This is the accessible text file for GAO report number GAO-03-7 
entitled 'Telecommunications: Additional Federal Efforts Could Help 
Advance Digital Television Transition' which was released on December 
02, 2002.



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Report to the Ranking Minority Member, Subcommittee on 

Telecommunications and the Internet, Committee on Energy and Commerce, 

House of Representatives:



United States General Accounting Office:



GAO:



November 2002:



Telecommunications:



Additional Federal Efforts Could Help Advance Digital Television 

Transition:



GAO-03-7:



Contents:



Letter1:



Results in Brief:



Background:



Transition to DTV Will Allow the Return of Valuable Spectrum but Will 

Require Millions of Americans to Buy New Equipment:



Consumer Adoption of DTV Has Been Slow, Partly Because Many Americans 

Are Unaware of the Transition and Are Not Well Informed about DTV 

Products:



Carriage of Digital Signals by Cable and Satellite Operators Is 

Insufficient to Help Achieve 85 Percent Threshold Quickly:



Availability of Digital Programming Is Increasing but Still Limited, 

Possibly Due in Part to Copy Protection Concerns:



Digital Over-the-Air Tuners Have Been Mandated, but Digital Cable-Ready 

Capability Has Not:



Conclusions:



Recommendations for Executive Action:



Agency Comments:



Appendix I: Scope and Methodology:



Appendix II: Equipment Issues Affecting the DTV Transition44:



Digital Inputs and Copy Protection Technologies:



Digital-to-Analog Converter Boxes:



Adequacy of Over-the-Air Reception:



Appendix III: Analysis of the Consumer Survey:



Appendix IV: Comments from the Federal Communications Commission:



GAO Comments:



Appendix V: GAO Contacts and Staff Acknowledgments:



GAO Contacts:



Staff Acknowledgments:



Table:



Table 1: Differences in Familiarity with the Digital Television 

Transition on the Basis of Household Characteristics:



Abbreviations:



DMCA: Digital Millennium Copyright Act:



DTV: digital television:



FCC: Federal Communications Commission:



HD: high definition:



NCTA: National Cable & Telecommunications Association:



ORC: Opinion Research Corporation:



POD: point of deployment:



November 8, 2002:



The Honorable Edward J. Markey

Ranking Minority Member

Subcommittee on Telecommunications 

 and the Internet 

Committee on Energy and Commerce

House of Representatives:



Dear Mr. Markey:



The transition to broadcast digital television (DTV) offers the promise 

of more programming options, interactive services, and the high-

resolution picture quality provided by high definition television. It 

also will allow some of the valuable radiofrequency spectrum now used 

for broadcasting to be made available for other uses.[Footnote 1] To 

help realize this transition, the Congress and the Federal 

Communications Commission (FCC) have established requirements for 

television stations to broadcast digital signals. In an April 2002 

report, we discussed the progress that stations are making in rolling 

out these digital broadcasts.[Footnote 2] Although the provision of 

digital broadcast signals is progressing, many other things must happen 

before the transition can be successfully completed. These include the 

adoption of DTV equipment by consumers, cable carriage of digital 

broadcast channels, and the availability and provision of digital 

programming.



As FCC Chairman Michael Powell has noted, at the heart of the DTV 

transition lies a classic chicken-and-egg problem. Until more consumers 

have purchased digital television sets, there is little incentive for 

networks to provide and cable systems to carry more digital 

programming. Yet without much digital programming available, consumers 

have little incentive to purchase digital television sets. In April 

2002, the Chairman issued a proposal for industry actions to speed the 

DTV transition. The proposal laid out specific--though voluntary--

actions that various industries should take to provide an immediate 

spur to the DTV transition. In addition, in August 2002, FCC 

established a requirement that by July 2007 most new television sets 

include a tuner capable of receiving over-the-air digital broadcasts.



The DTV transition began in 1987 when, at the request of many 

broadcasters, FCC began to investigate issues related to the 

introduction of advanced technologies for improvements to television 

picture and sound. This process led to a study of the feasibility of 

transitioning from the conventional analog broadcasting system to a 

digital broadcasting system. Since that time, regulatory actions by 

FCC, in conjunction with direction set out by the Congress in the 

Telecommunications Act of 1996 and the Balanced Budget Act of 1997, 

have established the framework and timeline for the DTV transition. 

During the transition, all television stations in the United States 

have been provided with a second channel on which to operate a digital 

broadcast in addition to the channel on which they operate their analog 

broadcast. Once the transition is complete, broadcast stations will 

operate solely in digital. FCC set 2006 as the target date for the 

completion of the DTV transition. The Congress later codified this date 

but also provided for extending the date under certain conditions. The 

goal is for broadcasters to cease broadcasting the analog signal by the 

target date so that some of the radiofrequency spectrum needed for 

analog broadcasting can be made available for other uses. However, many 

believe that the transition will not be completed by the target date.



We were asked to assess issues related to the DTV transition, including 

(1) the benefits and implications of turning off the analog broadcast 

signals, (2) consumer awareness and adoption of DTV, (3) cable and 

satellite carriage of digital signals, (4) the availability of digital 

programming and the role of copy protection concerns, and (5) issues 

related to DTV tuner mandates.



To meet these objectives, we interviewed representatives of companies 

in several key industry segments, including broadcasters, television 

producers, cable and satellite companies, and retailers and 

manufacturers of DTV equipment. We also had several meetings with FCC 

staff and various industry trade groups. To better understand consumer 

knowledge of the DTV transition, we contracted with a survey research 

firm to conduct a random household survey that asked questions designed 

to ascertain consumers level of knowledge about the DTV transition. We 

also visited a variety of retail stores to obtain anecdotal information 

on retail practices in marketing and selling DTV products. A more 

detailed discussion of our scope and methodology is provided in 

appendix I.



We performed our review from May 2001 through August 2002 in accordance 

with generally accepted government auditing standards.



Results in Brief:



An important benefit of completing the transition to digital television 

(DTV) is to recapture portions of the radiofrequency spectrum that are 

currently used for broadcast television. Some of the valuable spectrum 

television broadcasters currently use to broadcast analog signals has 

been reallocated for both public safety needs--such as emergency 

services--and commercial services. However, under the law, television 

stations do not have to return their analog channel until 85 percent of 

households in a market can receive DTV signals; this is not likely to 

occur by the December 2006 target date in many markets. FCC is still in 

the process of determining how to interpret the statutory provisions 

concerning when 

85 percent of households can receive DTV. However, even when it has 

been determined that the 85 percent threshold has been met, questions 

remain about the impact on the remaining 15 percent of the population, 

who would not be able to access at least some of their local broadcast 

channels until they purchased new equipment.



One impediment to the transition is that consumer sales of digital 

television sets, though increasing, are still relatively small. One 

barrier to sales is that digital television sets are still expensive 

compared with analog television sets, but another barrier may be that 

many Americans have little awareness of the DTV transition and its 

implications. For example, 40 percent of respondents to a random 

household survey conducted for us said they had never heard about the 

DTV transition, and fewer than one in five said they were very aware 

of the transition. In addition, the quality of information that 

consumers receive about DTV products at the retail level may be 

inconsistent. During visits to 23 DTV retailers in five states, we 

found that while much of the information provided by DTV sales staff 

was correct, many staff were uninformed about important issues, such as 

the ability to receive DTV over the air and the amount of high 

definition content currently available. Moreover, few of the screens 

displayed in the stores allowed customers to actually view a high 

definition picture. The Chairman of FCC has called upon broadcasters, 

cable systems, and DTV manufacturers and retailers to do more to market 

and promote DTV programming and equipment to consumers. However, at 

this time, FCC does not have significant initiatives of its own under 

way to raise public awareness about the DTV transition, apart from 

information that it provides through its Web site and call center.



Cable and satellite operators are not currently planning to carry 

significant numbers of local digital broadcast stations, which further 

hinders the completion of the DTV transition. Because more than two-

thirds of Americans receive their television via cable, cable carriage 

of DTV broadcast signals is important for facilitating the transition. 

Under one provision in the law, households receiving DTV via cable (but 

that do not have the equipment to receive DTV over the air) count 

toward the threshold only if their cable system carries one local DTV 

broadcast channel from all stations broadcasting such channels in its 

market. However, because cable systems are reluctant to use scarce 

channel capacity to carry a broadcast stations digital signal, 

particularly if it only duplicates what is being shown on the stations 

analog signal, market forces alone may not result in cable systems 

carrying all of the local broadcasters digital signals in a market. 

Direct broadcast satellite providers, which serve about 17 percent of 

American television households, are probably even less likely than 

cable systems to provide all local digital broadcasts; because 

satellite services are national in scope, these providers face 

constraints in their ability to carry local broadcasts.



Although broadcasters have the right to demand cable carriage of their 

analog broadcast channels, FCC has tentatively decided that it would be 

unconstitutional to require cable systems to carry both analog and 

digital channels during the transition. However, another option we have 

identified is to set a date-certain when broadcasters would, all at 

once, switch from having the right to demand carriage of their analog 

channels to having the right to demand carriage of their digital 

channels. This policy option could help speed the transition by 

requiring cable carriage of digital broadcast signals without the need 

for mandatory dual carriage. Because this option also could have 

certain disadvantages, it would benefit from further study to determine 

its viability.



The limited availability of digital programming, possibly due in part 

to concerns over copy protection, also is slowing the DTV transition. 

Digital programming, particularly high definition programming, is 

important both to encourage consumers to purchase digital television 

sets and to encourage cable companies to carry digital broadcast 

signals. The amount of digital programming has increased considerably 

in the past 2 years, but it still represents only a small portion of 

total television programming. Broadcast networks and cable networks 

vary greatly in terms of the amount of high definition programming they 

are providing. The provision of more digital content is held back by 

factors that include the small number of viewers with the equipment to 

watch DTV; the greater cost and complexity of filming or formatting 

high definition programming; and, possibly, concerns about unauthorized 

copying and retransmission of digital content provided over the air. In 

response to this last factor, FCC recently initiated a rulemaking on 

digital broadcast copy protection issues.



FCCs August 2002 order requiring that most new broadcast television 

sets include a tuner capable of receiving digital signals over the air 

raises several issues. This DTV tuner mandate, which is being phased in 

over 5 years, will speed the transition by increasing the number of 

households able to receive over-the-air DTV. However, there is some 

debate about how much this mandate will increase the price of 

television sets; FCC argues that the economies of large-scale 

production will keep the added cost of these tuners relatively low. 

Still, because fewer than one in five Americans actually get their 

primary television signal over the air, questions have been raised 

about the economic efficiency of requiring an over-the-air digital 

tuner in all new television sets. Moreover, although the DTV tuner 

mandate will help reach the 85 percent threshold, it will do so largely 

because cable and satellite households that purchase new television 

sets that include the digital over-the-air tuner will count toward the 

threshold even though they may not actually watch their television over 

the air.



One potential option for addressing this issue would be to mandate 

that, in addition to having an over-the-air tuner, new television sets 

also should be digital cable-ready. A digital cable-ready television 

would likely include a digital cable tuner as well as a security device 

to handle encrypted cable programming. The marginal cost of mandating 

digital cable-ready capability has not yet been studied in depth, and 

other issues regarding the interoperability of cable systems with DTV 

equipment are still outstanding. However, because far more American 

households receive television via cable than receive it over the air, 

mandating digital cable-ready capability could be an effective policy 

for speeding the DTV transition if the marginal cost of doing so were 

found to be reasonable and if the outstanding interoperability issues 

could be settled.



To address the barriers we identified facing the DTV transition, we 

recommend that the Chairman of FCC (1) explore options that FCC could 

take to raise awareness among the public about the DTV transition and 

the implications it will have; (2) direct the relevant FCC bureaus and 

offices to examine the costs and benefits of mandating that all new 

televisions be digital cable-ready, and report its recommendations 

regarding the actions it believes FCC or the Congress should take; and 

(3) direct FCCs Media Bureau to examine the advantages and 

disadvantages of a policy to set a date-certain to switch from full 

cable carriage of analog signals to full cable carriage of digital 

signals.



