broadcast signals as they are transmitted. And all of the features of a digital set should work, including new digital services such as program guides. "#'0*((%"Ԍ xԙTime Warner and CBS recently agreed on a signal carriage method that will not degrade  xbroadcast DTV signals. I applaud Time Warner and CBS, and I hope other cable MSOs and broadcasters will follow suit.  xyThese and other recent developments indicate a growing willingness of industries to  xVrecognize their mutual interests and work together cooperation which is essential for  xthe smooth transition consumers want and need. And when the consumer wins, we all win.  P14 Compelling Content  R ' xThe condition driving consumer adoption is compelling content. Programmers and  xentrepreneurs are hard at work developing new content and creative services. What will  xbe the "killer apps" of the new DTV medium? Will it be widescreen, highdefinition  xImovies for viewing on home theater systems? Will it be "enhanced" TV that integrates  xvideo and the internet? Will it be new services as yet undiscovered? Only the market  xwill decide. But industry must work together so that these new services can be delivered and put to the test of market acceptance.  xCopy protection is one particularly vital issue that must be resolved. High-value content  xin high-definition will be key to consumer enthusiasm for digital television. And  xconversely, the lack of a copy protection solution could stymie delivery of compelling content, and slow the transition.  x}I know that the members of our next panel have differing views on how to address copy  xVprotection, and I am very interested in their perspectives on how this issue can best be resolved for consumers.  P|4 Affordability  RN' x[The third and final condition driving consumer acceptance is affordability. Digital  xtelevision must be affordable if consumers are going to embrace the conversion to  xdigital. Manufacturers have sizable R&D investments to recover, and there certainly will  xbe a market for high-end DTV equipment. But I am very encouraged to see some of the  xIlow-cost options on display here at the CES show such as Thomson's "all format DTV decoder" box.  xIn particular, a vital element of the DTV adoption process could be products that allow  xconsumers to take an incremental approach to DTV. Lower priced products such as  xRdigitaltoanalog set-top decoders or DTV cards for personal computers could allow  xconsumers to test the DTV waters in ways that deliver benefits such as improved picture quality on analog sets.  R#'' xThis could lead to additional purchases, such as DVD players, digital receivers, or HD"#'0*((9%"  x_displays - once their appetites for DTV have been whetted. Widespread consumer  x/familiarity with DTV means a bigger market opportunity for all of the industries involved in the transition.  P4 CONCLUSION   Rv' xc To succeed, the conversion from analog to digital must be driven by the marketplace  R_' xnot by government. But government does have a role to play in fostering a fair and open market environment.  xTherefore, in 1999 I hope the FCC will continue to work to ensure a smooth deployment  xof DTV. We should poke and prod, jawbone and cajole, and shine a light on inter xindustry problems that are slowing the progress of delivering the benefits of DTV to consumers.  xWe should closely monitor the critical role of the cable and DBS industries in supporting  xRthe DTV transition. We will complete our pending rulemaking on cable carriage and related issues.  xWe will  +& }3 track the progress of inter-industry efforts to develop standards for equipment compatibility, copy protection, and next-generation DTV services.  xAnd we eagerly anticipate the innovation that you will deliver. If industries cooperate,  xlthe result will be equipment compatibility, bringing choice and compelling content, at affordable prices. Given the promise of digital television, I am confident that the consumers will be there.  x"Thank you very much for the invitation to address this super session. I look forward to  xan enlightening panel discussion of what to expect from the next generation of DTV products.