TRANSCRIPT OF PROCEEDINGS
       
                                      Before the
                           FEDERAL COMMUNICATIONS COMMISSION
                                Washington, D.C.  20554
       
       
       --------------------------------------)
       In the Matter of:                     )
                                             )
       Advanced Television Systems           ) MM DOCKET NO. 87-268 
       and Their Impact Upon the             )
       Existing Television Broadcast         )
       Service                               )
                                             )
       EN BANC Hearing                       )
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       DATE OF MEETING:  December 12, 1995         VOLUME:   
       
              PLACE OF MEETING:  Washington, D.C.          PAGES: 1 - 283                               Before the
                           FEDERAL COMMUNICATIONS COMMISSION
                                Washington, D.C.  20554
       
       
       --------------------------------------)
       In the Matter of:                     )
                                             )
       Advanced Television Systems           ) MM DOCKET NO. 87-268 
       and Their Impact Upon the             )
       Existing Television Broadcast         )
       Service                               )
                                             )
       EN BANC Hearing                       )
       --------------------------------------)
       
       
       
       
                 The above-entitled matter come on for meeting
       pursuant to Notice at 1919 M Street, N.W., Room 856,
       Washington, D.C., on Tuesday, December 12, 1995 at 8:30 a.m.
       
       
       APPEARANCES:
       
       
            Reed E. Hundt, Commissioner
            Susan Ness, Commissioner
            James H. Quello, Commissioner
            Andrew C. Barrett, Commissioner
            Rachelle B. Chong, Commissioner
       
                                       I N D E X
       
       
       PANEL 1:
       
       
       PANELIST:                                                        PAGE NO.
       
       Richard Wiley, Advisory Committee ATV                     16
       Steven Rattner, Lazard Freres and Company                 19
       Ed Grebow, TELE-TV                                        22
       Neil Braun, NBC, Inc.                                     24
       John Hendricks, Discovery Communications SINC/NCTA        27
       Stanley Hubbard, Hubbard Broadcasting, Inc.               29
       Lawrence Grossman, Brookside Productions                  31
       Andrew Lippman, MIT Media Laboratory                      34
       
       PANEL 2:
       
       
       PANELIST:                                                        PAGE NO.
       
       Gigi Sohn, Media Access Project                            91
       Alan Braverman, Capital Cities/ABC                         94
       Barry Diller, Silver King Communications                   96
       Faye Anderson, Douglass Policy Institute                  100
       David Honig, Minority Media Telecommunications Council    102
       John Siegel, Chris Craft/INTV                             104
       
       
       PANEL 3:
       
       
       PANELIST:                                                        PAGE NO.
       
       K. D. Horowitz, Viacom                                    156
       George Keyworth, Progress Freedom Foundation              159
       James McKinney, Advanced Television System Commission     161
       Edward Reilly, McGraw-Hill Broadcasting/MSTV              163
       John Major, Motorola                                      165
       James Carnes, Sarnoff/Grand Alliance                      168
       Joseph A. Flaherty, CBS/ATSC Broadcast Caucus             170
       
       
       PANEL 4:
       
       
       PANELIST:                                                        PAGE NO.
       
       Bruce F. Allan, Thomson Consumer Electronics              214
       Sherwin Grossman, CBA                                     217
       John Abel, Datacast Partners                              219
       Ralph Gabbard, Gray Communications/NAB                    221
       David Liroff, WGBH Educational Foundation                 223
       Joseph Tasker, Jr., Compaq Computer Corporation           225
       
       
       
       
       
       
       
       
       