We provided a draft of this report to FCC for comment. FCC said it 

agreed that raising public awareness about the DTV transition was 

important, and it noted actions by Chairman Powell and private industry 

to help achieve this increased awareness. FCC also said it has been 

engaged in long-standing efforts to achieve compatibility between 

digital television sets and cable systems and will address this issue 

in a forthcoming Report and Order. In addition, FCC said that it sought 

comment on a wide range of options related to digital must-carry, 

including an option similar to the one described in this report, and 

that FCC staff are in the process of drafting an order on this issue.



Background:



The nation is currently undergoing a transition from analog to digital 

television broadcasting. Traditional analog broadcasting uses the 

radiofrequency spectrum to transmit analog signals--that is, signals in 

which motion pictures and sounds have been converted into a wave form 

electrical signal. With digital technology, the analog wave form is 

converted into a stream of digits consisting of zeros and ones. For 

digital television service, like analog service, broadcast stations 

have been allotted 6 MHz of radiofrequency spectrum for each television 

channel. However, because digital video signals can be compressed, the 

spectrum can be used more efficiently, allowing much more information 

to be broadcast using the same amount of spectrum.



As a result, digital broadcasting provides greater flexibility in terms 

of the type of television content that can be provided. Most notably, 

digital broadcasting makes it easier to offer high definition (HD) 

television. HD television provides roughly twice as many lines of 

resolution, creating a television picture that is much sharper than 

traditional analog television pictures. HD television can also provide 

CD-quality sound and is in widescreen format, with display screen 

ratios similar to a movie theater. With digital broadcasting, 6 MHz of 

spectrum can be used for at least one channel of HD programming, or it 

can be subdivided to allow the simultaneous transmission of as many as 

six separate TV programs of lower quality standard definition 

television, a concept known as multicasting. A broadcast station can 

also provide datacasting--using digital signals to transmit text or 

data, such as stock quotes or electronic newspapers. Broadcast 

stations, also known as broadcasters, are local operations that 

transmit signals over the air from the stations transmission tower to 

the antennas of television sets. Broadcast stations may get their 

programming content through an affiliation with a broadcast network 

(such as ABC, NBC, or PBS) or a station may be an independent 

broadcaster. Most stations also produce some of their own content, such 

as local news programming.



More than four-fifths of American households do not receive their 

primary television service over the air via their television sets 

antenna. Instead, they pay a fee to a subscription television service, 

such as a cable or satellite service. A cable system is a company 

that runs a localized network of cable lines to deliver television 

signals to subscribers. Some cable systems are individually owned, 

while others are owned by companies that own and operate more than one 

cable system. Direct broadcast satellite is a nationally distributed 

service that transmits programming from orbiting satellites to a 

customers satellite dish. Cable systems carry all of their markets 

local analog broadcast stations, while satellite services carry local 

broadcast stations in select markets. Cable networks (such as CNN or 

MTV) produce or acquire television programming that is delivered to 

cable systems and satellite operators.



Like broadcasters, cable television systems are also transitioning to 

digital, although they are under no government mandate to do so. Many 

cable operators have added digital tiers to their programming 

offerings. Satellite systems have always transmitted their signals in 

digital. Both cable and satellite systems primarily use digital 

technology as a way of increasing the number of channels they can 

offer. References in this report to the DTV transition refer to the 

transition by local broadcast stations to the use of digital broadcast 

signals; it does not refer to the way that cable or satellite systems 

transmit their signals.



For the DTV transition to be completed, and analog broadcasting to end, 

two major things need to happen: (1) television stations must broadcast 

a digital signal and (2) consumers must be able to view that signal. By 

May 1, 2002, all full-power commercial television stations across 

America were to have begun airing a DTV signal. As of October 17, 2002, 

however, only about 43 percent of these stations were broadcasting 

digitally; the remainder had filed for extensions with FCC. By May 1, 

2003, all public broadcast stations also are to be broadcasting a DTV 

signal.



For a household to see local digital broadcast signals via cable or 

satellite service, the household must have the necessary equipment, and 

its cable or satellite service must also carry local digital signals. 

For consumers to see the digital signal over the air via an antenna, 

they must either have a digital-to-analog converter box that will allow 

them to watch digital signals on their existing analog set, or they 

must own a digital television set that includes a tuner capable of 

receiving and processing a digital signal.[Footnote 3] To speed the DTV 

transition, FCC adopted in August 2002 a requirement that most new 

television sets must include an over-the-air tuner that receives 

digital broadcast signals. FCC set various deadlines for manufacturers 

to include DTV tuners in new television sets, with all sets over 13 

inches required to include the tuners by July 1, 2007.



Transition to DTV Will Allow the Return of Valuable Spectrum but Will 

Require Millions of Americans to Buy New Equipment:



One important goal of the DTV transition is to recapture portions of 

the radiofrequency spectrum currently used for analog broadcasting so 

this spectrum can be used for public safety needs and auctioned to 

private companies. Under the law, the spectrum is due to be reclaimed 

by December 2006, but this date can be extended if less than 85 percent 

of households in a given market can receive the DTV signal. FCC is 

still in the process of determining how to interpret the statutory 

provisions concerning when the 85 percent threshold has been met. Even 

when 85 percent of households can receive DTV, concerns remain about 

the impact on the remaining 15 percent of the population, who would not 

be able to access some or all broadcast channels until they purchased 

new equipment.



Recapture of Broadcast Spectrum Is an Important Goal of the DTV 

Transition:



An important motivation for completing the DTV transition is to 

recapture parts of the broadcast spectrum. One goal is to free up 

portions of the broadcast spectrum that have been reallocated for 

public safety needs, such as communications by local police and fire 

departments. The Public Safety Wireless Advisory Committee, in a 1996 

report to the FCC, said that an additional 97.5 MHz of spectrum would 

be needed for public safety communications uses by 2010. In the 

Balanced Budget Act of 1997, the Congress directed FCC to reallocate 24 

MHz of the spectrum to be reclaimed from broadcasters to public safety 

uses. After the terrorist attacks of September 11, 2001, the Chairman 

of FCC said that freeing up spectrum for public safety uses has become 

an even higher priority.



In addition, the vast expansion of wireless technologies in recent 

years by mobile telephone, broadband Internet, and wireless companies, 

has greatly increased these industries demand for portions of the 

radiofrequency spectrum currently used for television broadcasting. 

This demand arises not only because of the general scarcity of 

spectrum, but also because the spectrum used for broadcasting has 

qualities that make it ideal for the provision of many wireless mobile 

services.



The Balanced Budget Act of 1997 directed FCC to auction certain 

portions of the spectrum freed up by the DTV transition according to 

certain timelines. The Congressional Budget Office has raised concerns 

that early auction timing could devalue the spectrum because bidders 

would have to wait years before being able to use the spectrum. The 

Auction Reform Act of 2002[Footnote 4] modified the statutory deadlines 

set by the Balanced Budget Act and gave FCC increased flexibility in 

determining when to complete auctions for the remainder of the 

spectrum.[Footnote 5] The Auction Reform Act noted that delay in the 

return of portions of the spectrum used for broadcasting reduces both 

the amount of money that auctions are likely to produce and the 

probability that the spectrum will be purchased by the entities that 

will put it to its most productive use.



Date When DTV Transition Will Be Completed and Spectrum Returned Is 

Uncertain:



FCC established 2006 as the target date for completing the DTV 

transition, and this was later codified by Congress in the Balanced 

Budget Act of 1997. By December 31, 2006, the goal is for broadcasters 

no longer to broadcast the analog television signal, and for the 

spectrum that they vacate to be returned so that it can be made fully 

available for other uses. However, because the Congress was concerned 

about leaving substantial numbers of households without the ability to 

access broadcast television signals, the law specifically provided for 

extensions in certain circumstances. Under the statute, FCC must grant 

extensions to requesting stations in a television market where it finds 

that one of the following three conditions exists:



1. at least one television station affiliated with the four largest 

national networks (ABC, CBS, Fox, or NBC) is not broadcasting a DTV 

signal;



2. the technology to convert a digital signal for use on an analog 

television set is not generally available; or:



3. fewer than 85 percent of television households in the television 

market has the ability to receive DTV--a television household would not 

count as receiving DTV if it (a) did not subscribe to a multichannel 

video programming distributor (such as a cable or satellite service) 

that carries a digital broadcast channel from each broadcaster in that 

market and (b) did not have a television receiver or a digital-to-

analog converter capable of receiving digital broadcast 

signals.[Footnote 6]



How FCC interprets the third provision--sometimes referred to as the 

85 percent rule--has important implications for when the broadcast 

spectrum can be returned. Several aspects of this provision are still 

to be determined. For example:



* Defining a market: It has not yet been established what constitutes 

a television market under the statute. FCC officials told us that they 

have not yet determined what market definition to use, and that this 

would likely be established in a formal proceeding.



* Counting cable subscribers: For a household to count as receiving DTV 

via cable, its cable service must carry at least one digital 

programming channel from each broadcaster in its market. But it is not 

yet clear whether a household subscribing to such a service counts if 

it does not have the equipment necessary to actually view that 

programming (i.e., it does not have a digital television set or set-top 

converter box).



* Method of measurement: It is not yet clear what method would be used 

to actually measure how many households in a market can receive DTV 

signals. Some information may be available from cable and satellite 

providers, but it is uncertain how FCC will determine how many 

households in a market have the equipment to receive DTV over the air.



In a January 2001 notice of proposed rulemaking that focused on cable 

carriage of DTV signals, FCC included a section seeking comment on how 

to count DTV households for the purpose of reaching the 85 percent 

threshold.[Footnote 7] FCC has not yet issued a ruling on this notice, 

and FCC officials told us that few of the comments received touched on 

the 85 percent rule. The officials also noted that because DTV 

penetration is still very low, clarifying the 85 percent rule does not 

need to be addressed immediately. We asked FCC in a letter for its 

interpretation of the statute regarding how cable subscribers will 

count. In a return letter, FCC said that it has not yet adopted a 

definitive interpretation of that provision of the statute, but that it 

may initiate a proceeding in the near future that focuses on soliciting 

public comment on the issue.[Footnote 8]



The first and second provisions of the statute cited above--that major 

network affiliates broadcast the digital signal and that technology be 

available to allow the signal to be converted for use on an analog 

television set--are not likely to be an obstacle to the transition. 

However, there was a consensus among most industry experts we spoke 

with that the third provision--the 85 percent rule--will probably not 

be met in most markets by 2006. To reach 85 percent penetration of DTV 

signals, a series of interrelated changes need to occur, many of which 

are largely driven by the market. These changes include the 

availability of more digital programming, increased carriage of digital 

signals by cable companies, and increased consumer purchases of DTV 

receivers or converter boxes. As discussed throughout this report, 

serious roadblocks still remain to achieving each of these changes.



DTV Transition Will Require Millions of American Households to Buy 

Additional Equipment to Continue to Access Broadcast Stations:



The DTV transition will impose some cost, either directly or 

indirectly, on all television viewers. To be able to receive DTV 

signals, a household must take one of several actions. It either must 

(1) purchase a television set that includes a tuner capable of 

receiving digital broadcast signals, (2) purchase a converter box that 

captures the digital broadcast signal and converts it to a format that 

can be shown on an analog television set, or (3) subscribe to a cable 

or satellite provider that is carrying the broadcast stations digital 

signals as well as have the equipment necessary to receive that 

providers digital signals.[Footnote 9] All of these options involve 

some financial cost related to DTV equipment--and digital television 

sets and tuners are currently relatively expensive. Although the price 

of these technologies is expected to drop dramatically as more units 

are produced, the cost still may be a burden to many households, 

particularly low-income households.



Once the 85 percent threshold has been met in a market and the analog 

signals are turned off, the remaining 15 percent of households will no 

longer be able to receive some or all broadcast channels. Households 

that were receiving their television solely over the air, and had not 

yet purchased a digital television set or converter box, would lose all 

television service. These households would need to purchase a new 

television set or converter box to resume their access to broadcast 

television. Households that were subscribing to cable or satellite 

would, depending on their circumstances, need to get the necessary 

equipment to view their cable or satellite services digital signals or 

purchase an over-the-air digital tuner (if they did not have one 

already) to continue to receive the local broadcast channels not being 

provided by their cable or satellite service. Nationwide, 15 percent of 

American television households represents nearly 16 million households, 

consisting of about 40 million people, who would lose access to at 

least some of their local broadcast channels until they purchased 

additional equipment.



In addition, many households that are able to receive all DTV signals 

via their cable system will still face some loss of television service. 

