September 1, 2000

The Honorable W.J. "Billy" Tauzin, Chairman

House Subcommittee on Telecommunications

U.S. House of Representatives

2183 Rayburn House Office Building

Washington, D.C. 20515

Dear Chairman Tauzin:

Thank you for allowing me to appear before the House Subcommittee on
Telecommunications at its July 25, 2000, hearing on digital television.
In response to your request that each of the panelists provide their
recommendations on what Congress should do between now and 2006 to
expedite the DTV transition, I am submitting the following statement.

Initially, I want to clarify that the opinions and recommendations I
express herein are my own, and may not necessarily reflect the views of
the Commission.

The success of the DTV transition depends on the conversion of all of
the component elements of today's broadcast television service to
provide and/or support digital operation. The broad array of elements
involved include: broadcast television stations, cable television
systems, direct broadcast satellite services, the DTV transmission
standard, programming (including pre-recorded media such as
videocassettes and DVD discs), and television receiving and recording
equipment. As we have already seen, delays or problems in converting any
of these elements can have the effect of slowing progress in most or all
of the others. All of these factors are interrelated, so that any one
can affect the whole system involved in the transition process. While
substantial progress is being made towards moving the transition
forward, there are some important outstanding issues that could slow its
progress. The Commission is already in the process of taking specific
steps to directly and/or indirectly address a number these issues,
consistent with its statutory authority, including:

-   Balancing viewers interests in copying DTV programming for personal
    use against program owners rights and concerns for protection of
    their property against unauthorized distribution

-   Compatibility of DTV receiving equipment (receivers, recorders, and
    set-top boxes) with cable service

-   Carriage of broadcasters DTV signals on cable systems

-   The availability of receivers that are equipped to display DTV
    signals

-   The uncertainty over the terrestrial DTV transmission standard

The Commission plans very shortly to take action in its outstanding
proceeding on cable-equipment compatibility issues. Part of our action
will relate to copy protection issues in the delivery of cable services
to consumer equipment. We also have an outstanding proceeding on the
difficult matter of cable carriage of DTV signals. On the transmission
standard, the Commission has denied a petition for expedited rule making
submitted by Sinclair to allow broadcasters to use an alternative DTV
modulation system for DTV transmissions. In addition, our Chairman
recently sent a letter to the industry parties who are field testing the
performance of the DTV broadcast standard and the principal alternative
system to advise them that in looking at alternative transmission
systems, they should not consider options for uses (*i.e.*, data and
mobile services) that are inconsistent with the intent of both Congress
and the Commission for broadcast television service or would necessitate
revisions to the DTV Table of Allotments.

I believe that additional public policy actions on the part of Congress
could help to resolve the remaining issues and speed the DTV transition
onto a rapid and successful conclusion. Action by the Congress could
both help to support actions and efforts already underway by the
Commission and to provide new statutory guidance, authority and
framework in others. In this regard, I recommend that Congress consider
the following actions to expedite the DTV transition through its
scheduled completion in 2006:

-   Clarify that the Commission has specific authority to adopt a
    requirement that all new television receivers above a certain screen
    size, *e.g.*, 13 inches, include the capability to receive DTV
    signals. One such approach would be to require that all such
    television sets manufactured after 2003 have DTV reception
    capability. With regard to this recommendation, I note that the cost
    of DTV receiver chips is coming down rapidly and, as an example of
    this, that HDTV receiver cards for computers are now available for
    about \$150. With the scale economies involved in producing all
    larger screen TV sets with DTV capability, chip prices could be
    quickly brought down very low so that the effect on receiver prices
    would be minimized.

-   Provide the Commission specific authority to, if necessary,
    establish technical performance standards for DTV receiving
    equipment.

-   Cable systems could be required to convert to digital format using
    the same coding and transport structure as that used by broadcasters
    on the same schedule as broadcasters, with full conversion after the
    2006 or some other date. Cable systems could also be required to
    devote some percentage of their capacity to digital service before
    that time. This might provide them with incentive to carry
    broadcasters DTV programming as a source of material to meet their
    own conversion obligations.

-   Consider possible approaches to address cable operators concern
    about the impact of DTV must carry on their capacity. Such
    approaches could include limiting the number of DTV stations
    required to be carried. The number of stations required to be
    carried could be limited to the four major networks, at least at
    first, for example. Other options would be to base DTV carriage
    requirements on the cable systems capacity and/or to limit carriage
    rights to one program stream of video that could be combined on a
    channel with other broadcast signals in a multicast format.

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-   Provide assistance through new legislation to facilitate and
    expedite local and federal approval processes for construction of
    broadcasters' DTV tower and transmission. Some broadcasters are
    facing problems and delays, particularly with local authorities, in
    obtaining zoning and other approvals with siting a new tower or
    mounting a new antenna for a DTV signal.

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-   Provide funding to accelerate the transition of public television
    stations to DTV services. Public TV stations are already among the
    leaders in installing DTV transmission facilities and in producing
    new and innovative programming for this service. Providing for the
    immediate conversion of the approximately 400 PTV stations would
    nearly triple the number of stations operating DTV service. In
    addition, funding grants could be provided to support the production
    of programming by public stations. A substantial boost in the
    quantity and quality of DTV programming by non-commercial
    broadcasters could provide the impetus for consumer demand that
    would impel commercial broadcasters to support substantial DTV
    program production.

-   Provide tax incentives for broadcasters who build out to their full
    authorized DTV facilities by a date certain, for example, 2003.

Congress could also clarify the rights of program owners and consumers
with regard to copying of programs. In this regard, I believe that
consumers should be able to do in the digital world what they are
currently permitted to do in today's analog world, while protecting the
interests of copyright owners in protecting their property. For example,
consumers should be able to make "fair use" of digital programming that
would include making a single copy of programming provided on broadcast,
satellite and cable services, except for programming that is provided on
a pay-per-view, on-demand, or hard copy (VCR or DVD) basis.

My colleagues and I would be pleased to work with and assist the
Congress in developing any specific legislation it may wish to pursue in
this area. I am confident that if we all, that is, Congress, the
Commission and industry, work together on this we can ensure that the
transition to digital television takes place quickly and smoothly, and
so maximize the benefits of this important and exciting new technology
for the American public and our in

industry.

Sincerely,

Dale N. Hatfield

Chief, Office of Engineering and Technology

cc: Congressman Edward J. Markey, Ranking Member

House Subcommittee on Telecommunications