       
       Meeting Began: 8:30 a.m.                         Meeting Ended: 4:41 p.m.
                                 P R O C E E D I N G S
                                                                     (8:30 a.m.)
                 COMMISSIONER HUNDT:  Good morning, everybody.  We're
       going to have a really big show today.  I would like to thank
       our extremely distinguished panelists.  They've all taken time
       from their very busy schedules to contribute to the important
       public debate about digital television.  We're going to have
       very brief opening statements.  You're in the middle of mine,
       and then we'll go through the different commissioners, and
       then we'll get started.
                 This hearing today is intended to kickoff a
       heightened public open debate about digital television.  As we
       will learn today, a group of brilliant scientists has put a
       digital genie in the bottle, and that genie can grant many
       different wishes.
                 Our excellent FCC staff has given me a brief guide
       to avoid terminological implosion and I want to share it with
       you.  So this is the way it goes.
                 The spectrum we're talking about is for digital
       broadcast.  It's currently unused and unusable spectrum. 
       Today large chunks of the broadcast allocation lies unused to
       avoid interference with the old technology, the current
       technology, of analog transmission.  With the new digital
       technology, we can add additional broadcasting in the spaces
       in between.  For example, in Washington, D.C, the dark
       spectrum between analog broadcast on Channel 20 and Channel 22
       could be used for digital transmission.  in other words, it's
       the space that would be filled by a Channel 21 if you had a
       Channel 21.  So when we use the term digital spectrum, we're
       talking about, for example, the 6 MHz in the space between
       Channel 20 and Channel 22.
                 Digital broadcast licenses are assumed to be 6 MHz. 
       The 6 MHz can be used to transmit a wave, the wave can carry
       bits, the digital Morse code for delivering voice or video or
       data.  The Grand Alliance transmission standard can use 6 MHz
       to deliver almost 20 million usable bits per second.
                 The transmission standard can be used to deliver
       different amounts of bits to display different formats.  A
       very high resolution format will require more bits than a less
       high resolution format.  A progressive format will require
       more bits than an interlaced format.
                 High definition, as opposed to digital, is just one
       of many digital formats.  High definition is a synonym for
       highest resolution, and it requires more bits, obviously, than
       a less high resolution format.  Standard definition is a
       synonym for a format that has a less high resolution than high
       definition, and it requires less bits but it still produces
       some terrific pictures.
                 As the engineers have explained to me, the fewer
       bits that are used for the picture, the more pictures or
       programs that can be simultaneously delivered by the bit
       stream.  So, for example, if a broadcaster elects to use a
       standard definition format for digital transmission, the
       broadcaster probably can send more simultaneous programs.
                 So that's how the experts have explained it to me
       and ask you to pass on to you and hopefully the many experts
       who will testify today can build on this brief introduction. 
       In particular, I would like to call your attention to the
       display of digital video technology at 2000 M Street.  It will
       be open all day today through lunch until 5:30 p.m., and I
       particularly would like to thank the following companies who
       set up the displays:  The Grand Alliance, Texas Instruments,
       USSB, DirecTV, Sony Corporation of America, NBC, Inc., Hitachi
       of America, Microsoft Corporation, and CBS, Inc.  If a picture
       is worth a thousand words, their displays are worth a million
       bits, and I strongly urge you to visit the site.
                 The digital spectrum is beachfront property on the
       Cybersea, and, as we all know, Congress and the Administration
       are discussing whether the licenses to use the digital
       spectrum should be auctioned.  The other apparent possibility
       is to give the digital spectrum licenses to today's analog
       broadcasters, and then retrieve, for the public, the analog
       licenses on some date certain, or when certain conditions are
       met.  Then the analog spectrum could be auctioned.  We're
       happy to hear anyone's comments on this subject, but, of
       course, these questions will be decided by Congress and not
       the FCC.
                 Whoever receives the digital spectrum licenses, and
       however they are meted out, the FCC needs to decide whether
       there should be any restrictions on the use of the licenses. 
       Should we order that only one transmission standard be used? 
       Should we order that that transmission standards should be
       used to deliver only one particular format?  For example,
       should we order that only the very high resolution format
       called High Definition is permissible as a matter of law?  Or
       should we order that only progressive scan formats are
       permissible as a matter of law?  Or should we strive to be
       deregulatory and to keep our mitts off the marketplace? 
       Should we follow the advice Jack Nicholson gave in the movie
       "Chinatown," to avoid mistakes, do as little as possible.
                 Well, as opposed to interfering with business
       judgements about transmission standards and formats, a
       different question is whether the FCC should ask licensees of
       analog or digital spectrum to deliver programs that serve the
       public interest in ways that mere marketplace competition
       might not do.  It comes as no surprise to anyone that,
       speaking personally, that I'm very interested in hearing the
       views of the panelists about the possibility of using the
       increased capabilities of digital transmission to serve the
       ends of children's education and reform of the campaign
       process.  It is certain that digital transmission will
       increase the number of TV programs broadcast over the air. 
       Doesn't that mean that it can also increase America's ability
       to use the wonderful medium of broadcast to serve all the
       dimensions of the public interest.
                 The great thing about today's open meeting is that
       this is the right time and the right place to talk about the
       future of television in this country.  The is an historic
       moment similar to the late 1940s when the FCC and Congress
       made the fundamental decision that shaped the analog
       television of the last half century.  So let's all recognize
       that none of us want to use this opportunity -- none of us
       want to let this opportunity go buy, none of us want to pass
       it up.  We want to debate vigorously, with good cheer and
       optimism, all the questions and the many answers that digital
       TV generates.  Thank you.  Commissioner Quello.
                 COMMISSIONER QUELLO:  You bet.  Very fine statement
       and mine will be much less technical.  But I hope that maybe
       years from now, during my fifth and sixth term as
       Commissioner, I hope to be able to say I was there when HDTV,
       the greatest invention since color television, was just a
       glimmer in the FCC's eye, and I hope to be able to look around
       at the dramatic and widespread public excitement about high
       definition pictures, at the high penetration levels of digital
       television that surpass all instruments, and at the
       proliferation of high definition programming, and at a
       stronger than ever broadcast industry available free to all
       the public.
                 However, this day may never come if the Commission,
       the Congress or the White House makes any serious missteps in
       the rollout of advanced television.  Perhaps the biggest
       threat, in my mind, would be a decision to either auction the
       digital channel or to compress the transition to an advanced
       television to such a short period of time that both
       broadcasters and consumers would be threatened.
                 Should the government and the American public
       eventually recover the value of the 6 MHz the broadcasters
       relinquish?  Absolutely.  However, they should not be forced
       to choose between an early return on spectrum and a viable-
       free advanced television system, and I think transition to
       HDTV must be a progressive evolutionary process.
                 I will, therefore, be focusing my energies in this
       very important proceeding, on insuring that high definition is
       a success for consumers and broadcasters alike.  While the
       goal of a balanced budget is vital to the future of our
       democratic society, it should not be accomplished by
       threatening the position of the United States in the global
       economy or by impeding the ability of broadcasters to bring to
       every home in America the next and best generation of free
       television.
                 So I look forward to hearing all of the varied views
       of this very expert group of panelists.  Thank you.
                 COMMISSIONER BARRETT:  Thank you, Mr. Chairman.  My
       learning curve becomes a regressive on when listening to
       myself, so I choose, Mr. Chairman, to put the statement
       wherever it goes in the record, give it to everyone and to
       compliment you and Commissioner Quello for your overview.  But
       I also wanted to follow-up on what the chairman had suggested,
       and that is to take a tour of the -- what's the address, 2000
       M Street.  I went over yesterday and caught a cold from
       Commissioner Chong yesterday and I thought that we would also,
       Mr. Chairman, I'd like to advice everyone, go see Stan
       Hubbard's son, and you can see what a bright child of his
       mother, he took after his mother, obviously, but go see Rob
       Hubbard, who makes a great presentation, Mr. Chairman, who you
       did see yesterday, and it's an excellent overview.
                 And I want to compliment Chairman Wiley for all of
       his hard work, and I will forego the statement, Mr. Chairman,
       and make it part of the record of whatever it is we're doing
       here today.  Thank you very kindly.
                 COMMISSIONER NESS:  Mr. Chairman, the subject of
       this En Banc, whether and how we transition our television
       broadcasting industry from an analog to a digital system, is
       perhaps the most challenging issue facing the Commission
       today.  But we're not alone.
                 It is challenging for broadcasters who must decide
       whether to invest billions of dollars in new equipment without
       new revenue streams to cover capital costs and without
       assurance that their audiences will follow.
                 It is challenging for Wall Street, which is not
       certain such an investment will succeed.  It's challenging for
       video providers, who want the opportunity to compete for
       digital licenses.  It's challenging for consumer, electronics
       and computer manufacturers, who much rapidly roll out
       equipment to retrofit our video population.
                 And above all, it will be challenging for consumers
       who are mostly unaware that in a decade or so, their analog
       television sets and VCRs may become obsolete.
                 Digital broadcasting offers a future that is full of
       promise.  One need only visit the advanced television
       demonstrations across the street to appreciate the
       extraordinary progress that has been made to date.  Many have
       labored to achieve what is truly a remarkable product, the
       Grand Alliance standard.  I want to express my appreciation
       publicly to Chairman Dick Wiley and his committee for their
       very fine work.
                 We're at a crossroads in this country, should we
       proceed with the digital transition as proposed or should we
       consider other options?  I begin today's hearing with some
       preliminary thoughts:
                 First, free, over-the-air broadcasting provides and
       invaluable service to the American public.  It serves us all
       any time, any place, rich or poor, urban or rural.  It
       educates, informs, and entertains.  When widely held, its
       diversity of voices serves as an insurance policy for our
       democracy.
                 Among video distributors, only broadcasting is
       available as a free advertiser-supported service throughout
       the country.  We must be cognizant of the millions of
       consumers who depend upon broadcasting for their news and
       entertainment.  Whatever we do, we must ensure continued
       service to all, including those who cannot or choose not to
       subscribe to pay services
                 Second, of all the video competitors, only
       broadcasters much receive this Commission's blessing before it
       can upgrade its service to digital.  Cable can be digital
       without FCC's permission.  DBS already is digital and can
       provide high definition if it so chooses.  Video dial tone,
       wireless cable, and LMDS are all planning to go digital.  If
       our goal is to promote competition among video providers,
       broadcasters must have the digital tools to compete.
                 Third, the Grand Alliance system was carefully
       crafted through a very public process.  It was designed,
       developed, and paid for, not by government, but by private
       industry.  The broadcasters, both commercial and public, as
       well as cable, computer, manufacturing and film industries,
       invested their time and their talents.  Extraordinary efforts
       were made to accommodate every sector without sacrificing the
       goals of digital broadcasting.
                 The Grand Alliance standard provides great
       flexibility, is computer friendly, and ha plenty of headroom
       for new advances.  And it is homegrown.  It has the potential
       to expand domestic jobs and grow industries.  Advocates of
       other systems will have a high burden of proof.
                 Fourth, spectrum is a national resource.  We must
       ensure that it is efficiently used.  As I study various
       spectrum transition scenarios for broadcasting, I will be
       focusing on both short-term and long-term benefits,
       particularly the possibility or freeing up 100 to 150 MHz at
       the end of the process through increased efficiency.
                 Fifth, historically, broadcasters were viewed as
       stewards of the airwaves.  In this special position of trust,
       broadcasters were given mandatory carriage and channel
       positioning on cable systems.  In exchange, broadcasters were
       expected to serve local communities in "in the public
       interest."  If incumbent broadcasters are to receive a free
       second channel for digital conversion, I want to know more
       clearly how their public interest obligations will be
       fulfilled.
                 Finally, and most importantly, our decisions must be
       in the public interest.  I want to better understand the
       impact that our digital television proceeding will have on
       consumers.  If we go ahead, for the first time, a major
       transition will not be backwards-compatible.  I therefore want
       to examine what maximum public benefit we can have while
       minimizing disruption and cost.
                 These are some of my thoughts, Mr. Chairman, and I
       look forward to hearing our distinguished panelists' comments
       on these issues.  Thank you.
                 COMMISSIONER CHONG:  I just want to clarify that it
       was Commission Barrett that had the cold yesterday, and I'm
       pretty sure he sneezed on me when we were looking at Stan
       Hubbard's and I woke up this morning with a runny nose, so
       it's your fault.
                 I wanted to add my thanks for everyone coming.  I
       know you have busy schedules and the fact that you all made it
       is terrific.  I wanted to thank the staff, first of all, for
       pulling this hearing together.  I think that I was the one
       that asked for this back when we were doing the digital notice
       because there was a lot to learn, both policy-wise and
       technology-wise and I thought this might be helpful that we
       would all focus.
                 It seemed to me, back then, that a lot has changed
       since the first decisions were made about digital television
       and it was important for us to have a thorough understanding
       of where our technology had brought us at this moment in order
       make good decisions going forward.  I wanted to state up front
       that I have a very central concern, and that is, preserving
       and promoting free over-the-air television, which I think is
       central to a democratic society.  And, as a result, I think
       that the transition that we're going through from analog to
       digital is inevitable and we can't really expect broadcasters
       to maintain their audiences if they're going to be in a
       Startrek era with Gunsmoke technology.
                 So these are the concerns I'm going to be asking
       about when we get to the panelists.  We have said that we
       think that the principal use -- I have said that the principal
       use of the spectrum ought to be for free over-the-air
       broadcasting.  Is this going to be a reasonable approach given
       the increased flexibility broadcasters will get when they
       transition to digital?  And if broadcasters do use the
       spectrum for ancillary uses, non-free broadcast, I want to
       know whether it would be fair to make them pay for that.
                 Secondly, in past decisions, the Commission has
       decided to loan a second 6 MHz channel to broadcasters to
       avoid disenfranchisement of viewers during the transition, and
       I want to know whether this approach is still the right one,
       given that some parties have expressed some interest in
       standard digital channels that might possibly require less
       than 6 MHz.  And if we do allocate less than 6 MHz, doesn't
       this undercut the very commendable and impressive achievements
       of the Grand Alliance.  As a world leader in HDTV right now,
       why would be backtrack on that decision at this point?
                 If this transition happens, how do we ease the
       transition?  This is the primary area of my concern.  What
       would a reasonable transition period be?  Can we learn from
       any past experiences, such as the transition from black and
       white to color, or the introduction of CD-Rom and what about
       consumers?  I shudder to think about what would happen when
       Aunt Beulah turns on her analog TV in 10 years and it doesn't
       work.  There's going to be a couple of irate phone calls made
       at that point.
                 So how do we ease the transition for consumers,
       what's reasonable, and what about the impact of the transition
       on the small and the medium-sized broadcasters, including
       community broadcasters?  What about public television stations
       which are suffering from budget cuts right now?  I want to
       hear ideas on how we can accommodate the needs of these
       broadcasters.
                 And finally, spectrum efficiency, are there ways we
       can manage the transition to maximize the use of the spectrum,
       freeing up valuable spectrum for other uses is a very
       important governmental interest.
                 So, that's plenty to ask about, I look forward to a
       full and lively discussion and I thank you again for coming
       today.
                 COMMISSIONER HUNDT:  Thank you very much.  Let me
       move quickly into the panel.  First, I'd like to note the
       addition of Andy Lippman from the MIT Media Labs to the panel
       over here on this side, and thank you very much, Andy, for
       coming.  And before I kick it off by asking foreman chairman
       Dick Wiley, who also the chairman of the advisory committee to
       make the first remarks, I'd like to especially acknowledge
       people on the FCC staff who are responsible for all of the
       work behind this particular day:  Donna Jean Ward, Roger
       Holburg, Alan Cohen, Dan Bring, Brett Tanitser, Mary Beth
       McKerrick, Manya Bagdadi, Tom Tanosovich, and in particular,
       probably the key person in the Mass Media Bureau for this
       whole effort, who has been providing us all on the Commission
       tremendous assistance, Saul Shapiro.
                 The timekeepers are harsh and strict
       disciplinarians.  They have cards to warn everyone, including
       the Commissioners, of how short the time is and if you go over
       their rules, they will leap across the table and choke you
       until you stop, an embarrassing experience that all of us will
       want to avoid by simply following their advice.  Dick.
                 MR. WILEY:  Mr. Chairman, Commissioners, it is a
       privilege to appear before you this morning.  Each of you has
       received the Advisory Committee's final recommendation.  I
       won't take the time to discuss this conclusion this morning. 
       Suffice is to say, that the Grand Alliance's digital standards
       represents world leading technology --
                 (Bad mike, unable to hear.)
                 MR. WILEY:  I'll start.  Mr. Chairman,
       Commissioners, it's a privilege to appear here.  Each of you
       has received the Advisory Committee's final recommendation.  I
       won't take the time to discuss its conclusions.  Suffice it to
       say that the digital TV standard of the Grand Alliance
       represents world leading technology permitting ATV's dazzling
       pictures and sound, multiple SDTV programming, and myriad NII
       data services and all on a dynamic basis.
                 In my written testimony I describe some of the key
       technical issues that the Advisory Committee faced including
       progressive scanning versus interlaced scanning.  Now, as you
       know the Grand Alliance technology incorporates both formats
       at minimal additional cost, thus reasonably meeting the needs
       of all affected industries.  As such, and let me emphasize
       here, it would represent the world's only progressively
       scanned television system and with fully advances and
       compression technology, it should be possible to migrate to an
       all progressive scanning format in the future.
                 Now, let me offer my own brief rules on four
       criticisms of the FCC's long-standing ATV program.  First,
       that the FCC's planned transition to digital television
       represents a "give away" of valuable frequencies to existing
       broadcasters.  But in reality, it is only an exchange of one
       spectrum block for another with, with the public ending up
       with a greatly enhances video service in the process.
                 Second, that the digital channel, so to speak,
       should be auctioned, but this could disrupt the Commission's
       orderly transition plan and likely deprive broadcast viewers
       of the full advantages of ATV.  A better alternative, in my
       view, is to auction the returned and probably more valuable
       channel.
                 Third, broadcasters might be given less than a full
       6 MHz channel, but the Grand Alliance system cannot be sliced
       up in this manner.  Instead, an entirely new transmission
       system would have to be designed and tested, assuming anyone
       had the financial incentive to do that.  And in the meantime,
       the American public would be deprived of the services provided
       by digital HDTV including NII interoperability, and the United
       States might well lose its position of clear technical
       superiority which ultimately should add greatly to our
       economy.
                 Fourth, and finally, that the lower resolution SDTV
       is just as good as HDTV.  But the hundreds of advisory
       committee technical experts and lay viewers did not see it
       this way.  The truth is that high definition television
       represents a whole new video platform and a quantum leap
       forward in the state of the art.  Fortunately, however, the
       Grand Alliance's supple framework eliminates any need for
       choice, we can have both HD and SD.
                 In all, ladies and gentlemen, the United States and
       the FCC stands today on the threshold of an exciting new video
       era.  But to bring it to fruition, a new television
       transmission standard should be should be established and I
       urge you to do so as soon as feasible.  Such an action will
       make it possible for the American public to enjoy the greatest
       advance ever in broadcast and video technology.  Thank you,
       and good luck.
                 COMMISSIONER HUNDT:  Mr. Rattner.
                 MR. RATTNER:  Speaking as a member of the financial
       community, I believe that the financial world will ultimately
       consider what emerges from these deliberations with two
       parameters in mind, certainty and flexibility.  Investors have
       traditionally favored the media industry for a variety of
       reasons, strong financial performance being, of course, the
       principal one.  But investors have also appreciated that while
       certain sectors of the media industry have been heavily
       regulated, that regulation has been accompanied by a degree of
       certainty.
                 For example, in financing television stations, Wall
       Street has been able to assume with confidence that station
       licenses would continue to be renewed, that no fees or taxes
       would be levied on the spectrum, and that no other significant
       regulator action would impede the ability of broadcasters to
       earn profits while meeting their public service obligations.
                 In contrast, that confidence was somewhat shaken in
       recent years with regard to the cable television industry, as
       we went from regulation to deregulation and back to
       regulation.  While I know from my own experience in Washington
       that regulators by and large take their responsibilities very,
       very seriously, the inevitably tortuous process of developing
       new regulatory frameworks can cause considerable angst on Wall
       Street.
                 Thus, my first suggestion is that whatever policies
       are developed with regard to the new spectrum be specific,
       clear, as simple as possible, and subject to as little change
       as possible after their adoption.  To the extent that the
       Commission can convey such an approach convincingly to Wall
       Street, the ability of broadcasters to raise capital to
       finance ATV projects will be enhanced.
                 The second principle that I would set further would
       be flexibility.  Wall Street recognizes the extent to which
       the media and communications businesses are changing.  Take,
       for example, the matter at hand.  Five years ago, HDTV
       appeared to be the focus of attention in this area.  Today,
       opinions differ dramatically on the best use of new available
       spectrum.  Since we all have difficulty predicting new
       technological developments and consumer preferences, investors
       generally hope that the government will let companies make
       their own strategic choices.  This can also be viewed as in
       the public interest as it is likely to maximize the chance
       that whatever services are provided are those of greatest
       interest to consumers.
                 This is certainly true in the case of digital
       television, which has the potential to provide new services
       for consumers and help insure that broadcasters become active
       participants in the next phase of information delivery. 
       Specifically, I think investors are most interested in the
       opportunities for multiplexing and new communications services
       since it is hard to see how HDTV alone will generate
       sufficient additional revenue to fund major capital
       expenditures.  Regulatory action that limited broadcasters'
       ability to enter new businesses would almost certainly
       decrease the availability of capital for digital conversion.
                 None of this should be construed to mean that there
       are not circumstances under which the FCC should mandate
       service.  History suggest that in some instances, such as the
       introduction of UHF, mandates are essential to generating
       consumer interest.  Certain common technical standards may
       also well be sensible.  We simply must weigh very judiciously
       the benefits of the mandate against the market's potential to
       determine the best available use of resources.
                 These two principles are the major thoughts that I
       would like to convey today, and I thank you all for letting me
       appear.
                 MR. GREBOW:  Mr. Chairman, Commissioners, TELE-TV is
       a partnership formed by Bell Atlantic, NYNEX and the Pacific
       Telesis Group.  We announced in October of '94 our intention
       to offer a wide range of advanced television programming,
       consisting of both "traditional" channels as well as
       communications and interactive capabilities.  We will launch,
       by the end of 1996, through digital wireless transmission and
       hybrid fiber-coax cable, as well as on switched digital
       (fiber-to the curb) systems to be deployed by our partners
       beginning in 1997.
                 TELE-TV promises a new generation of television,
       offering not only unequalled breadth, diversity and quality,
       but also interactivity and interconnectivity available today
       only in the telephone environment.  TELE-TV thus represents a
       convergent blending of the best of telephone, computing and
       television.
                 The Commission has asked whether digital technology
       will make broadcasters a more effective competitor in the
       increasingly challenging video marketplace.  I think the
       answer to that question is a clear yes.  Digital technology
       will allow broadcasters to offer both high definition
       television and multiple free over-the-air standard definition
       television, neither of which broadcasters can do today.
                 Should the Commission decide to allocate free
       spectrum for the conversion of broadcasting to digital
       technology, we believe that the Commission should continue its
       policy of promoting HDTV.  Specifically, the Commission should
       encourage broadcasters to offer a minimum amount of HD
       content.
                 There are several sound public interest reasons for
       such an approach:  the public interest in assuming technical
       excellence in the broadcasting service, the public interest in
       stimulating the marketplace for new and innovative HDTV
       digital TV sets and the public interest in avoiding confusion
       between standard definition and HD standards.
                 The Commission has also asked about the impact of
       broadcasters' use of digital technology on broadcasters'
       competitors.  Aside from additional competition, about which
       we do not believe that competitors can complain, there are two
       policies the Commission should refrain from adopting to avoid
       adverse effects on competition in innovation.
                 First, the Commission should not mandate the
       carriage or processing by competing media of any non-free
       over-the-air service offered by broadcasters.  We acknowledge
       the powerful arguments, both for and against mandatory
       carriage requirements, for free over-the-air broadcast signals
       in the analog domain.  However, should broadcasters be
       permitted to use new digital technology for other than free
       over-the-air broadcasting, they lose, it seems to me, their
       unique and powerful public interest arguments.  Like any other
       competitor, these carriage arrangements should be worked out
       in marketplace negotiations.
                 Secondly, the Commission should continue its policy
       of not requiring other media to utilize transmission schemes
       compatible with the Grand Alliance HDTV System, or set
       specific signal or equipment standards for this purpose. 
       Specifically, the Commission should not take any steps to
       impose mandatory standards or other regulatory constraints on
       the wide range of innovative proprietary set-top boxes now
       being introduced into the marketplace.  Such a policy avoids
       action that might inhibit the rapid innovation of digital
       technology in non-broadcast media.
                 In closing, I want to take this opportunity to
       congratulate the Commission on the work it has so successfully
       overseen in this field.  Thank you very much.
                 COMMISSIONER HUNDT:  Thank you, Mr. Braun.
                 MR. BRAUN:  As president of the NBC Television
       Network, I'm honored to be here today to discuss digital
       broadcasting.  NBC shares the excitement over the potential of
       digital broadcasting but my goal today, is to ask you to
       evaluate everything you hear against one seminal principle. 
       Please make sure that FCC rules and policies give broadcasters
       the opportunity to compete on a level playing field in the
       digital domain.  In order to compete, broadcasters must first
       have the technical capability to provide consumers with
       comparable picture and sound.  HDTV, if that's what consumers
       want and that's what our competitors are giving them. 
       Imagine, could broadcasting be competitive today if government
       policies had forced us to remain a black and white medium
       while all other video services had moved to color, of course
       not.
                 Our competitive disadvantage will be just as acute,
       if we don't have the ability to offer the same high definition
       pictures and CD quality sounds that will be available on
       cable, telco and satellite programming services.  Broadcasting
       is the only competitor to these paying media that is free and
       available to everyone.  We're not asking for special
       treatment, quite the contrary.  We're trying to prevent the
       tilting of the competitive playing field against us.
                 Secondly, in order to compete, broadcasters must be
       able to reach the entire potential audience, we need universal
       access.  Once we have access to the audience, we'll compete
       with all video services.  What we cannot tolerate is a
       gatekeeper who stands between broadcasters and the audience,
       and we're particularly concerned about gatekeepers who own
       their own programming or program services and, therefore, have
       ever incentive to favor their proprietary interests over
       others.  If our ability to attract a mass audience is
       impaired, the economic base of broadcasting will almost
       certainly be destroyed, and if the public's access to
       broadcasting is curtailed, broadcasters will find it
       increasingly difficult to serve the needs and interests of
       local communities.
                 It is important that government rules and policies
       allow broadcasters to compete for several reasons.  To begin
       with, broadcasting will be the foundation for and delivery of
       all digital video technology.  If broadcasting isn't competing
       in digital, it will take consumers far longer to buy digital
       sets.  Without the programming investment and promotion of
       broadcast television behind them, many of the new services you
       will hear about today will never be launched, many of that are
       launched will fail or be marginally successful.
                 But if broadcasting cannot compete, it will affect
       more than television.  The unique promotional power of
       broadcast television is critical to the launch of new consumer
       products and services and therefore critical to the GNP. 
       Entertainment programming is one of this country's biggest
       exports with television programs accounting for 21 percent of
       the $8 billion generated abroad during 1994.  So, as
       broadcasting is diminished, it will negatively affect the
       balance of trade.
                 Equally important, over-the-air television is the
       one medium that provides the same high quality programming to
       both the haves and the havenots.  It is the most widely shared
       experience of our society. 
                 For these reasons, the decisions the FCC faces are
       momentous.  I implore you to make those decisions in a way
       that allows NBC and other broadcasters to succeed or fail in
       the marketplace as equal competitors.  Please don't condemn us
       to an early demise by forcing us to compete as an analog or
       inferior digital pace against the pay services of tomorrow. 
       Thank you.
                 COMMISSIONER HUNDT:  Thank you, Mr. Hendricks.
                 MR. HENDRICKS:  Mr. Chairman and Commissioners, my
       name is John Hendricks, and I'm the founder, chairman, and CEO
       of Discovery Communications.  Discovery is a privately held
       multimedia company which manages and operates the Discovery
       Channel and The Learning Channel and other related businesses. 
       I'm testifying today on behalf of the National Cable
       Television Association, which, as the principal cable industry
       trade association, represents the interests of cable
       programming networks such as Discovery.  However, let me
       devote just one sentence to my role as a TV consumer every
       night, and how generally excited I am about the new
       differentiated services that my broadcast competitors will be
       introducing through advanced digital television.
                 I appreciate the opportunity to appear before your
       to discuss, from the perspective of a non-broadcast, cable
       programmer, the implications of the transition to digital
       television.  The cable industry generally has been ahead of
       the back in embracing technological advances such as digital
       compression.  For example, we, at Discovery, have taken the
       lead in enhancing consumer control over viewing opportunities
       through the development of at digital satellite service called
       "Your Choice TV." 
                 From the perspective of a cable programmer such as
       Discovery, the most important digital spectrum policy
       decisions will be those the Commission will make regarding the
       application of must carry and retransmission consent rules to
       digital TV.  Discovery believes the imposition of must carry
       requirements severely interferes with competition in the video
       marketplace and impedes the development of new programming by
       forcing cable operators to devote a significant portion of
       their capacity to the carriage of programming without regard
       to viewer preference.
                 Must carry artificially restricts the availability
       of capacity to cable programmers who have no over-the-air
       access to viewers.  As a result, cable programmers cannot
       build and develop their audiences and entrepreneurs will be
       unwilling to risk their capital by investing in new services
       and programming.  Most importantly, must carry will deny the
       American public the choices and services that will evolve out
       of a more robust, unrestricted competitive digital TV
       environment.
                 I also urge the Commission to consider carefully the
       potential for broadcast retransmission rights to create
       similar competitive disadvantages.  In particular, I urge the
       Commission to adopt safeguards to prevent broadcasters from
       unfairly leveraging their retransmission consent rights to
       demand carriage of additional over-the-air services.
                 In conclusion, I would like to emphasis that cable
       programmers intend to a vital part of the digital TV
       revolution.  There already are nearly 200 networks vying for
       carriage and dozens more are in the planning stage.  For
       example, Discovery has announced plans for the development of
       five new digitally transmitted services focusing on niche
       programming areas, including at least one service specifically
       devoted to children's programming.  The public's access to
       these and other new services should be determined by the
       marketplace, not by regulations that skew the competitive
       environment.  Thank you.
                 COMMISSIONER HUNDT:  Thank you, Mr. Hubbard.
                 MR. HUBBARD:  Thank you, Stanley S. Hubbard's my
       name.  I thank you very much for the opportunity to be here. 
       I think that everybody in this room believes that the
       transition to digital will be a very good thing.  I know I do,
       I was there when the switch was turned on in 1948 and I was
       there when the color switch was turned on and I hope to be
       there when the HDTV switch is turned on for terrestrial
       broadcasters.
                 But in order for that to work, it must be done in a
       very carefully crafted manner.  I've heard a lot of talk about
       give away of channels, and I can assure you that when we, as
       broadcasters, have to turn on a more desirable channel for a
       less desirable channel in order to make the switch to HDTV or
       to digital, that's not, to me, a give away.  I think that
       being on a fasttrack, too fast a track, could destroy the
       attempt to go to digital because, as Commissioner Chong said,
       I don't think people are going to want to wake up one day and
       find out that in order to watch their free over-the-air
       television, they must go out and buy a converter or buy a new
       television set.  
                 I believe that this transition is going to take 10
       to 15 years, at the minimum.  I believe that the broadcasters
       need all 6 MHz, as Chairman Wiley suggested.  I think that any
       attempt to put more than one broadcaster on a 6 MHz spectrum
       allocation would be a grave mistake and we would be playing
       Russian roulette with the interference possibilities.  I think
       it's going to be a wonderful thing, not a negative thing, for
       a broadcaster to be able to provide two free services at a
       time.  For example, in some day part there may be an
       entertainment program on a non-HDTV program, while at the same
       time there may be an educational program on which Chairman
       Hundt talks about, or there may be a discussion on whether or
       not there should be higher speed limits in the state of
       Minnesota.  All programming will not be HDTV programming. 
       There are thousands and thousands upon hours of good
       documentary material, educational material, material that John
       Hendricks uses which is not in the HDTV format and to suggest
       that we should use all that 6 MHz all the time for HDTV, I
       think, would be a very grave mistake.
                 So I commend the Commission, I ask you to please to
       got carefully.  I ask you to, at all time, recognize the
       important free service that the American people have and to
       not take a chance and jeopardize any of that service and if
       they have any questions, I'd be happy to answer them.
                 COMMISSIONER HUNDT:  Mr. Grossman.
                 MR. GROSSMAN:  Thank you, Mr. Chairman.  I want to
       join my colleagues in congratulating you all for holding these
       hearings that seek to make Federal Communications policy
       suitable for the digital era.  Certainly the arrival of the
       digital era gives you and the Congress a unique opportunity to
       revisit the increasingly outmoded and, I believe, largely
       archaic regulatory scheme that has governed broadcasting for
       over half a century.
                 I agree with Steve Rattner, in the conviction that
       the more complex the situation, the clearer and simpler the
       rules should be.  I urge you to recommend to the Congress
       three basic approaches to telecommunications policy for the
       information age.
                 First, to do away with the policy that treats
       broadcasters differently from everyone else.  That sounds
       rather radical, but commercial broadcasting is a business
       first and foremost and a very good one, and not basically
       either a public service, and certainly not a public
       trusteeship, as anyone who listens to radio and watches
       television would know.
                 In this age of postcard station renewals, greater
       public service requirements for thousands of radio and TV
       stations can't realistically either be either overseen or
       enforced by any government agency and more are coming on board
       every day.  In the digital age, it no longer makes any sense
       for broadcasting to have that special status, and if there are
       requirements to be imposed, I certainly agree with what the
       chairman has said in the past, that they should be specific
       and limited and clear and focused very clearly on things like
       children's programming and the very important political
       campaign process.
                 Secondly, I urge you to recommend that unused radio
       spectrum be auctioned off rather than given away to
       broadcasters for high definition at this point.  Let the
       consumers in the marketplace, not the government, decide what
       are the best uses for the spectrum and what new commercial
       services should be introduced.
                 Broadcasters should be encouraged to broadcast in
       the digital mode and make the best use of their bandwidth to
       engage as well in non-broadcast services.  Winning bidders in
       spectrum auctions should be required, it seems to me, to
       provide every existing broadcaster with enough bandwidth for
       at least one digital TV channel free of charge.  And for now,
       that requirement would best serve the interests of small
       broadcasters as well as the big ones.  And yet, such an
       auction would still produce tens of billions of dollars,
       estimates run from $25 to $70 billion as a significant public
       dividend for the commercial exploitation of the public
       spectrum.
                 Third, and finally, I urge you recommend that this
       Congress follow the wise example of a republican Congress more
       than a century ago, which, in a moment of extraordinary
       foresight, authorized the sale of unused public land to
       finance a remarkable educational initiative.  The Land Grant
       College Act of 1862 opened new educational horizons for
       millions of Americans and it was what build the nation's great
       system of public universities and educational research
       centers.  Today's equivalent of the unused public land of a
       century ago is the public's unused radio spectrum and from the
       money to be earned from the auctions, a brand new educational
       and civic information trust fund, suitable for the new age,
       can be developed and it can interconnect schools and libraries
       and homes for the benefit of all Americans.  Thank you very
       much.
                 COMMISSIONER HUNDT:  Thank you, and Mr. Lippman.
                 MR. LIPPMAN:  Good morning, and thank you for the
       opportunity to speak here.  HDTV is an idea whose time is
       passed.  In the 25 years since the issue was first invented,
       it's been eclipsed.  The initial vision was a clearer new
       television set that you'd wake up to on Christmas morning with
       the same programs, the same programmers, the same audience and
       the same means of distribution, but it's been overtaken. 
       Instead, we have new programs, new programmers, new audiences
       and new means of distribution.  The variables were right, but
       the sign bit was wrong.
                 Digital television is thriving, high definition
       television is withering on the vine.  the new opportunity
       before us is digital broadcasting, not necessarily HDTV or not
       necessarily even television at all.   The explosive
       penetration of personal computers attest to this, they're
       begging for networks to attach themselves to.  The FCC faces a
       challenge today, it faces a one gigabit challenge, that's the
       capacity of the UHF band.  The challenge is how to get the
       bits out and how to leave the meaning of those bits up to
       society to determine.  You might watch high definition
       television during the scrimmage and download a new operating
       system to your personal computer in the midst of the huddle. 
       You can't assume that a television set will be tuned into
       those bits at all, you might assume that computers, pagers,
       telephones and everything else imaginable, even your jacket,
       could be tuned to those channels.
                 The Grand Alliance has done a tremendous engineering
       job building a system for the delivery of high definition
       television pictures and the delivery of the bits that will
       carry those pictures.  They deserve a shot.  We deserve a
       mechanism and a way for us to move forward into the future. 
       They don't deserve an exclusive shot, they deserve one of the
       many infinite uses of the almost infinite number of bits that
       are going to be out there.
                 The challenge before you is, get the bits out as
       rapidly as possible and leave the meaning of those bits up to
       us to determine dynamically, fluidly, as the technology and
       the demands of society declare.  Thank you very much.
                 COMMISSIONER HUNDT:  Thank you all very much.  What
       we are going to do is have a round of questions and answers. 
       It will be six minutes for each commissioner and then another
       six minutes for each commissioner.  If the answer has used up
       most of the six-minute time, I'm sure the questioners will be
       frustrated and irritated beyond measure.  Commissioner Quello.
                 COMMISSIONER QUELLO:  Okay, Mr. Wiley, you've been
       an effective leader in HDTV, you've seen it for over eight
       years, but with auctioning of the digital channel still a
       possibility.  However, as distasteful that it might be to
       some, can you explain in detail what, in your view, would be
       the economic impact of an auction of the ability of
       broadcasters to finance the transition to advanced TV?
                 MR. WILEY:  Well, I think auctioning of the digital
       channel would interfere with the FCC's long planned and
       orderly transition from analog to digital to the detriment of
       the broadcast viewing public.  What you would have is the
       inefficient analog transmission remaining, perhaps forever,
       and high definition television probably becoming only a
       subscription service.  There is nothing wrong with that, but I
       think it should also be accompanied by free over-the-air
       broadcasting service.
                 And finally, auction revenues are likely to be
       higher on the returned and repacked NTSC channels, so if we
       want to have auctions, and we want to get the maximum revenue,
       if that's the goal, then I think I would auction the return
       channel.
                 COMMISSIONER QUELLO:  Um-hum, all right.  Mr.
       Hubbard, can you provide us with an estimation of the
       difficulties broadcasters might have in earning a profit in
       the new digital era.  You've taken quite a risk yourself for
       advanced service to the service to the consumer, what do you
       see as earning a profit in the new digital era?
                 MR. HUBBARD:  Well, Mr. Quello, I think the larger
       the market, the easier it will be to earn a profit.  But, you
       know, most markets in this country are not New York, Los
       Angeles and Chicago.  You know, when you get to the smaller
       markets, such as in Albuquerque or Wichita or at Tulsa, it's
       going to be very difficult and very expensive for those
       stations to switch over to digital and it's going to take them
       a long time to return to the profit stream that they have
       today because the investment is not going to result in any
       increased profit.
                 COMMISSIONER QUELLO:  All right, thank you.
                 MR. HUBBARD:  But a lot of increased expense.
                 COMMISSIONER QUELLO:  Yes that's the way I see it,
       too, but -- Mr. Hendricks, on must carry, you know, I've been
       with that as long as you have or maybe longer, you know.  At
       one time I was able to make the statement that no monopoly or
       semi-monopoly transmission pipeline should be able to impede
       or prevent a broadcaster from serving the public -- a
       broadcaster's license to serve and so on -- that's been pretty
       much my attitude on must carry and, you know, isn't there a
       danger that cable operators could extract pre-carries from
       broadcasters for their very valuable signal without a must
       carry?  You want to take that on, John?
                 MR. HENDRICKS:  Sure, I think the --
                 COMMISSIONER QUELLO:  You've heard it before.
                 MR. HENDRICKS:  -- the issue boils down to cable
       programmers, such as Discovery and A&E, we only have one shot
       to get to the marketplace.  We have no broadcast transmission
       facilities so our primary means of distribution are via cable. 
       For broadcasters, they have, of course, their primary means is
       over-the-air broadcast.  A supplemental means is through cable
       retransmission.  Our fear, and our nightmare, is that a group
       of five local broadcasters compressing their extra channel, at
       say, six to one, would have 30 channels that would flood on a
       must carry basis the cable system.  The cable systems are
       tight as they are today.  Some day, they'll have another five
       channels, perhaps, that can convert to digital, which would be
       another 30 delivery channels.  But, you know, our position is
       clear, we think that the broadcasters can clearly develop a
       documentary channel and that would be a great thing to have
       free over-the-air broadcasting for either at the local level
       or at the national network level for a broadcaster to have a
       new documentary channel.  But we think it would be enormously
       unfair for then mandatory carriage then on the cable system
       that could displace Discovery or A&E or Learning.
                 COMMISSIONER QUELLO:  Well, with your multi-channel
       capacity, why should they have to displace anyone?
                 MR. HENDRICKS:  Well, there's a myth that there's
       this 500 channels of capacity and that ignored the 15-year
       transition period to digital.  A cable operator has to keep up
       carriage of the analog signal.  Once any signal goes digital,
       it becomes invisible to virtually all of America until they
       get the new decoding equipment.  And so the cable systems
       today are at average capacity of around 45 channels, through
       upgrades they'll get another five, perhaps ten, analog
       channels that could be converted, those additional channels,
       to digital.  So five new channels at six to one compression,
       would give 30 new channels.  Now, someday, maybe 15 years from
       now when everybody in the United States has digital decoding
       equipment, that 50 channel cable system could go, say, at ten
       to one compression and have 500 channels, but that's a long
       way into the future.
                 COMMISSIONER QUELLO:  Well, I think of the
       broadcasters getting five or six channels for the single
       channel now is going to be sometime in the future, too, I
       mean, if that's going to be used as an argument.  But, Mr.
       Grossman, I made the statement and I probably disagree with
       you a little bit on this, and I said broadcasters had their
       best executives and the best engineers developing HDTV and
       digital for eight years.  They finally developed it, now that
       it's developed, they say, well, auction it off.  You can
       compete with all people, have direct payment from consumers
       and compete with them.  Now, we know that going into HDTV will
       cost broadcasters the price of a transmitter, they will be
       transmitting initially with people that don't have HDTV
       receivers, it's going to be a very expensive process.
                 I find it a little hard to accept as fair the fact
       that broadcasters developed the technology and now they have
       to bid against everyone that has maybe direct income, whether
       it's the telephone, cable, or cellular, how do you answer
       that?
                 MR. GROSSMAN:  I agree, it's a very hard decision,
       Mr. Quello.  But I also agree with Mr. Lippman, that in many
       ways, this has gone by.  The broadcasters will have the 6 MHz
       that they use for analog.  Down the road, they may decide and
       you may decide it would be wise to convert to HDTV if that
       seems to be the way.  The Japanese certainly are having
       terrible problems in that very conversion, and here you have
       an opportunity to really let the American people and the
       companies in the marketplace decide which way this spectrum
       should be used and how to use it in the most efficient manner
       and the best way to assure that it will used in the most
       efficient manner is to see what prices that will fetch and
       particularly when the public dividend that could be created
       for that in terms of reducing the deficit and providing for
       alternative systems for education and specific and public
       service use.  I think the price is well worth it.
                 COMMISSIONER QUELLO:  Okay, I've been told my time
       is up, so.
                 MR. WILEY:  Can I just comment on that last point,
       though.
                 COMMISSIONER QUELLO:  Yes.
                 MR. WILEY:  That HD has somehow gone past that Mr.
       Lippman and Mr. Grossman have made.  I don't know understand
       the basis for that?  I mean, the Japanese system, which is a
       satellite delivered system, analog transmission, is certainly
       not a guide for what could happen here in the United States
       with the terrestrial system with the world's leading
       technology.  To say that it's simply gone, I think, is just
       fallacious.  Plus we can have, once again, both high
       definition and standard definition and all the NII
       interoperability.  It's our bullets, we can have it all and I
       don't know why we should step back to the past simply because
       the Japanese haven't done it.
                 COMMISSIONER HUNDT:  I think Mr. Wiley was borrowing
       from your time, Commissioner Barrett.
                 COMMISSIONER BARRETT:  Meanwhile -- that gives me a
       little more time.
                 MR. WILEY:  Yes, I always thought it was give, give,
       give.  Go ahead, Commissioner Barrett.
                 COMMISSIONER BARRETT:  Steve, how are you?
                 MR. RATTNER:  Fine.
                 COMMISSIONER BARRETT:  We have a heard a great deal
       about the limited amount of -- Mr. Grossman and Mr. Lippman
       talked about HDTV having passed by and Dick just responded in
       kind from his perspective.  How does the financial community
       feel in terms of the capital that they have, given the fact
       that you have many places to place you invested money in and
       you have a limited amount to invest, has it passed by from
       your perspective?
                 MR. RATTNER:  I think Stan Hubbard addressed this in