Many households that have cable or satellite service also have one or 

more additional television sets that are not hooked up to this service. 

Any such sets that do not contain an over-the-air digital tuner will no 

longer function without the purchase and installation of a set-top 

converter box once analog service ends. Overall, approximately 81 

million television sets in 42 million American homes currently receive 

their television signal solely over the air, according to Consumer 

Electronics Association estimates.



Policy-makers will likely find it unpalatable to disenfranchise a large 

number of American households from the ability to receive broadcast 

television signals. The importance that many Americans attach to having 

television access was illustrated a few years ago in a series of 

lawsuits involving several broadcasters and a satellite video 

distribution company named PrimeTime 24.[Footnote 10] As a result of 

court rulings, the satellite distributor was ordered to stop providing 

certain broadcast signals to about 2 million satellite subscribers. 

This potential loss of service engendered an enormous amount of 

correspondence from affected satellite subscribers to Members of 

Congress, resulting in considerable pressure for a solution before the 

signals were to be shut off. The PrimeTime 24 case is not a perfect 

analogy to the DTV transition: that case had the potential to 

completely turn off certain television signals to certain consumers, 

whereas at the completion of the DTV transition, households can choose 

to maintain their television service by purchasing additional 

equipment. But the PrimeTime 24 case does serve to illustrate how the 

public may react to any disruption in their television service. As with 

the PrimeTime 24 case, political pressure will likely develop among 

those American households faced with an impending loss of television 

service due to termination of the analog signals.



Many other countries also are wrestling with how to complete their DTV 

transition without stranding substantial numbers of consumers who have 

not yet adopted DTV equipment when the analog signals are shut off. For 

example:



* The government of the United Kingdom has said that its broadcasters 

will turn off the analog signals when at least 95 percent of households 

can receive the digital signals. In addition, United Kingdom officials 

have noted that their decision about a turn-off date will also factor 

in the affordability of DTV equipment.[Footnote 11]



* The Canadian governments recent policy statement on DTV states that 

consumers will be able to upgrade their equipment at their own pace 

and convenience and that the transition will be market-driven. 

Canadian officials told us that industry interests opposed any strict 

deadlines for turning off analog signals.



* In setting the date for turning off analog signals, the Japanese 

government factored in the average life cycle of a television set in 

Japan (8 years) and the expected cost of digital television sets after 

the economies of mass production are realized. On the basis of that 

analysis, government officials told us that consumer adoption of 

digital television sets will be sufficient to turn off the analog 

signals without serious adverse effect to consumers by 2011.



Consumer Adoption of DTV Has Been Slow, Partly Because Many Americans 

Are Unaware of the Transition and Are Not Well Informed about DTV 

Products:



In a telephone survey of 1,000 randomly selected American households, 

we found that many people have little understanding of the DTV 

transition and its implications. In addition, consumer electronics 

sales data suggest that consumers have not been purchasing digital 

television sets at a pace rapid enough to make it likely that 85 

percent market penetration will be reached by the end of 2006. When we 

posed as consumers during visits to 23 DTV retailers, we found that 

much of the information provided by sales staff about DTV equipment was 

correct. However, many staff were uninformed about important issues and 

few of the screen displays in the stores allowed consumers to actually 

view a high definition picture.



Knowledge about the DTV Transition Is Limited:



More than 98 percent of American homes have a television set and the 

average number of televisions per home is 2.5. Moreover, television has 

become an important part of American life; it is how we share news, 

entertainment, and public safety information. In addition, the Congress 

has repeatedly noted the importance of maintaining the nations free, 

over-the-air system of local broadcasting, which provides local news 

and community programming.



The DTV transition will greatly change how television is received in 

the United States; every household will need to make choices about what 

type of equipment or service to purchase to continue to receive 

television programming. However, it appears that relatively few 

Americans are familiar with the DTV transition and what it entails. To 

gauge consumer understanding of the DTV transition, we contracted with 

a survey research firm to conduct a telephone survey of 1,000 randomly 

selected American households. The consumers were asked questions that 

were designed to ascertain their level of familiarity with and 

knowledge about the DTV transition.



Overall, we found that many people have a low level of understanding of 

the DTV transition and its implications. For example:



* Forty percent of respondents said they had never heard about the 

transition to digital broadcast television, and another 43 percent said 

they were only somewhat aware of the transition. Fewer than one in 

five said they were very aware.:



* Nearly half of respondents said they were not familiar at all with 

the difference between an analog television set and a digital, high 

definition television set. Only 14 percent were very familiar with 

the difference between the two products.[Footnote 12]



* Sixty-eight percent of respondents did not know that most television 

sets currently in use will require a converter box to continue to 

receive over-the-air broadcasts when the transition is complete.



We also found some differences in the characteristics of people who 

were more likely to know about the transition versus those who were 

less likely to know. For example, we found that men were considerably 

more likely to know about the transition than women, and those who were 

college-educated were more knowledgeable than those without advanced 

education. Also, we found some evidence that respondents who received 

television over the air were less likely than cable or satellite 

subscribers to know about the transition to DTV. (See app. III for more 

detailed information about the survey results.):



This lack of familiarity about the DTV transition among American 

consumers could be problematic. If consumers are unfamiliar with DTV--

particularly with benefits such as high definition television--they are 

less likely to purchase digital television sets. Yet, if few consumers 

purchase digital television sets, producers have little incentive to 

provide much digital content and cable systems have little incentive to 

carry the digital signal. Thus, consumer awareness of the transition--

and subsequent consumer adoption of DTV equipment--is a key element in 

facilitating the transition.



Chairman Powells April 2002 proposal for voluntary industry actions to 

speed the DTV transition suggested several actions that sought to 

increase consumer awareness. The Chairman called on broadcast stations 

to use their analog channel to promote the content on their digital 

channel. He also called on cable systems to market their DTV products 

and programming on the air and in customers monthly bills. In 

addition, he asked DTV equipment manufacturers and retailers to market 

broadcast, cable, and satellite DTV options to consumers at the point-

of-sale. In response to this proposal, the 10 largest cable operators 

said they would do more to advertise and market their value-added DTV 

programming, and consumer electronics makers said they would use point-

of-sale promotions and a national public awareness campaign to promote 

DTV set-top boxes. In addition, in January 2002, the broadcast and 

consumer electronics industries formed a joint initiative to increase 

awareness and understanding of DTV through promotional activities in 

select cities.



FCC itself has not undertaken any significant activities to raise 

public awareness about the DTV transition and its implications. An FCC 

official told us that the agency provides information about DTV in 

several places on its Web site and through the call center of its 

Consumer & Governmental Affairs Bureau. However, although the Powell 

plan addresses actions that industry should take, FCC has no specific 

initiatives of its own under way regarding public education on DTV or 

the transition. FCC officials told us that the bulk of consumer 

education that is related to DTV will likely be provided by the private 

sector, such as through advertisements and point-of-sale discussions, 

rather than by the government. However, because DTV sales and 

programming are still relatively limited, consumer electronics makers 

and other industries may not have sufficient market incentives to 

provide a high-profile DTV marketing campaign in the short term. 

Because the public will accrue some of the benefits from recovering 

portions of the broadcast spectrum, a publicly funded information 

campaign may be justified if it would hasten the end of the DTV 

transition.



Quality of Information That DTV Retailers Provide to Consumers Varies:



Although sales of digital television sets have been increasing 

steadily, the overall level of adoption remains low. Sales have grown 

from approximately 14,000 units in 1998 to approximately 1.5 million 

units in 2001, according to the Consumer Electronics 

Association.[Footnote 13] However, despite this sales growth, in 2001 

digital television units still represented less than 5 percent of the 

28 million television sets sold in the United States. Moreover, the 

majority of these units were DTV monitors, which lacked a DTV tuner 

that can receive DTV signals. Sales of television sets that included a 

tuner capable of receiving digital broadcast signals, when combined 

with sales of set-top DTV tuners, still represented less than 1 percent 

of all television sets sold. Sales of digital television sets with DTV 

tuners will increase due to FCCs recent requirement that all new sets 

include a DTV tuner, but this requirement is being phased in, with 

virtually all new televisions to have a DTV tuner by 2007.



There also are roughly an additional 250 million existing television 

sets in the United States, nearly all of them analog. Because the 

average life span of a television set is about 10 years, large numbers 

of households will have analog television sets for the foreseeable 

future. As a result, even the DTV tuner mandate--which affects only new 

television sets--is unlikely to result in 85 percent DTV market 

penetration by the end of 2006, or several years thereafter.



Perhaps the most significant barrier to greater consumer adoption of 

DTV equipment is its cost. In 2001, the average price of a digital 

television set was more than $1,800. Still, digital television set 

prices have steadily dropped in the past few years. Whereas the average 

price for a digital television set was more than $3,000 in 1998, by 

mid-2002 some units were available for as little as $1,000, according 

to the Consumer Electronics Association.



Many analysts believe that many more consumers would be willing to 

purchase DTV equipment if they were more familiar with DTV and had more 

exposure to high definition televisions picture and sound. For many 

consumers, retail sales outlets provide the best opportunity for 

viewing and learning about DTV products. To gather anecdotal 

information on consumers experiences at DTV retail outlets, we visited 

23 consumer electronics stores in California, Maryland, Massachusetts, 

Nevada, and Virginia. We visited each store as a consumer shopping 

for DTV products and asked several standard questions to a member of 

the stores sales staff.



The accuracy of the information provided by the sales staff with whom 

we spoke was mixed. Nearly all of the staff were correctly able to 

explain the platforms available for receiving digital and HD channels 

(i.e., over the air, cable, and satellite). They also were generally 

accurate in explaining what equipment would be needed to receive 

digital signals. In addition, most staff had some knowledge about which 

channels and programs were available in high definition.



However, there was also a fair amount of inaccurate information 

provided. Overall, 18 of the 23 sales staff provided inaccurate 

information about at least one significant aspect regarding DTV. For 

example:



* Eight of the 23 sales staff significantly overstated the amount of HD 

content currently available. For instance, 1 said that all cable 

channels are in HD; a few incorrectly said that Fox and WB were 

currently broadcasting in HD.



* Four of the staff incorrectly said local broadcasters in their market 

were not broadcasting a digital signal.



* Four of the staff told us DTV is not available over the air at all. 

Other staff misstated what equipment would be needed to receive DTV 

over the air.



In addition, we noted that the majority of stores we visited were not 

showing an actual high definition picture on the high definition 

television sets being displayed on the showroom floor. Instead, many 

stores showed prerecorded movies or non-HD satellite programming. Sales 

of DTV products may be slowed because many consumers have never 

actually experienced true high definition television, with its superior 

audio and video qualities.



In addition to visiting individual retail stores, we also interviewed 

executives at the corporate offices of four major retailers of DTV 

products. They acknowledged that there is a lot of confusion among 

consumers about DTV equipment due to the complexities involved. Because 

digital television sets represent a tremendous growth opportunity for 

consumer electronics retailers, they said they are eager to ensure that 

their stores provide consumers with exposure to DTV, including high 

definition, and that their sales staff are highly knowledgeable about 

DTV products. Some companies told us that they provide their floor 

staff with specialized training on DTV, and that they are using 

innovative methods, such as on-line training tools, to do so.



Carriage of Digital Signals by Cable and Satellite Operators Is 

Insufficient to Help Achieve 85 Percent Threshold Quickly:



On the basis of current plans for digital carriage by cable and 

satellite companies, it appears unlikely that many households will have 

access to all of their local digital channels via cable or satellite by 

December 2006. FCC has tentatively decided against mandating that cable 

systems carry analog and digital channels simultaneously during the 

transition. In lieu of dual carriage, however, another option we have 

identified is to set a date-certain when cable systems would, all at 

once, switch from carrying analog channels to carrying digital 

channels.



Cable Carriage of Digital Signals Is Limited:



Because more than two-thirds of Americans receive their primary 

television service via cable, cable carriage of digital broadcast 

signals is an important element in encouraging consumer adoption of 

digital television sets and in encouraging producers, networks, and 

broadcasters to provide more original digital and HD programming. 