       connection with STV or with digital TV and I think it goes
       even more so with HDTV.  As I said in my statement, from the
       point of view of Wall Street, it is difficult for us to see
       what incremental revenues or profits would result from
       financing HDTV expenditures.  That's not to say that HDTV
       shouldn't happen, it's just very difficult for us to see how
       that's going to result, as I said, in additional revenue and
       cash flow.
                 COMMISSIONER BARRETT:  If you had to place in some
       kind of ranking order, where you would advise institutional
       investors to invest their money or who they want to invest
       money, where would HDTV rank?  It certainly would rank above
       video-on-demand, but where would it rank?
                 MR. RATTNER:  I'm not sure it would rank above
       video-on-demand.
                 COMMISSIONER BARRETT:  Well, that's interesting.
                 MR. RATTNER:  I think, again, if you look at it
       purely from a profit and loss point of view, putting aside
       public policy issues which, I don't think, we should put aside
       but for the purposes of answering your question, I'll put
       aside for the moment, many of these new services that all of
       us on the panel alluded to that could be provided, whether it
       be data transmission or wireless communications or whatever,
       certainly have the potential for profit and therefore would be
       of interest to Wall Street.  Video-on-demand, a much debated
       and controversial subject, has some possibility for profit as
       well.  As I said before, HDTV, it's not obvious to me, and I
       don't think it's obvious to anybody on the panel, where that
       exactly leads in terms of profits.  Not to say it's a bad
       thing, but where it leads in terms of profits and so what I
       come down to, in my own thinking on this, is it just strikes
       me that unless there is some form of HDTV mandate, I think
       it's very difficult to envision how or why HDTV ultimately
       happens.  I think if you turn the spectrum over to the
       broadcasters and say, do what you want with it, I would be
       relatively pessimistic myself that there would be a lot of
       HDTVs simply because the economics don't push you that way.
                 So if the policy decision is we want HDTV, I think
       it's going to require some form of mandate from the Commission
       for that to happen.
                 COMMISSIONER BARRETT:  Hum, okay.  Dick, you're
       shaking your head, take at least 30 seconds to --
                 MR. WILEY:  Okay, I'm just have -- all the universe
       of film product that we have today, in our language, which is
       a big advantage for this country, is high definition
       television and I don't have any question that broadcasters, if
       given 6 MHz, will end up showing high definition television
       sports and the film product.  But I think they should also get
       the opportunity to do SDTV, multiple SDTV and other kinds of
       data services.
                 COMMISSIONER BARRETT:  Mr. Braun, you had talked
       about you find it difficult to fund local programming, when
       things do not occur as it relates to the spectrum.  Tell me
       what programs you're talking you'd have --
                 MR. BRAUN:  Local news in particular, but what --
                 COMMISSIONER BARRETT:  Let me ask you a question.
                 MR. BRAUN:  Sure.
                 COMMISSIONER BARRETT:  When you do fund that, that's
       revenue supported?
                 MR. BRAUN:  No, don't forget the networks actually
       pay the local broadcaster to carry their programming so one of
       the -- there's a vast number of television stations in this
       country that would not be profitable were it not for the
       compensation paid them by networks.  That money is reinvested
       in local news.  They would not be able to have local news
       operations if they did not have cash compensation from
       networks.
                 COMMISSIONER BARRETT:  Well, you're right, no
       question about that but that's part of the affiliation
       agreement.  It seems to me that while I don't always react to
       the term, and I use it quite often with my colleague, Jim
       Quello, free over-the-air broadcasting.  What we're really
       talking about is advertise-sponsored local programming and
       clearly you are not doing this without revenue support from
       other sources in addition to the network, at a local level --
       situation.
                 MR. BRAUN:  It's all advertising, no, it's all
       advertising.  It's advertising supported at the national level
       and at the local level.
                 COMMISSIONER BARRETT:  Okay, I just don't want to
       make people think it's free.  We don't pay for it, but it has
       --
                 MR. BRAUN:  Right, it's free to the consumer, it's
       free to the consumer.
                 COMMISSIONER BARRETT:  Okay.
                 MR. BRAUN:  And I --
                 COMMISSIONER BARRETT:  And you were going to respond
       to my question which basically to Mr. Rattner was from the
       financial perspective, and Dick from the amount of public
       policy, I'm not sure where you're from.
                 MR. BRAUN:  If I may.  Well, the question I would
       raise is --
                 COMMISSIONER BARRETT:  No, I don't want you to raise
       a question, are you going to respond to the --
                 MR. BRAUN:  Well, the response to Mr. Rattner's
       comment is then that likewise, I presume, the financial
       community would find it uncertain and ambiguous if
       broadcasters were legislatively or regulatorily prohibited
       from competing against other forms of delivery for CD quality
       sound and digital pictures.  I think it would be --
                 COMMISSIONER BARRETT:  What other forms of delivery?
                 MR. BRAUN:  Other wire line and DDS.  So if we don't
       have sufficient bandwidth to actually deliver comparable sound
       and picture, I think the financing underpinnings of the
       broadcasting industry are actually going to be at risk.
                 COMMISSIONER BARRETT:  Okay, Stan, were you going to
       --
                 MR. HUBBARD:  I say Mr. Braun is absolutely right,
       so is Mr. Wiley.  Everybody will want to go into HDTV, it'll
       start from the bigger markets down, as did color.
                 COMMISSIONER BARRETT:  Thank you, Mr. Chairman, I
       will -- and again -- well, let me go back to Mr. Rattner again
       because I think it's important that we understand that what
       Chairman Wiley's talking about and what Steve is talking about
       certainly, while not compatible while they sit there, we can
       make good public policy and do the things that make Mr.
       Rattner survive and certainly do the things that Dick Wiley
       wants to see come forth.  Steve, if you had in your mind to be
       able to develop the -- a policy in your mind to take care of
       your financial interests and take care of Chairman Wiley, what
       would you do as a regulator?
                 MR. RATTNER:  Well, let me say, I'm happy to say I
       think I'm going to survive, whatever we do on this question. 
       But --
                 COMMISSIONER HUNDT:  And very handsomely as well.
                 MR. RATTNER:  Excuse me, and you as well?
                 COMMISSIONER BARRETT:  Mr. Chairman, I want to tell
       you, we were in Italy and I had to fly back on a slow plane.
                 MR. RATTNER:  Germany, Germany.
                 COMMISSIONER BARRETT:  And he took a much faster
       plane back.  Germany, we were in Germany, that's right,
       Germany.  Now, I'll tell the truth, that's where I caught that
       cold, in Germany last week.
                 MR. RATTNER:  It felt like Italy.  I think that what
       I would say on that, and unfortunately, i can't solve your
       problem for you completely because I'm not a regulator, I'm in
       the financial world.  I have no problem with you, with HDTV,
       with the Commission mandating HDTV, with broadcasters doing
       HDTV, and, as a consumer, I probably would actually be a buyer
       and enjoy it and make use of it.  All I'm here to point out to
       you here are a couple of things. 
                 First, that I don't believe that HDTV will happen in
       a meaningful way without some form of a push from the
       Commission because I don't believe, for example, if the
       spectrum is auctioned, that the resources will be available
       for the existing broadcasters to buy it and use it for HDTV.
                 I don't believe there's any great financial
       incentive today for a broadcaster's interest in HDTV at all,
       even if he had the full 6 MHz, simply because I don't know if
       there's any way for him to recoup that money, and therefore,
       voluntarily I'm not sure he's going to do it.
                 So, if the Commission decides that from a public
       policy point of view, from the point of view of promoting
       American interest internationally, the Grand Alliance, all
       these different things that we all know about, I think the
       Commission's going to have to make it happen and that is going
       to involve a very difficult public policy balance between
       allocating the full 6 MHz for HDTV, at least part-time, and I
       take your point, Dick, versus having it being used for other
       services that could produce greater profits.  It's a bit of an
       apples and oranges comparison, unfortunately.  Greater profits
       on the one hand, versus a public interest or a long-term
       public benefit of having high definition television.
                 COMMISSIONER BARRETT:  Something we do -- and have
       some high level respect for the investment thoughts and a
       number of other things.  Let me stop and I may, on the next
       round of questioning, may want to get back into that.
                 MR. RATTNER:  Can I just say one last question on
       this, Commissioner?  From an investor yield --
                 COMMISSIONER BARRETT:  That's the end of time.
                 MR. WILEY:  You'll get a chance, I'm sure.
                 COMMISSIONER HUNDT:  You can a chance, Commissioner
       Ness.
                 COMMISSIONER NESS:  Thank you, Mr. Chairman.  Mr.
       Wiley, you talk about the flexibility of the Grand Alliance
       system and Mr. Hendricks commented about his concerns with
       respect to must carry.  How do you rationalize, how would you
       handle if you were here to make a determination about must
       carry, how would you handle the Grand Alliance system with
       respect to the limited carriage opportunities on cable?
                 MR. WILEY:  Well, I think that is, you know, really
       a government policy but, from my standpoint, I think if you
       give the broadcasters four channels, it is a little difficult
       to require, it seems to me, must carry of cable on all those
       channels.  I think that would be more difficult.  I'd like to
       see the HDTV channel and they use the whole channel for one
       program.  I think that should be must carry, under current
       policy.
                 COMMISSIONER NESS:  Okay, Mr. Rattner, you comment
       quite eloquently about the dual goals of certainty and
       flexibility.  How do those dual goals live happily ever after
       in an environment where a broadcaster perhaps would be able to
       offer paging services or other services in competition with
       some of the other folks that you regulate, or that you
       finance, rather, and who have paid for their spectrum?  Is
       that an issue bringing into question the certainty in the
       marketplace?
                 MR. RATTNER:  Well, purely from a financial
       community point of view, that degree of flexibility would be a
       plus, not a minus.  In other words, the fact that a
       broadcaster would not be restricted to providing one form of
       service or another, whatever it might be, would enhance the
       broadcasters ability to finance because, left to his own
       devices, the broadcaster is going to develop one or more
       projects that represent in his mind the most profitable use of
       the spectrum, he will come to us.  The fact that there's
       competition, we can deal with competition and all these
       markets are becoming more competitive and there's nothing
       wrong with that but he will have the ability to come to use
       and say, I'm going to use Channel X for this purpose, will you
       finance it, and we will have the confidence to know that he
       has the right to use Channel X for that purpose, more or less
       in perpetuity, subject to good behavior and so on.
                 COMMISSIONER NESS:  Okay, Mr. Grossman, you talked
       about requiring the auction winners to carry another
       broadcaster's signal.  Wouldn't that prevent the auction
       winner from broadcasting in HDTV?
                 MR. GROSSMAN:  It probably would, unless it was a
       broadcaster who won, and the reality is that very few
       broadcasters would be able to put up the money or would be
       willing to put up the money, as Steve suggested, to bid for
       that specific purpose.  And the real question is, in the free
       market place, when consumers, in the end, are making those
       decisions and investors are making the decisions and nobody
       can predict what's going to happen, I think it's a high
       question as to whether you would want to mandate such a
       system, rather than let it flow out and then you still have
       the 6 MHz on analog that eventually can be dealt with if
       everybody decides that HDTV is the way, down the road, when
       you have more information.
                 COMMISSIONER NESS:  Certainly you talk about the
       ability of choice, but wouldn't it be very difficult if
       there's not a critical mass of programming out there for an HD
       opportunity to survive, Mr. Grossman?
                 MR. GROSSMAN:  Yes, it would be very difficulty, and
       again, that's what the American people and what the investment
       community is going to have to sort out and decide.  I think
       for all of those sort of civic and educational purposes that
       you consider to be central, and we all consider to be central,
       then you have an alternate way instead of imposing those
       requirements on broadcasters as has been traditional, you have
       an alternate way to fund them, in the manner that I suggested.
                 COMMISSIONER NESS:  Mr. Lippman, you talk about
       having many standards, how, if you were a manufacturer of
       consumer products, such as a television set, how would you be
       able to determine what to offer the consumer and would that
       not, if you had to address many different standards, would
       that not increase prohibitively the cost of the television
       set?
                 MR. LIPPMAN:  Well, first of all, we already have a
       plethora of standards out there.  Most of the computers that
       we use in work stations and commercial environments and the
       ones that are approaching our desktop already sweep out a
       picture that's clearer than most of the high definition
       television systems that we've seen today.  So the transition
       to those kinds of scan rates is not difficult, nor is it
       needlessly expensive, it's rooted in old single-purpose
       thinking to believe that you have to do it once and you have
       to do it only one way.
                 The digital electronics that allow you to
       intermediate between standards are becoming much, much simpler
       every day and by the time that we have high definition
       television broadcasts and it's not necessarily obsolete, it's
       simply not the driver of the transition to digital technology. 
       As those broadcasts emerge, so will our ability to
       intermediate between them.  So it's not an inherently
       expensive task, it's more like a software task.
                 COMMISSIONER NESS:  Mr. Hubbard, finally, in your
       testimony you mentioned that translators are very important
       particularly in rural areas, how, for provision of local news,
       for example, how would we address the issue of local
       translators the cost of conversion to digital and their
       carriage in a world of digital television?
                 MR. HUBBARD:  Well, there are more than 5,000
       translators in this country and, of course, that's the
       lifeline to many, many people for television service.  It
       would seem to me that this once again underlines the need for
       a long transition period which will allow these local
       communities who pay for their translators to raise the money
       and, at some point, switch over.  But if you say to them
       tomorrow morning, you're going to have to be digital, they'll
       all be off the air, they can't raise the money.  They have a
       terrible time paying their electric bills.
                 COMMISSIONER NESS:  I don't think anybody is
       assuming that we would immediately be seeing --
                 MR. HUBBARD:  I'm not assuming it either,
       Commissioner, I just say that that would be a disaster.
                 COMMISSIONER NESS:  Okay, thank you, my time is up.
                 COMMISSIONER HUNDT:  Commissioner Chong.
                 COMMISSIONER CHONG:  Thank you.  I want to follow-up
       with Mr. Rattner.  Mr. Gabbard, in the fourth panel, talks
       about the costs of converting to digital television for small
       and medium size broadcasters, and he estimated it was about
       $1.8 million to do a conversion to digital excluding the cost
       of a new tower.  And he expressed concern about how
       broadcasters would be able to obtain financing from the
       financial community for this conversion.  I wanted to know
       what you thought about that scenario.  Do you think small and
       medium broadcasters would have difficulty obtaining financing
       for approximately $1.8 million to convert given the financial
       situation of broadcasters in that size?
                 MR. RATTNER:  It's going to be a function of
       individual circumstance.  I agree with Mr. Hubbard, there's no
       question that the cost of this digital conversion is going to
       be significant, it's going to be born, as I've said a couple
       of times now, without any immediate prospect of additional
       revenues or cash flow and therefore it's going to have to be
       financed out of existing station operations.  So what that
       means is that a broadcaster who doesn't have $1.8 million in
       the bank, is going to go have to borrow it and he's, in
       effect, going to have to pledge some portion of his existing
       cash flow to repay that loan over time.  If he has no other
       debt, that probably works and he can probably get that
       financing.   It's not a huge amount even for a smaller
       station, given the value and cash flows of these.  If he's
       heavily leveraged or otherwise under any financial pressure,
       it could certainly, at the margin, cause him some problems.
                 COMMISSIONER CHONG:  Now, suppose the government
       conducted an auction of these channels and a smaller medium-
       sized broadcaster wanted to borrow money to participate in a
       auction, would a broadcaster have difficulty borrowing that
       kind of money?
                 MR. RATTNER:  It's actually a very similar situation
       to the one you already asked about, it would be -- assuming
       the full 6 MHz were auctioned off and they didn't even get one
       channel for their digital conversion, and they then felt
       compelled or wanted to buy such a channel, again, without any
       immediate prospect of additional revenues or cash flow, the
       cost of that channel, whatever it turns out to be, would have
       to be financed out of existing cash flow from operations.  And
       the same answer, if they're doing well and they don't have a
       lot of debt, they presumably could finance it, it would cause
       them significant pain.  If they're not doing well, it could be
       impossible.
                 COMMISSIONER CHONG:  Thank you.  Mr. Braun, your
       fellow panelist's Mr. Grossman, suggested that broadcasters
       shouldn't have public interest obligations anymore and that
       broadcasters should buy their channels in an auction and be
       able to carry whatever they want and then pay fees according
       to their use of the spectrum.  Do you think that broadcasters
       are amenable to that kind of approach, would they be happy
       with that?
                 MR. BRAUN:  No, not even close.  First of all, in
       response to Mr. Grossman, I'd like to say in terms of the free
       market idea he's espousing, the consumer would never get a
       chance to vote with respect to broadcasting HDTV because they
       don't spend consumer dollars on that, so it would really be
       the diminution of the market and therefore the loss of
       advertising revenue which would force the contraction of the
       broadcasting system, not the consumer's decision that he
       doesn't want to receive free over-the-air local broadcasting.
                 But, in addition to that, I will tell you, just as
       good business, the whole so-called affiliate wars of the last
       year where the networks were all competing for local
       affiliated stations, it's possible to be misperceived as a
       fight over VHF band stations, but it's much more than that,
       it's about stations that have strong local identifies, who
       have news franchises, who have a relationship with their
       community that brings audience to the television set because
       that's good business for us.  It's a great promotional
       platform to tell them what's going to be on when the network
       time periods come.  So more than just having affiliates with
       strong VHF signals, the long-term viability of local news is
       critical to the networks.
                 COMMISSIONER CHONG:  Mr. Grebow, you were contending
       that the Commission should encourage broadcasters within
       constitutional limits to offer a minimum amount of HD content
       and I was wondering what exactly you meant by that, what
       constitutional limits were you talking about, and I presume --
       I mean, are you saying that we ought to have a minimum or that
       we shouldn't have a minimum, and if we did have a minimum,
       what would that minimum be, a quantitative kind of minimum or
       some other kind of time of day minimum?
                 MR. GREBOW:  We believe that the Commission does not
       require some minimum content of HD, that HD will not happen
       and that if the Commission believes, as we do, that HD is
       important, then it is going to have to require it.  Now, there
       are constitutional issues that have been raised that I'm not
       in a position to address, but the Commission needs to decide
       if it believes that HD is something that American consumers
       want, and if it's a public policy important imperative.  If it
       is, we believe that some reasonable number should be required. 
       There is no magic number, some proponents have suggested five
       hours per week, that's probably sufficient.  Remember, it's
       requiring any HD that forces broadcasters to make the
       investment, so the importance is to require the first hour,
       really.
                 COMMISSIONER CHONG:  How tough would it be to
       deliver five hours a week, Mr. Braun?
                 MR. BRAUN:  Well, NBC has gone on the record as
       saying we would support that minimum mandatory requirement so
       -- that's based on the belief that it's going to be critical
       to our competitive stance.  So however tough it is, we believe
       we have to do it.
                 COMMISSIONER CHONG:  Well, let's ask the cable guy. 
       Mr. Hendricks, cable, are going to be doing HDTV, broadcasters
       say that they have to be competitive, are you guys going to do
       it?
                 MR. HENDRICKS:  Yes, I think that you'll see high
       definition television as something that's on the cable menu,
       you know, three to six years from now.  You know, I'm
       supportive of the broadcaster having 12 MHz to play with so
       that they can be competitive in being able to multiplex their
       services as well as be in a position to offer high definition
       television.
                 COMMISSIONER CHONG:  Now, it's my understanding
       cable's upgrading their system to do precisely that, isn't
       that true?
                 MR. HENDRICKS:  Yes, cable's upgrading its systems
       to provide additional capacity, and again, it'll take a long
       time to digitize the entire system, but we should have five to
       ten additional channels within about three to four years.
                 COMMISSIONER CHONG:  Thank you, I think my time's
       up, Mr. Chairman.
                 COMMISSIONER HUNDT:  Thank you.  Mr. Hubbard, you
       have the capability to choose to transmit in the format called
       high definition right now, isn't that right?
                 MR. HUBBARD:  With our direct blockade satellite
       system, yes, sir, we do.
                 COMMISSIONER HUNDT:  And you're not doing that, is
       that correct?
                 MR. HUBBARD:  Well, no, we're not doing it.
                 COMMISSIONER HUNDT:  You're not doing that because
       you don't know of anyone who could watch it?
                 MR. HUBBARD:  Well, who would -- there's no one that
       can watch it, that's the very primary reason.
                 COMMISSIONER HUNDT:  So that's a case of relying on
       the market to make these decisions instead of asking the FCC
       to order you to broadcast in one particular format?
                 MR. HUBBARD:  Yes, it is.
                 COMMISSIONER HUNDT:  Mr. Hendricks, the cable
       industry is deploying boxes of the digital conversion, that's
       right, isn't it?
                 MR. HENDRICKS:  That's correct.
                 COMMISSIONER HUNDT:  These boxes will take a digital
       signal over the cable hookup and will translate it to an
       analog picture so I can watch it on the TV that I already
       have, isn't that right?
                 MR. HENDRICKS:  That's correct.  You will get a
       hybrid transmission from the cable head-in of analog which
       would be the bulk of the signal, and then a portion of the
       spectrum would be digital and that's what your box would
       decode.
                 COMMISSIONER HUNDT:  In generalizing about the cable
       industry which includes many different players, does it appear
       right now to be the cable industries business strategy to
       deploy these digital down converter boxes to all of the cable
       subscribers?
                 MR. HENDRICKS:  No, because of the costs of the
       equipment, we think that most often it would be the cable
       operator would be advertising that the new convertor boxes are
       available, the new content services would be advertised and
       those consumers who were interested in paying for the new
       services would get the new boxes.
                 COMMISSIONER HUNDT:  Do I understand you to be
       saying that cable's thought is that consumers will be making
       the decision to spend the money on the digital convertor based
       on the notion that they can get some new content?
                 MR. HENDRICKS:  Well, you have to understand, I
       think a large segment of cable consumers feel that they are
       television saturated.  There are some consumers, though, that
       want more services, movies on demand, and it will be those
       consumers we think that would readily respond to new
       offerings.
                 COMMISSIONER HUNDT:  And what the digital revolution
       does for cable is it gives cable the opportunity to offer more
       channels and more content, correct?
                 MR. HENDRICKS:  Yes, what digital offers both cable
       and broadcaster is additional capacity.
                 COMMISSIONER HUNDT:  Additional capacity to deliver
       more programs, right?
                 MR. HENDRICKS:  That's correct.
                 COMMISSIONER HUNDT:  Now, this digital down
       convertor box that I might choose to subscribe to will display
       the picture on my analog TV, right?
                 MR. HENDRICKS:  That's correct.
                 COMMISSIONER HUNDT:  So, I will not get, because of
       the limitations of my television, I will not get the kind of
       resolution that a high definition picture coupled with an
       appropriate receiver might give me?
                 MR. HENDRICKS:  That's correct --
                 COMMISSIONER HUNDT:  So, in other words --
                 MR. HENDRICKS:  But the cable industry will have to
       wait until high definition television is first feeded by the
       broadcast industry to be able to make use of the new sets.
                 COMMISSIONER HUNDT:  So, in other words, the cable
       industry won't have any business plan to deliver a high
       definition format unless and until some other industry finds a
       way to convince customers to buy a receiver that will actually
       display with appropriate resolution the high definition image.
                 MR. HENDRICKS:  Yes, that's why I think it's some
       three to four to five years out.
                 COMMISSIONER HUNDT:  Meanwhile, Mr. Rattner is
       saying it's never going to be out unless we order the
       broadcasters to deliver a high definition picture.  Isn't that
       what you were hear him saying?
                 MR. HENDRICKS:  Yes.
                 COMMISSIONER HUNDT:  And you hear Mr. Braun saying
       the same thing and Mr. Grebow saying the same thing, right?
                 MR. HENDRICKS:  That's correct.
                 COMMISSIONER HUNDT:  In other words, the view seems
       to be that unless the FCC interferes with the market, there
       isn't going to be a substantial number of people who are going
       to buy the receivers that are appropriate for high definition,
       but, in fact, we can't order anyone to buy that kind of home
       theater, can we?
                 MR. HENDRICKS:  I don't think so.
                 COMMISSIONER HUNDT:  We don't have -- our powers are
       limited, they're limited no matter what we may think, they're
       limited in some respects, aren't they?
                 MR. HENDRICKS:  That's correct.
                 COMMISSIONER HUNDT:  Mr. Lippman, do you see any
       public policy reason for us to interfere with the market so as
       to try to promote a particular format, bits are bits, aren't
       they?
                 MR. LIPPMAN:  It's been said by others on this panel
       and I certainly agree.  I don't agree that without your
       forcing people to transmit HDTV pictures will never have high
       definition television.  The natural evolution --
                 COMMISSIONER HUNDT:  You mean, it just might happen
       in the marketplace?
                 MR. LIPPMAN:  It not only might happen in the
       marketplace, but it's unavoidable in a smooth and seamless way
       through the pure evolution of the screens that we have in our
       living rooms and on our desks without any CD necessary and by
       the time those TV sets, as you might call them at that time,
       defuse through the marketplace, the investment hurdles might
       be ever so much smaller to overcome and even Mr. Rattner would
       care to invest.
                 COMMISSIONER HUNDT:  But this smooth and seamless
       evolution that you're talking about would be one driven by
       consumers and the marketplace as opposed to the government,
       isn't that right?
                 MR. LIPPMAN:  Yes, and the access to the digital
       networks that you could provide in the UHF band.
                 COMMISSIONER HUNDT:  Mr. Rattner, if we auctioned
       the digital spectrum, presumably someone would pay something
       for it, you agree with that, don't you?
                 MR. RATTNER:  I agree.
                 COMMISSIONER HUNDT:  And presumably it would be
       people who saw that they could make a profit using that
       spectrum, right?
                 MR. RATTNER:  Presumably.
                 COMMISSIONER HUNDT:  Now, if we give the digital
       spectrum to a current broadcast licensee who doesn't have the
       financial resources to develop it, what logically is that
       particular licensee going to do with the spectrum?
                 MR. RATTNER:  If he can't develop it, depending on
       the rules, he'll turn it back or he'll sell it as the rules
       permit.
                 COMMISSIONER HUNDT:  Do you think we should prohibit
       the analog broadcast licensee who might receive the digital
       spectrum license, should we prohibit them from transferring
       the digital license?
                 MR. RATTNER:  Well, that's a long and broad
       question.  Let me say this, I think that if you --
                 COMMISSIONER HUNDT:  I thought that was a yes or no
       question.
                 MR. RATTNER:  I know, but unfortunately it's not a
       yes or no answer, so I'm going to give you a slightly
       different answer.  If you -- I don't believe that the problem
       of broadcasters being unable to develop the digital spectrum
       is a substantial one.  In other words, I think if you give the
       digital spectrum to broadcasters, I'm not saying whether
       that's right or wrong, but if you decide to do that, with
       little or no restrictions as to how they use it, then, I
       believe, they will find a way to use it and get finance
       because we will finance them.
                 COMMISSIONER HUNDT:  Should we prohibit them from
       transferring the digital broadcast license?  Should we make it
       unsellable for 15 years?
                 MR. RATTNER:  It's a public policy question, it
       really depends on --
                 COMMISSIONER HUNDT:  Do you see any public policy
       reason to interfere with the marketplace?  Normally, in the
       market, you'd allow them to transfer property.
                 MR. RATTNER:  Normally in the market you would allow
       them to transfer.  I think, in this particular case, there is
       certainly a significant public policy issue over whether you
       should give broadcasters a full additional 6 MHz and tell them
       to use it for anything they want regardless and it's theirs
       forever.  In other words, it is not obvious to me that you
       should give broadcasters six more MHz and let's assume that
       they all wanted to go into cellular phones or data
       transmission, and that they should get that for free and they
       should have the right to have it in perpetuity.  That's not
       obvious to me, that's a public policy question.
                 COMMISSIONER HUNDT:  Because it might be too much of
       a gift?
                 MR. RATTNER:  Yes, that's not part of the deal going
       in.
                 COMMISSIONER HUNDT:  All right.  Commissioner
       Quello.
                 COMMISSIONER QUELLO:  I have kind of a hypothetical
       question for say Mr. Braun, Hubbard, some of those in
       broadcasting.  Say that Congress and the FCC decides that you
       have to pay for the digital and for the HDTV in an auction. 
       Does broadcast have any plans once you pay for it and you --
       that's a big bite, I mean, you're going to have to pay for the
       transmitter, your transmitting simulcasting to people that
       don't have very many receivers, yet it's going to be a long
       evolutionary process, has there been any planning at all, and
       I'm putting on my old broadcast has now, of maybe providing a
       hybrid service similar to cable where you would all of a
       sudden, if you're going to pay for the auction, you're going
       to have a pay service and let people pay for, let's say,
       football, baseball, basketball, hockey, the best movies, the
       soap operas, the best news in the world so that you could --
       all of a sudden you go from free TV to a pay service TV and
       you're sitting now on still the most attractive programming,
       any plans for doing that?  Has that come up in anyone's mind
       on how you're going to do it you have to pay an exorbitant
       price for an auction and wouldn't that be pretty much the end
       of free over-the-air TV?  I've said that before, I think we'd
       be developing a nation of have and havenots.  But if I'm going
       to pay for the auction, I want to be able to finance it and I
       think, if I have that kind of a proposition, it should be very
       attractive to Mr. Rattner and all the other people that
       actually invest money.
                 MR. BRAUN:  I'd like to address that, Commissioner. 
       Actually, I had a conversation on that topic just yesterday. 
       Later today NBC is going to be making an announcement about an
       acquisition of rights far out into the future and of a major
       event of public interest that's traditionally always been
       carried on free over-the-air television, and precisely because
       of the uncertainty that we're discussing today, I discussed
       with the people negotiating that arrangement to please
       preserve the flexibility to be able to do whatever is
       necessary in an economic climate where we can't reach a
       universal audience in the kind of picture and sound that
       they're used to.  Meaning, in fact, that we would charge -- in
       fact, have the right to be able to charge for certain types of
       program, this particular program, in fact, over time, if we
       couldn't make money on it by delivering it free over-the-air. 
       We have to hedge that bet.
                 COMMISSIONER QUELLO:  I think there's a general
       feeling that broadcasters are entitled to a channel only for
       broadcast purposes, not for cellular and paging and all the
       other things that might be very profitable.
                 MR. BRAUN:  Right.
                 COMMISSIONER QUELLO:  So I was just thinking if
       ahead, if you're going to get a broadcast channel, how are you
       going to pay for it?
                 MR. BRAUN:  Well --
                 MR. HUBBARD:  May I respond also?
                 COMMISSIONER QUELLO:  Sure.
                 MR. HUBBARD:  I can't envision any broadcaster being
       so foolish as to try and charge for their broadcast services. 
       And I can't imagine a Commission allowing that.  The very
       purpose for our licenses and for our being is to be good
       public servants and provide a free over-the-air service, and
       I, for one, reject the concept of a broadcaster charging for
       services.  And, if I might also add, if it were to be an
       auction situation, I don't think very many broadcasters,
       Steve, would be able to win that auction.  You'd have AT&T or
       USWest or whoever coming in and winning the auction, the
       prices would be so high that it would then become a pay
       service.  That would be the end of free over-the-air, in my
       opinion.
                 COMMISSIONER QUELLO:  So it's, if you go auction,
       why it's going to be a pay service, but you can't visualize
       broadcast every being pay service?  Of course, most of us
       don't want broadcast to be a pay service, either.
                 MR. HUBBARD:  I don't either, Mr. Quello.
                 COMMISSIONER QUELLO:  We owe that service to the
       public.
                 MR. HUBBARD:  What I'm saying is if there were an
       auction situation, I think that the market price for the
       spectrum would be so high that broadcasters would be out of
       business and then new people would have that spectrum and they
       would charge because they had paid so much, and that'd be the
       only way they could recover.
                 COMMISSIONER QUELLO:  All right, thank you.  Have
       you got something, Larry?
                 MR. GROSSMAN:  I just wanted to -- I certainly agree
       with that and that's why I would suggest that if there were an
       auction situation that you do reserve at least enough spectrum
       for a digital channel for any television broadcaster who wants
       to use it, so you can have the best of both worlds, in a
       sense.
                 COMMISSIONER CHONG:  Does that include the community
       broadcasters?
                 MR. GROSSMAN:  I beg your pardon?
                 COMMISSIONER CHONG:  I'm sorry, Jim, this is your
       time. 
                 COMMISSIONER QUELLO:  Community broadcasters, yes --
                 COMMISSIONER CHONG:  Oh, I'm sorry.
                 COMMISSIONER QUELLO:  I've just have one more
       question for Mr. Wiley.  Do you respond to Mr. Lippman's
       argument that there are standards already out there and
       therefore no need to mandate HDTV?
                 MR. WILEY:  Well, I'm not comfortable with mandating
       certain programming requirements, but I do think it's
       essential to set a standard.  I think to insure efficient use
       of the ATV spectrum, to give the public certainty to get the
       service quickly, I think the Commission needs to act and I
       think it's especially so, and going back to some comments that
       the chairman asked or the questions he asked, I think the ATV
       spectrum, after all, is going to be shared, sharing
       interspersed channels with the NTSC operations and I think
       you've got to look to having an efficient use of that
       spectrum.  And the nice thing about it is, there really isn't
       any need for the Commission to do anymore work in this area. 
       The standard had been fully documented, thanks to Mr.
       McKinney's organization's excellent work.  I think there's a
       questionable precedent here to simply depart after the
       Commission has said to people, spend hundreds of thousands of
       hours and millions of dollars to develop this, and then walk
       away from setting a standard.  I think that'd be most
       unfortunate.
                 COMMISSIONER QUELLO:  All right.
                 COMMISSIONER BARRETT:  Mr. Hubbard, you said that
       broadcasters should not be able to do what with the
       allocations?
                 MR. HUBBARD:  Charge for the services they now
       provide for free.
                 COMMISSIONER BARRETT:  If you take a look at the
       progressive scanning model which is more compatible with
       computers and you look at the interlaced scanning model which
       is compatible for higher resolution and you consider the fact
       that the Grand Alliance can do both, would you have a problem
       with people using any of that spectrum for data transmission
       or anything like that?
                 MR. HUBBARD:  No, as long as it accompanies the
       broadcast service, and I think that broadcasters --
                 COMMISSIONER BARRETT:  What are they -- charge for
       those services?
                 MR. HUBBARD:  I'm going to get shot by friends in
       broadcasting, probably, but I don't think they should be able
       to charge for it.
                 COMMISSIONER BARRETT:  So, you don't believe in
       flexible use for the channel.
                 MR. HUBBARD:  Yes, I do.  Yes, sir, I do, I think --
       I believe in the use of any auxiliary channel in coordination
       with the main broadcast channel.
                 COMMISSIONER BARRETT:  How they then now make that
       attractive to Mr. Rattner's clients, if, in fact, I'm going to
       limit what they do under the Grand Alliance concept which can
       handle both of -- the progressive scanning and the interface
       scanning process?
                 MR. HUBBARD:  Broadcasters have a long history, Mr.
       Barrett, of always trying to give the public the best possible
       service, how to improve their picture, how to improve their
       news, how to improve everything.  If you give it enough time
       to transition, I think every station in the United States will
       go digital and will give the best possible service without
       having to charge for that service.  Without free service we're
       out of business.  There's no point in having broadcasting.
                 COMMISSIONER BARRETT:  If we mandate some portion is
       to be used for broadcast purposes and then, in turn, can,
       under some concept, bid to Grand Alliance which can do both of
       the models, and they can provide data services, other
       services, that are compatible with computers and the high
       resolution aspect and they can charge for that, do you have a
       problem with that?
                 MR. HUBBARD:  No, I don't, but I also -- and this
       again, I'm a heretic, but I think that if -- what we get -- we
       have a broadcast channel which we have that because we
       developed it, we took the risk and I think to say that we're
       going to charge for the services without us paying something
       for the use of that particular service, I think is a mistake.
                 COMMISSIONER BARRETT:  Is that attractive, Steve,
       if, in fact, we limit the use for ancillary programs in
       addition to the broadcast aspect?
                 MR. RATTNER:  Clearly to the extent you limit the
       use of the spectrum and decrease flexibility, it becomes less
       attractive to Wall Street as something to finance.
                 COMMISSIONER BARRETT:  Neil, you're biting at the
       chops.
                 MR. BRAUN:  Well, the -- I agree with Stanley except
       for one thing, if, in order to compete in broadcasting in a
       competitive environment, we need to be able to have 6 MHz for
       HDTV transmission.  If you preserve flexibility and we use it
       for pay services, we believe it's appropriate for you to make
       different rules for subscription services using that spectrum
       as opposed to free over-the-air.
                 COMMISSIONER BARRETT:  Well, what rules do we make
       if, in fact, we're getting what we want at a minimum or a
       maximum requirement that we have suggested that they do in
       terms of a broadcasting perspective?
                 MR. BRAUN:  I'm not sure I followed --
                 COMMISSIONER BARRETT:  If, in fact, we get what we
       want for use of that free channel, if I may, of the spectrum,
       and we get that and you're able to do other things that are
       compatible with the usage of that spectrum, what difference
       does it make that I put rules down to limit you in terms of
       data transmission and things like that?
                 MR. BRAUN:  I'm simply making the point that what
       broadcasters are by and large arguing for is the ability to
       compete and we need the 6 MHz for that.  But we don't need it
       100 percent of the time.  If we use it for things that
       generate a new revenue stream from subscribers, that should be
       subject to different rules and paying for value in that case.
                 COMMISSIONER BARRETT:  Why should it be when I'm
       getting what I want for what I've given you the allocation
       for, why should I then set a rule for what you can do when
       you're not using it for 100 percent of what I allocated it
       for?  Why should the government be involved in that?  If I'm
       getting what I want from you as a matter of public vision --
                 MR. BRAUN:  Right.
                 COMMISSIONER BARRETT:  -- and I think the Chairman
       has put it before us more profoundly than anyone, if I'm
       getting that, even if it's the children's television stuff you
       had suggested, if I'm getting all of what I want and you have
       other time usages, and you want to use that flexibility, why
       should I determine what you should use it for and why should
       there be different rules for that flexibility?
                 MR. BRAUN:  I'm just acknowledging a distinction
       between those free over-the-air services that are totally
       supported by advertising and those which ask consumers to take
       money out of their pocket.  I don't know there's a public
       policy interested in charging us, as long as you're getting
       what you want, you're right, there may be no public policy
       interest in charging us beyond that.
                 COMMISSIONER BARRETT:  Let me say this, let's assume
       that Congress says that we need -- you need to have 3-1/2
       hours of children's television.  And let's assume that we
       implement that and let's assume that one suggests that you
       need "X" number of hours of educational programming, if I'm
       getting that and you still have some time to be used for
       broadcast for whatever kind of services, why then, for that
       additional time, should I subject you to governmental rules
       after you have fulfilled my public policy vision?
                 MR. BRAUN:  No, that's clearly a quid pro quo, that
       makes --
                 COMMISSIONER BARRETT:  I'm not even sure it's a quid
       pro quo in the legal sense because I've gotten what I want.
                 MR. BRAUN:  Well, right.  I'm not --
                 COMMISSIONER BARRETT:  Did -- I'm sorry.
                 MR. HUBBARD:  I agree, but if you require us to do
       certain things that are costly, that changes the whole --
                 COMMISSIONER BARRETT:  And you do then.
                 MR. HUBBARD:  Yes, and we do them, then I agree --
                 COMMISSIONER BARRETT:  And you have uptime for
       usage.
                 MR. HUBBARD:  Yes.
                 COMMISSIONER BARRETT:  Why, then, should the
       government tell you, set a different set of rules?
                 MR. HUBBARD:  You shouldn't, I think we're
       vehemently agreeing with you.
                 COMMISSIONER BARRETT:  Are you a lawyer, are you a
       lawyer?
                 MR. HUBBARD:  I think that all -- I went to law
       school.
                 COMMISSIONER BARRETT:  That's a good answer, we all
       wish we didn't go to law school.  But before I congratulate
       Dick on his alma mater in Chicago going to the Rose Bowl and I
       was going to wear purple today, I'll wear it Thursday, this
       purple and black tie I'm going to wear.  How do you respond to
       that, Dick, given that the Grand Alliance can do all that --
       and, Mr. Chairman, I really apologize for doing this, for gone
       over now, I won't --
                 COMMISSIONER HUNDT:  You're just taking Commissioner
       Ness' time.
                 COMMISSIONER BARRETT:  I apologize, Commissioner.
                 COMMISSIONER NESS:  This is a marketplace
       negotiation.
                 COMMISSIONER BARRETT:  Did you understand what I'm
       saying?  I'm getting what I want, we have determined, by
       whatever mandate, that a certain amount of educational and a
       certain other kinds of programs we want, I've gotten that. 
       There is still time to be used.  Do you think I ought to be
       telling you, set up a different set of rules for your clients
       or how your friends ought to use that time?
                 MR. WILEY:  No.
                 COMMISSIONER BARRETT:  Okay, thank you very much,
       Mr. Chairman.  I apologize, Commissioner Ness.
                 COMMISSIONER HUNDT:  He knew a yes or no question.
                 COMMISSIONER BARRETT:  He went to a great law
       school.
                 COMMISSIONER NESS:  During the transition from a
       terrestrially delivered network signal to an earth station
       satellite delivery, many of the networks provided some
       compensation or helped to underwrite the cost of those earth
       stations.  I don't recall whether or not NBC fell within that
       category, but I believe so.  I see someone shaking their head
       yes.  Is there a similar -- and the reason it was done was so
       that it furthered the goal of the network to be able to make
       this deliver system which presumably had clearer pictures and
       cost less.  I assume that there may be perhaps the same
       incentive to assist some of the network affiliated stations
       with a more rapid conversion to digital or to HD, if a network
       wanted to be able to maximize its audience and thus, perhaps,
       derive some revenues from delivery of HD signals, is this a
       concept that has been contemplated by your network, Mr. Braun?
                 MR. BRAUN:  It's not one that I've been privy to any
       conversation with, but, I mean, if I accept your premise that
       -- I mean, if what we are doing is preserving our ability to
       deliver a critical mass audience, we will have to think about
       that.  I mean, if we believe that that's a critical issue to
       the continuation of delivery of a critical mass, we'll have no
       option other than to consider that.
                 COMMISSIONER NESS:  We talked a little bit earlier
       about must carry because this is still a very difficult issue
       to address when there are multiple programs streams coming
       down from broadcast.  How, Mr. Braun, would you address Mr.
       Hendricks' concern about multiple channel delivery and must
       carry?
                 MR. BRAUN:  I think I'm in pretty much agreement
       with Mr. Hendricks, I mean, the distinction in my mind, again,
       still is free over-the-air versus subscription.  If it's
       consumer financed, then I think we have to compete against all
       other services for carriage.  If it is free over-the-air on a
       universal basis and we're making it available to cable
       operators, I think it should be on the same must carry basis
       as the primary must carry signal.
                 COMMISSIONER NESS:  When you use the digital
       converter boxes that would enable the viewer to use an analog
       TV set, are those converter boxes dynamic in that the amount
       of digital bits coming forward may vary so that you could
       have, for example, an HD transmission coming through or
       narrower programming to create more channels?  How does that
       work?
                 MR. BRAUN:  I think the first generation might be
       somewhat limited but I think the boxes that will be available,
       say, a year -- that will be introduced say two years from now,
       will be robust enough to carry the full digital spectrum, will
       be able to reformat the bits and bytes to address the high
       resolution digital screen at that time.  I think the early
       boxes that will be introduced next year will be somewhat
       constrained because, again, they'll be largely just passing
       through the analog signal about 40 channels, but they will be
       able to decipher that limited digital spectrum and redisplay
       video on demand and other services.
                 COMMISSIONER NESS:  So if an HD signal came through,
       you would be able to pass through an HD quality picture to the
       subscriber?
                 MR. BRAUN:  I'm just not sure about the first
       generation boxes, I'm pretty sure that the boxes in the second
       generation, two to three years from now, will be robust enough
       to address that.
                 COMMISSIONER NESS:  About 70 -- what, I guess about
       66 or 65 percent of households now subscribe to cable and much
       of the cable viewership is to over-the-air broadcast channels.
                 MR. BRAUN:  Right.
                 COMMISSIONER NESS:  How will we be able to progress
       to have HD, for example, if the signals are being carried or
       being watched through a cable system?
                 MR. BRAUN:  Well, I think the opportunity here is to
       have government encourage carriage of certain hours during the
       week of high definition television.  That, by and itself, I
       think, will drive the technology out.  You know, to produce an
       economic model that Wall Street and Steve Rattner will respond
       to, I think the local broadcaster will have to probably have
       four or five new services that will be introduced on a
       multiplex basis and what we've ignored here is the revenue of
       advertising which has always been a strength of broadcasting. 
       They can introduce an all news channel to compete with CNN,
       for interest, and finally people who have free over-the-air
       television, can have all news all the time, and that could be
       very powerful in the advertising world.
                 COMMISSIONER NESS:  Yes, my concern is if we are
       going to try to get high definition television, there's got to
       be a critical mass of viewers out there and even if there were
       to be sets, if they're not able to receive the HD signal, for
       example, through cable and they're cable subscribers, how does
       that work, Mr. Hubbard?
                 MR. HUBBARD:  They might buy an antenna.
                 COMMISSIONER NESS:  So, in other words, that might
       encourage folks not to subscribe or at least to use an A/B
       switch?
                 MR. HUBBARD:  Yes, most people will always get a
       better picture if they have an antenna than they will from a
       cable anyway, and I think with HD -- well, that's a matter of
       fact.  What a cable company does is use an ordinary household
       antenna, but they hook it up properly, so there's a lot of
       people that can buy an antenna as they do for DSS.
                 COMMISSIONER NESS:  Okay, what percentage of a
       broadcaster's time ought to be free over-the-air broadcast? 
       We talked about having the flexibility, if the Commission or
       if government does not regulate a specific number of hours of
       HD or other type programming, at what point do you feel that
       the consumer is perhaps not getting full value if, let's say,
       there were one stream of programming that were free and the
       rest of the streams of programming were all pay services, Mr.
       Braun?
                 MR. BRAUN:  It's hard to answer that question as a
       hypothetical.  I would say that that is where the marketplace
       should determine it.  Every technology looks for its killer
       application, its enabling application.  Broadcasting is the
       application for digital that cumes 100 percent of television
       households every week.  So, as Steve said before, I think it's
       the first hour of HDTV that's most critical, and I think
       incrementally we'll see what happens and we will learn by the
       market place about what level of programming commitment we
       drive penetration at.  It's very had to forecast beyond that.
                 COMMISSIONER NESS:  Mr. Hubbard, do you have any
       thoughts on that?
                 MR. HUBBARD:  Well, it took seven years for the
       first million color TVs to be shipped and it's going to be a
       long process and broadcasters are better equipped than anybody
       else to do it.
                 COMMISSIONER NESS:  Okay, Mr. Wiley.
                 MR. WILEY:  I think we're going to see an
       evolutionary process, Commissioner Ness, but I think once the
       public sees it, and I invite anybody to go down there and look
       at it themselves this afternoon, they're going to say, I'd
       like to have that in my living room.  And keep, again, in mind
       the fact that we do, in this country, have all that product
       which was 35 mm cinematography which is the equivalent of
       HDTV.  It's available off the shelf and I think that will help
       the transition.
                 COMMISSIONER NESS:  In other words, absent
       government regulation, you would not have a problem if the
       broadcaster were to send out five streams of programming of
       which only one is free over-the-air and the remainder were all
       pay services?
                 MR. WILEY:  Well, I think that's a government policy
       decision.  I think that Stanley Hubbard is right, a lot of
       broadcasters might be giving up their birthright in that
       instance, but some pay programming might make sense.
                 COMMISSIONER NESS:  Okay, thank you.
                 COMMISSIONER HUNDT:  Commissioner Chong.
                 COMMISSIONER CHONG:  I just have two last lines of
       inquiry.  To any broadcaster on the panel, there's been lots
       of talk about using the additional flexibility you would have
       if you have digital.  To your knowledge, are there
       broadcasters out there who would want to convert to digital
       and then, as a primary or entire use of their spectrum, use it
       for non-broadcast subscription services?
                 MR. BRAUN:  No.
                 MR. HUBBARD:  No, I don't think so.
                 COMMISSIONER CHONG:  My second line of inquiry is
       about the transition period.  I've heard a lot about how, you
       know, we have, I think, 15 years currently set up in the
       decisions and some have suggested that maybe shorter was
       better, others have expressed concerns about the length.  Mr.
       Hubbard, you suggested that maybe we should declare the end of
       the transition period as 95 percent penetration of high
       definition TVs into the marketplace.  Why did you pick 95
       percent, do you think a penetration standard is better than an
       arbitrary time standard and why?
                 MR. HUBBARD:  Well, the lower the penetration number
       is before its arbitrated, the more people are going to be
       still relying on the old sets, and 95 percent is 95 million
       homes and that leaves 5 million homes would have to convert
       and the fewer that have to or forced to, the better.  It's
       going to be a hard pill for some people to swallow who don't
       want to do the new system, but at some point you have to bite
       the bullet.
                 COMMISSIONER CHONG:  And what about set-top boxes, I
       mean, when would be expect to have set-top boxes that are at a
       low enough price where most of those last 5 percent of
       Americans could afford it, anyone can answer that.
                 MR. HUBBARD:  I would think by that time, I'm in the
       set-top box business, and I would think by that time the set-
       top -- they are just chips, and by that time there should be
       enough of them to make the price very low.
                 COMMISSIONER CHONG:  How low do you think?
                 MR. GREBOW:  In the '97 time frame, we would hope
       that the chip sets would be available to do that pretty easily
       and pretty inexpensively, but it's still going to be several
       hundred dollars if it's a separate stand alone box.
                 COMMISSIONER NESS:  Is it out of the question to
       think that to provide an incentive for the last 5 percent of
       Americans to switch that the broadcast industry might
       subsidize the box for low income Americans?
                 MR. HUBBARD:  No.
                 COMMISSIONER CHONG:  Stan is shaking his head.
                 MR. HUBBARD:  Well, I'm saying no because we don't
       have any cash flow except our advertising.
                 COMMISSIONER CHONG:  Well, what about the possible
       ancillary services?
                 MR. HUBBARD:  Well, that's something that can be
       looked at.
                 COMMISSIONER CHONG:  NBC?
                 MR. BRAUN:  You know, broadcasting keeps getting
       discussed like it's a deep pocket and -- you have to
       understand there are companies -- it's cyclical like any other
       industry.  Some of us are doing very well, some of us are
       doing much less well right now.  Having available cash to do
       all the different things we've talked about today to implement
       the new system, if we had to do them all, I don't think
       anybody could survive.  So picking which ones we have to, I
       think, is going to be critical.
                 COMMISSIONER CHONG:  That's all I have.
                 COMMISSIONER HUNDT:  Mr. Braun, are you comfortable
       with the idea that the government would prohibit NBC from
       deciding what programs to put on the digital spectrum?
                 MR. BRAUN:  Am I comfortable with the idea that the
       government would prohibit NBC from -- no, I'm not comfortable
       with that idea.
                 COMMISSIONER HUNDT:  Are you comfortable with the
       idea that we would tell you that you are absolutely obligated
       to show on the digital spectrum the exact same program that
       you're showing on the analog spectrum, 24-hour-a-day
       simulcast?
                 MR. BRAUN:  I think -- let's put it this way,
       whether it's a reasonable thing for a government to do is
       separate from the question of whether we would have a business
       problem with it.  We're prepared to put a substantial
       simulcast on because we think that's what's going to drive
       technology and penetration.
                 COMMISSIONER HUNDT:  If you want to volunteer to do
       that, that's one thing.  What I'm asking you is, are you
       comfortable with the idea that the government would order you
       to simultaneously broadcast on digital the same show that was
       on analog as opposed to allowing you voluntarily to make that
       decision on your own because you thought that was the best way
       to keep your audience?
                 MR. BRAUN:  Obviously, I prefer to do it by my own
       judgement.
                 COMMISSIONER HUNDT:  Okay, similarly, with respect
       to the decision to broadcast the high definition format,
       wouldn't you be more comfortable with the notion that you
       would voluntarily make that decision instead of having the
       government order you to pick that particular format?
                 MR. BRAUN:  Yes, and we will.  But my point is, if
       the 6 MHz isn't available to do it, consumers will never have
       the choice to get broadcasting and HDTV free over-the-air
       broadcasting.
                 COMMISSIONER HUNDT:  These questions assume that you
       have the 6 MHz for digital broadcasting and if you will
       voluntarily decide to use the high definition format, I just
       have to say, my reaction is, why would you want the government
       to micromanage your business and order you to it?
                 MR. BRAUN:  Well, we don't.
                 COMMISSIONER HUNDT:  Let's suppose, nevertheless,
       that someone were to insist that we mandate a certain amount
       of high definition format for NBC stations, do you think that
       we should order you to do that during prime time?
                 MR. BRAUN:  I mean, that really does become
       micromanagement.  I mean, I'm trying to envision what the
       impact of that is.  Our prime time programming is already our
       most expensive programming.  It is where the vast majority of
       our revenue comes from, so while -- if you wanted to gain
       exposure that might be it, but it's putting the most important
       part of our business at risk and you're basically telling us
       how to run the most important -- we've got.
                 COMMISSIONER HUNDT:  Well, I'm not, I'm just raising
       the hypothetical.  I'm a lot more deregulatory than that kind
       of idea would require.  Mr. Hubbard, should we order you to
       use the direct broadcast satellite to delivery a high
       definition format?  You already serve everyone in the country,
       you've already got the satellite up.  If we need somebody to
       drive the purchase of high definition receivers, why don't we
       pick on you, you don't even have to pay for the spectrum, why
       don't we make you use the high definition format?  That'd be
       the easiest way to go, wouldn't it?
                 MR. HUBBARD:  Mr. Chairman, we really did pay for
       that spectrum, we put everything we had at risk to develop
       that service, so I want to make that clear.  No, I don't think
       you should order us to do that.
                 COMMISSIONER HUNDT:  Well, I agree with you, I don't
       think we should be ordering anyone to take a particular format
       and I know you put a lot at risk for that spectrum and nobody
       believed you'd be successful but there you are, up in the sky
       as being successful.  However, if you want a government policy
       that drives the creation of the high definition receiver and
       you want somebody to deliver the high definition format,
       you're the most logical candidate, aren't you?
                 MR. HUBBARD:  Let's let the marketplace do it.
                 COMMISSIONER HUNDT:  That's an idea.  Mr. Braun,
       I've been told by Mr. Perlman, formerly CEO of Zenith, that
       the 6 MHz digital spectrum could be used in a high definition
       format for at least two movies simultaneously, is that the
       same information you're receiving?
                 MR. BRAUN:  I don't believe that's true on
       broadcast, I believe that's true on cable but there are others
       here who know more about that than me.
                 COMMISSIONER HUNDT:  Okay, I've been told -- pardon
       me?
                 MR. HUBBARD:  Two movies is possible.
                 COMMISSIONER HUNDT:  You agree that you could see at
       least two movies, no question.
                 MR. BRAUN:  No question, we do that every day, but
       two basketball games, a big problem.
                 COMMISSIONER HUNDT:  But you could do two movies?
                 MR. BRAUN:  Yes, you could.
                 COMMISSIONER HUNDT:  Let's go with Mr. Hubbard's
       statement, he's in the business, do you think, Mr. Braun, that
       we ought to, by rule, say that one of those movies has to be
       free and one has to be subscription, or one has to be free,
       but the other could be subscription?
                 MR. BRAUN:  Well, I believe -- I don't think you
       should say which one should be or one has to be but I think
       what we're talking about is that there should be a free over-
       the-air signal as part of the spectrum.
                 COMMISSIONER HUNDT:  Well, isn't that the same thing
       as saying that at least one of those two movies would have to
       be free?
                 MR. BRAUN:  It's saying that -- yes, you're not
       saying that you have to put a movie on but you're saying that
       if you did put it on, at least one of them would have to be
       free.
                 COMMISSIONER HUNDT:  Well, if you had two programs
       at the same time, at least one would have to be free, that's
       what you're saying we ought to do.
                 MR. BRAUN:  Yes.
                 COMMISSIONER HUNDT:  Okay, but right now we don't
       have any rules that obligate you to show free television,
       that's correct, isn't it?
                 MR. BRAUN:  I don't think it is correct.
                 COMMISSIONER HUNDT:  You're not doing it because of
       our rules, look it up.
                 MR. BRAUN:  No.
                 COMMISSIONER HUNDT:  You're doing it because it's
       good business.  And Mr. Hubbard, you're aware that there have
       been efforts by broadcasters to try to charge a subscription
       for broadcast TV, that's happened in the last several decades?
                 MR. HUBBARD:  Yes, and the American citizens have a
       funny thing, they don't want to pay for what they can get for
       free.
                 COMMISSIONER HUNDT:  That's right.  But the
       Commission didn't preclude anyone from trying to charge, the
       market didn't tolerate it, right?
                 MR. HUBBARD:  Not that I'm aware of.
                 COMMISSIONER HUNDT:  I'm just saying I don't know
       why we should start laying new rules on digital broadcast that
       we don't even put on analog broadcast.  Thank you very much. 
       We should stop but --
                 COMMISSIONER BARRETT:  We should all stop -- getting
       mixed signals from these people in terms of my question, but
       you followed up wisely on it, don't worry about it, that's
       fine.
                 COMMISSIONER HUNDT:  Okay, we'll take a 10-minute
       break.  I want to thank all of the panelists very, very much,
       this has been entertaining, informing and very much fun.  A
       10-minute break, we're going to be quite sharp about that.
                                        PANEL 2
                 COMMISSIONER HUNDT:  -- convenience of necessity. 
       The issues in this panel are of particular significance to our
       very able Mass Media Bureau and I'd like to acknowledge the
       presence of Roy Stewart, the very able chief of the Mass Media
       Bureau, who is going to be listening, as we are all, with
       great attention to these issues because whoever gets the
       digital spectrum and whatever be the resolution of the issues
       about formats and transmission, we still face the public
       interest issues and off we go to the discussion.  Preliminary
       remarks, again, let me remind everybody to visit the
       demonstrations on the first floor of 2000 M Street, they'll be
       open until 5:30.  No. 2, the format is that there will be
       three minutes for each of the panelists and then in two rounds
       of six minutes per commissioner, there will be Q and A, long
       answers deprive questioners of the opportunity to fire
       carefully crafted sharp-pointed questions and thus irritate
       the questioners.  Off we go.
                 MS. SOHN:  Thank you.  I appreciate the enormity of
       your task.  I urge one thing in particular, not to forget your
       mandate to make the public's interest paramount.  The worst
       thing you could do for the public would be to simply give the
       ATV spectrum to existing broadcasters, to let broadcasters
       receive this enormous benefit without imposing any new
       obligations in exchange, would be the biggest corporate
       welfare give away of the decade.
                 Unfortunately, there is little in the record here to
       indicate that broadcasters plan to do anything more for the
       public than provide prettier pictures.  Indeed, until now,
       this debate has largely been framed in terms of broadcasters
       needs to compete, to have flexibility, to provide non-
       broadcast services and to have an adequate transition period. 
       It is now time for the Commission to focus more on the
       public's needs to have access to diverse sources of
       information, to be adequately compensated, and to be assured
       access to free TV.
                 MAP has suggested two approaches to serve these
       needs effectively.  The favorite approach would be for the
       Commission to permit broadcasters to use only enough capacity
       as is necessary to provide one free digital service.  We call
       this the condominium option and it somewhat resembles the
       British government's plan for digital TV.  This plan would
       permit new entrance in unaffiliated programmers to use the new
       spectrum.  My written testimony suggests how this can be
       achieved consistent with the Grand Alliance standard.
                 The second approach assumes the Commission grants
       broadcasters the full block of spectrum, notwithstanding
       Supreme Court prohibiting this outcome.  In that event, MAP
       asks the Commission to require broadcasters to use 3/4 of
       their capacity for free broadcasting and that it require
       additional enhances public interest obligations in return for
       the exclusive opportunity to transition.
                 We suggest three such obligations, free time for
       candidates, reservation of capacity for low-cost public use,
       and increased children's television obligations.  If I may be
       blunt, your job would be easier if some broadcasters were more
       candid about their intentions for the Spectrum.  For example,
       commercial broadcasters say they need to be multichannel
       providers to compete, yet, their rhetoric and legislative
       plans indicate that they want to provide just one program
       service of standard quality.  Many broadcasters shun HDTV and
       predict that they will be able to multicast, yet, when asked
       to reserve a small portion of that capacity for public uses,
       they say that they cannot anticipate what technology will
       ultimately permit them to do.
                 Finally, in the face of auction threats, other
       broadcasters have reembraced HDTV, even as they urge the
       Commission not to set minimum requirements.  The Commission
       should stay these proceedings until broadcasters stop being
       evasive about what they can or want to do with the spectrum.
                 In conclusion, I want to clarify two misconceptions
       about MAP's position.  First, we do not oppose the conversion
       to digital, what we challenge is giving broadcasters exclusive
       use of the huge chunk of spectrum without returning something
       additional to the public. 
                 Second, we do not oppose HDTV, but we are skeptical
       of the public's need or desire for it and we don't endorse
       minima.  Many large broadcasters have pledged to provide HDTV,
       we saw that on the last panel.  That's enough to enable to
       public to decide if they want more.  Time doesn't permit me to
       discuss other important issues.  I look forward to your
       questions.
                 COMMISSIONER HUNDT:  Thank you, Mr. Braverman.
                 MR. BRAVERMAN:  In summarizing my written testimony,
       I would like to make three points.  First, contrary to the
       views of some of my fellow panelists, lending spectrum to
       broadcasters for a transition period to effect a transition to
       digital is not a spectrum give away.  Eight years ago, the FCC
       correctly determined that the public interest would be best
       served by affording broadcasters the means to upgrade this
       country's free over-the-air broadcast system to the highest
       quality picture and sound that was technologically possible. 
       After years of work and millions of dollars of investment,
       private industry has solved the daunting technical hurdles to
       FCC's upgrade plan.  While the goal is accomplished, the means
       to do so changed from an analog approach to a digital solution
       with all of the potential for flexibility that digital
       technology allows.
                 Some now assert that the fact that digitization
       holds the potential for other uses should cause the Commission
       to abandon its judgement that broadcasters should be given the
       means to enable them to upgrade their service to HDTV.  We
       disagree.  If digital were indeed a genie in the bottle, it
       should not change the Commission's wish.  Just as it was true
       eight years ago, the ability to offer high resolution video
       service remains vital to the continued viability of the free
       over-the-air system the country now enjoys.  Cable, Telco, DBS
       and other new technologies will surely compete for viewers by
       exploiting digital's revolutionary potential for improved
       picture quality and sound.
                 Free over-the-air broadcasting will whither if it is
       forced to meet that competition through technologically
       inferior NTSC offerings and the public interest is hardly
       enhanced by limiting these digital breakthroughs to only the
       video-by-subscription world.
                 Second, the transition to digital will require the
       imposition of some ground rules, to assure a successful launch
       and, just as importantly, an expedited transition.  In
       addition to a simulcast requirement, we believe that a fair
       market test of HDTV does require a prescribed minimum hours of
       HDTV programming.  We are hardly alone in this view.  Contrary
       to the views of some panelists, the broadcast industry has not
       backed off its commitment to HDTV and many, in both the
       broadcast and equipment manufacturing industries support an
       HDTV minimum.
                 And, third, with respect to the public interest, one
       vital point should not be lost in the debate.  The public
       interest will be greatly enhanced by enabling our free over-
       the-air broadcasters to offer to the public an opportunity to
       enjoy the highest quality picture and sound that's
       technologically possible.  We do not believe that the loan of
       the new spectrum should or needs to be conditioned on new
       governmentally imposed public interest obligations.  Like all
       broadcasters, we very much understand that the use of the
       digital spectrum will and should be charged with an obligation
       to operate in the public interest both during the transition
       and after the give back.
                 But this is hardly a new concept.  At Capital
       Cities/ABC, we have operated our stations for many years in
       the public interest and are proud of our record of doing so. 
       We, as all broadcasters, have met this obligation without the
       need for the imposition of specific quantified public interest
       obligations by the government.  We have long believed and
       continue to believe that the imposition of such specific
       obligations would be bad policy and counterproductive to
       assuring that the totality of a community's needs are served
       by the broadcasters that serve it.  Thank you, and I look
       forward to your questions.
                 COMMISSIONER HUNDT:  Thank you, Mr. Diller.
                 MR. DILLER:  Thank you.  Well, the only sane way
       that I know to begin this discussion is to flatly say how
       ridiculously complicated the whole topic is.  New
       technologies, old systems, the displacement of old players,
       new sources of revenue, potentially disenfranchised consumers,
       eager new players, and, of course, the future of what we now
       call free broadcasting.
                 The truth is, I don't envy this Commission its task,
       and I'm somewhat reluctant to play the role of a backseat
       policy maker.  Nevertheless, you've been generous enough to
       ask my opinion, an always dangerous thing, and I'll do my best
       to comply.  This much I can say with certainty, anyone making
       hard predictions on how all this is going to come out, is more
       than likely to be wrong.  Guessing at the behavior of 250
       million people, except in this year by the programmers at NBC,
       is no easy trick.  So to proceed on the assumption that was
       can safely lay down a comprehensive ATV policy is ridiculous. 
       Nonetheless, the technology may be on the verge of viability
       and we have no choice but to set preliminary guidelines lest
       we artificially retard the process.
                 My gut tells me that in this case, less is more. 
       Rather than over-intellectualize ATV, let's establish that no
       matter what form it takes, it should be primarily organized as
       an evolution of our old mass free broadcasting system.  This
       system has served us well for over half a century, providing
       us with the most prolific and diverse programming in the world
       along with the most possible complaints about its
       shortcomings.
                 The mechanism that has made this all possible is
       that unique, though always precarious, balance between
       commerce and responsibility.  Our system is four parts free
       market and one part public interest obligation, the latter is
       more subtle but the recipe is worthless without it.  I think
       the same formula is well applied to rule-making involving
       future technology.  Any absolute dictation to the marketplace,
       whether mandating HDTV transmissions or fixing the timing of
       conversion, is bound to do more harm than good.  The beauty of
       our existing system is that it flows with the rhythm of the
       market and only kicks in to keep the broadcasters from getting
       too out of sync with the public.
                 We really don't know if consumers will want better
       pictures or more channels or anything at all.  If there's a
       market for HDTV, someone will go for it.  If cable or the
       Telcos get there first, don't worry, it may be at their last
       breath, but broadcasters will certainly follow.  Or
       conversely, one broadcaster, believing it will get an
       advantage, will take the early lead and reap the rewards or
       fall on its face, in what may be the ultimate chicken-and-egg
       scenario to force anyone in or out of the coop, except
       possibly for the fox, would be foolish.
                 However, no matter how many channel choices
       technology provides us, nor how much free mass broadcasting is
       worth preserving, free must be a reciprocal street.  To the
       extent that broadcasters maintain their historic obligations
       to program in the public interest for free, they should
       continue to get their licenses for free.  If they use some of
       the new digital spectrum for pay services, then it's right and
       proper that they pay the going rate.  And if any free
       stations, not just strictly defined to news or educational
       channels, do not demonstrate strong and sincere commitments to
       the public interests, then such broadcasters should be
       replaced with programmers that are willing to honor the
       public's interest.
                 Now, this will definitely require reinvigoration of
       the Commission's responsibility to proactively enforce
       broadcasters' compliance with the public interest.  But I've
       been arguing that's necessary regardless of whether you
       broadcast in digitally delivered fiber or pipe cleaners. 
       Whatever the distribution, we must fix this now or the system
       we've enjoyed for so long will be truly in danger, and I think
       balancing new services with general public interest
       responsibility is a better and more sensible course than
       mandating all sorts of things like date-certain timings for
       conversion and auctions based thereon, much less give back to
       the minimums for a marketplace that doesn't yet exist. 
       Meanwhile, I wish you all the best of luck.  Thank you.
                 COMMISSIONER HUNDT:  Thank you very much, Ms.
       Anderson.
                 MS. ANDERSON:  Good morning, I want to comment the
       Commission for initiating an open dialogue on what is indeed a
       controversial issue, the proposed give away of lose spectrum
       to broadcasters.  For nearly ten years, the debate about HDTV
       has been the exclusive province of special interest groups,
       broadcasters, consumer electronic manufacturers and their
       legions of lawyers and lobbyists with no input from the
       American public.  While the Commission's original plan to set
       aside spectrum for HDTV has been rendered obsolete by advances
       in digital compression technology and the utter lack of
       consumer demand for HDTV sets that cost the equivalent of a
       down payment on a new car, these special interests loudly
       proclaim that the public interest will nevertheless be served
       by doubling the amount of spectrum assigned to broadcasters
       and giving broadcasters the, "flexibility" to use the new
       spectrum to provide new digital broadcast and non-broadcast
       subscription services.  If the proposed ATV licensing plan is
       implemented, broadcasters will reap an unconscionable windfall
       at the expense of American taxpayers who will unwittingly
       subsidize their transition to digital technology.  Such an
       eventuality would be the national scandal that former FCC
       General Counsel Henry Geller warned about in his testimony
       before the Senate Commerce Committee last July.
                 I believe a discussion of digital broadcasters'
       obligation to serve the public interest is premature.  The
       threshold question needs to be answered, what public interest
       is being served by government mandated transition to digital
       television that doubles the amount of spectrum assigned to
       existing broadcasters, forces consumers to spend an estimated
       $33 to $187 billion to receive "free-TV," widens the trade
       deficit and disenfranchises millions of American who depend on
       free over-the-air television as their primary source for news
       information and entertainment.  I respectfully submit that at
       the end of this review, the Commission will conclude that the
       marketplace should determine consumer demand for digital
       television and that the public interest will be served by
       auctioning the spectrum to the highest bidder and earmarking a
       portion of the revenues for educational technology block
       grants to the states to a connect the nation's public schools
       and library to the information super highway.
                 Finally, the Commission and our nation are at an
       historic moment.  In the original assignment of television
       licenses, the Commission failed to secure concrete commitments
       from broadcasters to serve the public interest.  The tragic
       consequences of that policy failure and lack of accountability
       are reflected in survey findings that a whopping 80 percent of
       Americans believe television is harmful to society and
       especially to children.  The proposed ATV licensing plan
       presents a farcical notion that the public interest will be
       served by giving existing broadcasters 12 MHz of spectrum for
       an indefinite period of time.  We can, and indeed, must do
       better for our country, for ourselves, for our children, and
       for future generations.  My time is up, I'd be happy to answer
       any questions that you might have.  Thank you.
                 COMMISSIONER HUNDT:  Mr. Honig.
                 MR. HONIG:  Good morning.  Throughout the 87 year
       history of broadcasting, the airwaves supposedly have belonged
       to the public at large.  Yet, even today, minorities own only 
       31 full power television stations, 2.7 percent of the total,
       representing less than have of one percent of industry asset
       value.  Owing to the elimination of tax certificates and the
       disuse or suspension of your other race-conscious licensing
       policies, minority media ownership is declining rapidly.  This
       is a national disgrace.
                 Your highest priority should be to rectify this
       insidious and unlawful misallocation of one of our greatest
       national resources. We urge you to license no ATV facilities
       until you complete post-Adarand research study and develop a
       race-conscious plan aimed at insuring that ATV licensees
       resemble the audiences they will serve.  Licensing first and
       studying minority ownership later will mean locking out
       minorities forever.
                 We encourage you to adopt four goals in ATV
       licensing.  First, you should ensure that the licensing
       process will foster diversity in ownership and viewpoints.
                 Second, you should remedy, once and for all, the
       Commission's long history, over two generations, of official
       discrimination and ratification of licensees' discrimination.
                 Third, you should take account of the profound
       difficulties faced by minorities in obtaining access to
       capital.
                 And, fourth, you should insure that every licensee
       selected for ATV, irrespective of how they are selected, will
       implement an aggressive EEO program.
                 The question of the day is this:  Which is the most
       promising algorithm to insure that minorities have a
       meaningful opportunity to win ATV construction permits,
       lotteries, comparative hearings, auctions, or a gift to
       incumbents?
                 The answer is either comparative hearings or
       auctions, provided that either hearings or auctions are
       structured to facilitate the licensing of minorities and other
       applicants with strong commitments to public service. 
       Comparative hearings are the most rational means to enable the
       best applicants to be selected.  Discovery and scrutiny by an
       ALJ are powerful disincentives to most fraud and front artists
       and to those with no commitment to public service.
                 Auctioning off the spectrum would insure that only
       the most well-financed corporations would receive the
       licenses.  Indeed, an auction would probably shut out most of
       the 31 minority-owned full power NTSC licensees, given their
       lack of access to the development capital needed to bid in an
       auction and pay the cost of migration.  It would be tragic to
       lose any of these 31 good broadcasters.
                 Nonetheless, if you decide to use auctions, you
       should design in a substantial credit for minority ownership
       of the type you used successfully in IVDS licensing.  You
       should also build in credits paralleling those you would use
       in comparative hearings, including civic participation, EEO
       proposals and minority ownership incubation.  And you should
       work with Congress to develop legislation authorizing the
       application of auction proceeds to public broadcasting,
       children's programming and a minority ownership equity fund.
                 Finally, we express our concern that the phase-out
       period for NTSC not be too swift.  This morning Stanley
       Hubbard suggested that it be tied to penetration and we would
       tend to agree, perhaps, to 95 penetration.  The poor depend on
       television as their window to citizenship.  Low income
       Americans must not be forced to spend hundreds of dollars on
       high-tech equipment they didn't ask for.
                 COMMISSIONER HUNDT:  Thank you, Mr. Siegel.
                 MR. SIEGEL:  Good morning.  I'm honored to be here
       today to focus on the nature of broadcasters' public interest
       obligations in the digital age.  We believe that the reference
       point for analysis of this and all issues relating to ATV
       should be the maintenance of free universal broadcast
       television.  It's a national jewel and, I might add, the only
       quality consumer alternative to pay video.  Numerous
       companies, such as ours are willing to risk capital and devote
       our energies and creativity to the education and entertainment
       of our viewers.  The regulatory framework established by the
       FCC for the transition from analog to digital broadcasting
       will largely determine our ability to survive into the next
       century.  Broadcasters recognize that their future lies in the
       rapidly developing digital technology, but the transition will
       be risky and difficult.  Stiff competition will come from a
       variety of multichannel, multiservice, wire and wireless pay
       systems.
                 Our company owns eight television stations and
       notwithstanding the competitive challenges, we are investing
       substantial sums to create a new over-the-air network service
       that can help many local independent stations be competitive. 
       Last January Chris-Craft launches the new UPN network which we
       own and which six of our stations, previously independent, are
       now affiliated.  We, and INTV's members recognize that as
       broadcasters we have a special obligation to serve the needs
       and interests of our licensed local communities.  Free over-
       the-air television will continue to be the core of our
       business in a digital world, but localism, in the digital age,
       will mean different solutions for different broadcasters
       serving different consumers in different communities. 
       Competitive and regulatory flexibility, not rigidity, will be
       required particularly for the affiliates of our emerging
       network, many of which are far from the strongest stations in
       their markets.
                 We submit that a station's compliance with its
       public interest obligations should be judged on the basis of
       the totality of its free over-the-air offerings and that the
       extent of that obligation should not be determined or affected
       by the number of such offerings that might be offered over the
       station's digital channel.  As we transition to digital, the
       public is best served if stations are given the greatest
       flexibility in determining how to utilize their bandwidth. 
       Thank you.
                 COMMISSIONER HUNDT:  Thank you.  We'll now do the
       six-minute blocks of questions and answers.  Commissioner
       Quello.
                 COMMISSIONER QUELLO:  Okay, Mr. Honig, you know the
       goal of increasing minority ownership is supported, I think,
       by about everyone up here, including me, and in fact, I still
       favor tax certificates and as a strong supporter of it, I
       think it's too bad that some how or other it got thrown by the
       wayside.  But, No. 1, HDTV spectrum's going to be very
       expensive for anyone getting it, I mean, you are transmitting
       to an audience that isn't there yet.  It's going to be very,
       very -- a very tough thing to get financing.  Do you have any
       ideas on how we could, you know, in light of Adarand and help
       enhance the ability of minorities to secure financing.  I
       mean, give us your best shot?
                 MR. HONIG:  There are a couple of approaches.  One
       would be to designing an incentive for applicants to incubate
       minority owners as a means of selecting which applicants
       receive the most desirable or the most space.  The National
       Association of Black Owned Broadcasters developed such a
       proposal and we would endorse it.  Probably, I think the
       important point is that the Commission is going to have to
       grapple with this question of race-conscious remedies through
       it's post-Adarand study before it takes to undertakes to
       license, probably this last great, great opportunity for
       ownership.  That's the most important point.  If it licenses
       this spectrum first, before it grapples with that question,
       then it does the study and finds that it could have used
       incentives such as that, at that point it's too late.  And the
       opportunity will be forever lost to us.
                 COMMISSIONER QUELLO:  I think the idea is that what
       requirement is there if say a minority would have to get
       enough money to bid for it, but if they got it, would there be
       some provision where they'd have to operate it or could they
       just transfer it to someone else?
                 MR. HONIG:  Right now, there are 31 stations,
       suppose new costs are imposed on them and often these are
       fairly small operators that are highly leveraged now, in
       effect, the Commission would be saying, you must go to the
       banks, you must borrow against revenues that you don't now
       have and, in effect, you're going to have to turn over much of
       your company to other investors and really become a different
       kind of company simply because we want bigger pictures.
                 I question whether that makes sense and until the
       Commission grapples with how we're going to insure diversity,
       it really shouldn't -- that's a necessary decision to all of
       the rest of the licensing decisions that be made.
                 COMMISSIONER QUELLO:  It's just a matter of
       financing, I mean, that's a real tough problem on how we can
       get it.  Mr. Diller, I'm glad to see that you are advocating
       definite and increased public interest obligations at this
       time.  I just want you to know, on a personal note, that I was
       here when we authorized home shopping services and I also want
       you to know that I caught hell from some my best friends in
       Congress for authorizing it.  It was a very controversial
       thing, so --
                 MR. DILLER:  Probably me too, since I was the
       competition.
                 COMMISSIONER QUELLO:  Wondering what we were doing
       and the only argument I had at the time was that, look,
       they're meeting a commercial demand, they're serving that, but
       -- I mean, home shopping is 100 percent commercial if you want
       to take that approach and I had a tough time with it.  I
       finally voted for it.  So I have to agree with what you're
       saying today, but how do you square increased public interest
       requirements with the current realities of the marketplace in
       which broadcasters are facing more channels than ever before,
       facing an increasing and a variety in the strength of
       multichannel competitors.
                 MR. DILLER:  I don't think that abrogating those are
       going to lessen their competitive edge.  I think that the
       system, this mass engine broadcast system that has always
       worked somewhere in the nexus of the balance between commerce
       and responsibility and has given every broadcaster kind of a
       secondary agenda, has not only delivered generally good
       programming, but has made it the -- but it has been the
       service that has been the one that is the only one right now
       that is mass.  All of the other alternatives that do chip
       away, chip away from a rating and a half, .7, 1.3, but for
       bigtime broadcasting, it's in the hands of the people who
       deliver it with these responsibilities intact and I think that
       they're strengthening of those responsibilities is only going
       to allow broadcasters to be more competitive, not less
       competitive.
                 COMMISSIONER QUELLO:  Well, there is a cost, of
       course, involved in this thing and, as you heard this morning,
       the broadcasters certainly feel that they have a public
       interest obligation and they perform a valuable public
       service.  So, in a speech about three months ago, I had two
       pages of existing broadcast regulations -- going away, there's
       a lot of regulations still on the book, issues in programming
       is one of the big ones, but there are so many others.  But I
       was interested in your comments and I'm glad to see that your
       creativity is being put a very practical use these days with
       your expansion and good luck.
                 MR. DILLER:  Thank you very much.  I will add that
       we have, in our petition or filing or whatever it is
       technically called, for a change in control of the Silverking
       Stations, we have said that our plan is to migrate them from
       home shopping, to be full service local providers of
       entertainment, news, information, etcetera.  So that's my
       comment about home shopping on broadcasting.
                 COMMISSIONER QUELLO:  All right, thank you.  You
       know, Ms. Sohn, what if a station -- is my time up?
                 COMMISSIONER HUNDT:  Do you have --
                 COMMISSIONER QUELLO:  Oh, yes, I'm all through,
       thank you.
                 COMMISSIONER BARRETT:  Could you tell me what page
       those comments are that you just described in terms of this --
       what it is you agreed to do?
                 MR. DILLER:  What page?
                 COMMISSIONER BARRETT:  Yes.
                 MR. DILLER:  You must be joking.  It's in here, I
       promise you it's in there.
                 COMMISSIONER BARRETT:  You mentioned that
       broadcasters --
                 COMMISSIONER HUNDT:  It's on the front page.
                 COMMISSIONER BARRETT:  You mentioned that
       broadcasters --
                 MR. DILLER:  Was it on the front page?
                 COMMISSIONER BARRETT:  -- ought to pay the going
       rate.
                 MR. DILLER:  Yes, sir.
                 COMMISSIONER BARRETT:  Should that be in programming
       or cash?
                 MR. DILLER:  No, I think probably it should -- if
       they're going to use the spectrum for anything but free
       broadcasting, they should pay in cash to the government the
       going rate for such services.
                 COMMISSIONER BARRETT:  Notwithstanding the fact that
       you -- I think you were recorded as suggesting that there
       ought to be more children's programming and broadcasters ought
       to adhere to that or commit to that, would that -- would you
       accept that as a substitute?
                 MR. DILLER:  Well, I think you get into difficulties
       when you mix these things.  I think that the true principles,
       you know, you operate free broadcasting and you get the
       license for free, then you've got to program in the broad
       public interest, which obviously, over different periods and
       times, that interest changes and if your -- if, in fact,
       you're taking care of your responsibilities, then all ought to
       be okay in that bargain, everybody is getting something quite
       appropriate.  We have a great system, that was based on that. 
       I think it's eroded in recent times and I think it can be
       strengthened in those respects.  If, however, you're going to
       have it not be free and people have to pay for it, then that
       is a totally different standard and that should go to the
       highest bidder, however you want to organize that.
                 COMMISSIONER BARRETT:  But you would not accept the
       programming that you have been supportive of most recently in
       terms of additional or more children's programming, a
       quantitative amount for the cash?
                 MR. DILLER:  No, because I think once you get into
       those kinds of judgements, you end up making lots of mistakes.
                 COMMISSIONER BARRETT:  Okay.
                 MR. DILLER:  You slice the salami like of in
       probably contradictory ways over a period of time.
                 COMMISSIONER BARRETT:  Ms. Anderson, I'm not sure --
       you made two statements that I'm sure that Gigi and certainly
       David would probably disagree with you on and that is that the
       public has not input in this process, and secondly, that we've
       failed to serve the public interest.  It may be that we don't
       agree -- you don't agree with how you think we have served
       that interest or the fact that one has missed filings or have
       not filed, but -- I don't think there's any evidence that
       we've violated either of those.  It is clear to me that David
       writes so much it almost makes you sick, even though we're
       glad to hear it, so I don't think there's any evidence that
       we've violated any of those two things.
                 MS. ANDERSON:  Well, I'm not suggesting that.
                 COMMISSIONER BARRETT:  Okay.  David, let me ask you
       a question.  If I owed a station in San Diego and I own a
       station in El Paso, Texas, and I own a station in San Antonio,
       Texas, do I serve the community for my racial persuasion or do
       I serve that community there?
                 MR. HONIG:  We would need to know a lot more
       information.
                 COMMISSIONER BARRETT:  Well, what information do you
       need to know other than my economic suggests to me that I
       serve the market where my audience is?
                 MR. HONIG:  Who makes the decisions, who do you
       hire, who do you entrust --
                 COMMISSIONER BARRETT:  Obviously it's not clear what
       I am but I'm saying, it seems to me that the driving force
       behind my serving in San Diego, and El Paso, Texas and in San
       Antonio, Texas would have absolutely nothing to do that I was
       a minority owner, it had to do with my wanting to stay in
       business and I would need to serve that public, which brings
       me to -- does it really make a difference who owns a station
       or does it make a difference what kind of programming they
       provide?
                 MR. HONIG:  What kind of programming you provide is
       in very large measure determined by who owns the stations and
       --
                 COMMISSIONER BARRETT:  Is it?  Let me ask you this,
       are you aware of WGCR in Chicago which has the No. 1 drive
       show in the morning which probably has two or three in the
       afternoon, it is No. 1 or 2 in Chicago.  It is just --
       overflows in terms of its community committee.
                 MR. HONIG:  And Gannett owns it.
                 COMMISSIONER BARRETT:  Uh-huh.
                 MR. HONIG:  That's right.  The --
                 COMMISSIONER BARRETT:  Well, let me finish my point,
       does it make any difference who owns it as long as they
       program satisfactory to that community or does the ownership
       make a difference?
                 MR. HONIG:  Two point --
                 COMMISSIONER BARRETT:  If I own the station, I'm
       going to program to the economics of how I can survive and not
       to a community.
                 MR. HONIG:  First, Gannett would not be the
       progressive company it is without having led the industry in
       equal employment opportunity within its own ranks from the
       middle '70s.  Second, our point is not that non-minorities
       can't provide good service to minorities or vice-versa.  The
       point is that when minorities are included in the mix of
       owners, you tend to get more -- a greater opportunity for
       viewpoints that might not otherwise be heard, to be heard by
       some of those broadcasters.  There are three or four minority
       owners in Chicago, too, I think Chicago is much better because
       of them. 
                 COMMISSIONER BARRETT:  But you don't program from a
       racial persuasion perspective or a politics or philosophy,
       that's a loss of your economic base, though, do you?
                 MR. HONIG:  That's one factor.
                 COMMISSIONER BARRETT:  I mean, it would be foolish
       for me to be in the three towns that I mentioned and
       notwithstanding who I am to program for Chicago's -- certain
       segments in Chicago and New York and L.A., doesn't make very
       much sense, if I want to stay in business.
                 MR. HONIG:  It's much more subtle.  A minority, if
       they're involved -- if the minority owner, or any owner, is
       involved in the making of program decisions, that person's
       background, any owner's background, brings non-pecuniary
       values to the table in who they hire, who they entrust with
       those decisions, how they make editorial judgements.  At the
       margin, when you can't make precise economic judgements about
       what program is better, which one you choose.  The research
       data has supported that and those finding in Metro to that
       effect have been not been specifically overruled, I think they
       were valid.
                 COMMISSIONER BARRETT:  Okay, I have to stop, I'll
       follow up later.  Thank you, Mr. Chairman.
                 COMMISSIONER HUNDT:  Commissioner Ness.
                 COMMISSIONER NESS:  Mr. Siegel, you mentioned -- you
       were talking about public interest obligations, what are those
       public interest obligations, can you describe them, please?
                 MR. SIEGEL:  Well, serving our local communities,
       the children's programming, which we certainly support,
       providing information, ascertaining what our communities are
       all about and trying to meet those needs.
                 COMMISSIONER NESS:  If you -- you mentioned that we
       should look at the totality of offerings that are free over-
       the-air, if a station had flexibility with its digital
       spectrum under the Grand Alliance standard, and it were to
       place all of its public interest programming, be it the
       children's programming or carriage of political advertising or
       any of the community service needs, on one of the streams of
       programming outside of the mainstream programming that might
       be carried, for example, on cable, would that, in your view,
       be deemed to be serving the public interest?
                 MR. SIEGEL:  I think it could be deemed to be
       serving the public interest, yes.  I think that -- for
       example, what we're talking about here is an advertising
       supported service and, yes, I think that it could be deemed to
       supporting the public interest, yes.
                 COMMISSIONER NESS:  Ms. Sohn, do you agree with
       that?
                 MS. SOHN:  Well, of course, I don't agree with it
       but let me try to explain with why.  Well, I do agree -- let
       me just mention that I do agree with Mr. Siegel to the extent
       that I believe that a broadcaster's public interest service
       should be judged by the totality of what they do and not that,
       for instance, children's television obligations shouldn't, you
       know, be attached to each individual service that they
       provide.  But where we disagree is that I don't think it's
       enough just to take the public service obligations that
       broadcasters have now and say they need to do no more.  I view
       this gift of spectrum, it's not a new loan and it's not a new
       reallocation of spectrum, and I believe that in return
       broadcasters should do a bit more.  If can address
       Commissioner Quello's concern about how broadcasters can
       compete in a multichannel world, they're doing just fine and
       they'd do even better if they get another 6 MHz of spectrum to
       become multichannel providers.
                 COMMISSIONER NESS:  Mr. Diller, you talk also about
       public interest obligations, in fact, you waxed eloquently on
       the topic, how would you enforce those public interest
       obligations?
                 MR. DILLER:  Well, I think that some of the basic
       rules have to probably be modified.  I mean, you can go back
       to some degree to what it was some time ago and look inside
       the process where a broadcaster would say, I would recommend
       that a broadcaster say at the beginning when applying for a
       license, that he would do in each of these areas or in one
       particular area, a range of services that very clearly
       demonstrated public interest programming, whether it be in
       either news or in educational programming, in children's
       programming, in local community programming.  Whatever it was
       that he thought, she thought, it thought, that was appropriate
       and it would have to be significant and significant is not
       hard and fast.  It might be 8 percent, it might be 12 percent,
       but it wouldn't be lip service, and it wouldn't be just a
       specific number of meeting some quota.  It would be a genuine
       commitment and three years later or five years later, it would
       be judged as to whether or not it had been met, if it had been
       met, fine, if it had not been met, and it wasn't quickly
       cured, there would be serious repercussions.  You would not be
       able to broadcast any longer.  I mean, to me, I think, that is
       a sensible and flexible way to deal with the issue.
                 COMMISSIONER NESS:  Mr. Braverman, do you have some
       -- do you agree with Mr. Diller?
                 MR. BRAVERMAN:  Well, I don't think I agree with Mr.
       Diller's premise, which is as of today broadcasters are not
       living up to their public interest obligations.  I do agree
       with him, though, that if there is an issue with regard to
       that question, it ought not to be tied -- its resolution ought
       not to be tied to loaning the spectrum to broadcasters to
       admit them to upgrade their service.  This is a very difficult
       set of questions, as you know, and there's a lot of history
       here.  If one were to conclude that as a general proposition
       broadcasters are failing to live up to their existing public
       interest obligations, a proposition I don't endorse, then I
       think each -- its appropriate to take a look at some of the
       strategies that were used in the past.  I'm skeptical about
       the promised performance regime that I think Mr. Diller was
       referring to as to whether that worked, I think it was
       abandoned in part because of the perception at the time that
       it wasn't accomplishing the objective.  But, again, you have
       to go back to the premise and the premise is, are broadcasters
       living up to their public interest obligations today, I
       believe they are.  I do not believe that increased public
       interest obligations as an abstract proposition should be the
       quid pro quo for loaning a spectrum in order to upgrade our
       service to remain a viable service.  If there is to be a
       debate, and, by the way, I believe that we benefit, the whole
       industry, the public benefits from the robust debate about the
       very question of whether it resolves in quantitative
       guidelines or not, I think we are -- should be held
       accountable to what we're doing, I think we should be
       challenged as to what we're doing.  Having said that I think
       we're living up to our obligations, I recognize the fact that,
       as in every other endeavor in life, you can always do more and
       you can always do better and we're prepared to be challenged.
                 COMMISSIONER NESS:  Thank you.  Ms. Anderson, you
       say right now that there's no demand for HDTV, how can you
       make that determination when there are no sets that are really
       broadcasting in HDTV. when no broadcasters are broadcasting in
       HDTV, when there's no programming on the market, etcetera, how
       would you make that determination presently?
                 MS. ANDERSON:  How does -- how did I make the
       determination there's no demand for HDTV -- that the public
       doesn't want it?
                 COMMISSIONER NESS:  Right.  They don't have it right
       now, how can you say that they don't want it?
                 MS. ANDERSON:  Well, that's why I go back to the
       threshold question, what -- why is HDTV in the public
       interest?  I'm just not convinced pretty in pictures, better
       quality audio is the most efficient uses of spectrum.  There
       was not, at one time, CD, the marketplace determined CDs
       value, the marketplace determined the demands for CD.  There
       was not VHS and no BETA, the marketplace determined the
       demand.  All I'm suggesting is let the marketplace determine
       the demand for HDTV.
                 COMMISSIONER NESS:  That may work, for example, with
       DSS or it may work with cable where there is some flexibility,
       but for broadcast, broadcasters don't have the flexibility to
       choose whether or not to provide HDTV unless they have the
       spectrum and be, frankly, a standard because they need to have
       the TV sets out there that will receive and show HD if that,
       in fact, is going to be something that they choose to do.  How
       then would we not be precluding HDTV if we have, as for
       example, Ms. Sohn, is suggesting, a condominium approach to
       spectrum management or as some of the folks this morning were
       suggesting that we just auction the digital spectrum and
       require -- not make any requirements whatsoever that there be
       a standard to be applied for that spectrum.
                 MS. ANDERSON:  Okay, again, the threshold issue is
       the need for HDTV.  Assuming, for the sake of argument, the
       Commission determines that HDTV is, indeed, in the public
       interest, then that begs the question, how much spectrum to
       give to broadcasters, will there be a commitment to transmit
       an HDTV.  This issue is, if they're not going to use the
       spectrum for HDTV, why give it to them?
                 COMMISSIONER NESS:  Thank you.
                 COMMISSIONER HUNDT:  Thank you.  Commissioner Chong.
                 COMMISSIONER CHONG:  Thank you.  Mr. Braverman, if a
       broadcaster isn't meeting its public interest obligations,
       would you agree with me that the time for the Commission to
       address that is at license renewal time?
                 MR. BRAVERMAN:  Yes.
                 COMMISSIONER CHONG:  Thank you.  Ms. Sohn, you know,
       we've relied on broadcaster discretion for many years, in
       terms of their meeting their public interest obligations, and
       in your testimony you suggested that in a digital world we
       should be much more aggressive and specific in our -- about
       these obligations.  I guess what I was wondering is, why would
       we expect broadcasters to suddenly to need a change or more
       direction or the Commission should be more aggressive about
       the public interest obligation in a digital world.  In my
       view, moving from analog to digital is really just a