Without carriage of the digital broadcast signals by their carrier, 

cable customers--even those who own digital television sets--are unable 

to watch via cable the digital channel provided by most local broadcast 

stations in large cities.[Footnote 14] Presently, for a cable customer 

to watch local digital broadcast stations in digital format over a 

cable system, several factors must be in place: that customer must (1) 

own a DTV monitor; (2) live in a market with stations that are 

broadcasting digitally; (3) subscribe to a cable system that has chosen 

to carry those local digital broadcast signals; and (4) get from the 

cable system a special set-top box and the necessary cable subscription 

package needed to view HDTV.[Footnote 15]



Currently, most cable companies do not offer their customers local 

digital broadcast signals. As of August 2002, only 3 of the 10 largest 

cable companies--Time Warner, Comcast, and Cox, which together serve 

more than 25 million cable customers--carried local digital broadcast 

stations in some of their markets. In his April 2002 proposal for 

voluntary industry action, the FCC Chairman called on cable systems 

with at least 750 MHz channel capacity to carry up to five channels 

that provide substantial HD programming or other value-added digital 

programming during at least 50 percent of their prime-time schedule by 

January 1, 2003. The nations top 10 cable companies have all agreed to 

do so in the top 100 markets. However, these five channels may include 

a mix of both local digital broadcast channels and national cable 

networks that provide HD programming. As a result, it is unclear how 

much cable carriage there will be of digital local broadcast channels 

in the near future. These companies also have agreed to provide 

consumers who request them with set-top boxes that include digital 

inputs and can display HD.



We spoke with representatives from 5 large companies that own multiple 

cable systems and 10 broadcast stations, and we reviewed comments 

submitted by the cable industry in FCC proceedings. We asked the 

representatives about the incentives and disincentives that cable 

systems face in choosing to carry local digital broadcast channels as 

well as to carry high definition channels provided by national cable 

networks. Cable companies said they are willing in some cases to carry 

local digital broadcast stations, but they are reluctant to use their 

limited channel capacity to provide a local digital signal that (1) 

very few consumers are able to watch and (2) often merely duplicates 

what appears on the broadcasters analog channel. The cable companies 

said they are far more likely to carry a stations digital signal if it 

offers compelling content that is in demand by their customers. In 

particular, they said they are most interested in carrying digital 

channels that offer substantial amounts of high definition programming, 

as opposed to standard definition digital or multicasting.



Cable companies also told us that their most important incentive for 

providing more digital carriage is competition with direct broadcast 

satellite. Satellite service has rapidly increased its market share: it 

grew from about 7 percent of television households in 1999 to more than 

17 percent by mid-2002. The two major national satellite companies 

generally do not provide local digital broadcast channels, but they do 

offer their customers several high definition cable networks, such as 

HBO HD and Discovery HD Theater. Cable companies told us that they want 

to increase the amount of digital programming they offer--including 

local digital broadcasts--to stay competitive with satellite.



Some cable systems would have great difficulty carrying digital signals 

even if they wanted to do so. Many smaller cable systems have not 

installed fiber optic cable lines or made other upgrades to their cable 

network that allow for the carriage of digital signals. As a result, 

these systems are highly limited in their channel capacity and are 

unable to carry local digital broadcast channels in a digital format.



Cable Carriage Is Unlikely to Be Sufficient to Help Reach the 85 

Percent Threshold by December 2006:



As previously discussed, the analog broadcast signals are not likely to 

be turned off after December 2006 unless 85 percent of households in a 

given market can receive DTV. More than two-thirds of American 

households subscribe to cable television, and thus cable carriage of 

DTV signals may play a large role in determining when that 85 percent 

threshold has been reached. The law says that households receiving DTV 

via cable count toward the 85 percent threshold only when their cable 

system carries a digital broadcast channel from all stations 

broadcasting digitally in their television market. Yet, while most 

large cable companies are planning to provide a digital broadcast 

channels from some broadcast stations in many markets, none currently 

plan to carry a digital broadcast channel from all digital broadcast 

stations. As a result, it appears highly unlikely that cable carriage 

of local digital broadcast signals will be sufficient to substantially 

contribute to reaching an 85 percent market penetration by 2006. To 

some extent, this problem is mitigated by FCCs recent DTV tuner 

mandate. In the future, as cable customers purchase new television sets 

that contain a DTV tuner, they will be able to receive digital signals 

over the air even if their cable system is not carrying those signals. 

However, this will require some cable households to take actions that 

many are resistant to: install a rooftop or set-top antenna and switch 

back and forth between cable service and over-the-air reception to 

access local digital channels not carried on their cable system.



Direct Broadcast Satellite Providers Offer No Local Digital Channels:



As of mid-2002, about 17 percent of American television households 

subscribed to direct broadcast satellite service, and subscribership 

has been increasing rapidly in recent years.[Footnote 16] The two 

primary satellite television services available in the United States 

are DirecTV and EchoStars DISH Network. All satellite subscribers need 

a satellite dish and a satellite receiver, but subscribers who want to 

access HD programming via their service are given a special dish and 

receiver that can process HD signals.



DirecTV and DISH each offers subscribers the option of receiving their 

local analog broadcast channels in about 45 television markets. 

However, neither service offers any local digital broadcast channels in 

any market.[Footnote 17] Both satellite providers do, however, offer 

several options for HD programming from cable or satellite networks. 

For example, both providers offer HBO HD and Showtime HD, while DirecTV 

also offers HDNet, and DISH also offers Discovery HD Theater.



Because satellite is a national service, it faces inherent constraints 

in providing local broadcast channels: carrying a local channel in a 

few markets uses the same channel capacity as carrying one cable 

network to customers nationwide. Representatives of the two satellite 

services have said it is therefore not feasible for them to carry local 

digital channels and analog channels at the same time on a widespread 

scale. Lack of local digital carriage during the transition by 

satellite providers may increase the difficulty of reaching the 

necessary 85 percent DTV penetration threshold in many markets, 

particularly if satellite service continues to grow in market share.



This problem is somewhat mitigated by the fact that satellite equipment 

can be adapted fairly easily to have the additional capability of 

receiving local digital channels through an over-the-air antenna. DISH 

already offers subscribers equipment that serves the dual purpose of 

receiving and decoding both satellite signals (which can include HD) 

and over-the-air broadcast signals (which can include both analog and 

digital). The over-the-air antenna automatically picks up the signal 

when the television is tuned to a local broadcast channel, and the 

satellite dish picks up the signal when the television is tuned to 

other channels.



FCC Has Tentatively Decided Against Mandatory Dual Cable Carriage:



Under the Cable Television Consumer Protection and Competition Act of 

1992, local commercial broadcast stations have the right to require 

that cable systems in their market carry their analog signal. Once the 

DTV transition is complete, and analog broadcasting ends, this right, 

commonly known as must-carry, will transfer to broadcasters digital 

signals. Most stations, including the great majority of those 

affiliated with a major broadcasting network, do not need to invoke 

must-carry because cable systems desire to carry them. These stations 

sign what is called a retransmission consent agreement with the cable 

system, which lays out the terms under which the cable system will 

carry the station.



Currently, these must-carry rules apply only to broadcasters analog 

channels.[Footnote 18] In July 1998, FCC initiated a proceeding on DTV 

cable carriage, which included a discussion of whether must-carry rules 

should be modified so that they apply both to a stations analog 

channel and its digital channel during the DTV transition.[Footnote 

19],[Footnote 20] In the proceeding, broadcasters argued that few cable 

systems currently offer local digital broadcast channels, which means 

that cable customers have little incentive to purchase digital 

television sets. With few viewers owning digital television sets, 

networks have little incentive to provide more value-added digital 

programming, such as HDTV. This completes a circle: with few consumers 

owning digital television sets, and little digital programming 

available, few cable systems have any incentive to carry local digital 

signals. Broadcasters have argued that mandating cable carriage of both 

analog signals and digital signals, often known as dual must-carry, 

would break this circle and greatly improve the speed with which 85 

percent DTV market penetration is reached.



The cable industry has strongly opposed a dual must-carry requirement, 

arguing that it would greatly limit the number of channels that cable 

providers are able to offer their customers. The industry contends that 

the DTV transition has been slow largely because broadcasters have 

failed to provide enough original digital and HD programming; it also 

says that cable systems will carry local digital broadcasts as soon as 

consumer demand warrants it. In addition, the industry argues that dual 

must-carry would represent a violation of its free speech rights and an 

unlawful taking of its property.



In January 2001, FCC tentatively decided that it would be 

unconstitutional to require dual must-carry. FCC concluded that 

requiring simultaneous carriage of both analog and digital broadcast 

signals appeared to burden cable operators First Amendment interests 

more than was necessary to further a substantial government interest. 

FCC also issued a Further Notice of Proposed Rulemaking to collect 

public comment and gather more information before a final ruling is 

made on the issue.[Footnote 21]



Setting a Date-Certain for Cable Switchover from Analog to Digital 

Carriage Might Be a Way to Facilitate DTV Transition:



Under the current legal and regulatory environment, it may be a long 

time before cable carriage of broadcast DTV signals is sufficient to 

help substantially contribute to the 85 percent threshold. Market 

forces are unlikely to engender full dual carriage because cable 

systems do not want to use scarce channel capacity to simultaneously 

carry two channels of each broadcast station. At the same time, cable 

systems have little incentive to switch from solely analog to solely 

digital carriage of local broadcast stations until the end of the 

transition. The resulting situation is something of a catch-22. Once 

the transition is completed, and the analog signals are turned off, all 

cable systems will be carrying local broadcasters digital signals. 

However, it is likely that the transition will not be completed until 

85 percent of households in a market can receive those digital signals. 

Yet, because cable systems are generally unwilling to carry the analog 

and digital signals simultaneously, it is more difficult to reach that 

85 percent threshold in the first place.



Rather than wait for cable systems to carry all local broadcast digital 

signals through voluntary dual carriage, one option we have identified 

is for FCC to adopt rules under which a specific date is set for cable 

systems to switch from full carriage of analog signals to full carriage 

of digital signals. Imposing a date-certain for a cable carriage 

switchover from analog to digital signals could have two specific 

advantages. First, it could facilitate the transition by requiring 

cable carriage of digital broadcast signals--and would do so without 

the need for dual carriage. Second, cable systems and their customers 

would know a date-certain for which they could plan to be ready for the 

switchover and have the necessary equipment in place.



Procedurally, this policy might best be carried out by setting a date 

when broadcast stations right to invoke must-carry for their stations 

signal would transfer from their analog signal to their digital signal. 

Because cable systems and broadcast stations routinely renegotiate 

carriage agreements every 3 years, a logical time frame for 

implementing this switchover would be when these agreements are set to 

be renegotiated. Those negotiations are set to be take place in 2005 

and again in 2008.



A policy of a date-certain switchover may have drawbacks as well as 

advantages. If many cable customers do not have DTV equipment by the 

date-certain, cable systems may elect to continue to carry analog 

signals as well as digital signals after the switchover date. FCC 

officials told us that such a scenario could have two unintended 

outcomes. First, it could create a de facto policy of dual must-carry. 

Second, the policy could inadvertently harm smaller broadcast stations 

and their viewers. Once the analog must-carry requirement were to end, 

many cable systems might choose to continue carrying the analog signals 

of large stations (which have a large market share) but not of small 

stations. Thus, some smaller stations would no longer be seen by 

households that did not have a set-top box or digital television set 

for processing digital signals.[Footnote 22]



Officials at the National Cable & Telecommunications Association (NCTA) 

expressed concern that equipment issues could make preparing for a 

date-certain switchover an enormous and costly task. To continue to 

receive local broadcast channels via cable once the switchover 

occurred, consumers whose cable system was no longer providing any 

analog signals would require either a digital cable-ready television 

set or some form of cable set-top box. Digital cable-ready television 

sets are not yet available on the market, and some consumers are 

resistant to using set-top boxes. NCTA officials also said that smaller 

cable systems with no digital capability at all may need some kind of 

exemption. These officials also noted that a date-certain switchover 

policy would place much of the burden of the DTV transition on the 

cable industry and its customers, even though the DTV transition was 

promoted by and pertains to broadcast television stations.