       technology change.  I mean, for example, when we went from
       black and white TV to color TV, we didn't increase public
       interest obligations at that time, why would we do that now?
                 MS. SOHN:  Well, I -- let me just step back for one
       moment and say, you know -- as well as I do that the
       Commission should be more aggressive in having broadcasters
       meet their public interest obligations, so this isn't really a
       new -- no, while we do say rely on discretion, we sometimes
       have had problems with the Commission's enforcement of the
       Communications Act in that regard.  This is, you know, I
       disagree strongly with Mr. Braun on the previous panel that
       this is akin to going from black and white to color.  In my
       mind, this is a whole new service, I mean, the possibilities
       that broadcasters will have to do multiple program services,
       to do non-broadcast services, to do subscription broadcast
       services, it opens up a whole new world, and it gives them
       incredible opportunities to make much more money and, in
       exchange, I don't think it's unreasonable to ask for some more
       public interest obligations.  I mean, the public -- the whole
       basis of our spectrum allocation, of broadcast spectrum
       allocation is that broadcasters get it, the public accepting
       in return.  This is a new allocation, I think the public
       should get more than what it just receives now.
                 COMMISSIONER CHONG:  New allocation, are you talking
       the loan of the 6 MHz channel?
                 MS. ANDERSON:  Well, I think it's really semantics
       when you say loan and some people say this is a reallocation. 
       Let me talk about reallocation first and the case was, and it
       is mentioned in my comments and my testimony, is really
       overwhelming that reallocations are mere exchanges.  Now, this
       is not a mere exchange.  You heard Mr. Hubbard say that we're
       going to need a very, very long transition period and, indeed,
       if you don't set a date certain for a transition period, you
       may never get this spectrum back.  I mean, broadcasters are
       now saying, oh, yeah, we're going to give it back, we're going
       to give it back, but give us a nice long transition period. 
       Who knows when that's going to be, who knows when 95 percent
       penetration is going to take place.  It may not take place in
       our lifetime.
                 COMMISSIONER CHONG:  Wouldn't it be sensible to
       monitor it as it went along and see how the market progresses?
                 MS. ANDERSON:  Yes, and I'm not saying it's not
       sensible and I'm also not saying that there shouldn't be a
       long transition period.  In our comments, we do not advocate a
       particular amount of time for a transition period.  But what
       I'm saying is, that when you conceive this as a mere loan, you
       have to look a little bit deeper as to what is really taking
       place here.
                 COMMISSIONER CHONG:  Mr. Braverman, your fellow
       panelist contend we should increase public interest
       responsibilities in a digital world.  In fact, she wants you
       to spend 20 percent of your air time doing political public
       TV, children's television, do you think that with the new
       potential of digital television and the increased capacity
       that could bring a broadcaster that broadcasters will
       voluntarily provide public interest programming?
                 MR. BRAVERMAN:  I believe the answer to that
       question is yes, but let me explain.  I think that the public
       interest obligation has always been a dynamic concept.  It has
       changed over time, it has changed in response to perceived
       needs of communities and express desires of communities.  It's
       changed with changes in technology and the difficulty in
       answering that question is like Mr. Diller, I feel somewhat on
       shaky grounds in terms of predicting how this technology is
       going to emerge.  Some have hypothesized the world in which
       broadcasters are, in fact, using the spectrum principally to
       multiplex and therefore have increased airtime opportunities
       available to them. I do know, that in today's marketplace,
       broadcasters are trying to differentiate themselves through
       localism.  More than ever before, I think broadcasters are
       trying to get a feel for what the needs of the local community
       are, programming to those local needs in part because of the
       public interest obligation and in part because it's perceived
       to be good business and in this one instance, the two ideas
       happily coalesce.  And I believe that if, in fact, the digital
       world unfolds, in a way so that there is, in fact, multiple
       channels available to broadcasters, that that same drive to
       accommodate localism would lead broadcasters voluntarily to
       increase the amount of local news and information and
       educational program they have.
                 COMMISSIONER CHONG:  Mr. Siegel, would you like to
       comment?
                 MR. SIEGEL:  I would agree 100 percent with the
       concept that it's good business to be involved with your local
       community and that's what we do.  And in terms of quantitative
       percentages or numbers, I think that we run a great risk that
       we all want to provide quality entertainment product and
       quality public service product and we all strive to achieve
       that.  But when you start getting into percentage numbers,
       you'll find that that will result in the lowest common
       denominator of that percentage.  Currently, we exceed a number
       of our stations the minimums that are recommended, if you
       will, are the ones that are being bandied around.  But I think
       that, quite frankly, you'll find that it will be
       counterproductive to have percentages and it may, in fact,
       result in harming the very system of free television that, I
       think, we all hope to preserve.
                 COMMISSIONER CHONG:  Thank you.
                 COMMISSIONER HUNDT:  Mr. Braverman, right now all
       the educational TV for kids that ABC provides in its national
       feed it does so voluntarily, is that your view?
                 MR. BRAVERMAN:  On the network level, that is
       correct, because, so far as I'm aware, there are not legal
       obligations imposed on the network.
                 COMMISSIONER HUNDT:  And how many hours is ABC
       providing on the network level of educational TV for kids
       using whatever definition you feel comfortable with?
                 MR. BRAVERMAN:  Two hours.
                 COMMISSIONER HUNDT:  Two hours, and is that
       generally true for ABC-owned stations as well, that they're
       showing two hours?
                 MR. BRAVERMAN:  It is generally true that the ABC
       owned stations are showing more than two hours.
                 COMMISSIONER HUNDT:  At least two?
                 MR. BRAVERMAN:  Oh, yes.
                 COMMISSIONER HUNDT:  I'm not trying to hold you to
       the numbers, but --
                 MR. BRAVERMAN:  No, no, at least two.
                 COMMISSIONER HUNDT:  Now, if it turns out that all
       the ABC stations receive a digital broadcast license, and if
       it turns out in the marketplace during most hours of the day
       they choose to multicast, in other words, deliver, let's say,
       four different programs simultaneously.  I don't think those
       are unreasonable assumption, at least for the sake of a
       question.  Could we count on ABC to multiply by four the
       number of hours of educational TV that would be provided, two
       times four equals eight?
                 MR. BRAVERMAN:  I don't know the answer to that
       question.  The fact in thinking through the digital world, it
       may be that we're constrained in our imagination but thus far,
       our thinking has been essentially to offer a simulcast feed of
       existing NTSC service, upgraded to high definition quality for
       a certain number of hours a day and migrating to more and more
       of a mix of ATV quality and HDTV programs.  So I don't -- we
       really -- I haven't thought through what the multiplication
       factor is.  I think the principles that would govern us are
       the ones that I identified in response to Commissioner Chong's
       questions.
                 COMMISSIONER HUNDT:  So isn't fair to say that in
       the absence of a rule requiring you to do a certain minimum
       amount of educational TV with a digital license, we can't
       count on any specific result, not right now.
                 MR. BRAVERMAN:  If you're asking --
                 COMMISSIONER HUNDT:  Not predictable and we can't
       get a commitment from ABC anyhow --
                 MR. BRAVERMAN:  I think if you get a commitment from
       ABC that we will do our best to respond to the needs of our
       local communities with regard to that aspect of our public
       interest obligation.
                 COMMISSIONER HUNDT:  Mr. Siegel, you said that you
       consider children's programming to be part of the public
       interest obligations that your stations have for analog
       broadcast right now.  That's a fair repeat of your statement,
       isn't it?
                 MR. SIEGEL:  Yes.
                 COMMISSIONER HUNDT:  Does that -- did you mean to
       include specifically children's educational TV within that
       category?
                 MR. SIEGEL:  Well, we would include the whole
       panoply of what's being applied to the --
                 COMMISSIONER HUNDT:  Yes, but did you mean to
       include children's educational TV?
                 MR. SIEGEL:  Well, I would assume so, yes.
                 COMMISSIONER HUNDT:  Okay, now, if you used your
       digital license for most hours of the day to deliver four
       programs simultaneously, could we count on your to quadruple,
       multiply by four, whatever number of educational TV hours
       you're now showing?
                 MR. SIEGEL:  I don't think I would like to commit to
       that because I think that the digital age will enable us to do
       many things that we're not even fathoming right now to, in
       essence, to provide the same kinds of goals that we're trying
       to achieve to children.  For example, we may decide that while
       with multiplexing, which, quite frankly, I disagree with
       others that that's a real likely scenario, but if you assume
       multiplexing you might still have room to sent data in the
       form of textual materials to computers for children to
       interact with for them to further expand their knowledge and
       awareness about the subject matter that you're broadcasting. 
       But, quite frankly, right now, we really don't know how that's
       going to unfold, and so to put these requirements upon
       broadcasters in the face of, quite frankly, not having
       resolved them in the analog domain, I think that we're a
       little premature and that the digital spectrum is going to be
       a fluid arena and I think you're going to find that it's going
       to be good business for ABC or for Silverking stations to send
       out that material.
                 COMMISSIONER HUNDT:  But, Mr. Siegel, while I
       certainly am excited about the notion of broadcasting software
       programs over-the-air to children with computers, you'll grant
       me that I ought to have some concern about children who don't
       have the money to afford computers and who might want at home
       to be able to watch educational TV for free over-the-air, so
       if we give you a digital license and you get four times as
       many hours of programming, isn't it reasonable for me to ask
       that you multiply by four the amount of free over-the-air
       educational TV you're providing for the kids of America?
                 MR. SIEGEL:  I agree that it is reasonable for you
       to ask, but I do not --
                 COMMISSIONER HUNDT:  Well, that's all I wanted to
       know, if I could ask anyone and still be considered to be
       reasonable and I would like to ask you, Mr. Braverman, if you,
       very briefly, could tell me if you could estimate how much
       money the public would get if we auctioned the digital
       spectrum instead of gave it to today's analog broadcasters.
                 MR. SIEGEL:  I really don't have a number.  I
       suspect that the numbers that have been bandied about greatly
       overstate the value because I am not --
                 COMMISSIONER HUNDT:  Would you tell me what number
       is overstated and then I'll assume that a lower number states
       it.
                 MR. SIEGEL:  I've seen 11 billion to 70 billion --
                 COMMISSIONER HUNDT:  Well, what's your view at?
                 MR. SIEGEL:  I don't have a view because I haven't
       tried to quantify it.  But let me just say -- make one point
       which regard to that.
                 COMMISSIONER HUNDT:  That's all right, if you don't
       have a view, I'll get back to you later.
                 MR. SIEGEL:  Can I just make this one --
                 COMMISSIONER HUNDT:  Does anyone here have a view
       that they're willing to share with us concerning how much we
       could get in an auction?  Anyone?
                 MS. ANDERSON:  Well, I have a view?
                 COMMISSIONER HUNDT:  How much?
                 MS. ANDERSON:  Well, the FCC's report is anywhere
       from 11 billion to 70 billion.  As you will recall in a --
                 COMMISSIONER HUNDT:  That's all right, that's enough
       for me.  Do you agree with that?
                 MS. ANDERSON:  Well, I would go as high as $500
       billion according to William Safire -- panelist.
                 COMMISSIONER HUNDT:  All right, suppose we could
       get, in an auction, between 11 billion and 500 billion,
       anywhere in that range, or suppose Mr. Braverman is right,
       that it's worth less than that.  Mr. Siegel do you think it's
       reasonable for the country to ask that we get something in
       return from that in terms of specific public interest
       obligations that would be performed?
                 MR. SIEGEL:  We are performing the public interest. 
       You're asking for --
                 COMMISSIONER HUNDT:  I'm just asking if it's
       reasonable to give away spectrum worth whatever number,
       hundreds of millions or billions of dollars and not ask, at
       the same time, for specific public interest obligations to be
       performed.
                 MR. SIEGEL:  You are asking and we are satisfying
       the public interest.
                 COMMISSIONER HUNDT:  So you agree we could ask for
       that?
                 MR. SIEGEL:  Oh, I'm suggesting that we do serve the
       public interest and I think your question is asking --
                 COMMISSIONER HUNDT:  I'm not suggesting you don't. 
       We're at the end here, so we'll have to wait to the next round
       to carry this on.  Mr. Quello.
                 COMMISSIONER QUELLO:  Mr. Siegel, what would be the
       economic impact on HDTV development of requiring broadcasters
       to quadruple the amount of kids programming?
                 MR. SIEGEL:  Well, I can't quantify about that
       economic development, but I think that what you end up losing
       in the imposing specific requirements on broadcasters, is you
       end up losing creativity and innovation that is going to come
       about in this new digital age.  And I would suggest just one
       more point, we really haven't resolved these issues in the
       analog domain and what we're talking about is this
       transitional period and we should let the new things that
       broadcasters are going to be able the public emerge out of
       that.
                 COMMISSIONER QUELLO:  Um-hum, but there might be
       other things, too, that will best serve the public interest. 
       Of course, maybe I should get the AARP up in arms, I'm doing
       more for senior citizens, I mean, I've mentioned that. 
       They're completely neglected, the only reason they're
       neglected is they don't ask for it, and yet they're the
       largest voting block around.  So I think I can go to two or
       three of them and get them up in arms and maybe I should.  But
       anyway --
                 COMMISSIONER NESS:  When you become a senior
       citizen.
                 COMMISSIONER QUELLO:  Nice shot, thank you.  I owe
       you a good one.  Ms. -- again, what are the practical economic
       implications of increasing dramatically the public interest
       obligations of broadcasters?  At the same time, we're, one,
       requiring them to go through a lot of expense, I mean, there's
       going to be a big investment in HDTV equipment and
       transmitters without any receivers out there, and at the same
       time, we are in an unprecedented multichanneled, multifaceted,
       competitive communications marketplace, 1,500 commercial
       stations, four networks, two emerging networks, 363 public
       stations, more than 159 cable channels, more coming on.  Video
       dial tone coming, DBS already here, MMDS coming here.  And you
       want more for someone that's going to spend a lot of money on
       a new technology?
                 MS. ANDERSON:  You're asking a lot of questions but
       let me try to answer them one at a time.  First of all, we're
       heard a lot of people on this panel and the previous panel
       that belief of interest is good business.  So, I guess, I'm
       saying -- asking what the problem is.  And again, I'm asking
       for increased public interest obligations because broadcasters
       are getting a huge benefit.  They're getting the opportunity
       to do far more than they did before.  And lastly, I want to
       address this --
                 COMMISSIONER QUELLO:  That's unproven, but go ahead.
                 MS. ANDERSON:  -- this -- of environment.  Well,
       it's unproven, and as Mr. Siegel says, we don't know if we can
       multichannel, we don't know what we can do, this was in my
       written and oral testimony.  If broadcasters don't know what
       can be done and what can't be done, what's the rush, or maybe,
       why shouldn't we let the marketplace decide.  Let me address
       your question about, you know, the -- of environment.  I'm
       sure you saw in Saturday's Washington Post there was an
       article about how video-on-demand is going down the drain. 
       When people talk about, you know, all the competition that's
       there, the fact remains is that broadcasting is the No. 1
       place where people get their information in this country and
       the rating shares of the three networks dwarf -- well, of all
       the cable -- if you took all the rating shares of all the
       cable networks combined, it would barely reach the rating
       share of one of the networks.  Broadcasting is thriving and
       they're thriving partially because they get benefits like must
       carry and they get free use of the spectrum right now.  So I
       am -- I guess, I can't agree with your premise that
       broadcasters are being crushed by the competition.  I think
       they're coming out way ahead and I'm not convinced that more
       public interest benefits will kill them.
                 COMMISSIONER QUELLO:  I'm not saying they're going
       to be crushed by competition, but all these other channels
       also have advertisers and that's a source of revenue and that
       revenue will decrease.  Now, broadcasters still do pretty
       well, but, you know, network penetration went from 90 percent
       to 58 percent, it's going to go down more.  Now, cable maybe
       only has one or two percent, but you've got enough one and two
       percents and that accumulates quite a bit.  So I don't see
       more -- I see more competition benefiting the public maybe
       but, with more specific program that serves a public need, but
       I don't see it as a great economic benefit for those that have
       to compete with that many more channels.
                 MS. ANDERSON:  Well, you're permitting -- by
       allowing this, you're permitting, assuming multiplexing is
       possible, which, I believe it is, you're allowing broadcasters
       to become multichannel providers in this by giving them
       digital channel and therefore that kind of goes to some of the
       concerns Commissioner Chong has, I think they should be
       subject to some obligations that multichannel providers have. 
       For example, the sort of the public access idea that I had,
       cable operators have to provide it, why shouldn't multichannel
       broadcasters be able to provide it.
                 COMMISSIONER QUELLO:  Well, you have public stations
       that -- 363 of them, you have broadcasters now with public
       interest obligations, those issues programming, I said there's
       about -- still 80 or 90 existing regulations and so on, and
       overall, I think they do a better job than some of the
       organizational money given credit for --
                 MS. ANDERSON:  I agree.
                 COMMISSIONER QUELLO:  However, it's good to exhort
       people to do a better job of public service, I guess that's
       what they're here for.
                 MS. ANDERSON:  Let me make it clear that myself and
       my organization has always thought that we had the best system
       of broadcasting in the world.  It can be better.
                 COMMISSIONER QUELLO:  All right.  I'm through.
                 COMMISSIONER HUNDT:  Commissioner Barrett.
                 COMMISSIONER BARRETT:  Thank you, Mr. Chairman.  Mr.
       Diller, you remember when you got $8 billion in the one series
       of auctions, and I think that everyone here agrees with the
       chairman that we would like to see more children's television
       and more educational programming.  We have a slight
       disagreement on how do we get there, legislatively or do we
       get there administratively.  If you had had a magic wand,
       notwithstanding the fact that you're worth about $300 million
       yourself, at last count, rather than taking part of the $8
       billion and sticking it in your pocket in that beautiful home
       that you have that I want to steal from you, what would you,
       if you had a magic wand, based on your suggesting that
       broadcasters should pay the going rate in programming in cash,
       let's forget the programming and the cash aspect for right
       now.  If you had had the $8 billion which went down a dark
       hole or something called a deficit or whatever, what would you
       have done to reach the chairman and all of us, all our goals
       in terms of more educational children's programming with the
       $8 billion, rather than tacking onto companies an obligation?
                 MR. DILLER:  I'm not so sure that it's quantifiable
       in dollars, just as I'm not so sure about your dollar
       evaluations of need, but --
                 COMMISSIONER BARRETT:  Well, you know, do you
       remember Everett Dirkson, another great Illinoisan?  He said a
       billion here and a billion there and after a while you talk
       about money?
                 MR. DILLER:  Well, I think this --
                 COMMISSIONER BARRETT:  But you're too young to
       remember Everett Dirkson.
                 MR. DILLER:  I remember the hair, which, you know,
       I'm envious to such things.
                 COMMISSIONER BARRETT:  Okay, the white hair.  It was
       the same color as Don King's hair.
                 MR. DILLER:  This is great, I don't actually have to
       answer this.  No, I really think that you're not going to get
       this by any process, you're not going to get these things by
       any, so to speak, absolutely quantifiable process.  I do not,
       by the way, believe as an aside, my premise is not that
       broadcasters do not program in the public interest.  What I do
       think is, that as you look to what is happening today, or what
       may happen today, or what has been proposed in the telecom
       legislation which would go a long way towards removing what
       was, which was shaky at best.  Not under the wire, but shaky
       at best.  I mean -- ten years, now, it's eight years -- send
       it in on a postcard and to toss the whole idea that all you do
       is compete against the person down the road, is not, I think,
       the way to preserve what has been a very, very good system.  I
       don't like it when I sit around a table with broadcasters and
       some of them say, we shouldn't make any editorial judgements
       whatsoever.  Why should we have broadcast standards and
       practices department, what's the point?  Those guys don't down
       the hall in cable or in other First Amendment situations, why
       should we have to do that?  I think that would deliver us a
       kind of -- I think we'd lose a great deal.  So what I want to
       do is see it strengthen, I want to see it strengthen in a way
       where broadcasters can say, look, this is what we think would
       be good for our community and this is what we'll do and on
       some scale, some reasonable rational scale, it seems like fair
       quid pro quo for getting this free license and out of it will
       come educational programming, if somebody wants to do it.  Out
       of it will come increased localism of a kind or out of it will
       simply come a lessening in the erosion of standards that we
       see all around us.  I think those would all be good things,
       but, I mean for --
                 COMMISSIONER BARRETT:  Should it be done
       legislatively or administratively?
                 MR. DILLER:  Well, I think you have to set the
       groundwork legislatively, I don't think -- I think if you say
       to broadcasters, from now on you send it in on a postcard and
       you don't have to do anything, I think broadcasters will
       follow.  I mean, frighten broadcasters in certain respects,
       frightened properly, to the possibility that somebody's going
       to take that very valuable license away from them, now do the
       right tend to do the good thing in the breach.  After a while
       of doing it, if they keep getting reminded of doing it, they
       actually take it on as a kind of proud responsibility.  That
       has begun to ebb, I think that's unfortunate and I think there
       can be changes which put that back, then the balance will be
       restored and everything will be fine.
                 COMMISSIONER BARRETT:  Two quick questions, David,
       two quick answers.  Would you do it legislatively and how you
       -- what would you have done with the $8 billion that we got?
                 MR. HONIG:  I would have put it into a fund for
       minority ownership.  It would take at least that much to get
       the kind of diversity that we would need.  You would need
       massive federal intervention to get full diversity.
                 COMMISSIONER BARRETT:  How would you have done it,
       legislatively or administratively?
                 MR. HONIG:  Actually, I agree with Mr. Diller, you
       need the Congress to set some parameters and the Agency to
       implement them.  In fact, I was surprised you agree with most
       of them --
                 COMMISSIONER BARRETT:  Let me ask another question. 
       Ms. Anderson, watch your partner there -- Ms. Anderson, would
       you have -- what would you have done with the $8 billion, to
       accomplish some of the things that I think we all want to
       accomplish and contrary to public opinion, we all want the
       same things, the question is, how do we get there,
       legislatively or administratively?
                 MS. ANDERSON:  Right.  Well, first of all, I
       surprisingly agree with just about everything Mr. Diller said.
                 COMMISSIONER BARRETT:  Why stir the pot --
                 MS. ANDERSON:  But what I think it needs to be done
       legislatively that the people need to weigh in on this and the
       recent precedent for what do you do with the $8 billion.
                 COMMISSIONER BARRETT:  Okay, I understand this
       precedent.  Let me just ask because you and Barry are taking
       up my time.  What -- how would you have treated the $8 billion
       that -- which was a great job, by the way, on the part of the
       --
                 MS. ANDERSON:  Well, assuming -- right, right. 
       Assuming it was not earmarked for deficit reduction as was the
       case, as I said in the statement, and as Lawrence Grossman
       said earlier, the historical precedent, the Moral Act, to have
       the funds earmarked to the states for education technology
       block grants, that would be the greatest, the best use of the
       public resource and to get back to Commissioner Ness' point --
                 COMMISSIONER BARRETT:  That's okay.  They told me to
       stop and I was going to go to Gigi, but I'll stop and come
       back and some -- well, I won't see you all again.  Great
       panel, Mr. Chairman.
                 COMMISSIONER NESS:  Thank you, Mr. Chairman. 
       Following up on this conversation, there are some who say that
       there's, in essence, a fork in the road, we could allow
       broadcasters to continue to have their special benefits, must
       carry being one, we discussed that in the first panel a little
       bit in terms of what that means in a digital world.  We could
       allow them to continue to have channel preferences in
       placement and then also permit them to go for a transfer from
       analog to digital with a temporary spectrum.  And the reason
       we do all that is, again, because of the public interest, the
       benefits to the public that broadcasters have historically
       provided.  We had, on the other hand, a different perspective
       and that is that there ought to be total flexibility, that it
       really is a business that we've got to compete in the
       marketplace and perhaps there ought not to be any specific
       requirements on what a broadcasters ought to do.  Then, might
       it not be a better way, arguably, to just simply say, okay,
       let's take the perspective digital channels, auction them,
       take the revenues, as were suggested, and apply them perhaps
       towards fulfillment of some of these public interest needs. 
       Anyone want to comment on which way we ought to go in terms of
       broadcasting?
                 MR. BRAVERMAN:  I think the latter would be a
       terrible mistake and for a number of the reasons that Mr.
       Diller spoke to eloquently a moment ago.  However imperfect it
       is, however frustrating it may be from time to time to deal
       with the questions that this Commission has been wrestling
       with over the past year or so about how do you enforce it, how
       do you impose it, to go back to the question the Chairman put
       to me, how can I be sure you'll do it.  Those are all very
       tough questions, but this country would be a lot worse off if
       the companies that were providing the free over-the-air
       system, did not believe and take to heart a responsibility to
       operate in the public interest.  Just speaking personally, we
       have 28 people who do nothing but work in the standards and
       practices division because they're mindful of the standards
       questions that Mr. Diller was alluding to and fight against
       the trends of caving into the fact that simply because there's
       a competitive offering available on the wire, we, too, should
       do it.  We struggle, believe me, with questions about how do
       we address the educational and informational needs of
       children.  We may come out differently, we may have
       differences about quantification, but that is very much part
       of their mindset and to go -- to approach the fork in the road
       and to take the road that relieves people of those burdens, of
       those responsibilities, however ill-defined they are and
       frustrating to try to quantify, I think, would be a horrible
       mistake for this country and I think would do a disservice to
       the public.
                 MS. SOHN:  But Commissioner Ness, what troubles me
       is that what I haven't heard in two panels is anything from
       any broadcaster saying what they're going to give back to the
       public more than they have today, and I have to say that if
       the result is complete flexibility that would permit
       broadcasters to do one standard definition television service
       and the rest non-broadcast or subscription, either auction it
       or just give them enough, and I think my approaches in my
       written testimony are very valuable.  Even under an auction
       scheme, you can still do the conversion to digital
       broadcasting.  You can have must carry for those that can't
       afford to buy the spectrum, but I want to hear from the
       broadcasters what they're going to give back to the public. 
       I'm not hearing it.
                 COMMISSIONER NESS:  Mr. Siegel, do you want to
       respond to that?
                 MR. SIEGEL:  There is a fork in the road and it is a
       very clear fork, every system is going digital, if we, as the
       free broadcasters cannot transition to a digital transmission
       system, we will be relegated as a third class, fourth class,
       fifth class, I don't -- citizen down the road and the whole
       system of free information and entertainment to the public
       will go down the tubes because ultimately the pay services
       will beat all of the ability for all of us to compete by
       acquiring all the programming and being able to satisfy the
       entertainment needs and there will be no regulation of those
       services, and in terms of --
                 COMMISSIONER NESS:  But why would the public suffer
       from that, can you elaborate a little bit more?
                 MR. SIEGEL:  Well, I get from the premise that right
       now the free television industry offers value to the public. 
       We do not have currently information haves and havenots, we
       have the potential for every household to access freely
       television information.  If we go down this road and
       broadcasters are relegated to staying in the analog domain,
       you will not have that.
                 COMMISSIONER NESS:  Okay.
                 MS. ANDERSON:  If I could just add --
                 COMMISSIONER NESS:  Please.
                 MS. ANDERSON:  You know, we're talking about public
       interest in the abstract as if we don't have a track record,
       almost as if it's a given that broadcasters are currently
       meeting their public interest obligations.  I don't think
       that's the case, as I cited, actually citing the Chairman,
       that 80 percent of Americans do not believe that television is
       in the best interests of the country, that, if they were
       meeting their public interest obligations, there would not be
       the call for V-chips, if they were meeting their public
       interest obligations, there would not be the campaign against
       gangster rap, some of those videos are shown over-the-air free
       TV.  We now have a campaign against talk shows.  So what is
       this about in a digital age, it would be nice if they met
       their public interest obligations in the analog age.
                 MR. DILLER:  Call --
                 COMMISSIONER NESS:  Okay, any other response on
       that, as I see my time is up?  Okay, thank you.
                 COMMISSIONER HUNDT:  Commissioner Chong.
                 COMMISSIONER CHONG:  Well, you know, Yogi Berra said
       that when you reach a fork in the road, you should take it. 
       Does that help anyone -- he speakth with forked-tongue.  You
       know, I'm on cold medicine right now, I don't think that's
       good for the brains.  I guess I just have one last line of
       questioning based on what has just occurred.  I thought that
       was a very helpful discussion.  Just what I was hoping would
       come out of this hearing.  I guess part of what I'm troubled
       about is that Gigi, you seem to be assuming that to do what
       you want to do, as you lay it out in your testimony, you've
       got to have -- we're just going to give broadcasters 2 MHz of
       standard digital television, and what I'm also hearing from
       the broadcasters at the same time is that they believe that
       competition will drive them to HDTV and I also read some very
       interesting surveys that Thompson had done, which is another
       panel later today, talking about how consumers that were
       surveyed said they would pay up to $1,200 to get HDTV because
       it was so impressive, the sound and the picture, they wanted
       it.  When I looked at it, I wanted it, and I know my husband
       will want it, he loves sports.
                 So what I'm troubled about is, if the market does
       drive HDTV, I mean, we are a world leader, our industries and
       broadcasters just spent millions of dollars to develop this
       outstanding technology, why would we choose to do something
       less than the best technology that is current to go forward
       and what I'm thinking about is, you know, when I buy a
       computer, I could buy a $1,200 PC clone, but I know that in
       three or four years that computer is going to be outdated and
       I'm going to want to do Internet surfing and I'm going to have
       to go out and buy a new computer with, you know, CD-Rom and
       the most powerful chip there is.  So thinking ahead, if the
       best thing we have right now is HDTV and the broadcasters tell
       me that they want to do it and that takes 6 MHz, then I don't
       see how I can do what you have encouraged us to do in your
       testimony, and I'd like to hear from others besides Gigi, too.
                 MS. SOHN:  Well, let me clarify, we are really no
       longer advocating just giving 2 MHz, what we are advocating is
       this condominium approach and there's two ways to do it.  One
       way is to either open the spectrum for either comparative
       bidding or a comparative hearing, whoever wins the spectrum,
       if it's not an incumbent broadcaster, incumbent broadcaster
       would get must carry rights to do one digital television
       service.  Now, the winner of the spectrum --
                 COMMISSIONER CHONG:  Now, what happens to the
       broadcaster who's back on the analog channel?
                 MS. SOHN:  Well, they would get --
                 COMMISSIONER CHONG:  They would have to give up the
       analog channel?
                 MS. SOHN:  That's right, and they would get must
       carry so they could do digital.
                 COMMISSIONER CHONG:  Now, you're assuming, then, a
       very short transition period and so what are we going to do
       about the consumers, are you going to buy everybody a new
       digital television?  Are you going to issue set-top boxes?
                 MS. SOHN:  No, this one -- the transition would
       still be, you know, whatever transition you deem to be
       necessary for conversion from analog to digital, it wouldn't
       affect the transition period at all.  The point is, is that
       incumbent broadcasters wouldn't necessarily be guaranteed the
       spectrum, they'd either have to, you know -- auctions if
       Congress authorized it or they would get it in comparative
       hearing or we don't -- obviously we don't approve of
       lotteries, but whatever, you know, other way you want to give
       it out comparatively.  But the broadcaster with his analog
       channel, would be guaranteed a conversion to digital because
       they would be guaranteed must carry rights on the new spectrum
       that went to somebody else.
                 COMMISSIONER CHONG:  So that broadcaster, are they
       going to be continuing to broadcast in analog and they'll be
       must carried on the digitals -- people that won the licenses,
       is that what you're saying?
                 MS. SOHN:  Right, exactly, exactly, um-hum.
                 COMMISSIONER CHONG:  They wouldn't have to pay the
       money to upgrade to digital.
                 MS. SOHN:  That's right, they would get must carry -
       -
                 COMMISSIONER CHONG:  And how long would you propose
       that would go on, into perpetuity, or as long as they --
       renewal.
                 MS. SOHN:  Into perpetuity.
                 COMMISSIONER CHONG:  Into perpetuity.
                 MS. SOHN:  Well, obviously, they would be up for
       renewal, there's no doubt about that, I agree with Mr. Diller
       whole-heartedly, postcard renewal stinks and whether you're
       operating in digital or in analog, you should have to be, you
       know, brought before the Commission and you'd have to show
       that your performance is correct.
                 COMMISSIONER CHONG:  Let me stop for you a minute.
                 MS. SOHN:  -- say into perpetuity.
                 MR. DILLER:  Not to be impolite, I think that what
       you proposed worsens things because what will happen is that
       you will get nothing.  I mean, if what you're all after, the
       whole purpose of all of this is the possibility of getting
       this enhanced system.  Now, since no one knows anything yet
       and since no one knows how it's going to get developed, give
       the broadest possible process and then what will happen is,
       out of that, somebody is going to come along and exploit it on
       a business basis because any other basis, you're all fooling
       yourselves, it will not happen.  If they do, other people will
       react competitively.  At a certain point you'll look at it and
       say, everyone is now in this enhanced basis and no one is
       using that old analog channel any longer, now, let's take it
       and offer it to someone else for some other purpose, perfectly
       reasonable and fine.  But, if you manhandle this process too
       early, if you don't just basically say, in this world of
       unknowns, take -- this is how much bandwidth it takes, do
       something in it.  If you use it for free, fine, take the
       reciprocal process, if you use it for pay, pay us as much as
       we can gouge out of you, and if somebody else is going to
       offer an advanced high definition thing, someone else is going
       to follow them.  That's the best you can do, you can't do
       better than that.
                 COMMISSIONER CHONG:  I have 10 more seconds and I
       just want to throw out one last thought, which is, as opposed
       to mandating HDTV, can we do something less than that and just
       mandate that receivers must be able to receive HDTV?
                 MR. DILLER:  I don't know, it's beyond my -- I can't
       answer it, adopt a standard.
                 COMMISSIONER CHONG:  Someone's -- 
                 MR. SIEGEL:  Adopt a standard.
                 COMMISSIONER CHONG:  Adopt a standard says Mr.
       Siegel.  Mr. Honig?
                 MR. HONIG:  That would certainly be preferable
       considering the fact that the reason that we have public
       interest obligations, the reason for this panel, if you go
       back to the first year -- is the investment that the public
       has in the equipment used to receive the programming.  $1,200
       is a lot of money for a $6,000-a-year family, that's their
       entire income.  If you had a set that was subsidized in some
       way, they didn't have to pay for the whole thing, you wouldn't
       have a regressive tax where basically the poor are paying for
       a 40-foot picture or a 40-inch picture that maybe they don't
       want.
                 COMMISSIONER CHONG:  I understand the set-top box
       could also be an option at about $150 after time.  Thank you,
       I think my time is up.
                 COMMISSIONER HUNDT:  Mr. Diller, you wrote in the
       New York Times on the 4th of December the very lucid article
       in which you said, I quote, "The FCC should be instructed to
       set minimum guidelines for local educational and non-
       entertainment programming and to put in place a reasonable
       system for reviewing broadcaster performance based on these
       standards.  If the guidelines are followed, renewal every five
       years should be guaranteed," unquote.  You said a lot of other
       things as well.  I thought it was a very interesting article,
       suppose the FCC were to follow your advice in whole or in part
       and were to set minimum guidelines for local educational and
       non-entertainment programming, with respect to digital
       broadcast licenses, suppose we were to do that, would it be
       your view that we should do that at the time we grant the
       licenses, or should we wait until we're near the end of the
       renewal period and then reveal what we had kept secret the
       entire time and, that is, what really were the methods by
       which we intended to pursue the renewal process.
                 MR. DILLER:  That would have a star chamber.  I
       don't think, I mean, I think that you've got to have one
       omnibus set of rules for what is free broadcasting and if free
       broadcasting is going to be over a digital system, or over
       anything, then it ought to have whatever rules it had in its
       antique analog system.  So I don't -- I think that the issue
       is whether or not you give an environment guidelines,
       percentages, intentions, however it can be sensibly done to
       say to people when they apply for a license, how they plan to
       meet this area and then hold them to account.
                 COMMISSIONER HUNDT:  Whatever rules -- this is to
       Mr. Honig, whatever rules or guidelines or standards we decide
       to set with respect to digital broadcast licenses, do you
       agree that we should set them at the time we grant the
       licenses or do you think we should wait until the renewal
       period and then reveal what we really intended all along or
       then make up, at that moment, what would be the renewal
       process?
                 MR. HONIG:  It certainly inspires more confidence in
       regulation to have firm guidelines set first so that later
       you're not accused of retroactively imposing guidelines.  But
       at the same time, sometimes conduct can be so outrageous that
       you might not have predicted it at the time you initially
       developed the rules, you should retain the flexibility to a
       renewal time, take action where someone's behavior shocks the
       conscience.
                 COMMISSIONER HUNDT:  Let me speak personally for a
       minute, but possibly I speak for more than just myself.  Take
       ABC, for example, I think it's a great thing that "Good
       Morning, America" is available for free at 7:00 everywhere in
       the country, we share in the news experience.  It is
       frustrating that ABC does not have the capability to provide
       at the exact same time the creativity that it could give us in
       terms of educational TV for kids, and I don't see how the FCC
       would be in any way on sound grounds saying to ABC, we want
       you to turn off "Good Morning, America" Monday, Tuesday,
       Wednesday, Thursday, or Friday for half an hour and give us
       educational TV for kids.  The constraint of the single
       program, but this constraint doesn't exist in the digital
       license.  At the very minimum, it appears from every bit of
       testimony we've heard so far and everything in the record,
       that instead of 10 broadcast stations giving us 10 analog
       programs at one time in Washington, D.C., we are going to get
       digitally somewhere between 20 or 30 or 40 at any given time.
                 So if that constraint is broken that had bound us so
       tightly for so long and frustrated everybody on all sides of
       the public interest bargain, doesn't it make sense for us to
       take this opportunity to say to the, for example, the
       broadcast licensees and the digital world in Washington, D.C.,
       we don't care how the 10 of you do this, but figure out how
       every single morning, Monday, Tuesday, Wednesday, Thursday,
       Friday, parents will have the choice of some educational TV? 
       You have total flexibility in the market to figure out how to
       do it.  But if you don't, as a group, figure out how to do it,
       all of you ought to be subject to serious question as to
       whether you deserve renewal.  What do you think of that, Mr.
       Siegel?
                 MR. SIEGEL:  Well, I think that comments that Mr.
       Diller said that we really don't know how this is going to
       unfold, but we do know that the Grand Alliance system does
       contain memory and unlike what Mr. Honig said that certain
       people of certain incomes may not be able to afford a
       computer, it is my sense that our service is going to look
       very much like our existing service, only with enhancements
       and there's going to be a large portion of that in HDTV and
       there's going to be enhancements of other matters going out
       from our transmitters to enhance that which will be of
       educational value, of entertainment value, to the receivers. 
       And some of those matters will go on the display of the HDTV
       so that the remote control of that HDTV could click on more
       things that may be educational inside "Good Morning, America"
       for the viewer.  So I think that that's a distinct
       possibility.
                 COMMISSIONER HUNDT:  But suppose the core point
       which is reflected in the Children's TV Act is that we want to
       have free over-the-air educational TV in this country, not
       something you have to access through a computer, not something
       you have to pay thousands of dollars for real fancy TV to see,
       is there anything wrong with saying to the 10 broadcasters who
       would be doing digital broadcasts in Washington, D.C., we know
       you're going to get 20 or 30 or 40 different programs
       simultaneously, you figure out how to guarantee us educational
       TV.  Mr. Honig, last comment on this?
                 MR. HONIG:  I'm going to pass that to Ms. Sohn --
       comment.
                 COMMISSIONER HUNDT:  Ms. Sohn, he's passing it.
                 MS. SOHN:  Well, I agree with you whole-heartedly. 
       I mean, the whole premise of my testimony is, if you've got
       the opportunity to do more, you should do more.
                 COMMISSIONER HUNDT:  Well, I appreciate the whole-
       heartedness, but we have run out of time.  Thank you all very
       much for this extremely distinguished panel and we are now
       having the lunch break and we will recommence at 1:30 sharply.
                                        PANEL 3
                 COMMISSIONER HUNDT:  Good afternoon.  Commissioner
       Barrett is calling you to order, the enforcer.  This is the
       third panel of our extremely interesting digital TV En Banc
       and, speaking for myself and I bet for everybody else, the
       first two panels have been entertaining and informational and
       a lot of important issues are bubbling up and getting more
       visibility.  I think this is just terrific.  Our third panel
       is no less distinguished, is going to be no less interesting
       and probably will do the right thing as soon as I stop
       talking.  So here we go, Mr. Horowitz, you're first.
                 MR. HOROWITZ:  Thank you, Mr. Chairman.
                 COMMISSIONER HUNDT:  Very briefly through the rules,
       three minutes for each of these presentations, then the
       commissioners will each have six minutes, we'll have two
       rounds of six minutes per commissioner for questions and
       answers.  I would like to urge you to graciously accept a
       certain amount of brevity in the answers because the long
       answers come out of the time allocated to the questioners and
       the questioners have a lot of different things they want to
       raise.  So if we cut you off at all, as I had to do to Mr.
       Braverman before, it's only because we have so many things we
       want to get out on the table.  Mr. Horowitz.
                 MR. HOROWITZ:  Thank you, Mr. Chairman.  Good
       afternoon.  As a worldwide content provider, Viacom wants to
       supply our products and new enhanced and expanded of our
       products to every possible distribution outlet, from
       broadcast, to cable, to telcos, MMDS, DBS, computers and the
       global information infrastructure.  This is consistent with
       the American consumer's interest in having access to the
       widest possible range of digital offerings.  Our businesses
       depend upon open access for all of our content, programming
       from  Nickelodeon, Simon & Schuster, MTV, VH1, Showtime,
       Paramount, video games and interactive services.  And digital
       technology is going to enable us to provide our consumers with
       new forms of these products.
                 So how can the Commission to make this vision of new
       diverse digital applications available to all consumers and
       all Americans?  By requiring open access, open access to set-
       top boxes and ATV receiving equipment for all programmers
       while deferring to industry for the establishment of specific
       technical standards.  The Commission must act now to prevent
       technological roadblocks that could be used to exclude
       programmers or to favor one programmer or one delivery method
       over another.  And although ATV will be used on the --
       although the ATV standard that will be based on the Grand
       Alliance system is open, it alone does not guarantee that
       consumers will have access to all digital programming. 
       Therefore, the Commission must require interoperability of
       these set-top boxes.  
                 Technological road blocks can occur in two places. 
       The first is where programming enters the distribution
       pipeline and joins a multichannel package.  In other words,
       you're in the package or you're not in a package, and second,
       when the programming leaves that distribution pipeline and is
       prepared for display.  In this road block, the deployment of
       set-top boxes, one has to be careful to assure that they are
       capable of passing all signals, not a specific or certain
       signal, or that they can accept only a single proprietary
       conditional access technology or that they delay the program
       and deliver by it different service providers.  These we need
       to watch out for.
                 This situation would force consumers to limit
       viewing choices or pay for multiple set-top boxes.  It would
       slow the overall penetration of digital receiving equipment
       and it would lengthen the transition to advanced television.
                 So, in conclusion, the FCC should create safeguards
       against anticompetitive bottlenecks by creating rules of the
       open road, requiring open standards and interoperabilities. 
       This will help insure that no barriers can be erected between
       the providers of the digital content and the American public. 
       In a digital world, this flexibility is more possible than
       ever.  Thank you.
                 COMMISSIONER HUNDT:  Mr. Keyworth.
                 MR. KEYWORTH:  Thank you, Mr. Chairman.  I am
       pleased to testify today before the Commission, especially on
       a topic of such historic importance.  It is important because
       it addresses one step, and a big one, in the conversion of our
       outmoded analog communications system to one that is digital. 
       That conversion is essential if we are to sustain the pace of
       the wholesale restructuring of our economy and of our society
       that has been underway for more than a decade, and which has
       helped America regain its position as the world's most
       competitive producer.
                 This issue is not just about television, nor ever
       just about telecommunications, it is about whether we can
       revamp a regulatory process that was designed for another era
       into one that will let the computer revolution continue to
       thrive.  We have see, in but a decade, the once arcane
       computer become so pervasive that 40 percent of our homes are
       now equipped with at least one PC.  Virtually our entire
       economy, both manufacturing and service sectors, is empowered
       by PCs.  If permitted, digital television can be a part of the
       next step in that ongoing digital revolution which is to
       connect all those computers to make them even more useful.
                 In our report entitled "The Telecom Revolution, An
       American Opportunity," we emphasized two reforms that are
       particularly important in moving from today's analog
       regulatory environment to one that will accommodate the faster
       pace of digital connection.  The first is to eliminate
       regulatory barriers to new entrants.  Notwithstanding the
       predictions of many and the debate of the early '80s over
       competitiveness, America's computer industry today lead the
       world, largely because if its new players.  The success of
       that rejuvenated computer industry demonstrates how important
       new entrants are to overcoming the old habits associated with
       an installed base where the main frames are analog TVs.  In
       computing those new entrants were possible because of the low
       barriers that characterize a largely unregulated industry.  In
       television, more aggressive steps are necessary.  The
       transition to digital has simply dragged on too long.
                 The second reform is the dezoning of the
       electromagnetic spectrum.  Digital transmission in contrast to
       analog cannot be regulated by the nature or mode of
       information moved, thus, spectrum allocations need to be
       "dezoned," not limited to voice, video, paging, or text
       because digital information is inherently multi-media. 
       Attempting to regulate the movement of digital information by
       its nature is tantamount to regulating automobiles by their
       consumption of hay or oats.
                 in accordance with these two overarching reform
       principles, I respectfully suggest that spectrum allocated for
       digital television be dezoned with complete operational
       freedom within the bounds of antitrust law and interference
       considerations and with the ability to assign lease or sell
       that spectrum.  Moveover, existing spectrum allocated for
       analog television should be similarly and simultaneously
       freed.  These actions would facilitate the conversion from
       analog to digital service but would base the pace of that
       conversion on consumer demand and on new technology.  They
       would also reduce barriers to new entrants by increasing the
       number of ways new players could enter the new digital
       markets.
                 Finally, we view auctions as the more efficient
       means of allocating spectrum, if used wherever there is mutual
       exclusivity.  But I believe the American people are best
       served if the auctioning of spectrum for digital TV is
       accompanied by the simultaneous dezoning of spectrum currently
       allocated for analog TV.  Such a regulator step, a truly
       digital step, is necessary if we are to let the pace of
       digital connection catch up to the pace of the technology that
       is driving it computing.  Thank you.
                 COMMISSIONER HUNDT:  Thank you.  Mr. McKinney.
                 MR. MCKINNEY:  Mr. Chairman, and Commissioners,
       Chairman Hundt, you were correct, indeed, in your recent
       speech to the IRTS in New York when you pointed out that the
       Grand Alliance has invented something more than just a pretty
       picture.  Through the ATSC Digital Television Standard,
       broadcasters will have a level of digital flexibility to serve
       the needs and interests of the American television public and
       greater so than they have ever had in the past.  But, Mr.
       Chairman, you erred when you stated that the term "second
       channel," and the term "high definition" had, therefore, been
       made historical artifacts.  Quite simply, without a second
       channel, digital television will not happen.  Broadcasters
       cannot survive if they cannot serve both the old analog
       audience and the new digital audience during the transition.
                 When new technology becomes available in the
       broadcasting arena, there is always the "chicken and egg"
       question.  In this case, will broadcasters put the new signal
       on the air if there are few potential viewers?  And, for the
       equipment manufacturers, should they build digital receivers
       if, in fact, no broadcasters are on-the-air with digital
       signals?  I was chief of the Mass Media Bureau when Bob
       Pepper's predecessor convinced the sitting Chairman at that
       time that it would be unnecessary to standardize AM stereo
       broadcasting, that the broadcast marketplace would work quite
       well.  And so, stereo failed to be activated on most AM
       stations and the AM radio band today survives primarily on the
       backs of Rush Limbaugh and other talk show hosts.  Stereo
       television, however, was handled differently.  The FCC did
       standardize that and it thrived.  There are few television
       stations today that do not broadcast their entire day in
       stereo or surround sound and even lower price sets today are
       configured to decode it.
                 In a virtually unanimous filing, broadcasters
       support some minimum level of HDTV broadcasts.  If this is
       implemented, all television manufacturers will build equipment
       that will decode all formats.  You will not have to worry
       about the chicken-and-egg.  And, Commissioners, whenever you
       get an entire industry sector taking the same position,
       something rarely achieved, you should give that great weight,
       it may be that they understand their mass media industry very
       well.  And because of time limits, I'll stop now, but please
       know that after having spent 30 years in this business, I
       really offer my services to you and help I can give you during
       your decision process, I'll be happy to give, thank you.
                 COMMISSIONER HUNDT:  Mr. Reilly.
                 MR. REILLY:  Thank you.  Good afternoon.  I'm Ed
       Reilly, president of McGraw Hill Broadcasting and chairman of
       the Association of Maximum Service Television, the
       organization of television stations committed for 40 years to
       achieving and maintaining the highest technical quality for
       America's free over-the-air broadcasting system.  MSTV has
       been a leader in every aspect of the ATV process to further
       one overriding goal, to assure that the public's free and
       universal service from local television stations can make the
       giant leap to a new video era.
                 The opportunity for providing HDTV and other
       broadcast services, which the Grand Alliance system
       facilitates hinges on the Commission's making available
       transitional 6 MHz channels through a sound national
       assignment plan that allows broadcasters to upgrade without
       disenfranchising our current NTSC viewers.  Without this
       transitional spectrum, HDTV will be available only to those
       with the means and inclination to pay for it.  Inevitably,
       undermining the mass audience economic model which has
       sustained the public's free local and universal NTSC analog
       service, and upon which the successful introduction of free
       and universal digital television depends.
                 The market will, of course, be the best judge of the
       desirability of any ATV service, only if the public has a
       chance to view and to judge those options.  That's why
       broadcasters are committed to programming substantial amounts
       of the broadcast day in HDTV.  Moreover, if the Commission
       determines that, in addition, reasonable and practical HDTV
       minimums are necessary to give the service a fair market
       trial, we are prepared to comply.
                 While our goal is to make possible the retention of
       the mass programming market for HDTV services, the economic
       platform which supports universal free local service, we are
       also ready to apply the packetized capabilities of the Grand
       Alliance system by experimenting with the delivery of program
       related material.  I personally believe that the system's
       versatility and text compatibility could allow for new,
       creative, and expanded public service contributions in a
       digital ATV world.  We don't know today specifically what they
       might be, but we do know that the opportunities will be lost
       or fragmented forever if auctions are adopted, thereby biasing
       the whole system towards subscription services.
                 Broadcasters are willing to make the necessary heavy
       investments to transition the public benefits of our free,
       universally available, community-based television system into
       the digital era.  To make that conversion, we depend on the
       Commission to implement the Grand Alliance standard,
       technically sound paired channel assignments, reasonable must
       carry requirement, and ATV receiver standards.  Thank you.
                 COMMISSIONER HUNDT:  Thank you.  Mr. Major.
                 MR. MAJOR:  Good afternoon, Mr. Chairman and
       Commissioners.  I'll start with three observations.
                 First, in a speech before the IRTS, Chairman Hundt
       said, and I'll quote, "the Grand Alliance (nurtured by the FCC
       Advisory Committee) has...discovered a wondrous digital genie
       in a bottle.  With it you can broadcast multiple signals of
       higher resolution than today's NTSC signal, or dozens of audio
       signals, or software packages, or thousands of pages of text,
       or a pair of very high resolution movies."  In short, a world
       leading, technical marvel on the order of cellular telephony
       that includes within it the opportunity to create a whole new
       industry just as cellular did in PSC will.
                 Second, as the Commission's latest Advanced
       Television Notice points out, today only 120 MHz of the 400
       MHz of spectrum allocated to TV is actually use to deliver
       broadcast services.  In other words, the current system, 280
       MHz, is going largely unused.
                 Third, while we move purposely to exploit this
       opportunity for advanced signaling, we cannot lose sight of
       the obligation to provide for the needs of public safety and
       essential industries and we cannot lose sight of the potential
       for market dislocations if new services are allowed without
       auctions which would then compete with existing services that
       paid substantial sums through auctions.
                 The U.S. enjoys the best telephone system in the
       world and that capability has rapidly moved to the mobile
       environment. We should be proud of what we've accomplished. 
       However, we're now in a new era, 40 percent of today's homes
       have personal computers.  The internet has happened.  The NII
       and GII are becoming a reality.  The need to communicate
       broadband information including files, images and video with
       full mobility is expected to be as universal as the use of the
       mobile phone.  The potential applications may go far beyond
       entertainment.
                 New applications for this underutilized spectrum and
       this exciting new technology are limited only by our capacity
       to imagine and our ability to deliver a fair, market driven
       framework to allow it to be developed.  I'll suggest a five-
       point plan:
                 1.  Require that TV receivers shipped after some
       near-term date be ATV capable.
                 2.  Working with all the interested parties and
       affected parties, accelerate finalization of the ATV channel
       allotment plan, associated application filing window, and
       construction requirements for ATV stations.
                 3.  Strike a balanced approach including technical
       flexibility and compensation which allows ATV licenses to
       respond to market requirements.
                 4.  Make recovery of contiguous blocks of spectrum
       an absolute requirement from the outset, rather than a
       possible option in this proceeding.
                 5.  Structure allocations of recovered spectrum into
       segments to accommodate next generation systems which support
       public safety, essential industries, and general public use.
                 We do not pretend to have all the answers to this
       complex task.  However, by using the above five-point
       framework, we believe the Commission can accelerate change,
       provide business opportunities for the broadcast and
       telecommunications community, and usher in an exciting era of
       new services for the public.  Thank you.
                 COMMISSIONER HUNDT:  Thank you.  Mr. Carnes.
                 MR. CARNES:  Thank you, Mr. Chairman.  I'm proud to
       be here this afternoon representing the Grand Alliance.  There
       was a lot of talk earlier today about the public interest. 
       The Grand Alliance supports the Commission's public interest
       goals of preserving and promoting free over-the-air television
       while making the most efficient use possible of television
       spectrum.  We believe both goals will be best served by the
       rapid introduction of advanced television, especially high
       definition television.
                 Broadcasters face a very competitive environment. 
       Already computer displays offer higher resolution than current
       television.  Soon, much of the video delivered to homes by
       cable, satellite, fiber, and tapes or discs will move to high
       definition.  DDS is already delivering digital packetized
       signals to the home by satellite and is capable of delivering
       high definition signals today.  They don't today, but once an
       HDTV standard is endorsed and HDTV sets are available, they
       likely, very probably, will.
                 If free over-the-air television service is to
       survive, it must remain competitive in this environment.  The
       Grand Alliance system is broadcasters only means for avoiding
       technological obsolescence.  It will allow them to compete on
       a level playing field, but only if it is implemented.  To
       preserve free over-the-air broadcasting, the Commission must
       do everything possible to encourage and accelerate the
       implementation of advanced television, especially high
       definition television.  This suggests the following actions:
                 First, the Commission should quickly approve the
       advanced television standard so that the industries involved
       can finish designing the necessary broadcast and consumer
       equipment.  The Grand Alliance system is the most thoroughly
       tested system of its kind in history.  This is an outstanding,
       world-leading system.  Waste no time in approving it.
                 Second, the Commission should encourage broadcasters
       to implement digital service on the transition channel as
       rapidly as possible.  The transition channels should not be
       auctioned, for this would slow the process, if not destroy it. 
       Rather, the Commission should hasten the switch to digital so
       that the NTSC spectrum can be vacated as quickly possible and
       the advanced television channels can be repacked, thus
       allowing the reclaimed spectrum to be organized into large
       contiguous, nationwide blocks.  This approach would have far
       greater value in spectrum auctions than the alternative
       hatchwork of NTSC to move channels.
                 Third, the Commission should lend each broadcaster a
       full 6 MHz channel so that full HDTV can be delivered.
                 Fourth, and finally, the Commission should give
       broadcasters wide latitude in exploiting the unprecedented
       flexibility of the old digital system.  This flexibility can
       allow broadcasters to play a key role in the national
       information infrastructure and will enable them to bring new
       innovative services to the public which can help accelerate
       and pay for the conversion to digital.  Thank you.
                 COMMISSIONER HUNDT:  Thank you.  Mr. Flaherty, and
       let me just note that no one has a better claim than Joe to
       having helped us on the many technical dimensions of this
       issue and I want to thank you.
                 MR. FLAHERTY:  Thank you very much, Mr. Chairman.
                 COMMISSIONER HUNDT:  I won't ask anyone else, I'm
       sure you all will agree with me in this respect.
                 MR. FLAHERTY:  Thank you, sir.  Commissioners, and
       the Chairman has noted, I was responsible for introducing HDTV
       in American in 1981 here in Washington at a demonstration for
       the FCC.  Thus, I may be responsible in part for all of us
       being here today, and for that, I apologize.  Nevertheless,
       I'm pleased to be here.  We are on the verge of adopting a
       truly remarkable digital television standard that is the
       culmination of eight years of concentrated work by your
       Advisory Committee on Advanced Television Service and by a
       brilliant aggregation of engineers from the entities that
       became known as the Grand Alliance.
                 This extremely complex system carefully crafted in
       an open form by this nation's best scientists and engineers is
       the world's most advanced television system, now ready for
       adoption.  The message from your technical community is that
       the system has been designed, built, thoroughly tested and it
       provides outstanding performance now and is future proofed
       with head room to accommodate ongoing improvements in the
       future.
                 In order for over-the-air broadcasting to survive in
       this new environment, it will have to transition to this
       digital replacement service that will allow it to remain
       competitive with subscription-based video service providers
       like DBS, cable, telephone companies and so on.  This will
       require, of course, a massive financial investment by the
       broadcasters as it did in the days of color, and it will
       require the temporary grant by the government of this second 6
       MHz channel in which to operate the digital television service
       and HDTV service in parallel with the current NTSC service
       during the whole transition period.  At the end of this
       period, the broadcaster will return one channel, leaving him
       with the same bandwidth that he has today, but leaving a
       nation with a vastly improved service.
                 It's absolutely essential to provide the 6 MHz
       channels to enable a full range of transmission options
       including HDTV.  Without a 6 MHz ATV channel, terrestrial
       broadcasters will be forever foreclosed from offering world
       series, for example, in HDTV, while their cable competitors
       would be able to offer regular season games and wide-screen
       HDTV for their paying subscribers.  A 6 MHz channel is also
       necessary to assure that that sufficient headroom is available
       in the transmission channel to allow for the quality
       improvements in the various aspects of the Grand Alliance
       system which will be developed over time.
                 So, it's time to standardize and implement the Grand
       Alliance system for over-the-air broadcasting and to proceed
       promptly to assign the temporary 6 MHz channels to existing
       broadcasters.  Prompt action will spur the production of
       professional and consumer digital equipment.  It will allow
       the U. S. to maintain its world leadership in a role digital
       broadcast technology, and it will assure that the vast
       audience of over-the-air television has the same opportunity
       as customers with pay services to participate in this digital
       revolution.  In short, enable, not overregulate.  Thank you.
                 COMMISSIONER HUNDT:  Thank you.  Commission Quello.
                 COMMISSIONER QUELLO:  Okay, Mr. Flaherty, you've
       been involved with the development of HDTV from the very
       beginning, can you describe or maybe give us a review in
       practical layperson's terms of some of the services that
       broadcasters may be able to provide beyond television?
                 MR. FLAHERTY:  Yes, well, that's a very important
       piece that is often overlooked, that the service is so
       flexible that in addition to television high definition or
       standard television services, the system develops a very large
       data capacity, which occurs when the encoding of the system
       doesn't require the full data capacity available and that
       turns out to be a very large data capacity.  In one test that
       was made, for example, in a one-minute commercial in high
       definition, full high definition, the system developed 60
       megabytes of data, enough to transmit six major newspapers in
       less than one minute.  So the capacity is there, the question
       is, how would it be used and what business can be developed
       from it.  But the engineers or the toolmakers only to this
       trade, have, in fact, provided a very large data capacity in
       addition to television.
                 COMMISSIONER QUELLO:  Yike, great possibilities. 
       Mr. McKinney some naysayers are concerned that a broadcaster
       will fight efforts to recover the 6 MHz analog at the end of
       the transition.  Would broadcasts have any reason to keep this
       spectrum if they have been assigned 6 MHz of digital spectrum? 
       What's your view on that?
                 MR. MCKINNEY:  They may well want to keep it.  I
       think that's entirely in the hands of this Commission.  I have
       sat before this panel before when Commissioners have looked
       down at broadcasters and said, you will give this spectrum
       back.  All you have to do is condition the license
       specifically, that the frequencies must come back, and they
       will come back.
                 COMMISSIONER QUELLO:  Okay, I think a lot of us feel
       that's the way to go.  Mr. Carnes, you state that an option
       would slow the transition from analog to digital.  Can you
       explain why a delay would be inevitable, why?
                 MR. CARNES:  Well, I think the additional cost is
       going to slow down broadcasters from implementing digital
       television and I think that the most value can be gained by --
       right now the spectrum, as it exists, with NTSC stations
       scattered all around and pockets of open spectrum in different
       places, it's not worth a whole lot.  There's a lot of
       interference from NTSC stations, it's not contiguous, it's not
       geographically contiguous.  You're not going to get a whole
       lot of money for that spectrum.  But if we can move everybody
       to digital as fast as possible, get the NTSC back, repack it,
       get big swaths of open spectrum all the way across the
       country, that's where you're going to get money in an auction. 
       That's where you're going to have money to do whatever you
       want to do with it, and that's what we ought to be doing.  So
       we ought to be moving to digital as fast as we possibly can
       and that's one of the big reason.
                 COMMISSIONER QUELLO:  Okay, thank you.  Okay.
                 COMMISSIONER HUNDT:  Okay.  Commissioner Barrett.
                 COMMISSIONER BARRETT:  Thank you very much, Mr.
       Chairman.  Mr. Horowitz, Mr. Carnes has said we ought to move
       to digital as fast as we can.  Mr. McKinney said we should
       give great weight to any idea of the whole industry is in
       complete agreement with it, that would probably the reason I
       would not give complete hope to them, and someone else
       suggested that, Mr. Carnes again, said waste no time in
       approval.  You had stated in your testimony that any group,
       and you've heard all of the great things that the allegedly
       the Grand Alliance can do in terms of adopting to both of the
       kind of scanning formats.  Do you agree with what they can do
       in both of the scanning formats, a quick answer and I want to
       ask you something that you put in your testimony?
                 MR. HOROWITZ:  I've seen it demonstrated across the
       street.
                 COMMISSIONER BARRETT:  That's not what I asked you,
       about what you saw demonstrated.
                 MR. HOROWITZ:  I agree that they both technically.
                 COMMISSIONER BARRETT:  Then you had stated in your
       testimony that any one group of broadcasters could adopt a
       proprietary access -- standard and then effectively foreclose
       other broadcasters in the area from reaching the viewer.  Can
       you elaborate on that, if, in fact, you agree you don't have
       any problem with interoperability, any problem with access
       with the Grand Alliance's scheme?
                 MR. HOROWITZ:  I think, as the core system, as I
       stated in my testimony, is an open technology and it's an open
       system.  The issue comes when you add a proprietary or closed
       conditional access on the cription system on it that is not
       available to every other broadcaster in that same market.  So
       you could have two channels of a licensee broadcasting a
       proprietary way, would install a slew of consumer boxes in
       that particular market.  Along comes another broadcaster,
       wants to transport also secured programming into that
       household and he's stopped, and he's stopped because he can't
       get access to that closed conditional access system and he's
       stopped because the consumer now would have to go out and buy,
       yet, another device to put this --
                 COMMISSIONER BARRETT:  Is it a question of access
       and interoperability?
                 MR. HOROWITZ:  It's a question of access and
       interoperability to that proprietary piece of closed
       technology.
                 COMMISSIONER BARRETT:  How do we insure the maximum
       aspect in terms of interoperability?
                 MR. HOROWITZ:  I think that the Commission has to
       recognize and does recognize that there are these potential
       barriers where the roads can be closed and in your proceedings
       to develop the rules, you need to recognize that there is a
       chance that that barrier could be established and you need to
       basically specify or require interoperable systems, that one
       system can interopt with the next.
                 COMMISSIONER BARRETT:  Do those -- does the further
       standardization or certain standards delay what Mr. Keyworth
       and Mr. McKinney and Mr. Carnes talk about we ought to be
       moving toward as rapidly as possible or does that delay?  Mr.
       Carnes has just suggested we need to waste no time in approval
       and get a headon?
                 MR. HOROWITZ:  I believe it would not delay it if
       the FCC Commission is specific and direct now, that when
       you're --
                 COMMISSIONER BARRETT:  What does that mean, I'm
       sorry?
                 MR. HOROWITZ:  Meaning that you require
       interoperability today, that you recognize that -- you don't
       want to create an environment where one broadcaster or one
       delivery system can block the transportation or transmission
       of another one's system into that consumer's home.
                 COMMISSIONER BARRETT:  But I -- you don't assume
       that's a given from our perspective as a matter of public
       policy that we want interoperability and access?
                 MR. HOROWITZ:  I think it's a given that you want
       it, I think you have to state it because I don't think it's a
       given and the marketplace will respond to it.
                 COMMISSIONER BARRETT:  Do you have any instances
       where such a practice is prevalent in the cable or DBS
       industry, where one cannot have access interoperability in
       this sense?
                 MR. HOROWITZ:  Well, direct TV, consumer has gone
       out and bought an $800 piece of equipment which is only usable
       to receive signals off the direct TV satellite.  When Echo
       Star goes up --
                 COMMISSIONER BARRETT:  But they can receive
       programming from somebody else's satellite, though.
                 MR. HOROWITZ:  No, sir.
                 COMMISSIONER BARRETT:  If they have a different
       satellite than direct TV?
                 MR. HOROWITZ:  No, sir.  The direct TV conditional
       access system is a closed system.  You cannot use it unless
       you --
                 COMMISSIONER BARRETT:  If they have other choices of
       systems as opposed to direct TV and their satellite, that's my
       point.
                 MR. HOROWITZ:  If there's another direct --
                 COMMISSIONER BARRETT:  If I want Reed Hundt's
       satellite as opposed to direct TV, can I get that?
                 MR. HOROWITZ:  If you want to buy another box, you
       can get it.
                 COMMISSIONER BARRETT:  That's not what I asked you. 
       Okay, thank you very much, Mr. Chairman.
                 COMMISSIONER HUNDT:  Commissioner Ness.
                 COMMISSIONER NESS:  Thank you, Mr. Chairman.  Mr.
       Horowitz, following up on this, if the Grand Alliance system
       is adopted, TV sets would be able to receive that standard. 
       How would broadcasters then be able to establish this
       bottleneck, you're suggesting that they would take some of
       their signal, break it up, transmit several programming
       streams, block off some of them, through encryption and
       therefore a consumer, having acquired a box to receive that
       now pay programming, would not be able to receive anyone
       else's over-the-air programming?
                 MR. HOROWITZ:  They could receive anyone else's
       over-the-air programming that has been broadcast in the clear. 
       However, if another broadcaster was broadcasting some other
       closed programming that was also encryptive, then the consumer
       needs the keys to unlock it.  Well, if the second system of
       keys is different than the first system of keys, in other
       words, you have two locks, then you need, in effect, two
       boxes.  What I'm advocating is that we recognize that there
       will be both open and closed products offered and that we just
       make sure that one doesn't lock out the other.
                 COMMISSIONER NESS:  Okay.  Mr. Keyworth, pardon, I'm
       following up on keys, I'm sorry.  Is there some benefit to
       manufacturers and consumers in knowing that certain frequency
       video would be received in a certain format and on another
       frequency cellular telephones, for example, would work?  If we
       -- that is to say, if we mix all of the services on all of the
       spectrum, how would a TV set manufacturer or cell phone maker,
       for example, know what frequencies to use to make it work?
                 MR. KEYWORTH:  First, if -- your first question is,
       if you know what the frequency is ahead of time, of course,
       makes the technical challenge simpler.  However, it is a basic
       principle of digital technology that the cost of the
       technology or computing power falls faster than any technology
       we have ever experienced with, that is what is unique about
       the digital industry.  To make a translator that will
       basically heal or bridge a mismatch, is, in fact, done all the
       time.  I routinely watch television, NTSC television, on my
       computer display through $145 card, which, in a few years,
       will be a $5 chip on a motherboard.  So, yes, I agree there,
       it is simpler.  On the other hand, the power of a collapsing
       computer cost is not to be overlooked.
                 COMMISSIONER NESS:  Um-hum.  Mr. McKinney, do you
       have a response to that?
                 MR. MCKINNEY:  Yes, I would also point out that
       there are additional problems than just the question of
       frequencies, how does the television channel know where to
       tune, how does the receiver know where to tune, that's a
       critical question.  There's also a question of power, you
       know, some services use high power from a central antenna. 
       Some services use trunking, some services use cellular
       technology and some services use Quam or COFDM, or VSB, those
       are all issues that still have to be resolved.  Simply stating
       that all frequencies are open for all purposes doesn't solve
       your problem.
                 COMMISSIONER NESS:  Mr. Keyworth, you're suggesting
       now then that we do not need a transmission standard, that the
       marketplace will make that determination?
                 MR. KEYWORTH:  I'm certainly suggesting that we need
       interference standards, but I do not think, in the long run,
       we will have a single transmission standard.  However, let me
       qualify that, if I may.  I think the advancement that has been
       made by the Grand Alliance on ATV has gone a long ways towards
       bridging the transition between analog and digital television. 
       This is a pioneering effort.  What I am speaking of is in the
       long run, and we see this from DBS, we see this with cable, in
       the long run there will be multiple ways of broadcasting
       digital TV.
                 COMMISSIONER NESS:  So if we go the route of not
       having a specific transmission standard, then are we likely to
       be saying good-bye to a free over-the-air system, whereas the
       ones that you had suggested were all pay services?
                 MR. KEYWORTH:  Multifaceted question.  First of all,
       I think the role of what we call free television will be, for
       a long time, approximated because the customers are used to it
       and the customers want it.  Second of all, I believe that the
       standard that the gentlemen here have been involved in
       developing, not myself, is a very powerful standard.  It is
       excellent technology and I believe that the computer industry,
       and I read the newspaper today, I believe the computer
       industry can, in fact, accommodate to that standard more
       easily than one might expect.  So I think it is important. 
       All I am trying to say is that I believe the way the spectrum
       is allocated should be dezoned effectively and that it will
       allow the maximum number of new entrants and maximum amount of
       technology to adapt.
                 COMMISSIONER NESS:  We have today, for example, 280
       MHz of spectrum that's unused because it's diverse spectrum,
       because with analog you will have the interference problem. 
       Mr. Carnes had suggested in his comments about the value of
       repacking and therefore getting a contiguous spectrum which
       ultimately will be more valuable if we were to do an auction. 
       How do you respond to that?
                 MR. KEYWORTH:  First of all, I think I'm very, very
       wary of predicting directions in the technology and timing,
       it's all moving too fast.  None of us could tell five years
       ago what the status today of digital technology is.  We will
       know that there are coding techniques, spread spectrums, CDMA,
       others, that will also play a role in determining
       interference.  So I believe that cheap computing power, which
       is what the digital revolution means, means enhancement of
       signal to noise ratios, which in turn means, I think,
       multiplicity of ways to deal with interference.
                 COMMISSIONER NESS:  Did you have response to is, Mr.
       Reilly?
                 MR. REILLY:  Well, I just think that as we embark on
       trying to transition this nation's entire system to a new
       digital format, the notion of having no standards which
       consumers can rely on, that broadcasters can rely on, will
       stand in the way of ever developing any large scale mass
       market distribution system and we have many, many pieces of
       equipment that we've got to still assemble to put this whole
       system together and I think the consumer deserves some
       assurance that there will, in fact, be high definition
       programming that will work on the television sets that we're
       expecting them to buy.
                 COMMISSIONER NESS:  Thank you, I'm afraid my time
       has ended, Mr. Carnes.
                 COMMISSIONER HUNDT:  Commissioner Chong.
                 COMMISSIONER CHONG:  Thank you.  Mr. Major, you
       stated in your testimony that you think that the Commission
       should require that TV sets be ATV compatible and I was
       wondering whether you thought we should mandate that they be
       HDTV compatible?
                 MR. MAJOR:  The Grand Alliance has come out with a
       darn good spec and when the industry reaches the level of
       consensus it's achieved on the Grand Alliance standard, the
       concept of the FCC endorsing that consensus has a lot of
       mileage in it and some serious thought should be given to
       that.  Yes, I would accept an HDTV standard.
                 COMMISSIONER CHONG:  And do you think HDTV service
       would become available if we don't require sets to be HDTV
       capable?
                 MR. MAJOR:  Yes, it will become available if you
       don't require HDTV sets to be capable, but --
                 COMMISSIONER CHONG:  And that's because of
       marketplace forces, do you think?
                 MR. MAJOR:  Marketplace forces, but quite frankly,
       we can easily visualize the environment where it's required
       that they be capable and that might accelerate the trend.
                 COMMISSIONER CHONG:  I've been fascinated by Mr.
       Keyworth's testimony, I'm trying to think it through.  So
       let's assume we auction off all the transitional channels to
       the highest bidder, Mr. Keyworth and it looks as though you're
       suggesting that the people that are currently on the analog
       channels would stay on them, and everybody should be allowed
       to anything they want on it, broadcast, cable service, data,
       whatever they want, right, a bit is a bit is a bit?  Now,
       suppose we do that and there's no one that wants to serve a
       small rural area in Alaska with any kind of television service
       because it's not very economic.  So all the people in that
       town that's now currently receiving a couple of television
       stations would no longer receive it because nobody wants to do
       it.  I mean, do you think that that is a scenario that the
       Commission would be able to embrace given that we're trying to
       bring service to as many Americans as possible.
                 MR. KEYWORTH:  Yes, I do, because I believe that the
       Commission is confronting the fact that digital technologies,
       because of their plummeting costs, are achieving an
       unprecedented presence and penetration in the marketplace. 
       The penetration of DBS, but before that the penetration of PCs
       into the homes has been absolutely enormous, and as Tom Sewell
       pointed out in a Forbes magazine editorial a couple of months
       ago, no technology has every narrowed the haves versus
       havenots gap more.  Low-cost digital technology is
       accomplishing that penetration.  As far as rural service, we
       are seeing with -- for example, with fixed cellular technology
       worldwide, we are seeing cheaper and cheaper and cheaper per
       line per person costs for telephony.  We will see exactly the
       same thing here and that little town in Alaska that you refer
       to, I believe, will be the result of some very significant
       low-cost technologies.
                 COMMISSIONER CHONG:  I'd like to hear from others on
       the panel, do you think free over-the-air would survive? 
       We'll start with Mr. Carnes.
                 MR. CARNES:  I think that the technology that has
       narrowed the gap between the haves and the havenots and the
       history of the world has been television, the penetration of
       television is higher than television, and the penetration of
       PCs is nowhere near that, so I think preservation of free
       over-the-air television is the way to eliminate that gap and
       it's not to just open the spectrum up to anything.
                 COMMISSIONER CHONG:  Mr. Reilly.
                 MR. REILLY:  Spectrum auctions are not compatible
       with the transition to HDTV format.  People that are free to
       bid for spectrum to use it for purposes for which they will
       charge, will clearly be able to outbid people who are trying
       to launch a service for which there is a huge investment
       simply to replicate the service that they're already giving. 
       Eventually it will cost the public a lot more than whatever
       the auction generates.  The programs that they now enjoy for
       free will migrate to paid-for high definition digital wired
       services.  The pay services will take on a bigger role in the
       whole television programming industry.  The opportunity for
       the Commission to even entertain the notion of public service
       requirements will be lost because the analog broadcasters
       won't have the wherewithal to continue to serve the public in
       the same way.
                 COMMISSIONER CHONG:  Anybody else.  I think, Mr.
       Flaherty.
                 MR. FLAHERTY:  Thank you, I'd like to just address
       the question of the standard because the idea of doing
       anything on those channels is really not possible.  The reason
       that we need a transmission standard as opposed to production
       and other things, is that we already are in an existing NTSC
       environment which is already interference limited.  You don't
       finally lose the television signal because it fades out, you
       finally lose it because the station on that channel interferes
       with you, it's an interference limited service.  So the Grand
       Alliance transmission system was carefully crafted to be able
       to put 1,500 new television stations on the air in those new
       channels without causing that interference and there are very
       few changes that you can make to that without causing
       interference, literally months of testing of all the channels
       and all the taboos went into this and quite a few changes were
       made in the standard in order to improve this interference
       performance.  So there isn't complete freedom in this.  And,
       in fact, the FCC staff hasn't yet finalized an allotment plan
       which also influences this, what channel do you put in which
       city and which location in order to minimize this.  There is
       not a great deal of flexibility in transmission in order to
       minimize the interference into NTSC and from NTSC into ATV and
       ATV into ATV.  The simplicity of doing that and the simplicity
       of cutting the channels into slices is directly proportional
       to your distance from the problem.  This is not a great
       flexibility.
                 COMMISSIONER CHONG:  Thank you.
                 COMMISSIONER HUNDT:  Thank you very much.  Mr.
       Carnes, you said auctions will slow the deployment of digital
       television.  In other words, if Congress decides to auction
       digital broadcast spectrum, your view is it will slow the
       deployment of digital television.  Dr. Keyworth, you said that
       auctions are a favored way to go, that's the least regulatory,
       most market oriented approach.  Personally, I believe there
       are arguments against auctions, but Dr. Keyworth, does it
       stand to reason, in your view, that if someone pays in an
       auction for broadcast spectrum, they would, in some way, want
       to go slow in the deployment of the technology after having
       paid money for the license?
                 MR. KEYWORTH:  Not unless they had free money, no.
                 COMMISSIONER HUNDT:  Isn't it logical, Dr. Keyworth,
       that if somebody had to pay for the license, they, in fact,
       would think of every way they could to convert their customer
       base to digital reception so that they would be able to have
       an audience?
                 MR. KEYWORTH:  Yes.
                 COMMISSIONER HUNDT:  Isn't that the way the
       incentives would go?
                 MR. KEYWORTH:  Yes.
                 COMMISSIONER HUNDT:  Whereas, if you just give the
       digital broadcast license to someone, they might or might not
       be interested in taking money out of their pocket to set up a
       transmission system and converting their audience to digital.
                 MR. MCKINNEY:  But, Mr. Chairman, you're only
       talking --
                 COMMISSIONER HUNDT:  Excuse me, one second.  Excuse
       me, one second.  Don't you agree with that, Mr. Carnes?
                 MR. CARNES:  Well, I think the problem here is we're
       already worried about the cost of converting to digital and
       there's a big problem in dealing with that, it's dealable
       with, but to add more costs, I think, will cause some people
       to elect not to move and that's the wrong way to go.
                 COMMISSIONER HUNDT:  I agree with you that there are
       costs and there are costs, you agree with me, don't you, Mr.
       Carnes, that one cost is for the digital broadcaster, another
       cost is for the customer to convert to some product, whether
       it's the PC with the card or the digital television receiver
       or the box, they need to spend something to be able to watch
       the digital television broadcast.  You agree with that, don't
       you?
                 MR. CARNES:  Sure.
                 COMMISSIONER HUNDT:  Okay, now, you said you thought
       we should have a policy that moved everyone to digital as fast
       as possible.  What do you think of the idea that we've read
       about in the press, that the administration is floating in the
       budget reconciliation process, that says that some money ought
       to be reserved from a future auction of analog spectrum so as
       to use that money to help the consumers move more quickly in
       their buying patterns towards digital reception.  What is your
       view about that?
                 MR. CARNES:  Well, I think that would probably be
       fraught with a lot of difficulties as to how that money is
       actually apportioned and so forth.  I think the best way to
       satisfy the Congressional thing is to do some accounting magic
       that takes account of the future value of the spectrum and
       accounts for it in the seven-year period.
                 COMMISSIONER HUNDT:  There's been a lot of talk
       about how free over-the-air broadcast television can survive. 
       I want to ask you, Mr. Reilly, don't you think that one
       fundamental condition for the survival of free over-the-air
       broadcast is that digital broadcasters be able to reach 100
       million homes, the same way that analog broadcasters, taking
       the industry as a whole, can reach 100 million homes?
                 MR. REILLY:  Certainly the vast majority of that,
       yes.
                 COMMISSIONER HUNDT:  Or 90 million.
                 MR. REILLY:  90 million.
                 COMMISSIONER HUNDT:  You need the mass market, isn't
       that right?
                 MR. REILLY:  You need the mass market, yes, sir.
                 COMMISSIONER HUNDT:  For advertisers to continue to
       support in a way analogous to today's market.
                 MR. REILLY:  Well, and to be able to amortize the
       course of the programming and to be able to compete with
       services that have two revenue streams and can bid for
       sporting events or programming events with two revenue
       streams.
                 COMMISSIONER HUNDT:  Absolutely.
                 MR. REILLY:  We're trying to do it with one.
                 COMMISSIONER HUNDT:  Such as cable or satellite and
       you're talking about different kinds of services.
                 MR. REILLY:  Virtually anybody else who is in the
       business of delivering digital signals.
                 COMMISSIONER HUNDT:  Right.  Imagine with me, if you
       will, the following scenario.  We give all the analog
       broadcasters a digital broadcast license.  They build out
       those systems, whether it's fast or slow, whether Mr. Carnes
       is right or Mr. Keyworth is right, they do make a try at it.
                 MR. REILLY:  Yes.
                 COMMISSIONER HUNDT:  50 million American homes
       decide to buy a digital television receiver.  The other 50
       million, they don't do it, they don't want to take the money
       out of their pocket for that choice, you can't make them. 
       Maybe they don't want to do it because they decided to go with
       the cable industry and bought a digital down converter box
       instead.  But 50 million homes have a digital television
       receiver and 50 million have shown real reluctance to go along
       with this transition.  What do we do?
                 MR. REILLY:  Well, it certainly creates a major
       problem for the broadcasting industry, because for us to try
       and maintain, over a long period of time, a parallel system,
       is not going to be in our best interests.  This is one area
       where the government can rest assured that the broadcasters'
       interest in a speedy transition is congruent with the
       government's interest because none of us want to be buying
       second -- or replacement analog transmitters.  None of us want
       to be buying replacement analog tape machines and it certainly
       is our hope that the quality of the new product, the new
       delivery system that we'll be offering, the quality of the
       augmenting services that we'll be offering will certainly,
       over a long enough period of time, as equipment wears out,
       justify people buying new digital, at least digital decoder
       boxes that will light up their analog tubes.
                 COMMISSIONER HUNDT:  But it's realistic to believe
       that it is least a plausible scenario that the cable industry
       will get to at least 50 million homes given the additional
       down converter box, give them all the additional channels they
       can possibly want, do that before broadcasters are able to
       compete with that, and generate the 50/50 split that I'm
       talking about here.  Under the circumstances that I'm speaking
       about, doesn't it make sense to think about incentives to the
       consumers that would expedite or hasten or promote the
       transition to digital reception, the very type thing the
       administration is talking about?
                 MR. REILLY:  Well, we're hopeful that the incentives
       for the consumer to transition is based on the improved
       quality of the product that we're going to be able to offer,
       which is the ultimate, I think, incentive for them to try and
       move to a new generation of --
                 COMMISSIONER HUNDT:  I'm just suggesting a little
       cash is sometimes an incentive for a consumer, too. 
       Commissioner Quello asked me to go ahead to Commissioner
       Barrett in the next round since Commissioner Quello has to
       absent himself briefly, and Commissioner Barrett, as if on
       que, is here.
                 COMMISSIONER BARRETT:  And you asked all the
       questions when I saw you on television and you had asked the
       question about the spectrum thing and I got my answers, thank
       you very much.
                 COMMISSIONER HUNDT:  Commissioner Ness.
                 COMMISSIONER NESS:  Okay.  Following up one last
       question, Mr. Keyworth, on the issue that the Chairman raised. 
       You mentioned that it would, if one had an auction that would
       make digital conversion go more rapidly, is that a correct
       statement?
                 MR. KEYWORTH:  I'm saying that lowering barriers to
       entrants would make it go more rapidly.  I'm saying that
       auction, I believe, is the most expeditious and efficient way
       that I know to allocate spectrum.
                 COMMISSIONER NESS:  Okay, but that does not
       necessarily mean that that spectrum, unless the Commission
       were to mandate that the spectrum be used for digital
       television, it could be used for a whole list of other things
       and there may never be a conversion to digital television, is
       that not also the case, Mr. Keyworth?
                 MR. KEYWORTH:  There certainly will be a conversion
       to digital.
                 COMMISSIONER NESS:  Of some sort of another, but it
       may be a conversion to digital PCS, or some other digital
       service that we're not aware of.
                 MR. KEYWORTH:  I certainly think it could be broader
       than just television.  I believe that television will be an
       issue --
                 COMMISSIONER NESS:  But would television play a role
       in all of this?
                 MR. KEYWORTH:  -- a major role because it is a major
       marketplace and a major customer demand and requirement.
                 COMMISSIONER NESS:  Okay, but absent either
       mandating a standard or having some other requirement that the
       spectrum be used for digital television, is there any reason
       to conclude that auction recipients -- successful auction
       bidders, would rapidly use that spectrum for the provision of
       digital television?
                 MR. KEYWORTH:  Speculation only, I believe they will
       use it because it is an unmet demand in the marketplace and it
       is a very large and attractive market.  I believe they will
       also try to provide as many alternative services as possible.
                 COMMISSIONER NESS:  Would they do it if people don't
       have television sets in the marketplace to receive the signal?
                 MR. KEYWORTH:  Well, of course not.
                 COMMISSIONER NESS:  Okay, thank you.  Mr. Reilly.
                 MR. REILLY:  Yes, Mr. Hendricks said this morning
       that he thought that shortly after the broadcasting community
       led the way into digital, the cable community would follow
       along.  The fact of the matter is this is a huge expensive
       undertaking for our industry and it's the broadcasting
       industry that stands first to try and move the rest of the
       country into this new digital era.  However, if we are for
       once and all precluded from being able to make the transition
       to high definition, to digital, other delivery mechanisms who
       then will see that as a competitive advantage, a single
       competitive advantage, will move very quickly to sell digital
       delivery and eventually, I believe, take the lions share of
       the programming away from us that presents the base for our
       free and universal service.
                 COMMISSIONER NESS:  Assuming we adopt the Grand
       Alliance standard, for sake of discussion here, and we provide
       the additional 6 MHz of interstitial spectrum for that
       purpose, how would you determine when a transition has been
       made such that the original spectrum can be returned?
                 MR. REILLY:  Well, I think it has to be a standard
       based on the number of consumers who have migrated to the new
       digital forecasting.  I think just as practically as a
       political matter, disenfranchising --
                 COMMISSIONER NESS:  Is it households, is it number
       of TV sets in the --
                 MR. REILLY:  I think the standard reasonably would
       be build around households.
                 COMMISSIONER NESS:  Okay, does anyone else have a
       thought or comment on that?  Mr. McKinney.
                 MR. MCKINNEY:  No, I don't -- I think that's
       correct, and I don't think you wait until the last television
       set in every house has been replaced.  I think you do have to
       have a reasonable position to take and I think that is based
       on households.
                 MR. CARNES:  The cost of a set-top converter might
       be also a factor in this as it comes down, you might be able
       to go sooner because of the cost being low.
                 MR. REILLY:  There will also be an economic argument
       on the part of broadcasters.  By the time the analog audience
       gets down to 5 or 10 percent, it's going to be a very
       difficult proposition to replace your analog transmitter at a
       half a million dollars, and so eventually those service will -
       - we won't want to continue to operate those services.
                 COMMISSIONER NESS:  We had talked on an earlier
       panel about must carry, I was wondering if you could give your
       view as to what channels ought to be must carried?  Mr.
       McKinney.
                 MR. MCKINNEY:  No, I'd like not to answer that.
                 COMMISSIONER NESS:  Okay, is there anyone who would
       like to, Mr. Carnes.
                 MR. MCKINNEY:  I have a long history on the issue of
       must carry that Commissioner Quello has --
                 COMMISSIONER NESS:  Okay, assuming that the Supreme
       Court doesn't give us the answer or another court doesn't give
       us the answer.
                 MR. CARNES:  I don't want to get real deep into the
       must carry thing, but just point out one thing, that if --
                 COMMISSIONER NESS:  Please.
                 MR. CARNES:  Earlier there had been a discussion
       that if there were for programs on one channel in digital that
       it would require four cable channels to get them out.
                 COMMISSIONER NESS:  Not the case if it's dynamic.
                 MR. CARNES:  But if it's digital, the cable guy can
       just send it down his cable in digital format using the same 6
       MHz.  Now, beyond that, I have no comment about must carry.
                 COMMISSIONER NESS:  Mr. Reilly.
                 MR. REILLY:  And perhaps even less, in fact, if they
       move to a quam system, I believe, they'll be able to get it
       done in 3 MHz.  I think it would be unreasonable for us to
       expect the cable industry, until it begins to transition its
       platform to digital, to have to invest simply to deliver our
       programming.  However, once that transition is made, it seems
       to me that if we are operating in the public interest, then it
       is in the public interest to get our signals, our free over-
       the-air -- free universal signals to as many people as
       possible and continuing a must carry regime for our free
       programming.  Not necessarily for anything that we would want
       to pay, we'd strike a different kind of deal with the cable
       people then, but for the free service, it seems to me it's in
       the public interest to continue to require must carry.
                 COMMISSIONER NESS:  Thank you very much, my time has
       expired.
                 COMMISSIONER HUNDT:  Did you want to go?
                 COMMISSIONER QUELLO:  I've got one I want to --
                 COMMISSIONER HUNDT:  Go ahead.
                 COMMISSIONER QUELLO:  -- for Mr. Flaherty.  You
       know, there was some talk this morning about programming for
       HDTV and what's available for HDTV and how long will it take
       for HDTV format to be significantly in place?
                 MR. FLAHERTY:  That's a very important question,
       because this also affects the transition time.  People in the
       end watch programs and not technology, so they are certainly
       not interested in moving to digital TV sets unless there are
       good programs.  And in this case, the United States in a very
       unique position in the world.  You heard earlier some of the
       questions about how difficult Japan found it to launch the
       service.  Japan and Europe are in the same situation, they
       have foreseen to put these services on a satellite so they
       have instant coverage and no programs.  Our problem here is
       that we have to equip 1,500 television stations to get the
       coverage, but we have the programs.  We started a color
       service by launching primetime programs in color when the
       biggest audience watches and when the most attractive shows
       are on the air, and these same programs, some 70 percent of
       them, on the commercial television network, have been made in
       high definition for 35 years.  These are all 35 mm film
       programs, not cinema, made-for-television programs, some 8,000
       hours a year are made for television in high definition.  And,
       of course, Hollywood has the complete infrastructure for wide-
       screen production, changing from 4 x 3 to wide screen is a
       question of changing the apperature in the printer gate. 
                 So the United States could launch a very significant
       high definition program service and if those attractive
       primetime programs don't move the audience to buy digital
       television and high definition television sets then nothing
       will and we might as well abandon the process.  So we do have
       a very large bank and a very large capacity for a very quick
       start-up of high definition production in America.
                 COMMISSIONER QUELLO:  Any estimate or guesstimate of
       how long?
                 MR. FLAHERTY:  Well, as far as doing it is
       concerned, presently many of the studios, Warner Brothers, for
       one, is producing all their television series in wide-screen
       already, looking toward the residual and the future
       syndication, I assume.  So I would think at the longest it
       could take a season because it's the same cameras, the same
       film, the same operation, it's just a question of contracting
       for the show and the various aspects of choosing the shows. 
       But technically speaking, and only technically speaking, it
       could be done in a season.
                 COMMISSIONER QUELLO:  Okay, yes --
                 MR. REILLY:  I think this is all the more reason to
       aspire to the HD standard rather than a lower definition
       standard.  The entertainment industry, as someone pointed out
       this morning, is an enormous engine for earning foreign
       exchange, it's a positive balance of payments industry.  It
       exports American values and culture around the world and we
       should be anticipating that we should be enchanting our own
       Hollywood community to be producing in the highest standard
       that any other country may wish to adopt someplace out into
       the future.
                 COMMISSIONER QUELLO:  Good, thank you.  Mr.
       Chairman, I'm all set.
                 COMMISSIONER HUNDT:  Commissioner Chong.
                 COMMISSIONER CHONG:  Thank you.  Well, if I hear you
       all right, some you say for spectrum efficiency purposes, we
       need to go digital because we can repack closer, there is
       unused spectrum and it's not very efficient, so let's be smart
       about it, right?  I also hear people saying, you've got to go
       digital to compete because the satellite people and the cable
       people, and I presume also the telcos with video dial tone are
       going to go digital, and they're going to have these nice
       digital pictures that broadcasters will need to compete with
       to stay viable, to deliver free TV.  So, I always get back to
       the central question of whether the FCC should draw back from
       its decision before to mandate HDTV, and I guess I'd like to
       hear from each of you, if the commission didn't mandate HDTV,
       what you think would happen?
                 MR. CARNES:  I would question whether manufacturers
       will build sets that receive all formats.  Regardless of
       whether they display at that format, will they even decode all
       formats, if they're not confident that broadcasters, in fact,
       will put on the air high definition television.  Broadcasters
       have committed that the will do so, they have told you they
       plan to do so, and they have even asked that it be placed in
       the rules and once you do that, it seems to me you then give