The concern expressed by NCTA officials regarding the focus of a policy 

on cable subscribers is understandable. However, given that more than 

two-thirds of Americans get their television via cable, and given that 

the DTV tuner mandate will not take full effect for several more years, 

policies targeted at cable households could be important to meeting the 

85 percent threshold in a timely fashion. NCTA officials concern about 

ensuring that consumers have the necessary equipment for a date-certain 

switchover is also understandable: the rollout of DTV-compatible cable 

equipment will likely be costly, cumbersome, and confusing. However, it 

is important to note that for the DTV transition to occur, this rollout 

will occur with or without a date-certain switchover. Setting a date-

certain would simply help to ensure that cable customers transition 

within a certain time frame, but it may not necessarily increase the 

cost or complication of readying cable subscribers for the transition 

to DTV.



Availability of Digital Programming Is Increasing but Still Limited, 

Possibly Due in Part to Copy Protection Concerns:



DTV allows for a variety of new forms of content, including HD, and an 

increased supply of true digital content is an important element in 

encouraging consumer adoption and cable carriage of DTV. Both broadcast 

networks and cable networks have greatly increased the amount of 

digital content they provide, although this still represents a 

relatively small portion of all television programming. Disincentives 

to the provision of more digital content include the small market share 

of viewers able to watch DTV, the cost and complexity--relative to this 

small market share--of filming or formatting HD programming, and 

possibly concerns about unauthorized copying and retransmission of 

digital content provided over the air.



DTV Allows for High Definition and Other New Forms of Content:



The creation and delivery of digital programming is a key element in 

speeding the DTV transition. Consumers have little incentive to 

purchase costly digital television sets when little digital programming 

is available. Likewise, cable systems are not likely to use their 

limited channel capacity to carry broadcasters digital signals if 

those signals simply duplicate what is already on the broadcasters 

analog signals.



DTV allows for a number of different programming options. True digital 

programming has actually been filmed in digital or has been converted 

from a high-resolution format (such as 35 mm film) to a standard 

definition or high definition digital format. Alternately, a broadcast 

station can simply duplicate the programming shown on its analog 

channel by scanning it and converting it to digital. FCC gave 

broadcasters flexibility in determining how to use their digital 

signals and did not specifically require that broadcasters provide any 

programming in high definition. Indeed, many broadcasters have already 

said that they intend to use their digital channel to multicast several 

channels of standard definition at once, rather than to provide HD.



The camera, editing, and production equipment that most broadcast 

stations and networks currently use to film and produce live 

programming--such as sports or news--cannot be used for HD broadcasts, 

which require special equipment. By contrast, most recorded 

programming, such as scheduled dramas and situation comedies, has been 

shot in the past few years using 35 mm film or high-resolution 

videotape that can be converted into a variety of formats. These 

formats can include standard definition analog, standard definition 

digital, and high definition digital as well as either a traditional 

aspect ratio or widescreen.[Footnote 23]



Amount of Digital Programming Is Increasing but Still Relatively 

Limited:



As of August 28, 2002, 460 broadcast stations in 136 markets were 

broadcasting a digital channel. However, much of the programming on 

those channels is not true digital content, but rather programming that 

has been duplicated from a stations analog channel and converted to a 

single stream of standard definition digital. In a survey of broadcast 

stations that we conducted in the fall of 2001,[Footnote 24] 74 percent 

of the stations that had begun broadcasting a digital signal and that 

responded to our survey said they were providing at least some HD 

content--an average of 23 hours per week. In subsequent interviews, 

broadcast stations told us that the amount of HD content they provide 

on their digital channel generally depends on the programming feed 

provided to them by their affiliated network. HD content (as opposed to 

content in standard definition digital or merely converted from analog) 

is generally believed to be the most important factor in encouraging 

consumer adoption and cable carriage of DTV.



The national broadcast networks are mixed in terms of the amount of HD 

programming they provide, as follows:



* CBS was the first commercial network to provide substantial HD 

programming. Nearly all of its scripted prime-time situation comedies 

and dramas are available in HD, as are many national sports broadcasts, 

certain movies, and one daytime soap opera.



* ABC began providing nearly all of its scripted prime-time programs in 

HD during the 2001-02 television season. It also provides some sports 

programming in HD.



* NBC, until recently, has provided relatively little HD programming, 

primarily The Tonight Show, one prime-time drama, and certain sports 

broadcasts. NBC has said it will be providing several more hours-per-

week HD programming in the 2002-03 television season.



* Fox network provides virtually no HD content. It does provide more 

than two-thirds of its prime-time programming in Fox Widescreen, a 

digital, standard definition format.



* PBS provides several programs per month in HD, mostly in the form of 

special programs and series.



* WB, UPN, and PAX--the three smaller national networks--have provided 

virtually no HD or other true digital content. WB has announced it will 

begin providing about 5 hours per week of prime-time HD during the 

2002-03 television season.



Among cable networks, HBO, Showtime, and Discovery each has a channel 

that provides programming that is either exclusively or primarily in 

HD. Other cable networks, including Madison Square Garden and A&E, have 

occasional special programming in HD. HDNet shows programming that is 

exclusively in HD; it is currently available only via DirecTV, although 

the network is expected to offer a channel on cable systems in the near 

future. ESPN has said it will begin an HD channel next year. Most other 

major cable networks, including CNN and MTV, are not currently offering 

any HD programming.



Networks Face Incentives and Disincentives to Providing More Digital 

Content:



Chairman Powells proposal for voluntary industry actions to speed the 

DTV transition called on the top four broadcast networks, as well as 

HBO and Showtime, to provide HD or other value-added DTV programming 

during at least 50 percent of their prime-time schedule beginning with 

the 2002-03 season. We spoke with executives of four national broadcast 

networks, three major television studios, three cable networks, and 

other industry representatives to learn their incentives and 

disincentives for producing or delivering more HD and other true 

digital programming. Broadcast networks said the main disincentive to 

providing more HD content is the small number of viewers currently able 

to watch HD. Because the market share for HD content is small, HD 

programming provides little in the way of significant additional 

revenue opportunities. In addition, there is relatively little demand 

or pressure from viewers to provide more HD content.



Networks and studios told us that in absolute terms, the cost of 

converting most recorded programming--such as films, situation 

comedies, and dramas--to HD is relatively low, adding perhaps $8,000 to 

$10,000 for a 1-hour show. In addition, the cost of transmitting a high 

definition signal to broadcast stations is not significantly higher 

than that of transmitting a standard definition digital signal. 

However, industry representatives noted that given the small market 

share for HD, in relative terms these costs are not insignificant. In 

addition, the cost and complexity of providing live programming, such 

as sporting events, in HD can be substantial because of the need for 

separate cameras and production facilities.



Broadcast networks that are providing HD content say they are doing so 

not for any short-term profit but rather for long-term benefit. For 

example, they want their programming to be available in HD when it is 

sold for syndication years from now. Cable networks providing HD told 

us they want to be forward-looking and provide innovative, state-of-

the-art programming that adds value and distinguishes them from other 

networks.



We asked officials at two major broadcast networks, NBC and Fox, why 

they were providing relatively little HD content. NBC officials said 

that the studios that produce some of their programming have not been 

able to provide it in HD format in a timely enough manner. They also 

said that conversion to HD format was costly relative to the small 

number of viewers able to watch HD programming. They noted that other 

networks were doing more HD in part because those networks had 

agreements with consumer electronics companies to underwrite some of 

their HD production costs. Fox officials said they provide the great 

majority of their prime-time programming in Fox Widescreen, which, 

while not HD, provides a widescreen aspect ratio and a better picture 

quality than the traditional analog signal. In addition, they said that 

their standard definition digital format allows them to provide more 

live programming, such as sports, in a digital format because separate 

HD cameras and production facilities are not required.



Because television advertising ultimately funds most network 

programming, we spoke with three major television advertisers and 

reviewed the trade literature, to assess advertisings role in 

affecting network decision-making regarding digital content. Overall, 

we found that advertising revenues are not a significant driver in the 

DTV transition. Almost no advertising is produced in HD. In addition, 

due to low viewership, few advertisers are currently expressing special 

interest in placing ads on programs shown in HD. Advertisers also told 

us that networks and broadcasters are not making significant efforts to 

get them excited about DTV and any possibilities it holds with regard 

to advertising. However, with an eye to the future, two large 

advertisers said they have actively begun exploring the possibilities 

of DTV advertising to be ready when DTV becomes more widespread.



Copy Protection Concerns Are Still Being Addressed:



Many content providers say they are reluctant to provide high-value 

digital content over the air via DTV because they are concerned about 

consumers making unauthorized copies as well as redistributing the 

content over the Internet. DTV raises special concerns about copy 

protection primarily for two reasons. First, in the digital world, each 

copy is an exact replica of the original, whereas in the analog world, 

each successive copy degrades in quality. Second, digital content can 

be easily and widely transmitted on the Internet, whereas analog copies 

must typically be physically transferred from user to user.



In October 1998, the Digital Millennium Copyright Act (DMCA) was signed 

into law.[Footnote 25] The DMCA amended and updated the Copyright Act 

of 1976[Footnote 26] with respect to the use of copyrighted works in 

digital contexts. Most relevant to DTV, the DMCA makes it a crime to 

circumvent copyright protection (antipiracy) technologies, such as 

encryption and scrambling. In other words, the DMCA makes it a crime to 

intentionally create hardware or software to bypass technology designed 

to prevent unauthorized copying.



At the same time, the DMCA does not require that consumer electronics 

manufacturers actually include in their consumer products technology to 

protect against piracy of DTV broadcasts. In 1998, five consumer 

electronics manufacturing companies began working together to develop a 

standard for copy protection, resulting in the Digital Transmission 

Content Protection technology, commonly known as 5C. This technology 

is designed to protect DTV content from unauthorized copying or 

redistribution by DTV home consumers. The seven major studios that 

produce television content, as well as the cable industry, have agreed 

that 5C meets most of their key requirements for adequate copy 

protection.



However, as initially developed, 5C protects content delivered over 

cable or satellite service, but not content delivered over the air. All 

of the studios, as well as major broadcast networks, have expressed 

concern about this, and five of the studios have refused to sign 

licensing agreements using 5C technology until it covers over-the-air 

broadcasts. Broadcast networks in particular are concerned that without 

protection for over-the-air content on DTV, content providers will move 

their programming to cable and satellite channels where copyright 

protection is stronger.



To address copy protection for over-the-air content, studios want the 

use of a broadcast flag, which would identify rules for how 

particular content could be used. The flag would be recognized by 

technology embedded in digital television sets and other devices that 

receive DTV broadcast signals. For example, the flag might signal to a 

copy device that the user is allowed to make personal copies of a 

particular television program but would prevent that user from 

distributing those copies on the Internet. For a broadcast flag to be 

effective, a government mandate may be required to prohibit electronics 

makers from manufacturing products that did not follow the instructions 

of the flag.[Footnote 27]



In August 2002, FCC initiated a rulemaking exploring whether it can and 

should mandate the use of a copy protection mechanism for DTV. FCC is 

seeking public comment on several issues, including the need for a 

broadcast flag, the appropriate implementation of various copy 

protection technologies, and the extent to which FCC has jurisdiction 

regarding DTV copy protection issues.



Much of the debate over copy protection centers on finding the correct 

balance between the consumers right to view and copy material and the 

intellectual property rights of copyright holders. In the 1984 Supreme 

Court case Sony Corporation of America v. Universal City 

Studios,[Footnote 28] the court ruled that fair use doctrine[Footnote 

29] gives consumers broad latitude to record television programs for 

noncommercial use in the home. The Consumer Electronics Association 

argues that copy protection technologies should not be allowed to 

impinge on fair use rights, which would deprive the public of equal and 

fair access to information, entertainment, and education. Content 

producers, represented by organizations such as the Motion Picture 

Association of America, argue that mandated copy protection is 

essential in the digital era if intellectual property rights are to be 

preserved. Without sufficient protection, they say, content providers 

will not be willing to provide high-value content via digital broadcast 

television.



Copy protection issues are very important to the content and consumer 

electronics industries, and the debate has been contentious. However, 

DTV is only one part of a larger debate about copy protection in the 

digital era; the issue also encompasses recorded music, films, and 

other media. Many observers with whom we spoke in the content, consumer 

electronics, and broadcast industries said that DTV copy protection is 

an important hurdle that needs to be resolved. At the same time, many 

believed that copy protection issues were ultimately less of a 

roadblock to the DTV transition than other key challenges.