       absolute assurance to broadcasters, to receiver manufacturers,
       and to the American public that this real, that it will happen
       and the market will go forward.
                 COMMISSIONER CHONG:  So it sounds like you want to
       give certainty to the programmers that if they make HDTV
       programs, that there will be the ability to receive it by
       consumers.
                 MR. CARNES:  Indeed, I think that's --
                 COMMISSIONER CHONG:  So the manufacturers obviously
       need to put it into the set.
                 MR. CARNES:  Exactly.
                 COMMISSIONER CHONG:  Okay, so let me ask it another
       way, if you were to not mandate HDTV on the broadcast roles,
       but to tell manufacturers kind of like what we did with the
       All-Channel Receiver Act, that you must make your television
       capable of receiving HDTV and other digital formats, would
       that be adequate to incent programmers like Viacom to make
       programming in HDTV formats or digital formats?
                 MR. CARNES:  Well, just briefly, my position is that
       you can do either side.  You can either require the
       manufacturer to build or you can require the broadcaster to
       broadcast, and either way you go, you've solved the problem,
       you've solved the chicken-and-egg situation.
                 MR. HOROWITZ:  I would like to concur with Mr.
       McKinney and also to add to something that Mr. Flaherty said,
       is that the products that have been created, the U. S. has an
       enormous library and Viacom is just one of those companies
       that had that library of movie-based product, which, by
       definition, is done in high definition because it's film.  I
       actually think that I would go one step further and say it's a
       partnership, I think you really need to require the certainty
       to the broadcast community that they have an obligation to put
       a certain amount of HD product on the air and you have a
       certainty to the manufacturers that, hey, by the way, you
       shall build it and there's going to be something that will
       arrive there, at least over the air, potentially by cable,
       potentially by DBS, but at least over the air.  So I think you
       could probably do either one and take a chance, but there is
       no chance if you just do both, that's very simple --
                 COMMISSIONER CHONG:  So you would actually advocate
       both sides.
                 MR. HOROWITZ:  Yes.
                 COMMISSIONER CHONG:  Just to be absolutely sure.
                 MR. HOROWITZ:  Just to be -- because we're asking
       for a condition to occur --
                 COMMISSIONER CHONG:  Anyone have an opposite view? 
       Oh, this table is going crazy over here.  Mr. Reilly.
                 MR. REILLY:  Well, there's a third equation -- a
       third element to the equation and, that is, the consumer has
       to have a reasonable assurance that after the manufacturers
       build these things, that they will buy them in sufficient
       quantity to turn this whole thing into an economically viable
       practice and I think absent the assurance that broadcasters
       will, in fact, be generating high definition programs at a
       certain point in time, it's going to make that just that much
       more difficult a proposition for the consumer to buy into.
                 COMMISSIONER CHONG:  So you're talking about the
       people that owned the beta maxes.
                 MR. REILLY:  All those people have learned a lesson
       and they've learned -- there's a lot of computer people in the
       meantime who have learned lessons as well.
                 COMMISSIONER CHONG:  Okay, Mr. Carnes.
                 MR. CARNES:  I think that mandating broadcasters is
       the right thing.  People watch television programs for the
       content, they buy sets because they want to watch programs. 
       The most solid way to do this to eliminate any confusion and
       to sort of hasten the whole process along would be to mandate
       programs.  The fact that broadcasters already are willing to
       say, we would like you to -- I mean, it's okay if you mandate
       programs, it's not that you're jamming HDTV down their throat,
       but they understand that if this whole process is going to
       happen in a crisp way, that everyone involved, all of the
       industries, and most importantly, the consumer, are not
       confused about this.  That they have confidence if they buy
       the set, there will be HDTV programs there and I think that's
       why you would be best advised to make that mandate.
                 COMMISSIONER CHONG:  Okay, Joe, you've got one
       minute.
                 MR. FLAHERTY:  To some extent, the question of these
       regulations depends on how short you want the transition time
       to be.  If you don't care and it's left to the marketplace, it
       may take quite a long time.  The issue here is that once the
       broadcaster buys a transmitter and goes on the air and is
       putting attractive programs on, whether they're mandated or
       not, the rest of the turnaround depends on the receivers and
       the transition time really begins the day you sell the last
       NTSC-only receiver.  Any motivation to move that side quickly
       is what's needed.
                 COMMISSIONER CHONG:  I think that's a good point,
       Joe.  I am very concerned about the transition.  I'm not
       worried so much about the early adopters, it's -- you know,
       I'm a middle adopter, I'm worried about the guys that are, you
       know, declining to adopt at all, you know, what do we do about
       them.  Thank you.
                 COMMISSIONER HUNDT:  Let me ask you a question, Mr.
       McKinney, if our public policy goal is free over-the-air
       digital broadcast, free over-the-air digital broadcast,
       wouldn't the cheapest, easiest, quickest, shortest, most
       certain thing to do is the following:  When we auction the
       direct broadcast satellite slot on January 18 of next year, we
       will just say that they have to use at least ten of those
       channels for free over-the-air digital broadcast.  That'll
       provide it everywhere in the country, including Alaska, all
       the remote areas and we won't have to worry ever again about
       whether there will be free over-the-air digital broadcasts in
       this country, and then we can go ahead and be as flexible as
       we want and let digital broadcasters do anything they want.
                 MR. MCKINNEY:  Well, I'm glad you asked about free
       over-the-air broadcasting because your previous series of
       questions, where you asked Mr. Keyworth and Mr. Carnes, were
       based on a question concerning auction of spectrum for which
       they will be able to use it only a few years.  When you
       auction spectrum for a few years for a transition to the new
       digital service, all of those economic arguments about how
       much will be collected in the auction fall apart.  You can, in
       fact, have free over-the-air television by satellite if you're
       willing to commit the American consumers, the American
       television audience, to leave behind free over-the-air
       terrestrial television and go to a new satellite service and
       expend the funds necessary, in fact, to do that
                 COMMISSIONER HUNDT:  Well, when you say the funds
       necessary, you're talking about the consumer having to pay for
       the dish to receive it?
                 MR. MCKINNEY:  Oh, not only the dish but the down
       converter as well and leader phernalia.
                 COMMISSIONER HUNDT:  Well, who will put --
                 MR. MCKINNEY:  Yes, possibly $800 worth.
                 COMMISSIONER HUNDT:  Well, it's $800 except that
       we're constantly told here by everyone else that that number,
       with competition, is going to go to $500 and $400 and that's
       why the cable industry is going to have competition.  But
       whatever the number is, $300 to $400 to $500.
                 MR. MCKINNEY:  It's not local, it isn't local.
                 COMMISSIONER HUNDT:  Yes, I understand what you're
       saying.
                 MR. MCKINNEY:  Okay.
                 COMMISSIONER HUNDT:  But you haven't been making the
       argument that our public policy goal was 200 plus markets of
       local free over-the-air broadcasts, you've just been saying
       free over-the-air broadcasts.
                 MR. MCKINNEY:  I'll be happy to add local.
                 COMMISSIONER HUNDT:  So it's a necessity that it be
       local as well.
                 MR. MCKINNEY:  Of course.  Of course it would be
       local as well.
                 COMMISSIONER HUNDT:  Of course, all right, now with
       respect to local broadcasts, within five years, how many TVs
       will be receiving local broadcast over cable or telephony or
       wireless cable, all three added together?
                 MR. REILLY:  About what time?
                 COMMISSIONER HUNDT:  Within five years, how many
       households will be receiving local broadcasts over a
       combination of cable, telephone, and wireless cable?  Anybody
       want to give a --
                 MR. REILLY:  Are you talking about digital?
                 COMMISSIONER HUNDT:  Dr. Keyworth, you seem to be
       willing to give me an answer.
                 MR. KEYWORTH:  I would simply say the number will be
       quite large.
                 MR. REILLY:  More than 70 percent.
                 COMMISSIONER HUNDT:  Over 70 percent.  Mr. Reilly,
       over 70 percent?
                 MR. REILLY:  Yes.
                 COMMISSIONER HUNDT:  All right, so when we're
       talking about free local over-the-air broadcasts, we're
       talking about a service for less than 30 percent of the
       country in as soon as five years, since everyone else will be
       getting it over cable or over telephony or over wireless
       cable, right so far?
                 MR. REILLY:  Well, people that get local broadcasts
       from cable or telephony don't get it free, they pay for that
       delivery, that additional delivery service.
                 COMMISSIONER HUNDT:  I know, that's why I asked you
       how many would choose to pay for it.  So as long as we're
       clear on what we're talking about here and what group we're
       trying to preserve.  Now, let me ask you, Mr. Reilly, you said
       you thought we should mandate a minimum number of hours of
       high definition television as the particular format, what is
       the minimum number, in your view?
                 MR. REILLY:  Well, the number we've been talking
       about is five hours a week as a start.
                 COMMISSIONER HUNDT:  All right.
                 MR. REILLY:  However, if I may, the notion that
       someone mentioned earlier that once you start the regime, it's
       the first hour that's expensive to try and get out and I would
       think that more than five hours would become the business
       practice in a relatively short length of time.
                 COMMISSIONER HUNDT:  It may well be, but you're
       asking for a management of the industry by the Commission and
       I wanted to know how many hours you thought we should
       constrain in this manner and your answer is five.  That's five
       of the hours out of 168 hours in the programming week,
       correct?
                 MR. REILLY:  Um-hum.
                 COMMISSIONER HUNDT:  So the other way to look at
       your view is that for 163 out of 168 hours you don't think
       there should be any government regulation as to format.
                 MR. REILLY:  Well, I think if you give the consumer
       the assurance that five hours a week will come from each of
       five or six broadcasters, it will mean that the investment in
       a new high definition set will have an opportunity to see as
       many as 30 hours a week of high definition television at the
       start, is a reasonable proposition for the consumer.
                 COMMISSIONER HUNDT:  Now, I suppose that's appealing
       to the consumer as long as those hours they could appreciate
       on their high definition home theater were not at 4:00 a.m. in
       the morning.  So do we need to also pick the time of day when
       the high definition broadcasts are going to be delivered?
                 MR. REILLY:  I don't think that you'll need to do
       that in order to get broadcasters to broadcast in high
       definition and in a time when people will want to watch it.
                 COMMISSIONER HUNDT:  You mean voluntarily
       broadcasters are going to elect to broadcast in high
       definition format in primetime, for example.
                 MR. REILLY:  That would certainly be my
       expectations.
                 COMMISSIONER HUNDT:  So I'm just wondering if
       voluntarily they're going to do that, exactly why we have to
       have a government mandate to do it.  Now, let me ask -- that's
       just wondering, that's not a question.  Let me ask you, when
       Mr. Hubbard and Hughes worked together to put up their direct
       broadcast satellite, they had the problem of having to find
       somebody who would manufacture receivers and together go to
       the market with the service and the receivers.  But, instead
       of asking the government to solve that problem, they
       contracted with Thomson and then with Sony to have a joint
       enterprise and they offered in Sears and other places the
       receivers and the service and you could buy the receiver and
       the service at the exact same time, and that way, everybody
       involved knew, through private negotiations, that there would
       be something to buy and something to watch if you bought it. 
       Isn't that an illustrative and useful model of industry
       working together in private negotiations instead of asking the
       government to mandate formats?
                 MR. REILLY:  Well, I think it's remarkably different
       to have two companies get together and cooperate with a
       manufacturer than to expect 1,500 separate broadcasters, who
       are owned by hundreds of different companies, located all
       across the country, to somehow try and get together and
       contract with a manufacturer or a group of manufacturers to
       come up with an individual standard.  I don't think we have
       the market discipline, our whole industry is set up on the
       basis that we don't have that kind of uniform market action.
                 COMMISSIONER HUNDT:  We've run out of time.  I'm
       sure, on all sides, we have many, many questions and answers,
       unasked and unanswered but we've run out of time.
                 COMMISSIONER BARRETT:  Can I ask Mr. Reilly one
       question?  Are the 1,500, are you talking about those that are
       merely affiliates or those that are owned and operated by you?
                 MR. REILLY:  No, I'm talking about all the
       commercial television stations, not the --
                 COMMISSIONER BARRETT:  But you have some influence
       over those that you own and operate, you're not just --
                 MR. REILLY:  That we own and operate, of course,
       yes.
                 COMMISSIONER BARRETT:  And you have affiliate
       agreements in which you can put the agreements that the
       Chairman talked about in those agreements with the local
       broadcasters.  So you're not talking about everybody having to
       go out and to talk to 1,500 broadcasters?
                 MR. REILLY:  Well, but we don't have any affiliate
       agreements that would require what standard we'd broadcast
       under.
                 COMMISSIONER BARRETT:  You can put -- fill an
       agreement in order for one to have programming and to use
       whatever the name will be, at some point.
                 MR. REILLY:  I suppose that would be possible, I
       mean, it would be a negotiation between the separately-owned
       stations such as myself and the networks with which we're
       affiliated.
                 COMMISSIONER BARRETT:  Uh-huh, okay.  But if one of
       the networks wanted to bring something to you that was
       comprehensive in nature to get where the Chairman wanted to
       go, there are avenues for that to be done without one
       approaching each individual 1,500 institutions or stations. 
       Yes or no?
                 MR. REILLY:  I think it would be possible for ABC to
       come to us with a proposition that said, we want you, in order
       to remain an affiliate, to get in the high definition
       business.
                 COMMISSIONER BARRETT:  Right, thank you.
                 MR. CARNES:  We've already done that, sir.  The
       industry has gotten together and we've made the proposal, all
       we need is an approval to standard.
                 COMMISSIONER BARRETT:  No, no, my question was
       answered.
                 COMMISSIONER HUNDT:  If you are already to agree
       with each other, I'll just -- 
                 MR. CARNES:  I'm not 100 percent sure why we're
       here.  I think the Advisory Committee has made the proposal to
       you.
                 COMMISSIONER HUNDT:  Maybe you all could go and
       agree with each other some more and let us deregulate here. 
       But, in any event, unless one of my colleagues wanted to ask a
       question, we should thank you very much and move on.  Thank
       you all very, very much.
                                        PANEL 4
                 COMMISSIONER HUNDT:  This is the last, and by no
       means, the least of our panels.  This one is entitled, "The
       Impact on Consumers."  It's certainly something that a lot of
       people in the country are going to be interested in, namely
       consumers.  The Commission also is going to be very
       interested.  Brief recap on the format for those of you who
       haven't been watching all day, we'll allow three-minute
       opening statements to each of the six members of the panel. 
       The timekeepers on the right are authoritarian and armed with
       all enforcement powers.  We will then have six-minute blocks,
       one round and then a second round for each of the
       Commissioners, questions and answers.  If we appear slightly
       impatient during the answers, it's only because we like to
       hear our own questions, and we get started.  Mr. Allan.
                 MR. ALLAN:  Thank you, Mr. Chairman.  Thomson and
       the Consumer Electronics Manufacturers' Association, which
       joins in these comments, endorses the Commission's goal of
       preserving and promoting universal, free, over-the-air
       television while making the most efficient use of television
       spectrum.  These goals can best be achieved by upgrading the
       nation's terrestrial television system to high definition
       capability.  Once this is insured, broadcasters should be
       encouraged to develop additional services to respond to the
       information age needs of consumers.
                 Our experience with the RCA direct satellite system
       teaches that factors for successful introduction of digital
       television are early availability of substantial amounts of
       digital programming, and dramatic improvements in both video
       and audio quality.  The DDS experience also demonstrates that
       consumers, including many of modest means, will be willing to
       invest in digital television.  Recent market research affirms
       that in addition to a strongly favorable reaction to high
       definition TV picture quality, consumers are willing to pay
       substantial premiums for digital high definition receivers. 
       Thomson currently estimates that retail price premiums for
       HDTV over large screen NTSC sets will initially be
       approximately $1,000 to $1,500, will fall to between $500 and
       $750 within five years, and by the tenth year could be as low
       as $250 to $350 and even less on some small screened sets.
                 COMMISSIONER HUNDT:  Just for a point of
       clarification, that was for what, exactly?
                 MR. ALLAN:  That's the premium of high definition
       over comparable NTSC sets.
                 COMMISSIONER HUNDT:  It was the extra.
                 MR. ALLAN:  It's the extra, it's the increment.
                 COMMISSIONER HUNDT:  Okay, sorry.
                 MR. ALLAN:  Okay, while these premiums seem
       substantial, remember that when first introduced, color
       television cost about as much as an automobile.  As with
       similar product, by initially attracting early adopters,
       manufacturers can build volumes, achieve cost reductions, and
       drive down prices.  Other important facts that point to rapid
       consumer acceptance of digital television include, first, the
       seven-year replacement cycle in which consumers primarily
       replace their main viewing set, the consumer's desire to
       upgrade his current television set as evidenced by a 30
       percent annual growth rate in the sales of large-screen sets,
       and three, the title wave of digital technology sweeping over
       the consumer electronics industry creating significant
       synergies with digital television.
                 These advances make it clear that broadcasters must
       offer HDTV to remain competitive.  By requiring HDTV
       broadcasts, the Commission can insure early and frequent
       availability of HDTV programs and send a clear message on the
       most significant factor driving consumer acceptance of digital
       television.  This will hasten the day when all Americans have
       dramatically improved television service and allow the
       Commission to recapture valuable NTSC spectrum much sooner.
                 Thomson, and undoubtedly other manufacturers, will
       market digital receivers that receive all ATV formats.  Beyond
       these similarities, products will vary widely as manufacturers
       differentiate their offerings and compete for market share,
       but in the long run, the competitive market forces will
       determine both the desired feature and performance levels.  In
       consumer electronics, key ingredients for successful product
       and service introductions are, first, the broad availability
       of programming, second, wide retail distribution of receiver
       hardware and a clear consistent message to consumers.  Prompt
       leadership from the Commission will galvanize private industry
       to make the investments necessary to turn the vision of
       digital television into reality.  Thank you.
                 COMMISSIONER HUNDT:  You only went over because I
       interrupted you, so it's all right.
                 MR. ALLAN:  Okay.
                 COMMISSIONER HUNDT:  Mr. Grossman.
                 MR. GROSSMAN:  I'm going to tell you about a very
       large but very different group of TV stations, serving small
       cities, minorities, and rural areas.  You've ignored them so
       far in your spectrum allocation efforts and the big
       broadcasters running the ATV show are going to keep ignoring
       them unless you, Commissioners, tell them to pay attention. 
       Low power TV, a misnomer, it should be called community TV,
       serves five times more minorities than any other part of the
       industry.  It serves so many people in small towns that if
       it's ignored, you will have violated the basic tenants of
       serving the people of this country.  There are 1,772 low power
       TV stations, licensed in every state, most built in the last
       ten years and built with their investors own money, something
       you never see anymore.
                 They range from my own station serving 1,200,000
       Hispanics in Miami to Granny Evetts' tiny home town station
       serving 500 people in Etheridge, Tennessee.  LPTV stations
       have no must carry rights, they can't lease cable channels
       because the rates which you condone are so high but they
       survive and they serve, and if you throw them away, you'll be
       shutting down the only local service for millions of
       minorities and people in small towns and rural areas.  
                 How can you justify promoting the internet that you
       can't get without an expensive computer and doesn't provide
       local service while shutting down a fundamentally local
       service with an average of 23 hours a week of children's
       programming with no government law to make them do it.  The
       world of high tech has done nothing to replace the local
       broadcaster.  When disaster strikes, when Hurricane Andrew hit
       Miami, the cable went dead.  Immediately the official
       emergency broadcast station for Dade County is my LPTV
       station.  The only reason there wasn't panic is that the
       people could get information from over-the-air broadcast
       stations.  Full power stations can't survive without a big
       core central market, but LPTV stations can and do.
                 There is no Spanish language TV in Washington. 
       There is -- LPTV is the only local service in Hopkinsville,
       Kentucky, Junction City, Princeton, Indiana, where the high
       school kids run the TV station.  These small town people don't
       read the Federal Register and don't even know you are
       threatening their only service.  They pay taxes and they
       expect you to look out for them.
                 I have a map here that shows all the stations that
       are LPTV including over 200 in Alaska.  If all the services
       lost with ATV, aren't we taking a giant step backwards?  You
       know, if it walks like a duck, quacks like a duck, then, by
       gosh, it is a duck, and you can come up with any legal theory
       you like but LPTV looks like TV and the public relies on it
       like TV and we are broadcasters regardless of Paragraph 25 of
       the latest notice of proposed rule-making.  And he said stop.
                 COMMISSIONER HUNDT:  Mr. Abel.
                 MR. ABEL:  I'm the CEO of a new company, Datacast
       Partners, which is a partnership of two large broadcast group
       owners in which other group broadcasters will be joining a few
       weeks.  We're undertaking a venture to develop digital
       applications that will initially be transmitted in the current
       NTSC television channels.  This involves undeveloped
       technologies and applications in a less than optimal host, the
       NTSC channels, but I am confident that, at a minimum, our
       experimentation will develop a base of knowledge that will aid
       the creation of applications for the new digital channels.
                 Since existing TV receivers do not have sufficient
       memory or intelligence to receive, store, and manipulate
       digital content, we intend, initially, to transmit digital
       data to computers.  The National Data Broadcasting Committee
       has been testing and evaluating two systems for inserting data
       into the NTSC signal and one or both of these systems will
       eventually be recommended to the FCC by the Committee.  I
       encourage the Commission to act expeditiously on that
       recommendation.
                 I want to emphasize two points.  First, my company
       is working on digital broadcasting applications that will be
       totally free to consumers.  Today, as you know, if you have a
       computer, you must either pay an on-line service or an
       internet access provider to enjoy the benefits of digital
       content an information.  Our approach is different.  We want
       computers and ATV sets to be able to receive digital
       multimedia for free.  The free and universal nature of TV
       broadcasting is what has made us great and that's I think will
       continue to make it great.
                 Although the total bitstream capacity of the NTSC
       channels is only a fraction of the capacity of the ATV
       channels and will not permit digital full motion video, some
       exciting new applications that we contemplate testing include
       children's educational software, additional multimedia news
       content, schools closings and other school information, and
       digital mass marketing.  In addition, we can enhance existing
       TV advertising campaigns by transmitting additional digital
       content for products and services that are heavily information
       dependent, such as a digital multimedia brochure about a new
       automobile that was advertised for only 30 seconds in a
       station's main TV broadcast.
                 Our intent is to develop these applications within
       the limitations of the NTSC channels and then transition them
       to the more favorable ATV channels once these channels are
       assigned and activated.  The applications under consideration
       will not replace or change current real time television
       broadcasting in the current or the new channels, nor do we
       intend to transmit these digital applications in place of HDTV
       programming.
                 My partners have given me the opportunity to pursue
       a vision, risky though it may be, that TV broadcasting in the
       information age must be more tuned to the information needs of
       the consumer.  I believe that free digital broadcasting is the
       answer to providing multimedia content and additional
       information to all consumer, not just those who can afford
       subscription fees.  Thank you, and I'd be happy to answer your
       questions.
                 COMMISSIONER HUNDT:  Mr. Gabbard.
                 MR. GABBARD:  Thank you.  I appreciate the
       opportunity to be here today.   I come as president of Gray
       Communications, licensee of six television stations in smaller
       markets.  I'm also chairman of the Television Board of the
       NAB, and I carry one overriding message to the Commission
       today, that is, that the general viewing public's interest in
       ATV, the consumer's interest, is strongly tied to the ability
       of broadcasters in every market size to bring this new amazing
       ATV technology into all American homes.  This will enable the
       American viewing public to have full and fair opportunity to
       judge the benefits of digital TV and decide what they want for
       their future, for American television.
                 My written statement details the reduced profit
       pictures in the smaller markets and discusses how tough it's
       going to be for stations in these size markets to construct
       ATV facilities.  A staggered implementation schedule for mid
       and smaller market stations would help lighten this load.  It
       would do so by giving them more time over which to spread out
       these large investments.  But, importantly, a staggered
       construction period would reduce implementation costs by
       allowing the technology to mature, the manufacturing
       efficiencies to develop, competition to arise and prices to
       drop.  It would also remove the incentive to raise prices
       created by a crunch construction period where demand exceeds
       current production capacity.
                 If the Commission will extend out the construction
       period for midsize markets to say another two or three years
       and America's broadcasters, even in the mid to smaller size
       markets, stand ready to bring ATV to their audiences, the
       public should be given every opportunity to determine their
       future.  And we would like to see the smallest markets
       extended out maybe another two or three years because these
       are the markets that are going to have the most difficulty.
                 This means the smaller market broadcasters must be
       afforded a reasonable ATV rollout period.  Without it, many
       midsize and most small market broadcasters just could not
       construct ATV facilities and therefore not be able to bring
       ATV consumers into the smallest markets.  The cost to
       construct an ATV facility will be high, even just to pass it
       through, probably just the network, about $1.8 million is a
       good estimate, and that's for every TV station in every size
       market, no matter how large or how small.
                 We in the smaller markets want the opportunity to
       enter the 21st century with 21st century technology, so that
       American television can remain free, local, and over-the-air
       as the envy of the world.  I thank you very much.
                 COMMISSIONER HUNDT:  Thank you.  Mr. Liroff.
                 MR. LIROFF:  Thank you, Mr. Chairman.  In a recent
       speech you asked, "Will we be able to use this new TV not only
       to entertain our families, but also to educate our children,
       participate in political debates, gain knowledge and enrich
       our lives"? 
                 Public television's answer to this question is an
       enthusiastic yes.  We are distinguished from our commercial
       counterparts in that we are mission driven.  We all know the
       potential for enhancing series like Nova and the American
       Experience and Great Performances with high definition
       superior audio and video and we are unwavering in our
       commitment to bring HDTV to the public.  But ATV's
       multichannel capabilities also offer extraordinary
       opportunities for increasing public service.  A typical ATV
       schedule might combine primetime high definition broadcasts
       with a daytime schedule of four simultaneous and distinct
       educational services, such as a Ready to Learn program for
       pre-schoolers, advanced high school courses such as calculus,
       Japanese and physics, otherwise unavailable to students in
       many parts of the company, the high school equivalency and
       college credit telecources, and a local government and public
       affairs channel, a local C-span, if you will.
                 Now, distributed with each of these program services
       would be course materials, student and teacher guides,
       computer software as well as closed captioning and video
       description for hearing and visual impaired viewers.  This is
       not a pipe dream, these very types of services are available
       today on public TV stations throughout the country, but now
       each station must choose which type of service to offer and
       which audience to serve.  With ATV, stations will have the
       ability to unlock the full public service potential of their
       mission by servicing multiple audiences simultaneously.  Thus,
       with ATV, our public service will increase.
                 Now, it's important to stress that this vision will
       be made possible only with legislative relief and regulatory
       support.  Public television has proposed to Congress that it
       use its ATV spectrum to generate revenue to fund its future. 
       But even apart from this legislation, through this rule-
       making, the Commission can determine if our citizens are to
       benefit from the full potential of this new technology.
                 We strongly urge the Commission not to auction the
       ATV spectrum, this would sound the deathknell for public
       television, to reaffirm the assignment of a full 6 MHz
       bandwidth to ATV, to maintain its commitment to reserve ATV
       channels for non-profit educational use in whatever assignment
       plan is adopted, to clarify that licensees may use the ATV
       spectrum for ancillary and supplementary uses so long as the
       revenue generated supports the licensee's public broadcasting
       service.  We also urge the Commission to relax or eliminate
       financial qualification requirements for public television, to
       relax the six-year construction deadline, and to continue must
       carry requirement for both NTSC and ATV program services.
                 Public television is at a critical crossroads.  We
       face the daunting challenge of converting to ATV and the
       opportunity to significantly enhance our service to the
       American people, and at the same time, we face the most
       serious funding crisis in our history.  With the help of the
       Commission, as well as Congress, the full public service
       potential of this technology can be realized.
                 MR HUNDT:  Mr. Tasker.
                 MR. TASKER:  Thanks, Mr. Chairman.  I'm here on
       behalf of the Computer Industry Coalition for Advanced
       Television Services, a group of eight leading companies in the
       computer industry.  Our membership includes Hewlett-Packard,
       Silicon Graphics, Microsoft, Oracle, Intel, Apple, Compaq and
       Tandem Computers.
                 The coalition has serious concerns about the
       compatibility of the proposed advanced television standard,
       transmission standards with computers and computer technology. 
       The success of the telephone system, and the internet, can be
       expressed as the simplicity and uniformity of their
       transmission standards.  There is one in each case.  Companies
       are free to create innovation at the ends of the networks,
       either from the transmission end or the receiving end, but the
       single simple uniform transmission standards create an
       environment for maximum competition and lowest cost in both
       equipment and services available to consumers.
                 Now, let's talk about the ATV transmission
       standards.  One must understand, and I believe the Commission
       does, that advanced television is not just about digital
       delivery of pictures and sound to a TV set of the future.  ATV
       will change the nature of TV forever, just as my colleague
       from WGBH says.  What we are calling ATV is a digital data
       transmission standard, or set of standards, really.  Digital
       data is also transmitted among computer networks or over phone
       lines in a version similar to the ATV transmission standards,
       similar, but not the same, and that, in our view, is a great
       tragedy.
                 The ACATS process has left us with a standard
       containing residue of the legacy system of the old television
       in the new television standards.  Why a tragedy, because it
       could postpone, perhaps, forever the transition of television
       from a stand-alone entertainment system into a competitive
       conduit for entertainment and other interactive information
       flow, what we are getting familiar with here in Washington and
       the rest of the United States as the National Information
       Infrastructure.
                 Indeed, the ATV supporters promise that it has a lot
       to offer as a component of the NII and we agree.  We think so,
       too, that's why we're here.  But we're here to warn you that
       the promise will not be fulfilled as long as the residue of
       legacy systems remain in the standard set.
                 Let me be clear, these problems, interlace scan,
       rectangular pixels, a few other things that we'll get to you
       in a technical document, are not merely about watching
       television on computers.  That statement have very little
       meaning in the future, we're talking about much, much more. 
       What we are talking about is the possibility of continuing
       today's two set phenomenon, one for computing applications,
       one for television applications.  We are perfectly happy to
       compete on equal terms with television manufacturers for a
       position in the consumer's home, but under the proposed
       standard, the playing field is not level and it is tilted
       against the American computer industry, the companies I am
       representing today, and we would like the Commission to
       correct that inequality in the final standard.
                 COMMISSIONER HUNDT:  Thank you very much. 
       Commissioner Quello.
                 COMMISSIONER QUELLO:  Yes, Mr. Gabbard, we're
       interested in certainly having this new advanced picture and
       technology available to small and medium markets, but how can
       you afford to convert to ATV in a small market, or what plans
       do you have to do this?  How many stations do you have now?
                 MR. GABBARD:  We have six right now.
                 COMMISSIONER QUELLO:  Six, that's quite a load for
       you to handle.
                 MR. GABBARD:  Yes, sir, it is.  It's going to be a
       difficult transition, but given enough time to create a demand
       by the consumer, I think your broadcasters who serve their
       communities well with local television, use information,
       children's programming, all the things that we do, will find a
       way to make the conversion.  I don't think every station and
       every market will find their way, but I think your good ones
       will.  They'll lead the way.
                 COMMISSIONER QUELLO:  Um-hum.  What can the FCC do
       to help the small market broadcasters?
                 MR. GABBARD:  I would really encourage the FCC to
       take a look at spreading this out, as I said in my document,
       two to three years for the midsize markets, beyond your
       current schedule that's talked about today, and maybe another
       two or three years beyond that to the smaller markets, giving
       the stations time to let the consumers create a demand.
                 COMMISSIONER QUELLO:  Okay, that'll be quite an
       investment on your part.
                 MR. GABBARD:  Yes, sir, it would be a large
       investment and may I say, too, Mr. Quello.
                 COMMISSIONER QUELLO:  Absolutely, go ahead.
                 MR. GABBARD:  I would just like to add, too, it was
       mentioned this morning that there's about $1.8 million to do
       digital television to do ATV and I'd like to clarify that as
       we see it today, whether it's 1.8 million, 2 million, 1.6
       million, whatever the number is, that's strictly to pass the
       network through.  That is not to build a facility and convert
       your news cameras and your studio cameras and your tape
       machines so that all of your facility is digital.  We're
       talking about strictly a pass-through.
                 COMMISSIONER QUELLO:  Okay.  Let's see, Mr. Allan,
       you've had experience with DBS digital system, what do you
       think are ATV chances for success?
                 MR. ALLAN:  Oh, I think the chance is based on what
       we have seen with DDS, we conclude very quickly that HDTV has
       a tremendous chance for success.  When you look at a consumer
       who is willing to spend $699 for a digital set-top box, $200
       to have that installed so that he can pay a monthly premium
       for broadcasting, I think that you're seeing right there that
       the consumer is interested.  He's expressed, in our survey,
       basically two reasons for purchasing.  One, program choice,
       which we're all aware of, and the second one, with
       approximately 38 to 40 percent of the consumers surveyed
       reporting that their prime reason for buying was because of
       the picture quality.  With the other market research we're
       seeing where the consumer is reacting to picture quality,
       because the difference is significant enough that he sees it,
       he likes it, and he wants it, we think the chance for success
       is very high.
                 COMMISSIONER QUELLO:  Based on your previous
       experience, do you think the transition period will be longer
       or shorter than expected?  Do you have any estimate on
       transition period?
                 MR. ALLAN:  Well, I tried to do some homework today
       and I've looked at numerous things.  Color television, as all
       of us know, started in 1954, did not really take off until
       1964 when NBC was broadcasting roughly 3,000 hours of programs
       a year and then was joined at that time by the two other
       networks so the consumer was definitely certain that he would
       receive color broadcasting.  In the case of VCR, VCR took off
       in about 1981 when there was a sufficient amount of
       prerecorded programming available.  When you look at it, we've
       talk 10 to 15 years today, if we look at the most recent
       introduction where we can get a reasonable penetration curve,
       it took VCR roughly 18 years to get to 80 percent penetration
       in this country that could have been quicker except for the
       fact that there were two competing systems at the start that
       created some confusion and it took us four or five years to
       clearly indicate which system would be the winner.
                 COMMISSIONER QUELLO:  What do you estimate?
                 MR. ALLAN:  I would say it's roughly 15 years.
                 COMMISSIONER QUELLO:  15 years.
                 MR. ALLAN:  It's a primary service that could go
       faster than VCR because of the benefit offered to the
       consumer.
                 COMMISSIONER QUELLO:  Really, okay, thank you.
                 COMMISSIONER HUNDT:  Commissioner Barrett.
                 COMMISSIONER BARRETT:  Thank you, Mr. Chairman.  Mr.
       Allan, you talked about $600, was that for a high definition
       receiver?
                 MR. ALLAN:  When I talked $600 a minute ago, I was
       talking about the DDS set-top box.  When I was talking in my
       comments about pricing starting with a premiums $1,000 to
       $1,500, depending on feature content, that was a high
       definition receiver, declining over 10 years to a premium of
       roughly $350 to $400 above the price of a color television
       set, and I think if you look at --
                 COMMISSIONER BARRETT:  Over what period of time?
                 MR. ALLAN:  10 years.  Basically in consumer
       electronics you can assume that --
                 COMMISSIONER BARRETT:  It'll be above -- it'll be
       $300 above the cost of a color television set.
                 MR. ALLAN:  Color television set, in 10 years it --
                 COMMISSIONER BARRETT:  The cost of the set now, or
       the cost in 10 years?
                 MR. ALLAN:  The cost in 10 years will still be
       approximately $350 to $400 above the price of a color
       television set in today's marketplace.
                 COMMISSIONER BARRETT:  What will a color television
       set cost in 10 years from now?
                 MR. ALLAN:  Pardon?
                 COMMISSIONER BARRETT:  What will a color television
       set cost in 10 years?
                 MR. ALLAN:  If you're looking at 27-inch, it started
       at $1,000 seven years ago, it's now $299, so if I add $350 to
       that, it may be $699 to $700 for a large screen set.
                 COMMISSIONER BARRETT:  When you did your -- when you
       had the market research done and you talked about what people
       were willing to pay, I'm talking about in your written
       testimony, not in what you did, what was the demographics --
       who did the survey, No. 1?
                 MR. ALLAN:  The survey was done by Northwestern
       University for a group of four consumer electronics
       manufacturers.  Basically the only criteria on selection was
       that a consumer had purchased or intended to purchase a large
       screen television set in the future.  Of the people that were
       interested in purchasing a large screen television, they
       indicated that they were definitely interested in upgrading
       their current set with a larger screen size and higher
       performance, and they indicated, over and above that, they
       would pay an additional premium for high definition
       television.
                 COMMISSIONER BARRETT:  Do you know the income
       categories?
                 MR. ALLAN:  No, I don't, sir.
                 COMMISSIONER BARRETT:  So the acceptance and the
       agreement -- or not the agreement, but the willingness to pay,
       if you don't know the income level characteristics of those
       people, may, in fact, be less than 10 percent of the
       population, less than 15 percent of the population.
                 MR. ALLAN:  Well, I think you have to look at DDS
       where we have real live purchase behavior to answer that
       question, and in the case of DDS, 40 percent of the initial
       people that responded to the survey, had household incomes of
       less than $40,000.  So it tells you that there's a broad
       demographic selection of people buying DDS and we see the same
       thing in large screen sets with a broad demographic population
       in large screen sets today.
                 COMMISSIONER BARRETT:  When did they do the survey?
                 MR. ALLAN:  The survey was done in -- completed in
       October of this year.
                 COMMISSIONER BARRETT:  Given the fact that the
       income of Americans, probably given the fact that the jobs
       have been created more by a temporary employment agency than
       they are in industry in a particular segment of our business,
       mainly Manpower, Inc., out of Milwaukee, Wisconsin, where do
       you think people are going to get the money from to be able to
       pay what, $600 -- $300 over what the television cost will be?
                 MR. ALLAN:  Well, I think what we see there,
       Commissioner Barrett, today, we see many consumers, if video
       is important in their lifestyle, if video is an important
       entertainment source for them, they tend to step up and find a
       way to set their priorities to respond to their needs for and
       desires for entertainment.  They may do it through financing,
       they may do it through other mechanisms.  But we see the
       tendency in all large screen sets to see a very broad
       population and distribution sample and our business is
       predicated on selling to a large mass market.
                 COMMISSIONER BARRETT:  I'm sitting here laughing,
       because you know I am the only -- Jim Quello and I are the
       only ones that were talking in 1954 when NBC took the lead in
       color television.  She wasn't even born.  I know you and I
       weren't born then either, Sherwin.
                 MR. GROSSMAN:  I was there.
                 COMMISSIONER BARRETT:  I've really owned two
       television sets in my life, and I've only bought two because I
       managed during Christmas and birthdays to make it well known
       to relatives of my -- you know, I really would like a
       television, and I will not pay that kind of money to have this
       kind of a picture and I'm just curious as to what kind of
       people were you interviewing?
                 MR. ALLAN:  Well, I guess what I can tell you is
       right now the fastest growing segment of the consumer
       electronics business in the television industry is the large
       screen segment which is growing at a rate of over 30 percent
       per year.  And again, that is a broad demographic cross-
       section of the U. S.
                 COMMISSIONER BARRETT:  Okay, that's rather
       interesting.  I guess if I had $600 I'd say, well, in -- and
       hopefully by that time it'll be 10 years as opposed to 12, if
       I invested $500 in U. S. Savings Bonds, there'd be $1,000 in
       8, 9, 10 years, by then.  So that's rather a simplistic view
       from a simple person, but I was just curious as to who the
       people were that you interviewed.  Mr. Liroff, let me ask you
       a question, notwithstanding the fact that you will do great
       programming.  You talked about the relaxed flexible financial
       rules for all stations?
                 MR. LIROFF:  We were particularly asking for that
       relief for public television stations.
                 COMMISSIONER BARRETT:  All public television
       stations.
                 MR. LIROFF:  Correct.
                 COMMISSIONER BARRETT:  Does WBGH and WTW in Chicago
       need that kind of financial relaxation as opposed to possibly
       a station in East Lansing, Michigan that comes from a poor
       state university needing it because they don't have the fund
       raising mechanism or the University of Missouri or some place
       like that?
                 MR. LIROFF:  I think, as in commercial broadcasting
       with small markets and large markets, the large markets are
       probably in a better position to facilitate the --
                 COMMISSIONER BARRETT:  Would the answer -- let me
       ask you this, then, would the answer be in this area not to
       have three public television stations as opposed to having
       possibly one?
                 MR. LIROFF:  The legislative proposal proposes the
       construction of only one ATV transmitter during the
       transitional period.
                 COMMISSIONER BARRETT:  Who would get it in this
       area, WETA, Howard or the Maryland Broadcasters?
                 MR. LIROFF:  Well, the overlapped signals are those
       that you identified plus those in Northern Virginia, and the
       process to determine which of those would be the key operator
       has not been determined but the legislative proposal suggests
       that the ATV activities be shared by those broadcasters during
       the transition period.
                 COMMISSIONER BARRETT:  Um-hum, will we give
       financial relief to all of the three in this area or just
       decide that we're going -- let's assume that we were going to
       give it -- we'd set up some criteria for all three of those in
       this areas to meet and the ones that met it, the one out of
       three, would be the one that we'd give financial relaxation to
       as opposed to giving it to all three?
                 MR. LIROFF:  Well, again, during the transition
       period, they'd only be building out only one ATV transmission
       capability to be shared among those stations, so that they
       would share in the cost of that one ATV transmitter during the
       transition period.
                 COMMISSIONER BARRETT:  Okay, I guess what I'm trying
       to get you to agree to and you're not going to agree to is
       that this area doesn't need three public television stations.
                 MR. LIROFF:  I strongly disagree, Commissioner.
                 COMMISSIONER BARRETT:  Just one good one.  Mr.
       Grossman, who in the world -- this is -- you're going to love
       this question, Mr. Chairman.
                 COMMISSIONER HUNDT:  In that case, go ahead.
                 COMMISSIONER BARRETT:  My Chairman just glowed when
       you talked about 23 hours of children's television.  How in
       the world did you reach that and how can we reach that?
                 MR. GROSSMAN:  Our first surveys came from 200
       stations that --
                 COMMISSIONER BARRETT:  23 hours --
                 MR. GROSSMAN:  A week.
                 COMMISSIONER BARRETT:  Okay, a week.  The Chairman's
       only trying to get three, you're 20 over what he's trying to
       get.  How can we do that?  I'm serious, I'm very serious.
                 MR. GROSSMAN:  Commissioner, this is going to sound
       funny.  I've been in broadcasting, I guess, second only as
       long as Commissioner Quello.
                 COMMISSIONER BARRETT:  That's a long time.
                 MR. GROSSMAN:  Yes.
                 COMMISSIONER BARRETT:  1950, you look much better
       than he does.
                 MR. GROSSMAN:  Yes, but he's busier than I am.  He
       plays tennis.  But seriously, the rules of locally
       integration, and you have to define local.  For example, I was
       on a panel with the president of CBS and he spoke about the
       local television that their station in Minneapolis had, and it
       was the Minneapolis baseball team, which is a National League
       team, and it is local.
                 COMMISSIONER BARRETT:  That's an American League
       team that the White Sox beat all the time.
                 MR. GROSSMAN:  Yes.  Well, you see what kind of a
       baseball fan I am.  And it covers an area which is what high
       power stations do.  Whereas low power coverage --
                 COMMISSIONER BARRETT:  Now, you've got to get the
       answer to my question about the 23 hours because the
       Chairman's going to get mad.
                 MR. GROSSMAN:  -- we call it local local, we cover
       the schools.  We cover the school football games in a town and
       the local things in small cities.  Like in Princeton, Indiana,
       there's a television stations 60 miles from Evansville, does
       everything 15 hours a day, owned by the high school, run by 25
       kids.
                 COMMISSIONER BARRETT:  Okay, I really would like to
       see something in writing, though, because I think if you're
       getting that and it's reaching --
                 MR. GROSSMAN:  I'll be happy to send the return from
       the stations to you.
                 COMMISSIONER BARRETT:  -- and I will not call you
       low power, and that's the end of my question.  I wanted to ask
       John Abel something but John knows everything and I just don't
       need to ask him anything.
                 COMMISSIONER HUNDT:  I agree.  Commissioner Ness.
                 COMMISSIONER NESS:  Thank you, Mr. Chairman.  Mr.
       Allan, should we be concerned that continued sale of analog
       NTSC sets might impair the eventual recovery of the analog
       spectrum?
                 MR. ALLAN:  No, I think we're looking at a situation
       right now where you have numerous consumers that will require
       an analog set for secondary purposes because they have
       prerecorded NTSC cassettes, they have other products right now
       that work with NTSC and I think that one of the things we have
       always seen is that in consumer electronics, the older systems
       have uses because of various pieces of software that have been
       saved that require NTSC demand.
                 COMMISSIONER NESS:  -- selling new sets once a
       standard is adopted?
                 MR. ALLAN:  Yes.
                 COMMISSIONER NESS:  Some argue that the quality of
       DDS pictures is sufficient for most consumers.  Do you
       disagree, and if so, why?
                 MR. ALLAN:  Obviously, seeing we put the system
       together, we're very proud of the performance of DDS. 
       However, if we're trying to set a standard that has to last
       for numerous generations, I think it's essential, one, to have
       high definition and provide the headroom to further improve
       that signal and I think when we have shown in the
       demonstrations at the National Consumers' League on Capital
       Hill and the demonstrations here recently, that when most
       people see the differences between standard definition and
       high definition, or DDS quality, that they find a striking
       difference and react very favorably to high definition.
                 COMMISSIONER NESS:  When do you expect to see flat
       screen display panels to be available, if at all?
                 MR. ALLAN:  That's a tough one.  Right now, I mean,
       the flat panel and the flat screen and the television on the
       wall has going to be ready in the next decade for the last
       four decades.  There's still a lot of work, some people are
       doing some very good work in large screen flat panel.  It's
       still in the prototype stage and they're still very expensive. 
       So I think we're still quite some time away from large screen
       flat panels which is what the consumer really wants.
                 COMMISSIONER NESS:  Thank you very much.  Mr.
       Grossman, I have a lot of empathy for low power television
       stations, I think you do provide a wonderful service for your
       communities.  Since 1987, how many LPTV stations have been
       licensed?
                 MR. GROSSMAN:  Well, there 1,772.  I don't know what
       it is since 1987 --
                 COMMISSIONER NESS:  Do you know when they began --
       okay.
                 MR. GROSSMAN:  -- but the --
                 COMMISSIONER NESS:  I'm thinking about when we began
       our investigation.
                 MR. GROSSMAN:  Yes, I don't think there was more
       than 200 or 300 because it was tied up in a log jam legally in
       the FCC back in the years and then Keith Larson took about a
       couple of years to straighten it out.
                 COMMISSIONER NESS:  Okay.
                 MR. GROSSMAN:  Most of the industry was built while
       the engineering was going on.
                 COMMISSIONER NESS:  In reality, rural areas, I would
       assume, would have plenty of spectrum and it will continue to