Digital Over-the-Air Tuners Have Been Mandated, but Digital Cable-Ready 

Capability Has Not:



To speed the DTV transition, FCC has adopted an order requiring that by 

2007 most new broadcast television sets include a tuner capable of 

receiving digital signals over the air. Another policy option would be 

to pair the over-the-air mandate with a requirement that new television 

sets also be digital cable-ready. Because many more American households 

receive television via cable than receive it over the air, mandating 

digital cable-ready capability could be an effective policy for 

speeding the DTV transition if the marginal cost of this requirement 

were found to be reasonable. (See app. II for a discussion of other 

equipment issues that are affecting the DTV transition.):



Over-the-Air DTV Tuner Mandate Will Spur the Transition, but Standing 

Alone May Be Inefficient:



On August 8, 2002, FCC adopted an order requiring that most new 

broadcast television sets, as well as other equipment like VCRs that 

may contain broadcast receivers, include the capability to receive DTV 

signals.[Footnote 30] This DTV tuner mandate is being phased in over 

time on the basis of the size of the television set. For example, all 

new sets of 36 inches and above must have DTV tuners by July 1, 2005, 

while sets of 13 inches and above must have the tuner by July 1, 2007. 

FCC said that its jurisdiction to impose a DTV tuner mandate is 

established by the All Channel Receiver Act of 1962, as amended, which 

gives FCC the authority to require that television sets be capable of 

adequately receiving all frequencies allocated by FCC for television 

broadcasting.



Currently, very few television sets sold in the United States are 

capable of receiving digital broadcasts. FCC said it adopted the DTV 

tuner mandate to ensure that consumers are provided with the capability 

to receive broadcasters digital signals and to move more rapidly 

toward completion of the DTV transition. FCC also noted that the 

additional cost per television set will be minimized by the large 

manufacturing volumes that will result from the mandate. The National 

Association of Broadcasters, which strongly supported the mandate, has 

cited estimates that the cost of imposing a DTV tuner mandate may be as 

low as $16 per set by 2006.



Opponents of the DTV tuner mandate, which include the Consumer 

Electronics Association, cite different estimates, saying that the 

mandate could raise the price of a television set by as much as $250. 

Moreover, opponents say it is an inefficient policy, given that more 

than four-fifths of American households subscribe to a cable or 

satellite service for their primary television set and may not need or 

use a digital broadcast tuner. They argue that consumer demand, rather 

than a government mandate, should drive whether digital tuners are 

offered in television sets.



Both sides of the tuner mandate issue raise valid points. Because more 

than 25 million new television sets are sold each year, the DTV tuner 

mandate will undoubtedly allow the 85 percent DTV penetration rate to 

be reached more quickly. In addition, most experts believe that the 

per-unit cost of the mandate, while hard to predict, is not likely to 

be very high once the economies of large-scale production are achieved. 

At the same time, the tuner mandate raises questions of economic 

efficiency: all consumers purchasing sets of 13 inches or over will be 

paying for a DTV tuner that the majority of them (those who receive 

their primary television via cable or satellite) may be unlikely to 

use.



Moreover, although the DTV mandate will help reach the 85 percent 

threshold more quickly, it will do so largely because cable and 

satellite households that purchase new television sets that include the 

digital over-the-air tuner will count toward the threshold even though 

they may not actually watch their television over the air. To watch 

local digital broadcasts over cable or satellite--presuming those 

broadcasts were being carried by their cable or satellite operator--

many of these households would need additional equipment. The tuner 

mandate thus could result in a scenario where analog signals are turned 

off in a market because 85 percent of households are capable of 

receiving local DTV channels over the air--but the majority of those 

households are cable or satellite customers who, in practice, are not 

actually using their set for over-the-air reception.



Mandate for All Televisions to Be Digital Cable-Ready Might Have 

Benefits:



Cable and over-the-air television each uses a different digital format 

and thus each requires a different type of tuner to decode digital 

signals. Although a digital over-the-air tuner has been mandated, 

another option would be to additionally mandate that new television 

sets be digital cable-ready. With a digital cable-ready television 

set, the cable line would plug directly into the set and digital 

signals could be viewed without need of a cable set-top box. Cable-

ready analog television sets have been available for many years, but 

there are no cable-ready digital television sets currently on the 

market. Digital cable-ready sets could be important to the DTV 

transition because consumers may be more likely to purchase digital 

television sets if the set does not require a set-top box to access 

cable service.



Digital cable-ready capability is more complicated than analog cable-

ready capability, and there is no one definition for what constitutes a 

digital cable-ready television set. FCC and television manufacturers 

generally consider a digital cable-ready set to include, at a minimum, 

a digital cable tuner (to receive and process digital signals) and a 

slot for a point of deployment (POD) security device (to handle 

encrypted cable programming).[Footnote 31]



In February 2000, after much negotiation, the Consumer Electronics 

Association and the National Cable & Telecommunications Association 

submitted to FCC an agreement of basic technical standards for a 

digital cable-ready television set. However, since that time, the two 

industries have been unable to resolve details related to that 

agreement, including licensing and programming guide issues. Television 

manufacturers say they are reluctant to roll out digital cable-ready 

sets until all cable systems implement the agreed-upon technical 

standards, and they have requested that FCC implement a timetable for 

national cable standards. FCC and the Congress are monitoring the 

negotiations but so far have left the issues to the industries to 

resolve on their own and, to date, have not imposed any significant 

requirements regarding digital cable-ready television sets.



Because far more households receive local broadcast signals via cable 

than via over the air, pairing a digital cable-ready mandate with the 

existing over-the-air tuner mandate might be an efficient policy for 

ensuring that households are able to receive and watch DTV signals. It 

is not clear what the additional manufacturing cost would be of 

incorporating digital cable tuners and POD slots into television sets 

that already include digital over-the-air tuners. The Consumer 

Electronics Association has stated that because the electronic 

components for digital cable tuners are almost identical to those for 

digital broadcast tuners, manufacturers could include combination 

broadcast and cable tuners in their products at a cost that would be 

little greater than the cost of either a broadcast-only tuner or a 

cable-only tuner.[Footnote 32] Nonetheless, a more detailed cost-

benefit analysis would need to be undertaken before such a policy was 

implemented, particularly in light of the probable requirement for a 

POD slot to make the set digital cable-ready.



The idea previously discussed in this report for a date-certain cable 

switchover from analog signals to digital signals might be especially 

effective if paired with a mandate that all new television sets sold be 

digital cable-ready. Because about 25 million new television sets are 

sold each year, significant numbers of households would own a 

television set capable of receiving digital signals via cable without 

the need for a set-top box by the date-certain cable switchover, 

thereby lessening the need of cable subscribers to obtain set-top boxes 

when the switchover occurs.



Direct broadcast satellite service, like cable and over the air, 

requires a digital tuner to decode the digital signal and turn it into 

the picture that appears on the television screen. Satellite uses a 

third format for transmission of digital signals. Some digital 

television sets on the market are digital satellite-ready in that 

they incorporate a satellite tuner and do not require a set-top box to 

receive satellite service. However, a satellite DTV tuner mandate would 

not help reach the 85 percent threshold to the extent that a cable DTV 

tuner mandate would. First, there are many more cable subscribers than 

satellite subscribers in the United States. In addition, unlike cable 

operators, satellite operators are not required to carry local 

broadcast channels (although if they choose to carry any local channels 

in a market they are required to carry all of that markets channels). 

Satellite companies are uncertain about their plans for offering local 

broadcasts once the DTV transition is complete. This is partly because 

the HD programming that many local stations will be providing requires 

greater bandwidth than current analog programming, and this will impact 

the satellite systems capacity to carry local broadcast stations.



Conclusions:



The DTV transition will affect nearly all Americans by changing the 

nature of television--a main source of news and entertainment--and 

requiring nearly every household to obtain new equipment. Despite this, 

few Americans seem aware of the DTV transition and the implications it 

will have for them. This lack of knowledge is, in and of itself, a 

barrier to the transitions timely completion. It is likely a factor in 

the sluggish sales for DTV equipment and the lack of pressure by 

viewers for networks to provide more HD programming and for cable 

systems to carry local digital broadcasts. To date, FCC has made 

recommendations to the private sector but has not undertaken 

significant initiatives of its own to increase public awareness about 

DTV and the transition.



Until recently, laws passed by the Congress and rules implemented by 

FCC regarding the DTV transition have been focused largely on the 

rollout of DTV signals by broadcast stations. But factors driving 

consumer adoption also are important because the transition cannot be 

completed until sufficient numbers of households can view the digital 

broadcasts. The realization of most of these factors has largely been 

left to market forces. Generally, market-driven adoption of new 

technologies is considered best, but the current circumstances in the 

DTV transition suggest that it is unrealistic to anticipate that market 

forces will bring about the completion of the transition within the 

originally anticipated time frame. Thus, it would be helpful for 

policy-makers to better understand the various options that could be 

implemented to advance the timeliness of the DTV transition.



FCCs recent DTV tuner mandate serves as a notable exception to the 

transitions market-driven approach. However, that mandate alone--

which will not take full effect until mid-2007--may not be enough to 

complete the transition in a timely and reasonably seamless manner. An 

additional option would be to require digital cable-ready capability in 

addition to the over-the-air digital tuner. Because more than two-

thirds of households receive cable, mandating that televisions be 

digital cable-ready may prove a cost-effective policy option for 

hastening the DTV transition, particularly when paired with the 

existing over-the-air mandate. While the additional cost of the digital 

cable tuner is likely small, it is less clear what the incremental cost 

of the POD slot would be. In addition, outstanding cable compatibility 

issues would need to be resolved before a digital cable-ready mandate 

could be implemented.



Another policy option related to DTV that we have identified is to set 

a date-certain when broadcast stations right to invoke a must-carry 

status for their stations signals would transfer from their analog 

signals to their digital signals. This option could have the advantage 

of speeding up cable carriage of digital signals while avoiding 

problems inherent in requiring dual carriage. Pairing this date-certain 

switchover with a digital cable-ready mandate has the potential to be 

especially effective. The digital cable mandate would ensure that when 

the switchover did occur, a significant portion of households would 

both receive local digital broadcast signals and have the equipment in 

place to view those signals. However, the switchover policy could have 

disadvantages as well, such as possible adverse effects on smaller 

stations. As such, this policy would need to be evaluated more closely.



One of the most important goals for completing the DTV transition is 

the recapture of the broadcast spectrum that televisions stations will 

be returning. There is significant economic value embodied in this 

spectrum, and it has been allocated for both public safety needs as 

well as for new commercial services. Delays in completing the DTV 

transition would compromise for some time the ability to fully utilize 

this spectrum. Understanding the relative time frames for the 

transition--that is, the time frame with and without certain policy 

changes--is key to understanding the implicit cost to society of 

allowing the transition to move at its current pace. Ultimately, 

decisions about implementing further legal or regulatory changes to 

speed the DTV transition require balancing the costs and burdens of 

those changes with the benefits of returning the broadcast spectrum in 

a timely fashion.



Recommendations for Executive Action:



Some issues affecting the DTV transition, such as the production of HD 

television programming, are largely outside of traditional federal 

legislative or regulatory control. Other issues, such as inclusion of 

an over-the-air tuner, have already been addressed by FCC or are the 

subject of ongoing proceedings. Our recommendations are in areas over 

which FCC or the Congress have authority, and that have not been widely 

discussed but could have an important impact on the success of the DTV 

transition and the speed with which spectrum used for broadcasting can 

be returned for other uses.



We recommend that the Chairman of the Federal Communications Commission 

take the following actions:



1. Explore options to raise public awareness about the DTV transition 
and 

the implications it will have. For example, FCC might consider a public 

education campaign of its own, or it might consider partnering with the 

affected industries to provide consumers with more information about 

DTV products and the DTV transition. Such actions could help speed 

consumer adoption of DTV equipment as well as inform the public about a 

transition that will affect nearly all Americans.



2. Direct the relevant FCC bureaus and offices to examine the costs and 

benefits of mandating that all new televisions be digital cable-ready 

in addition to the existing mandate for a digital over-the-air tuner. 

As part of this process, FCC should conduct an independent analysis 

that estimates (1) the additional cost to consumers of adding a digital 

cable tuner and POD slot and (2) the timetable of the DTV transition 

with and without such a mandate. FCC should then report its 

recommendations as to the actions it believes the Commission or the 

Congress should take regarding a digital cable-ready mandate.



3. Direct FCCs Media Bureau to examine the advantages and 
disadvantages 

of a policy that would set a date-certain for cable carriage to switch 

from full carriage of analog signals to full carriage of digital 

signals. Such a policy could be implemented by transferring 

broadcasters must-carry rights from analog to digital on that date, or 

through some other means. The Chairman also should direct the Media 

Bureau to examine the possibility of combining such a policy with a 

digital cable-ready mandate. As part of this examination, FCC should 

estimate the amount of time it will take for the DTV transition to be 

completed with and without implementation of these policy options.



Agency Comments:



We provided a draft of this report to FCC for review and comment. In 

its comments, which are reprinted in appendix IV, FCC said the report 

analyzes some of the difficult challenges facing the DTV transition and 

should add useful input to the policy-making process. FCC agreed that 

it is important to explore options for raising public awareness, and 

emphasized that Chairman Powell has called on industries involved in 

the transition to take concrete measures to educate the public about 

the DTV transition and its implications. Regarding our recommendation 

on cable-ready DTV equipment, FCC noted that it has been engaged in a 

long-term effort to achieve compatibility between digital television 

sets and cable systems, and that many of the technical standards for 

digital cable-ready sets were not finalized until recently. FCC said it 

will be addressing these issues in a forthcoming Report and Order. 

Regarding our recommendation related to a date-certain for transfer of 

must-carry rights from analog signals to digital signals, FCC noted 

that its digital carriage proceeding sought comment on a wide range of 

options regarding must-carry, including an option similar to the one we 

described in our draft. FCC said that the record is now closed in that 

proceeding, and that its staff is preparing a draft order for the 

Commissions consideration. The actions described by FCC in their 

response are positive steps; however, we believe the Commission should 

also adopt our specific recommendations. FCC also provided us with 

technical changes to the report, which we incorporated where 

appropriate.



As agreed with your office, unless you publicly announce its contents 

earlier, we plan no further distribution of this report until 14 days 

after the date of this letter. At that time, we will send copies to 

interested congressional committees; the Chairman, FCC; and other 

interested parties. We also will make copies available to others upon 

request. In addition, this report will be available at no cost on the 

GAO Web site at http://www.gao.gov. If you have any questions about 

this report, please contact me at 202-512-2834 or guerrerop@gao.gov. 

Key contacts and major contributors to this report are listed in 

appendix V.



Sincerely yours,



Signed by Peter Guerrero:



Peter Guerrero

Director, Physical Infrastructure Issues:



[End of section]



Appendix I: Scope and Methodology:



To understand the benefits and implications of turning off the analog 

broadcast signals, we reviewed relevant studies, statutes, and Federal 

Communications Commission (FCC) proceedings on the topic, and we spoke 

with officials at FCC and the National Telecommunications and 

Information Administration as well as officials in the United Kingdom, 

Canada, and Japan who are addressing their nations digital television 

(DTV) transitions.



To understand consumer adoption of DTV, we reviewed and analyzed data 

from the consumer electronics industry and other sources on DTV 

equipment sales and projected trends. To obtain anecdotal information 

on retail practices in marketing and selling DTV products, we visited 

23 retail consumer electronic stores that sell DTV equipment in several 

locations: Boston and Worcester, Massachusetts; Las Vegas, Nevada; Los 

Angeles, California; and the Virginia and Maryland suburbs of 

Washington, D.C. During our visits, we posed as shoppers and asked 

sales staff a standard set of questions designed to gauge their 

knowledge of information that would be important to a potential 

consumer of DTV equipment. We also interviewed senior executives at the 

corporate offices of 4 consumer electronics retailers.



In addition, to gauge consumer awareness and understanding of the DTV 

transition, we contracted with Opinion Research Corporation (ORC), a 

national market research firm, to include questions regarding the DTV 

transition in one of the national telephone surveys conducted by ORC on 

a regular basis. The survey contained a set of 10 questions that asked 

respondents general questions about their television use (such as how 

they receive their television signal) and some questions specifically 

designed to gauge their knowledge and familiarity with the DTV 

transition. The questions were closed-ended, with response options read 

to the respondents. A total of 1,009 adults in the continental United 

States were interviewed between November 29 and December 2, 2001. The 

contractors survey was made up of a random-digit-dialing sample of 

households with telephones, stratified by region.



To use the survey results to make estimates about the entire adult 

population 18 years and older in the continental United States, ORC 

weighted the responses from the survey to represent the characteristics 

of all adults in the general public according to four variables: age, 

gender, geographic region, and race. Because our results are from a 

sample of the population, the resulting estimates have some sampling 

error associated with them. Sampling errors are often presented as a 95 

percent confidence interval. The percentage estimates we present in 

this report have a 95 percent confidence interval of about plus or 

minus 3 percentage points or less. The practical difficulties of 

conducting any survey may introduce nonsampling errors. As in any 

survey, differences in the wording of questions, the sources of 

information available to respondents, or the types of people who do not 

respond can lead to somewhat different results. We took steps to 

minimize nonsampling errors. For example, we developed our survey 

questions with the aid of a survey specialist and pretested the 

questions before submitting them to ORC.



To understand the role of cable and satellite carriage in the DTV 

transition, we spoke with representatives from 5 large companies that 

that own multiple cable systems; 10 broadcast stations, including those 

with and without cable carriage of their digital signals; and the 2 

national providers of direct broadcast satellite service. We also 

discussed these issues with representatives of the National Cable & 

Telecommunications Association, the National Association of 

Broadcasters, FCC, and other relevant parties. We also reviewed 

relevant documents, including FCC proceedings related to cable 

carriage.



To review issues related to the availability of digital programming, we 

spoke with representatives of television broadcast networks; cable 

networks; studios that produce and format television programming; 

television advertisers; and trade associations that represent these 

interests, including the Motion Picture Association of America and the 

National Association of Broadcasters. We also conducted a literature 

review to determine what digital programming is currently available. In 

addition, we reviewed and analyzed data related to programming from our 

survey of U.S. commercial broadcast stations that we conducted in the 

fall of 2001. To review the status of DTV copy protection issues, we 

spoke with representatives of broadcast networks and television 

producers as well as representatives of consumer electronics 

manufacturers. We also spoke with representatives of trade associations 

and other organizations that are concerned about copy protection 

issues, including the Electronic Frontier Foundation. In addition, we 

reviewed relevant legislation and court proceedings.



To review issues related to DTV tuner mandates, as well as other 

equipment issues, we spoke with representatives of four consumer 

electronics manufacturers, two industry standards organizations, three 

industry trade associations, and a consumer advocacy organization. We 

also toured the facility of a large DTV manufacturer. In addition, we 

reviewed documents from FCC proceedings involving technical issues 

related to the DTV transition.



[End of section]



Appendix II: Equipment Issues Affecting the DTV Transition:



FCC has mandated that most new television sets include a DTV tuner. 

However, several other equipment issues that could affect the pace of 

the DTV transition are still being resolved.



Digital Inputs and Copy Protection Technologies:



Digital inputs are connections that allow digital information to flow 

into the digital television set. Digital inputs facilitate the use of 

copy protection technologies and the connection of digital television 

sets to set-top boxes or other devices. Most digital television sets 

manufactured thus far have included only component analog inputs 

rather than digital inputs. This is problematic because these digital 

television sets may not be compatible with future devices or 

technologies, including those designed to provide copy protection. The 

consumer electronics industry appears to be settling on two types of 

digital inputs, and the FCC Chairman Michael Powell has called for one 

or more of these inputs to be included in all new HD monitors and 

digital receivers by January 1, 2004. A representative of one 

manufacturer with whom we spoke told us that his company plans to 

include both types of digital inputs in its DTV equipment in the near 

future.



Digital-to-Analog Converter Boxes:



Eventually, each of the more than 250 million analog television sets 

currently in use in the United States will need to be retired, 

replaced, or attached to a digital-to-analog converter box. A 

digital-to-analog converter box will allow consumers to keep their 

analog television sets once the DTV transition is complete by (1) 

converting digital signals to analog signals and (2) when necessary, 

converting high definition signals to standard definition. It is not 

yet known how much digital-to-analog converter boxes will cost once 

they become widely available. One expert with whom we spoke suggested 

that these converter boxes would need to cost about $50 or less before 

large numbers of consumers would be willing to purchase them for their 

analog television sets.



There are different types of digital-to-analog converter boxes for 

television signals received over the air, via cable, and via satellite 

because each of these three platforms uses a different digital 

transmission format.[Footnote 33] Converter boxes for over-the-air 

signals are essentially digital receivers that are intended for use 

with an analog television set.[Footnote 34] The issue of digital-to-

analog converter boxes could present the DTV transition with another 

catch-22. Consumers currently receiving analog television signals 

over the air have little incentive to purchase a converter box for 

their television set until the analog signals are shut off. However, 

the analog signals cannot be shut off until enough consumers are able 

to see the DTV signals--such as through the purchase of a converter 

box.[Footnote 35]



Adequacy of Over-the-Air Reception:



There are some concerns that digital television sets in locations with 

a weak signal will have difficulty receiving over-the-air broadcasts. 

This issue is important for the DTV transition because with a digital 

signal, unlike an analog signal, the picture is lost completely when 

the signal is inadequate. Over-the-air viewers who may currently 

tolerate a weak, snowy analog signal could find themselves without any 

signal at all when they try to receive the digital broadcast signal. 

FCC has declined to impose minimum performance thresholds for over-the-

air digital tuners (or receivers). In its August 8, 2002, Report and 

Order, FCC said that it believed that competitive forces were the best 

approach for ensuring that DTV receivers perform adequately and meet 

consumer needs.[Footnote 36] Efforts are under way by the broadcast and 

consumer electronics industries to improve the effectiveness of over-

the-air digital tuners. One expert withwhom we spoke noted that DTV 
tuner 

technology is now in its fourth generation and has improved 
significantly 

over earlier generations.



[End of section]



Appendix III: Analysis of the Consumer Survey:



To gauge consumer understanding of the DTV transition, we contracted 

with a survey research firm to conduct a random survey of 1,000 

American households. The consumers were asked questions that were 

designed to ascertain their level of familiarity with and knowledge 

about the DTV transition.



The survey collected basic demographic information about the respondent 

(such as race, gender, income, education level, and age) and asked 

questions related to television use, such as how the respondents 

household receives its television signals. There were also three key 

questions asking respondents about their awareness or familiarity with:



(1) the transition from analog to digital broadcast television,



(2) the difference between a traditional analog and a digital 

television set, and:



(3) the fact that analog sets will require a special converter box to 

continue to receive over-the-air broadcasts at the completion of the 

transition.



Forty percent of respondents were unaware of the transition from analog 

to digital television and 48 percent were not at all familiar with 

the difference between traditional analog television sets and digital, 

high definition television sets. In addition, nearly 70 percent of 

respondents did not know that after the transition, analog television 

sets will require a converter box to continue receiving broadcasts.



We combined the answers to these three questions to create a scale of 

knowledgeability about the DTV transition and used multivariate models 

to see if there are relationships between demographic and other 

household characteristics and knowledgeability of the transition. We 

included as explanatory variables in the model contrasting groups of 

households. Specifically, we included the following variables in the 

model:



* whether the respondent lived in 1 of the 30 largest television 

markets,



* whether the respondent was male,



* whether the respondent lived in an urban area,



* whether the respondent had a white-collar job,



* whether the respondent had at least a college education,



* whether the respondent was between 30 and 55 years old (this was 

contrasted with age under 30),



* whether the respondent was over 55 years old (this was also 

contrasted with age under 30),



* whether the respondents reported race was white,



* whether there was more than one telephone line in the respondents 

household,



* whether the respondent reported having satellite television as the 

primary television viewing method in the household (this was contrasted 

with reporting cable as the primary television method),



* whether the respondent reported having over-the-air television as the 

primary television viewing method in the household (this was contrasted 

with reporting cable as the primary television method), and:



* whether the respondent reported owning a DVD player.



Table 1 shows that males and white-collar and more educated households 

are significantly more familiar with the DTV transition. Households 

that own a DVD are also significantly more familiar with the 

transition. However, households still receiving their television over 

the air, rather than via cable or satellite service, were significantly 

less likely to be familiar with the DTV transition. Age, race, and 

urbanicity did not have any effect on respondents familiarity with the 

transition.