       have plenty of spectrum.  The major problem is probably around
       the urban areas, especially on the east coast, is this
       correct, in your view?
                 MR. GROSSMAN:  Yes, what we're really asking for is
       a chance to straighten out our own house.  For example, in
       Miami, Miami is on the east coast, it has 14 television
       stations.  I took the allocation plan and got the parameters
       from the engineering staff and I was able to give myself an
       ATV channel along with any other LPTV and there's reasons for
       it.  What we're asking for is that an LPTV station, that it
       have a chance to apply and get it out to its 74 DB curve.  I
       think financially, I know it's money, but, you know, we build
       1,500 stations with no bank loans.  Everybody built these
       stations on their own, with their own money, their own guts. 
       I'm not -- we need time like this gentleman says you do.  We
       just want an opportunity to do it, not be shut out after
       applicants.
                 COMMISSIONER NESS:  MSTV has tried to work out a
       plan for full power stations, have you analyzed the spectrum
       and come up with any sort of a transition plan that would
       accommodate LPTV stations?
                 MR. GROSSMAN:  What we've been able to find, yes,
       but we would need time, we're willing to work on it and do it. 
       What we need is from the Commission to say, go ahead and try
       and save the service and we'll go to work and try and save it. 
       We know we're secondary as far as NTSC is concerned, that was
       the deal when we got them, I can't change it.  We know the
       interference standards, we need new interference standards and
       then we'll follow the darn rules.  LPTV has been a trouble-
       free service for the Commission.
                 COMMISSIONER NESS:  Okay, thank you very much, Mr.
       Grossman.  Mr. Abel, or Professor Abel, Dr. Abel, how long,
       John, how long do you think that broadcasters will be
       broadcasting in NTSC?
                 MR. ABEL:  How long?
                 COMMISSIONER NESS:  Yes, please.
                 MR. ABEL:  For the rest of the life of everybody in
       the room.
                 COMMISSIONER NESS:  Oh, boy.  If we all become real
       heavy duty senior citizens that'll be a real long time.  In
       what way is data that's broadcast over NTSC a test of what it
       would be like to have data transmitted using a digital system
       such as the Grand Alliance system?
                 MR. ABEL:  What I'm trying to do is develop a small
       bitstream in the NTSC channel.  I would be the same kind of
       data, it would just be that the capacity of the ATV channel
       would be significantly greater to distribute more data at much
       higher rates, so I can provide more services in the ATV
       channel than in the NTSC channel.
                 COMMISSIONER NESS:  Okay, thank you.  Mr. Gabbard,
       I'm also very sympathetic with the concerns about small market
       broadcasters having lend to many of them, during the course of
       my lending days, all stations changeout equipment, what are
       the typical periods over which they would changeout studio
       equipment for new equipment?
                 MR. GABBARD:  Usually, for example, a transmitter
       might run 15 years, and it's a big, big expensive piece of
       equipment, obviously.  Studio cameras might last five to seven
       years, so it just depends on equipment.  Tape machines you
       wear out fairly quickly.
                 COMMISSIONER NESS:  Okay, how should we handle
       translators?  That has been an issue that was raised in a
       prior panel.
                 MR. GABBARD:  I don't have an easy for that.  I know
       that in areas in particular, Stanley Hubbard's areas, for
       example, the areas out west where Bill Sullivan operates in
       Montana and they rely heavily on translators to get the signal
       to the people in smaller, sparsely populated areas, but it's
       just as important to those folks to have the service as it is
       someone who lives in a metropolitan area.  So I don't have the
       answer to how you should handle that, that's more of a
       technical question that I am not qualified to get into.  But I
       can tell you that they are a very important service.
                 COMMISSIONER NESS:  Okay, thank you.  Mr. Chairman,
       if I can just simply observe that our wonderful digital
       compression demonstration here manages to deliver summer and
       winter temperatures within a matter of minutes in this hearing
       room, and I really want to commend everybody that's been able
       to go through this process all day with us.
                 COMMISSIONER HUNDT:  We did this in a deregulatory
       way until we did not predict what temperature at any given
       hour.  Commissioner Chong.
                 COMMISSIONER CHONG:  I think it's colder on the left
       end because I'm right under a vent.
                 COMMISSIONER HUNDT:  That's the way all of us on the
       left feel.
                 COMMISSIONER CHONG:  Is that a recent phenomena
       since about November?  I'd like to go back to Mr. Allan. 
       We're getting punchy, you know.
                 COMMISSIONER HUNDT:  It's been a long day.
                 COMMISSIONER CHONG:  Yes, it has, but this is a very
       important panel.  I really appreciated all the information you
       presented particularly in your testimony, Mr. Allan, because I
       think a lot of us are worried about, you know, only whether
       rich Americans are going to be able to afford HDTV and what
       will happen to middle and low income Americans if the HDTV
       standard is mandated and I was looking, with interest, at your
       market research on digital satellite systems, and that seemed
       to refute that concern because you found that nearly 40
       percent of early digital satellite system buyers had annual
       household incomes below $40,000.  So -- and, I would not, that
       a digital satellite system is not a primary service like free
       over-the-air television service is.  So, based on that, would
       you expect that if HDTV became a reality that even low income
       Americans would consider purchasing it?
                 MR. ALLAN:  Yes, I believe that it is determined by
       the person's desire, as I said earlier, on how important is
       that entertainment that the networks and the broadcasters
       provide to them.  I think a perfect example, and I've told the
       story many times, if you drive along the Ohio River, you'll
       see many places where you'll see digital satellite dishes and
       receivers that are more expensive than the homes and the
       trailers that are utilizing them.  I think that is just
       another indication that if television entertainment is a
       primary source of information entertainment for the consumer,
       they tend to try and find ways to adopt the sets.  And, of
       course, we do our best to drive the cost down as rapidly as we
       can to expand that market and make it as broad as possible.
                 COMMISSIONER CHONG:  Now, you've also told us that
       you think we ought to have a minimum HDTV requirement and you
       also say, though, that the Commission shouldn't mandate
       requirements for the consumer sets --
                 MR. ALLAN:  It sort of sounds like the broadcasters,
       doesn't it.
                 COMMISSIONER CHONG:  It does kind of sound like the
       broadcasters.  I've had people argue we should do one or the
       other or both today and I'm wondering why you took that
       particular position and what your reasons were?
                 MR. ALLAN:  Okay, we have already committed, and
       we've said all along, that we would build all-format
       receivers.  We think it's a requirement, I'm not about to try
       and explain to a consumer when signals change that his
       television goes blank and he's not about to actually receive
       the signal or wonder why he doesn't have programming.  We have
       also said, in some of the detailed comments, that we would be
       more than happy as Thomson, to accept a requirement to mandate
       for all television -- or all-format receivers with an
       equivalent requirement on broadcasters because we truly
       believe that the key to making this transition to rapidly and
       quickly is for a clear message to the consumer that tells him
       and assure him and make him confident that there will be high
       definition and standard definition television signals
       available and there will be receivers to receive them.  If we
       do a clear message, we will hasten the transition and make it
       happen as rapidly as possible.  If we confuse it, you have an
       AM stereo.
                 COMMISSIONER CHONG:  Which was not successful,
       right?
                 MR. ALLAN:  That's correct.
                 COMMISSIONER CHONG:  Okay, I'd like to turn to Mr.
       Liroff from the public TV area.  I mean, there's no question
       of the tremendous benefits that public TV has brought to
       America and my concern is how we can help public TV make this
       transition.  You have discussed, in your testimony, the
       proposal that's up on the Hill and I was wondering if you
       could briefly update us on the status of that proposal and
       whether you have any sense of whether it will go through or
       not?
                 MR. LIROFF:  My understanding, Commissioner, at this
       point is that it's not being considered actively until the
       present conference on the principal telecommunications
       legislation is completed.  We're hoping for some consideration
       before the end of the calendar year, but, at this point, I
       don't think it -- it's being discussed by staff, but it's not
       in active consideration at this point.
                 COMMISSIONER CHONG:  Now, you've expressed some
       interest in some multiplexing, in other words, squeezing four
       channels out of the 6 MHz --
                 MR. LIROFF:  Absolutely.
                 COMMISSIONER CHONG:  -- and my question to you is,
       if that's something you're interested in doing, do you think
       the Commission should mandate HDTV at all or would you like to
       have complete flexibility?
                 MR. LIROFF:  We would prefer that there be no
       minimum requirement.  We think that both the commercial
       broadcasters and the public broadcasters will move into HDTV
       and that there be some flexibility if there is a requirement,
       particularly for those ATV transmitters which we propose be
       shared by several stations during the transition period.
                 COMMISSIONER CHONG:  Right.  Let me ask you about
       that.  Now, you're talking about sharing one ATV transmitter
       during the transition, I mean, all the non-commercials in that
       area.
                 MR. LIROFF:  In each service area, right.
                 COMMISSIONER CHONG:  And you are going to lease out
       the excess capacity so that you can fund the public
       programming, is that correct?
                 MR. LIROFF:  The legislative proposal proposes that
       there be an investment trust set up to whom the spectrum would
       be assigned, the ATV spectrum.  It would assign --
                 COMMISSIONER CHONG:  I see, and they would lease it
       out and manage it.
                 MR. LIROFF:  And, for the purposes of establishing
       an endowment for public broadcasting, the proceeds from which
       would then fund ongoing operations of public broadcasting and
       take public broadcasting off the annual appropriations for the
       federal government.
                 COMMISSIONER CHONG:  Now, would there be any
       possibility that some of the spectrum that would be leased by
       the trust could possibly be leased to people like Mr.
       Grossman's group of community broadcasters?
                 MR. LIROFF:  I don't know that there are any
       conditions that have been proposed that would limit the use of
       that spectrum.
                 COMMISSIONER CHONG:  But it's possible there might
       be spectrum there that could be available for someone like a
       community broadcaster?
                 MR. LIROFF:  So far as I know, consistent with the
       desire to generate sufficient revenue to fund public
       broadcasting.
                 COMMISSIONER CHONG:  That's all I have for now.
                 COMMISSIONER HUNDT:  Thank you very much.  Mr.
       Allan, the median income in the United States, the last time I
       looked, was about $35,000 a year for a family of four.  You
       picked the $40,000-a-year number for your survey,
       substantially more than half of all Americans make less than
       $40,000 a year, what percentage of your sales of the DDS
       dishes have gone to people who are truly in the low income
       category, let's say the bottom fourth in terms of income?
                 MR. ALLAN:  In was roughly, and I have to go back
       and check the figure for you, but it was in excess of 20
       percent.
                 COMMISSIONER HUNDT:  About 20 percent of your sales
       have gone to people who make less than what?
                 MR. ALLAN:  I believe it was less than $28,000, was
       the other cut point.
                 COMMISSIONER HUNDT:  Now, do you think these people
       will also, in addition to having purchased your satellite
       dishes, will they also be interested in buying a home theater
       for watching the local terrestrial high definition programs
       that Mr. Gabbard might want to show in that same area along
       the Ohio River that you were talking about, will they want to
       do both?
                 MR. ALLAN:  Some of them may, but I would assume in
       that income, they've made a decision with their DDS service,
       they will stay with that until they feel something is
       affordable that they can replace it with.  So I think it would
       be doubtful that they would do both.
                 COMMISSIONER HUNDT:  So those consumers presumably
       have already gone digital by buying the Hughes or Hubbard or
       whoever else is providing the satellite service.
                 MR. ALLAN:  They've gone digital but you must
       recognize that there is a high definition television port on
       the back of the DDS box that will let them pass the signal by
       satellite into an HDTV receiver in the event they wanted to do
       so.  So there is an upgrade capability built into DDS for the
       future so that those people do have the ability to get HDTV.
                 COMMISSIONER HUNDT:  Right, and did Thomson try to
       persuade Hughes or Hubbard to deliver some high definition
       format programming?
                 MR. ALLAN:  We're working with them right now.
                 COMMISSIONER HUNDT:  Have you persuaded them yet?
                 MR. ALLAN:  We're working very hard on it.
                 COMMISSIONER HUNDT:  But you haven't asked the
       government to order it, you're willing to negotiate.
                 MR. ALLAN:  I don't own the satellite and I can
       prompt them and encourage them --
                 COMMISSIONER HUNDT:  Well, the spectrum is a public
       spectrum, but you have to come to us and ask us to order a
       particular format there.
                 MR. ALLAN:  But I think you will find that right now
       they have a competitive advantage with the quality of the
       program they're putting out and not a business decision.  They
       will make a decision on when it's appropriate for them to take
       the next step to remain in a competitive advantage.
                 COMMISSIONER HUNDT:  That's the kind of thing I like
       to hear.  I've managed to get some of the witnesses in the
       previous panels to agree with me that at least as to 163 of
       168 programming hours, they don't think the government should
       micromanage the format selection.  I think I'm kind of stuck
       in the last three to five hours, they're insisting that we do
       a little micromanagement there.  Mr. Abel, can you give us
       your views on this question of whether the government should
       mandate some specific quantitative amount of broadcasting in
       the high definition format which, I believe, I think it's Mr.
       Tasker's statement, says it's one of the 14 formats?
                 MR. ABEL:  My view on that is that if makes somebody
       happy out there and somebody thinks it's going to drive the
       market, let them try it.  I have no objection to a minimum
       number but I think the minimum number is always going to be
       arbitrary, somebody is not going to be happy about that
       particular number.  But as far as mandating a particular
       number, I don't think it's -- if someone thinks this is going
       to drive the market, that's fine.
                 COMMISSIONER HUNDT:  Well, do you think that
       mandating the broadcast of high definition format from 4:00
       a.m. to 6:00 a.m. in the morning is going to drive any
       particular market?
                 MR. ABEL:  Probably not.
                 COMMISSIONER HUNDT:  It kind of depends on whether
       it's the time of day in which there's popular programming
       being shown.
                 MR. ABEL:  I'm not sure it's time of day, I think it
       depends on program content.
                 COMMISSIONER HUNDT:  Program content.
                 MR. ABEL:  There are two types of program content
       that are important.
                 COMMISSIONER HUNDT:  Which are?
                 MR. ABEL:  Sports and movies.
                 COMMISSIONER HUNDT:  Would you suggest that the FCC
       mandate that sports and movies be broadcast in a high
       definition format?
                 MR. ABEL:  Personally, I would love it.
                 COMMISSIONER HUNDT:  Do you think that that's the
       type of thing broadcasters would like to have us do, Mr. Abel?
                 MR. ABEL:  I think that --
                 COMMISSIONER HUNDT:  Excuse me, let's let Mr.
       Gabbard answer that since he's a broadcaster.  Should we
       mandate that sports and movies be broadcast in the high
       definition format as Mr. Abel has suggested, says that he
       would love?
                 MR. GABBARD:  I don't think you'd need to mandate
       it.  I think all the networks have already said to you and
       certainly to me, that they're going to be in the high
       definition area, that they will take the lead to provide the
       service and try to drive the consumer.  We, as broadcasters,
       will follow when we're able to, and as I said earlier, I think
       the good ones will be first and provide it for their
       communities.  But I don't think you need to mandate it.
                 COMMISSIONER HUNDT:  Mr. -- I didn't cut you off,
       did I?
                 MR. GABBARD:  No, sir.
                 COMMISSIONER HUNDT:  Mr. Tasker, you are suggesting,
       are you not, that the government should mandate some
       broadcasting in a different format, mainly progressive format?
                 MR. TASKER:  Mr. Chairman, the FCC is going to set
       some standards here, if the FCC were not going to set any
       standards here and the marketplace were going to do its work,
       that would be a different thing.  What we are asking for is
       that we have one transmission standard that, if we're going to
       do deinterlacing, we do it at a place where it's most economic
       and efficient and cost effective for consumers and that's, we
       think, at the head-in, not additional costs to the consumer's
       box.
                 COMMISSIONER HUNDT:  The joint statement of the
       Computer Industry Coalition on Advanced Television Services,
       at the top of the second page, points out that the ACATS, our
       advisory group, has proposed 14 display formats. 
                 MR. TASKER:  That's right.
                 COMMISSIONER HUNDT:  We could well say that any one
       of those formats should be selected by a broadcaster at any
       given second and let the market decide.  Is that all right
       with you if we go that route?
                 MR. TASKER:  No, we're not asking for that, we're
       asking for -- there are a selection of formats for different
       reasons, but we are asking for a progressive scan.
                 COMMISSIONER HUNDT:  You're asking that we prohibit
       some of these formats and allow only those that are
       progressive, do I understand you correctly?
                 MR. TASKER:  We want to see the maximum amount of
       compatibility to do the kinds of things that you've talked
       about and Mr. Liroff and others have talked about with text
       and graphics and video all mixed up in what we call multimedia
       applications at the lowest possible cost to the widest number
       of consumers and we think that's done best by specifying
       progressive scans.
                 COMMISSIONER HUNDT:  By progressive -- so you want
       us to forbid interlaced format, is that correct?
                 MR. TASKER:  Yes.
                 COMMISSIONER HUNDT:  And, Mr. Allan, do you want us
       to forbid the interlaced format?
                 MR. ALLAN:  No, we fully intend to build sets that
       handle both interlace and progressive scan.  If you look at
       the specification done by the Grand Alliance, 12 of the 14
       formats in the system are progressive scan formats and I think
       yesterday, as the Commissioners saw when they saw the
       demonstration, one of the tests of compatibility in the
       interoperability is being able to read 9-point type and I
       think in the high definition format, we showed clearly that
       that was legible and there's no issue in using interlace.  As
       far as the cost of deinterlacing in a set, we have progressive
       scan sets, we do it today.  Our first high definition sets
       will progressive scan, and they will also be capable of
       handling interlace materials.  So from a set manufacturer's
       standpoint, we don't see it as a major challenge.
                 COMMISSIONER HUNDT:  So, if we didn't prohibit any
       formats, we just let the market take place in this connection,
       rollout what it wants, that'd be all right with you?
                 MR. ALLAN:  I think the formats have been very
       carefully defined by over 100 companies in a variety of
       industries from telco to computer to IC manufacturers, to
       consumer electronic set manufacturers.  There have been many
       compromises made, it's been addressed numerous times, it's not
       a new issue, and in each and every case the conclusion has
       basically been a consensus that the formats that we have are
       appropriate to go forward and I think if you look at the
       reports from the NII and their survey two years ago, the
       people at the NII, in their report, suggested that the Grand
       Alliance system be promoted and that we try and adopt it and
       implement it as rapidly as possible and there have been other
       government agencies and organizations that have had similar
       views.
                 COMMISSIONER HUNDT:  I've gone over a minute, we
       have three minutes left, would any of my colleagues like to
       use any of the remaining three minutes?
                 COMMISSIONER NESS:  I think we have another round.
                 COMMISSIONER HUNDT:   We have another round, I mean,
       for this particular --
                 COMMISSIONER BARRETT:  Yes, for this panel, we
       haven't had our second round, yet.
                 COMMISSIONER NESS:  This is the last panel and we
       haven't had our second round yet.
                 COMMISSIONER HUNDT:  But what I'm saying is, this
       panel was supposed to go to 4:15.
                 COMMISSIONER BARRETT:  No, 4:30.
                 COMMISSIONER NESS:  4:30.
                 COMMISSIONER HUNDT:  Even better than, would anyone
       else like to ask?
                 COMMISSIONER NESS:  I think we're going to continue
       on.
                 COMMISSIONER BARRETT:  I guess we're going to get --
                 COMMISSIONER HUNDT:  I mean, we have another round
       and --
                 COMMISSIONER NESS:  Yes.
                 COMMISSIONER QUELLO:  One more round, Dr. Abel.
                 COMMISSIONER HUNDT:  I apologize.
                 COMMISSIONER QUELLO:  Dr. Abel, I have great respect
       for the technical, administrative and academic achievements of
       Dr. Abel, who you may not have known, was a former candidate
       for president of my university, Michigan State University, and
       incidentally, I have to mention, naturally, gentlemen, that
       Michigan State did beat Michigan this year for a change, and
       it made our whole year successful.
                 MR. ABEL:  Thank you.
                 COMMISSIONER QUELLO:  But you know, I'm going to
       give you a hypothetical question, it's very hypothetical.  And
       this is the kind of a question that every chairman really
       fantasizes about, including me, and that is, let's assume you
       are now the sole FCC commissioner and chairman of the FCC,
       you're in control, I'm going to yield my six minutes to you,
       what would you do implement and expedite HDTV today, advanced
       television today, and if you have priorities, list them.
                 COMMISSIONER BARRETT:  First of all, you don't have
       six minutes, secondly, you will recall Reed -- called his
       excellency, director general, not chairperson.
                 COMMISSIONER QUELLO:  Oh, well --
                 COMMISSIONER BARRETT:  If there is one, it'll be his
       excellency.
                 COMMISSIONER QUELLO:  I'd be glad -- I'll repeat
       then, they'll never call him as long as he has anything to do
       with the FCC, your serene highness, your excellency, or
       whatever.
                 MR. ABEL:  Well, I think you've given me a really
       softball question here.  One, selective standard, the standard
       is critical to the selection -- to the development of the
       market, it's critical to the success of this for the public
       and the consumer as well as the broadcaster.
                 No. 2, make the standard as flexible as possible.  I
       am the posterboy for flexibility and I appreciate that role,
       but it would be tragic to go to digital broadcasting and only
       have HDTV.  I think HDTV is a very important part of this.  I
       think HDTV should be maybe the centerpiece of this in the
       early stages, but the standard should be as flexible as
       possible.
                 No. 3, you are going to encounter massive problems
       in implementing HDTV in this country or advanced television in
       this country that have not been faced yet and I think these
       problems relate to interference.  We've covered some of these
       issues here today with respect to translators and low power TV
       stations, but they're beyond that, they go to the issue of
       interference from the NTSC channels to the digital channels
       and digital to NTSC.  There will be, I predict, some problems
       with the assignment of the stations of the channels in the
       sense that broadcaster is going to broadcaster in this and I
       would like for you to work to minimize those litigation issues
       to make this advanced television happen as rapidly as
       possible.  I think those are the major points that I would
       consider.
                 COMMISSIONER QUELLO:  Good, I think that's going to
       take care of me.
                 COMMISSIONER BARRETT:  And I next, Mr. Chairman.
                 COMMISSIONER HUNDT:  Do you want to give your six
       minutes to someone else?
                 COMMISSIONER BARRETT:  Sherwin, my good friend, how
       do you propose that we can go forward with digital TV without
       adversely impacting community broadcasters?
                 MR. GROSSMAN:  There are certainly markets that
       you're going to impact them.  I think basically, if we're
       going to go forward under the present system, we have to have
       an opportunity to try and work it out and we need 180 days,
       120 days to do it --
                 COMMISSIONER BARRETT:  We, meaning your group with
       others?
                 MR. GROSSMAN:  Yes.  In answer to Commissioner
       Quello's, I have a much wilder idea.  You could -- if you take
       seven years as a point where you make all sets during that
       period are made with a converter, and at the end of that time
       you switch on the main -- on the same channels we're now
       broadcasting on, everybody, to digital, bring back your power,
       it's about a 10 to 1 drop, add an exciter to the transmitter,
       readjust the main tube, you're broadcasting digital.  You
       don't need a new tower, you haven't gone into the new
       antennas, they'll work the same, same transmission lines. 
       Now, you have a system because basically you've got a system
       today where there's over 6,000 transmitters to serve this
       country.  You're talking about reducing it to 1,500, it ain't
       going to work.
                 COMMISSIONER BARRETT:  Okay.
                 MR. GROSSMAN:  You're not going to serve the people
       of this country.
                 COMMISSIONER BARRETT:  Okay, thank you very much.  
                 COMMISSIONER HUNDT:  Commissioner Ness.
                 COMMISSIONER NESS:  Thank you.  Mr. Tasker, the
       proposed standard is for broadcasting.  Broadcasters say
       today's technology limits them to interlace for delivering
       full HD over the air within a single 6 MHz, is that correct,
       is my information correct on that?
                 MR. TASKER:  I didn't say that, it's -- we have a
       different view.  They say that you can't broadcast a 1,000
       line progressive scan.
                 COMMISSIONER NESS:  Right, to get to the 1,000-line
       full HD.
                 MR. TASKER:  Well, but 1,000-line --
                 COMMISSIONER NESS:  That you don't need full HD.
                 MR. TASKER:  -- interlace is comparable to a 720-
       line progressive and you can certainly transmit a 720-line
       progressive over a 6 MHz channel, so those are the
       comparisons.
                 COMMISSIONER NESS:  Okay.
                 MR. TASKER:  And we think that when you make those
       comparisons, you will see a big difference in the way the text
       handled and that the progressive text is a lot better.
                 COMMISSIONER NESS:  Have you seen the demonstration
       across the street?
                 MR. TASKER:  I got about half way through it before
       coming over here, I plan to go back.
                 COMMISSIONER NESS:  Okay, my recollection is there
       was one demonstration, and maybe Mr. Allan can elaborate on
       this, but there was one demonstration where we saw in
       interlace, text that was quite clear, I was surprised, in
       fact, that it was feasible.  I think we also saw a
       demonstration by Texas Instruments, and I'm trying to recall
       back there as to whether that was an interlace or a
       progressive display.
                 MR. TASKER:  Progressive.
                 COMMISSIONER NESS:  It was a progressive display,
       okay.  Did you see the ones that I'm talking about that did
       show on big screen in the interlace format?
                 MR. TASKER:  No, I guess I didn't.
                 COMMISSIONER NESS:  If you could read the bottom
       line, your eyes were supposed to be good, and I could read it
       and my eyes are awful so I think that that was relatively
       clear.  Now, my recollection was that the working parties of
       our advisory committee were open to everybody who ever wanted
       to do work effectively, what was the extent of your
       participation in the development of that ACAT standard, or the
       Wiley Standard, as, I guess, it's now called.
                 MR. TASKER:  The Wiley Standard, indeed.  There have
       been some computer companies, Apple particularly, that have
       tried their hardest to participate for as long as possible in
       the ACATS process, and I think, in fairness to the ACATS
       folks, the formats that my colleague from Thomson identified
       as progressive, are probably there because of input from the
       computer industry two or three years ago, we were concerned
       that there was no progressive scan in the planning and there
       are now a number of progressive scan formats and we're very
       pleased that they exist.  Our concern is that the interlaced
       residue in the system will keep those progressive formats from
       becoming the dominant form.
                 Now, people can say that Compaq could be faulted for
       not being in the process earlier.  We do not.  Three years
       ago, two years ago, the convergence of technology that would
       make television a very interesting thing to us, was not
       apparent, frankly.  I mean, the kinds of things that Mr.
       Liroff is talking about, the kinds of things that make this
       real interactive, interesting, computer television multimedia,
       call it what you want, that was not in existence two or three
       years ago.  Now, if we can be faulted for that, television was
       television then, it's television now, it was television 10
       years ago.  Ten years ago Compaq Computer Corporation was two
       years old and barely existing and the personal computer was a
       very different animal than it is today.  We've gone through
       seven product generations since then. 
                 So technology has changed a lot for us and today we
       find ourselves in the situation where we're all very excited
       about the growth of the national information infrastructure,
       at reasonable prices to the largest group of consumers that we
       can manage to find, and it is just our concern that we make
       this new system a full part of that --
                 COMMISSIONER NESS:  I agree with you, though, that
       it's extremely important to have convergence and to be able to
       interconnect with the benefits of computer, with the
       television set, but, Mr. Allan, can you tell me approximately
       how much additional it would cost the incremental cost of
       putting in a chip that would provide both interlace and
       progressive?
                 MR. ALLAN:  Do interlace?  We are already designing
       sets, the issue becomes the deinterlacer and estimates have
       been made anywhere from $25 to $35.  Our technical group
       believes they can do it for as little as $10 when we get into
       mass production, so relative to the price of the sets --
                 COMMISSIONER NESS:  Now, is that retail or is that
       cost?
                 MR. ALLAN:  That's cost.  So take $10 and make it
       $25 at retail.
                 COMMISSIONER NESS:  So that pulls up the cost.
                 MR. ALLAN:  So we don't see it as a major overall
       cost in moving the overall standard forward.
                 COMMISSIONER NESS:  Okay.
                 MR. ALLAN:  I think the other thing, if I may say
       that we should point out, is that both IBM and DEK have been
       very active in those meetings in setting the standard and both
       of them have approved the standard and, at the same time,
       tried to promote the fact that we should all move to
       progressive scan as rapidly as possibly and I think that's
       included in Mr. Will's report.
                 COMMISSIONER NESS:  Thank you, and I did note that
       there were, certainly at the last meeting, that there were
       members of the Advisory Committee from the computer industry
       who were present and presumably, when the vote was taken, had
       an opportunity to vote against the standard.
                 MR. TASKER:  May I say that Microsoft is also a
       member of ACATS, they joined very late.  I guess I would only
       say that Compaq is the largest producer of personal computers
       in the world, Apple is the second largest.  We were not
       involved in the process.  If you believe that consulting with
       IBM and Digital is consulting with the computer industry, it
       shows how out of date you are with the modern computer
       industry.  They are very strong competitors, but they are not
       sufficient to stand in for the computer industry of today.
                 COMMISSIONER NESS:  Okay, I appreciate your
       viewpoint, thank you.  In my half minute left, Mr. Liroff, I'm
       aware public television has really been instrumental and very
       supportive of the activities of the Advisory Committee.  What
       are your thoughts on the tradeoffs between SDTV and HDTV?
                 MR. LIROFF:  The tradeoffs in what instances?
                 COMMISSIONER NESS:  In terms of the relative value
       of going HD or going SD, providing those services to the
       consumer.
                 MR. LIROFF:  We think both are essential and will be
       of interest, that is, the flexibility that ATV provides will
       allow us to operate in SDTV when appropriate and in HDTV when
       appropriate.  I wouldn't see one versus the other but both.
                 COMMISSIONER NESS:  Okay, I see my time done, thank
       you very much.
                 COMMISSIONER HUNDT:  Commissioner Chong.
                 COMMISSIONER CHONG:  One last question for poor Mr.
       Liroff, who I'm picking on.  I forgot to task you one more
       thing.  The small and medium broadcasters had asked us for the
       possibility of a slightly longer transition period for them,
       would public television stations also want a longer transition
       period because of their budget issues?
                 MR. LIROFF:  Yes, we are requesting the same kind of
       relief.
                 COMMISSIONER CHONG:  I see, and you would probably
       want to be treated like the smallest broadcasters, probably.
                 MR. LIROFF:  Yes, so far as -- what we have asked
       for is an indefinite transition period with an obligation to
       convert to ATV in advance of the end of the transition period
       once that is determined, but that there should be flexibility
       to allow for their financial situations.
                 COMMISSIONER CHONG:  Thank you.  Mr. Gabbard, you
       provided some really good information about the cost of
       transitioning for small and medium broadcasters and I found it
       very helpful.  I think you just clarified that it was about
       1.8 million just to pass through the signal digitally and that
       doesn't include a new tower, that doesn't include upgrading
       your camera equipment and your studio and all that kind of
       thing, is that right?
                 MR. GABBARD:  That's correct.
                 COMMISSIONER CHONG:  Now, some have suggested that
       instead of the Commission loaning a second channel to the
       broadcasters during the transition period to digital, that we,
       instead auction the channels.  We had a financier here early
       who was talking about the ability of broadcasters to borrow
       money in order to finance the transition.  I wanted your
       opinion about how the small and medium broadcasters would do
       in an auction and whether they could raise the capital
       necessary to compete in an auction to keep their channels?
                 MR. GABBARD:  Obviously we're opposed to auctioning
       for a lot of reasons, but primarily it's going to hurt the
       consumer.  If we have to step up, and again, the smaller
       stations, the better broadcasters in the smaller markets,
       every market has at least one really good broadcaster who is,
       in most cases, profitable but not to the degree the bigger
       markets are, they put their money back in to serving the
       community.  That's why they're strong, local, No. 1
       broadcaster in most cases.  They will try to protect their
       business and their community and they will try to compete in
       an auction if it came down to that.   But if they had to do
       it, they're going to have to give up something somewhere in
       order to pay that back, and what they give up is the kinds of
       local news they do, the high school basketball games, the
       community Christmas chorus, whatever it might be.
                 COMMISSIONER CHONG:  Now, why would they give that
       up?  Is it because it's expensive to produce that, or what?
                 MR. GABBARD:  It's very expensive to produce.  It
       costs a lot of money to produce these --
                 COMMISSIONER CHONG:  So that's local production as
       opposed to the network feed, is that right?
                 MR. GABBARD:  I spend $2 million a year in
       Lexington, Kentucky to do news.  We put that much emphasis on
       local news and proportionately, as we go down to the smaller
       markets, Lexington is 68th in the country, as we go down,
       proportionately we're spending the same money.
                 COMMISSIONER CHONG:  So you're telling me that if we
       go to auction, the small broadcasters might choose to compete
       to try to keep their channel, one would assume, and to do
       that, they may have to reduce their public interest local
       broadcasting, is that what you're saying?
                 MR. GABBARD:  I can't think of another area they
       could get the money, they have to give up something because
       this is added-on money, this is not money that's laying there
       to be used.  If they have to buy the spectrum, then build a
       facility, that money has to be paid back somewhere and it has
       to come out of whatever profits are there, if there are enough
       to do it.
                 COMMISSIONER CHONG:  Thank you.
                 COMMISSIONER BARRETT:  Yes, let me ask you a
       question.
                 COMMISSIONER HUNDT:  Were you finished, Mr. Barrett
       asked if he could --
                 COMMISSIONER BARRETT:  I'm sorry, were you finished?
                 COMMISSIONER CHONG:  I will gladly yield to Mr.
       Barrett.
                 COMMISSIONER HUNDT:  I didn't -- no one wants to cut
       you off, though.
                 COMMISSIONER CHONG:  No, I'm done.
                 COMMISSIONER BARRETT:  I've heard all throughout the
       day and I often use the very rather generic term, free over-
       the-air broadcast, you talk about that if you go into auctions
       you will -- something will lose out like the local news.  I've
       never seen a local news where you gave them money, I thought
       all local news, I've seen somebody pay for it, as advertising. 
       So what is it that would cause you, if you, in fact, aren't
       selling at a discount rate to people that sponsor the news --
       what is it that -- what would they lose if you -- are you
       giving discounts on it now?
                 MR. GABBARD:  Let's take a broadcast day, take all
       the 18 hours or 20 hours.
                 COMMISSIONER BARRETT:  No, no, I want to take the
       broadcast news aspects since you mentioned that.
                 MR. GABBARD:  I'm coming to that.
                 COMMISSIONER BARRETT:  Can you tell me, what is it
       that you're giving in the news, in addition to what the
       sponsors are paying to have their names or whatever propped up
       on the news, I use the term free over-the-air broadcasts and I
       accept that premise in terms of some things.  But I also
       accept a premise that it is not being provided free by you,
       but rather it is sponsored by adverting, people that advertise
       with you.
                 MR. GABBARD:  Okay, at the end of the news, when you
       take all of our news commercials and say that there's "X"
       number of dollars there, and at the end of the month, those
       dollars translate to either a profit or a loss.  Let's assume
       there's a profit, and in the good broadcasters there are
       profits, those profit dollars have to be used to then fund
       whatever else you do, whether it be to buy capital
       improvements or hire more news people or whatever.  All I'm
       saying is this, Commissioner Barrett --
                 COMMISSIONER BARRETT:  Well, let me ask you this, do
       you not factor in various kinds of costs and you aggregate
       them into a total advertising -- what you see as your need for
       a quarter or two quarters or a year in terms of what you need,
       in terms of new equipment, can't you project those things?
                 MR. GABBARD:  Absolutely, we do that, but what we're
       talking about here is over and above our normal capital cost
       every year.  We're saying, here's a brand new thing and now
       we're going to have to compete with an auction situation,
       potentially, and if that happened, how could we do that. 
       There are no dollars there today to that, that's what I'm
       telling you, in the smaller markets.
                 COMMISSIONER BARRETT:  Then that becomes a problem
       with the size of the market in terms of what you can do in
       terms of getting ad, but what I'm trying to get rid of, and I
       use it myself because I believe that we need quote, "free
       over-the-air broadcast."  And I talk about news and whether or
       not it is raining or snowing or whether or not the school is
       open on a given day.  But I've never believed that you were
       providing without a cost to someone, and the cost to someone
       is to the people that advertise with you, either directly or
       through a placement agency.
                 MR. GABBARD:  Yes, sir.
                 COMMISSIONER BARRETT:  And I cannot believe you sell
       ads that do not cover the costs if you anticipated what the
       costs would be in terms of equipment replacement, raises, any
       number of other things.
                 MR. GABBARD:  We can only get so much money for an
       ad, it's based on how many people are watching a particular
       program, that's how we price it.  So if I were to go in
       tomorrow and say to an advertiser, we're now going to charge
       you 50 percent more or 25 percent more because I have to build
       a new system here.  The advertiser is going to look at me and
       say, what do I get out of it, are you going to sell more
       widgets for me?  And I have to say, no, I'm just going to
       charge you a premium because the government's making me do
       this.  That's not going to work very well with the advertiser. 
       He advertises for one reason only, and that is that we sell
       his product through reaching the consumer who goes and buys
       the product.  So, yes, the consumer pays us to provide that
       service, but it's doing it through the advertising supported
       system, and therefore it is free to the consumer at home.
                 COMMISSIONER BARRETT:  Yes, and I don't question
       that, but I'm just suggesting that it's been provided for not
       by you directly but rather by your having space and time to
       sell.
                 MR. GABBARD:  Right, I just don't want you to assume
       that there are new dollars laying there that we can sudden
       take and build a brand new facility over and above what we do
       every year to stay in business.
                 COMMISSIONER BARRETT:  Yes, but I don't want -- I
       don't want to assume either that you're not covering the costs
       of providing news to people.
                 MR. GABBARD:  We are covering the costs.  I never
       meant to infer --
                 COMMISSIONER BARRETT:  Okay, I just -- oh, I'm
       sorry, I thought you said that --
                 MR. GABBARD:  No, I'm saying that if we have to
       provide this new service out of today's operational budgets,
       then something has to be cut back in order.
                 COMMISSIONER BARRETT:  Okay, thank you.  I'm sorry,
       Mr. Gabbard, I apologize.
                 COMMISSIONER QUELLO:  I'd like to clarify that
       answer a little bit, because --
                 COMMISSIONER BARRETT: Yes, because I did ask it in a
       rather confusing manner because I'm talking about something I
       don't know anything about.
                 COMMISSIONER QUELLO:  One, you know, sponsorship is
       --
                 COMMISSIONER HUNDT:  They're not taking this away
       from time, you know.
                 COMMISSIONER QUELLO:  No, but sponsorship is not a
       sure thing.  I mean, you know, sometimes it's sponsored,
       sometimes it isn't.  Now, if you have a lot of money, you can
       do a hell of a job of news.  It so happens I ran a dominant
       station in Detroit, I was very lucky, it was one of the
       dominant ones in the country.  We had a 14-man news staff, the
       average news staff for every other station in town was six, so
       that gives you some idea if you have the money, you have money
       for better programming, better news, No. 1 radio
       personalities.  If you don't have the money, you can't do
       quite the same job and if you put all that money into --
                 COMMISSIONER BARRETT:  If you'd have kept that
       station as opposed to the $700,000 I understand, you'd have
       had $13 million in today's market --
                 COMMISSIONER QUELLO:  14-1/2.
                 COMMISSIONER BARRETT:  Yes, 14-1/2, and you'd have
       been able to set up the Jim Quello Foundation and provide all
       the local news we wanted.
                 COMMISSIONER QUELLO;  I know, but look how much use
       I'm supposed to have been.
                 COMMISSIONER BARRETT:  Chairman and I question how
       much use you've been to us lately.
                 COMMISSIONER QUELLO:  Okay, I'll return the
       compliment.
                 COMMISSIONER HUNDT:  My six little minutes.
                 COMMISSIONER BARRETT:  I'm sorry --
                 COMMISSIONER HUNDT:  No, that's quite all right,
       I've enjoyed it.  Mr. Abel, you said in response to a question
       from Commissioner Ness about what would be the duration of
       NTSC, also called analog broadcasting in the United States. 
       You said broadcasters will be broadcasting NTSC for the rest
       of the life of everyone in the room.
                 MR. ABEL:  For the youngest person in the room,
       maybe I should have said.
                 COMMISSIONER HUNDT:  For the rest of the life of the
       youngest person in the room.  Roughly speaking, let's say that
       you're predicting a 50 year future for analog broadcasting,
       would you care to give us the explanation of this particular
       statement?
                 MR. ABEL:  Well, I think that the reality is that in
       many places in the United States, NTSC broadcasting will go on
       for a long time.  It will be difficult to make this transition
       easily for both the broadcaster and the consumer.  More
       importantly, I am not confident that ATV is going to be
       implemented as fast as what everyone in this room seems to
       think that it is going to be implemented because of the points
       I mentioned before, contentiousness among broadcasters on the
       assignment, whether the system is truly flexible or not,
       interference issues with respect to the implementation.  So it
       may be more like five or six years before we even get it
       started.  Secondly, ultimately the points that you've been
       raising about the cost of the receiver and so forth, despite
       what we've heard from the consumer electronics industry that
       it's going to go down in cost, there still is a premium over
       and above.  I think the average price of a TV set sold in this
       country last year was under $400 or about $400, this is going
       to be a premium over and above that.  At some point the
       government is going to look at this and say, who is really
       adopting advanced television and who is left out.  In fact, it
       could be quite the opposite.  You could be coming to us or
       your replacement could be coming to us saying, can --
                 COMMISSIONER HUNDT:  Successor.
                 MR. ABEL:  Successor, sorry, successor, I apologize. 
       But in 30 years, could be coming back to broadcasters saying,
       please continue NTSC broadcasts because not every household
       has adopted and there is no really truly inexpensive way for
       them to adopt advance television.
                 COMMISSIONER HUNDT:  Another way to put it, I think,
       would be that if we simply trust in the market and allow the
       rollout of digital television to be whatever the market may
       require, then it's very likely that it'll be decades before
       analog broadcasting, as a product demand by consumers, fades
       away.  In other words, there will be millions of consumers
       that will continue to want that product.
                 MR. ABEL:  I think that's definitely a possibility. 
       You have -- you said it, I think, if you force the market a
       little bit, and that's why you need a little bit of forcing
       with respect to at least establishing the standard, if you
       force the market a little bit, you'll make this happen more
       rapidly.  But it's still up to the consumer to adopt.
                 COMMISSIONER HUNDT:  What's your view of the notion
       that the administration is kicking around that one way to
       force the market and expedite the transition and get to a
       world in which broadcasters won't have to be with the right
       hand doing the digital thing, or the left hand analog, one way
       to expedite that would be to prime the pump a little with some
       cash vouchers to consumers.
                 MR. ABEL:  I didn't like the idea.  First of all, I
       wasn't sure if it meant household or per set, I have 13 TV
       sets, if that goes through, I'm going to go out and buy 100
       since I could get the broadcasters to subsidize it.  I don't
       think it's a very good idea and I doubt that it will
       ultimately seed the market.  I think it's better to look at
       the all-channel or all-system receiver of some sort and to
       force, on the other end, some push on broadcasters to get it
       implemented and if you want to do this in terms of auctioning
       spectrum, it's better to take back spectrum later, after it's
       been repacked so you have it contiguous across the United
       States.
                 COMMISSIONER HUNDT:  But what you're saying with
       respect to the receiver is you think another way to force the
       market would be to mandate that all televisions be capable of
       receiving analog and digital reception, is that what you're
       saying?
                 MR. ABEL:  That's what I'm saying, yes.
                 COMMISSIONER HUNDT:  What about mandating that all
       televisions, after a certain date, receive only digital
       signals?
                 MR. ABEL:  That might be something to consider once
       it's been implemented.  I think there are too many unknowns
       here to really know how this would really develop from a
       consumer side especially, so we should wait until we see how
       it develops.
                 COMMISSIONER HUNDT:  But do you think unless we take
       some market-forcing step like that, otherwise it will be
       decades and decades that we see in paralleled both analog and
       digital broadcasting?
                 MR. ABEL:  It could be decades, I think.
                 COMMISSIONER HUNDT:  With respect to digital
       broadcasting, and I, for one, think it's a very exciting
       possibility, particularly if the government does the smallest
       amount of intrusion in terms of selecting the formats, but
       with respect it, today, Mr. Gabbard and his TV stations has
       160 hours a week, with digital broadcasting, what, according
       to your estimates, would be the number of hours that he'd be
       likely to have to fill or be able to broadcast depending on
       the way you look at it?
                 MR. ABEL:  Well, what I see is he could broadcast
       multiple services at the same time, not necessarily video, but
       speaking of multimedia services, which, in effect, make the
       viewing experience more desirable and perhaps can put more --
       well, I believe, more information into this medium that's
       under-utilized as a medium, I think.  So I'm not so focused on
       the real time hours.  In fact, I don't like talking about
       realtime broadcasting very much any more, I would like to
       think about non-realtime broadcasting, which is both the
       broadcasting we have today, and the broadcasting of the
       future, to allow more services to be packed into that
       bitstream.
                 COMMISSIONER HUNDT:  But broadcasters are always
       coming in saying, boy, I wish I had a second station in
       Louisville, or Lexington, because if I had two stations, if I
       had two streams of programming, then I could counterprogram,
       increase my aggregate market share, clearly digital
       broadcasting permits a broadcaster to achieve this pro-
       competitive goal, isn't that right?
                 MR. ABEL:  It does in a way, but it doesn't -- when
       they're speaking about that, they're speaking about two analog
       channels, I believe.
                 COMMISSIONER HUNDT:  Well, that's all that we have
       right now.
                 MR. ABEL:  Yes, when we get to the -- if you go to a
       city like Des Moines and the stations are not owned by a
       network -- not owned by a specific network, just affiliated
       with networks, I think it would be the worst nightmare for
       each station to have four or five channels of service, there
       would not be enough advertiser support to support all of these
       services in that community.  There would not be enough
       programming, and in fact, the network relationship with
       affiliate could be reversed such that the affiliate has to pay
       for programming. If there's not enough programming available,
       the total quality of the service would eventually deteriorate
       since there is not enough advertising support and programming
       is in scarce supply.  So, I don't think it's a good solution
       to this and I'm not sure SDTV is necessarily in the best
       interests of broadcasters.
                 COMMISSIONER HUNDT:  Can I just ask one more
       question?  Mr. Gabbard, would you like to be able to broadcast
       at least two streams of programming at the same time
       digitally?
                 MR. GABBARD:  Well, I have the same concerns that
       John has just laid out and we've done a lot of talking about
       this to try to see vision-wise, is there a business out there. 
       And, again, in the markets that I operate in, I have to put my
       focus on my main channel, what I do every day, and it's hard
       enough to keep it sold out, hard enough to keep it programmed
       properly.  Fantasyland, sure, I'd like to have another
       channel.  Could I make it work, I doubt it today, in the
       markets that I'm in.  I might turn to John and say, let me
       lease you this and you become my program provider.  Again, I'm
       not smart enough to day to know the answers, but we are
       looking, just like you are, to try to find his answers.
                 COMMISSIONER HUNDT:  Because I was just thinking, if
       you don't want the extra channel, and I say this in all
       seriousness, we can give it to Mr. Grossman here who otherwise
       doesn't have the spectrum, so if you quite seriously don't
       want it --
                 MR. GABBARD:  No, I didn't say that, I said --
                 COMMISSIONER HUNDT:  -- why don't we give it to Mr.
       Grossman and we solve that problem.
                 MR. GABBARD:  I said we want to study it and try to
       find what the business is because I don't honestly know, and
       it may be that he plays a role in that.
                 COMMISSIONER HUNDT:  Well, we do have a problem
       because he's right, he's not in the digital picture right now.
                 MR. GABBARD:  Right.
                 COMMISSIONER HUNDT:  All right.  Thank you all very,
       very much.  Very informative, very interesting, entertaining,
       informational, educational, all the things that TV can be. 
       Thank you very much.
                 (Whereupon the meeting was adjourned at 4:41 p.m.)