Table 1: Differences in Familiarity with the Digital Television 

Transition on the Basis of Household Characteristics:



Household/Respondent characteristics: Reside in 1 of the 30 largest TV 

markets; Regression coefficient: 0.06.



Household/Respondent characteristics: Male; Regression coefficient: 

0.79[A].



Household/Respondent characteristics: Urban; Regression coefficient: 

0.17.



Household/Respondent characteristics: White-collar; Regression 

coefficient: 0.29[A].



Household/Respondent characteristics: College or more education; 

Regression coefficient: 0.45[A].



Household/Respondent characteristics: 30 to 55 years old (relative to 

under 30 years old); Regression coefficient: 0.17.



Household/Respondent characteristics: Over 55 years old (relative to 

under 30 years old); Regression coefficient: 0.17.



Household/Respondent characteristics: White; Regression coefficient: 

0.06.



Household/Respondent characteristics: More than one telephone line; 

Regression coefficient: 0.21.



Household/Respondent characteristics: Receive TV via satellite 

(compared with receive TV via cable); Regression coefficient: -0.14.



Household/Respondent characteristics: Receive TV over the air (compared 

with receive TV via cable); Regression coefficient: -0.34[A].



Household/Respondent characteristics: Own a DVD player; Regression 

coefficient: 0.56[A].



[A] Bolding denotes statistical significance, p< 0.05.



Source: GAO analysis of data collected by Opinion Research Corporation.



[End of table]



[End of section]



Appendix IV: Comments from the Federal Communications Commission:



Note: GAO comments supplementing those in the report text appear at the 

end of this appendix.



Federal Communications Commission 

Washington, D.C. 20554:



October 10, 2002:



Mr. Peter F. Guerrero

Director, Physical Infrastructure Issues 

United States General Accounting Office 

Washington, D.C. 20548:



Re: GAO-03-7:



Dear Mr. Guerrero:



Chairman Powell asked me to respond to your request for comment on a 

draft copy of GAO-03-7, Additional Federal Efforts Could Help Advance 

Digital Television Transition. The report analyzes of some of the 

difficult challenges facing the digital television transition; it 

should provide useful input into the policy-making process.



Many of our staff comments were incorporated in the draft report 

itself, and I will not repeat them here. I would, however, like to 

emphasize some of the steps the Commission has already taken with 

respect to the areas covered by the reports specific recommendations.



First, the report recommends that Chairman Powell explore options to 

raise public awareness about the DTV transition. We agree this is a 

critical goal. That is why earlier this year Chairman Powell called on 

the industries involved in the transition to take concrete measures to 

educate the public about what the digital transition is and what it 

means for them. Although the report refers to Chairman Powells 

proposal, it fails to note that the ten largest cable operators, which 

serve more than 85% of all cable subscribers, responded to the proposal 

by agreeing to advertise and market HDTV and other new digital services 

using a broad variety of promotional tools. In addition, in an effort 

predating Chairman Powells proposal, the National Association of 

Broadcasters and the Consumer Electronics Association have joined 

together to launch outreach efforts in various DTV Zones around the 

country to increase public awareness and understanding of digital 

television. Nevertheless, as your report indicates, we have a big job 

in front of us.



Second, the report recommends that the Commission study the benefits of 

mandating that all digital televisions be cable ready. The Commission 

has been engaged in a long-standing effort to achieve compatibility 

between digital television sets and cable systems. Since 2000, for 

instance, the Commission has required the National Cable & 

Telecommunications Association and the Consumer Electronics 

Association to file progress reports every six months on compatibility 

issues. We have also held a series of meetings in which the parties 

have been called together for face-to-face discussions on these issues. 

Much progress has been made, particularly on the completion of the 

technical standards for digital cable ready sets.



Nonetheless, contentious and complex business and policy issues remain. 

The Commission has stated that it will address these issues in a 

forthcoming Second Report and Order in conjunction with our proceeding 

on Commercial Availability of Navigation Devices.



Finally, the report recommends that the Commission consider setting a 

date certain for broadcasters mandatory carriage rights to switch from 

their analog to their digital signals. Without commenting on the merits 

of such a proposal, I would note that the Commission has sought comment 

in our digital carriage proceeding on a wide range of options regarding 

digital must-carry, including an option similar to the one you 

describe. The record now is closed in that proceeding and the staff is 

preparing a draft Order for the Commissions consideration.



Thank you for the opportunity to comment on the draft report.



Sincerely,



Signed by W. Kenneth Ferree:



W. Kenneth Ferree 

Chief, Media Bureau:



See comment 2.



See comment 1.



See comment 3.



The following are GAOs comments on the Federal Communications 

Commissions letter dated October 10, 2002.



GAO Comments:



1. We added text on industry actions being undertaken to raise public 

awareness about the DTV transition, including those taken in response 

to Chairman Powells proposal. However, we believe that FCC should not 

rely almost exclusively on private industry initiatives, but also 

should explore initiatives that the agency itself might undertake to 

improve public awareness about the DTV transition and its implications 

for the American people.



2. This report acknowledges FCCs efforts to resolve issues related to 

the compatibility between digital television sets and cable systems. 

Resolving these issues is a prerequisite to making digital cable-ready 

television sets widely available. However, we believe that in addition 

to resolving compatibility issues, FCC should, as we recommended, 

undertake an independent examination of the costs and benefits of 

mandating digital cable-ready capability. We look forward to seeing how 

the Commission addresses these issues in its forthcoming Report and 

Order.



3. We also look forward to the Commissions upcoming order on digital 

cable carriage. The Commission did seek comment in its digital carriage 

proceeding on a variety of options, including one similar to our 

switchover option. However, FCC told us that few if any comments were 

submitted regarding this option, and it is unclear the extent to which 

it has been given full consideration. Assuming this is not addressed in 

the Commissions upcoming order, we believe the agency should conduct a 

more thorough examination of the advantages and disadvantages of the 

switchover option.



[End of section]



Appendix V: GAO Contacts and Staff Acknowledgments:



GAO Contacts:



Amy Abramowitz, (202) 512-4936

Jason Bromberg, (617) 565-8863:



Staff Acknowledgments:



In addition to those named above, Wendy Ahmed, Carol Bray, Aaron Casey, 

Michael Clements, Michele Fejfar, Chris Miller, Faye Morrison, Madhav 

Panwar, Emma Quach, Mindi Weisenbloom, and Alwynne Wilbur made key 

contributions to this report.



FOOTNOTES



[1] The radiofrequency spectrum is the part of the natural spectrum of 

electromagnetic radiation lying between the frequency limits of 9 

kilohertz and 300 gigahertz. It is the medium that makes possible 

wireless communications, including cellular and paging services, radio 

and television broadcasting, radar, and satellite-based services.



[2] U.S. General Accounting Office, Telecommunications: Many 

Broadcasters Will Not Meet May 2002 Digital Television Deadline, GAO-

02-466 (Washington, D.C.: Apr. 23, 2002).



[3] There are different types of digital tuners, depending on whether 

the digital signal is being received over the air, via cable service, 

or via direct broadcast satellite service. 



[4] P.L. 107-195, 116 Stat. 715 (2002).



[5] Various proposals have been made that broadcasters pay a fee for 

their use of the broadcasting spectrum until they return their analog 

channels. Although such a policy may have its advantages and 

disadvantages, it is unclear what its impact would be on the DTV 

transition. More than likely, all broadcast stations will be 

transmitting a digital signal by 2006, and most of the other factors 

affecting the transition--such as cable carriage and consumer adoption 

of DTV equipment--are largely outside of the broadcast industrys 

control.



[6] The Balanced Budget Act of 1997 amended the Communications Act of 

1934 by adding Section 309(j)(14), which provides: 

(14) AUCTION OF RECAPTURED BROADCAST TELEVISION SPECTRUM. --

 (A) LIMITATIONS ON TERMS OF TERRESTRIAL TELEVISION BROADCAST 

LICENSES--A television broadcast license that authorizes analog 

television service may not be renewed to authorize such service for a 

period that extends beyond December 31, 2006. 

 (B) EXTENSION--The Commission shall extend the date described in 

subparagraph (A) for any station that requests such extension in any 

television market if the Commission finds that--

 (i) one or more of the stations in such market that are licensed to 

or affiliated with one of the four largest national television networks 

are not broadcasting a digital television service signal, and the 

Commission finds that each such station has exercised due diligence and 

satisfies the conditions for an extension of the Commissions 

applicable construction deadlines for digital television service in 

that market; 

 (ii) digital-to-analog converter technology is not generally 

available in such market; or 

 (iii) in any market in which an extension is not available under 

clause (i) or (ii), 15 percent or more of the television households in 

such market--

 (I) do not subscribe to a multichannel video programming distributor 

(as defined in section 602) that carries one of the digital television 

service programming channels of each of the television stations 

broadcasting such a channel in such market; and 

 (II) do not have either--

 (a) at least one television receiver capable of receiving the digital 

television service signals of the television stations licensed in such 

market; or 

 (b) at least one television receiver of analog television signals 

equipped with digital-to-analog converter technology capable of 

receiving the digital television service signals of the television 

stations licensed in such market.



[7] In the Matter of Carriage of Digital Television Broadcast Signals, 

CS Docket No. 98-120, First Report and Order and Further Notice of 

Proposed Rulemaking, FCC 01-22 (released Jan. 23, 2001) at paragraph 

117.



[8] Letter from W. Kenneth Ferree, Media Bureau Chief, FCC, to Alan 

Belkin, Assistant General Counsel, U.S. General Accounting Office (Aug. 

5, 2002).



[9] This assumes that cable providers do not downgrade the 

broadcasters digital signals to analog before transmitting them to 

subscribers. If this were done, cable subscribers would not need new 

equipment but would also not receive most of the benefits of DTV, such 

as high definition.



[10] Several broadcast television stations sued a satellite video 

distributor for copyright infringement for providing certain broadcast 

signals to some households. Specifically, broadcasters charged that 

PrimeTime 24 was illegally providing broadcast signals from distant 

markets to viewers who were close enough to the local broadcast towers 

in their own markets to adequately receive the stations signal through 

an over-the-air antenna. Two courts ruled against PrimeTime 24 and 

required that it cease distribution of distant station signals to about 

2 million households. The case was ultimately resolved when the 

Congress passed the Satellite Home Viewer Improvement Act of 1999, 

which allowed (1) direct broadcast satellite providers to include local 

broadcast signals as part of their programming packages and (2) some of 

the households specifically affected by the PrimeTime 24 case to 

continue receiving distant broadcast signals.



[11] Officials told us that converter boxes that convert broadcasters 

digital signals to analog for display on a traditional television set 

are currently selling for about the equivalent of $150. The DTV 

transition in the United Kingdom generally involves less expensive 

equipment than in the United States because the transition in the 

United Kingdom is to a digital, but not high definition, platform.



[12] It is possible that respondents overreported their familiarity 

with the difference between analog and digital television sets. For 

example, we also asked respondents whether they currently own a 

digital, high definition television set. Nine percent said they did, 

even though the Consumer Electronics Association estimates that only 1 

percent of households owned such a set at the time the survey was 

conducted. Consumers may be confusing a digital television service 

(such as digital cable or satellite) with a digital television set.



[13] Digital television units include digital television monitors, 

integrated digital television sets (monitors that also include a 

digital tuner), and stand-alone set-top boxes that serve as digital 

tuners. Sales figures cited here represent factory-to-dealer sales, 

rather than sales to consumers. Because they include products still in 

inventory in retail stores, actual consumer sales may be lower.



[14] Cable customers with digital television sets and a digital tuner 

can still receive DTV signals over the air. However, few consumers have 

such a tuner, and those who do must switch back and forth between cable 

and antenna reception to receive local digital broadcasts.



[15] Cable systems offer different subscription packages or tiers. 

The basic tier typically consists, at a minimum, of local analog 

broadcast signals, while an expanded tier includes additional cable 

network channels. In the past several years, cable systems have been 

offering a digital cable tier, which can have 100 or more channels. 



[16] Companies that provide television delivery for a fee (as opposed 

to free, over-the-air television) are known as multichannel video 

programming distributors. In addition to cable and direct broadcast 

satellite, which are by far the most common, these distributors include 

multichannel multipoint distribution systems (wireless cable), local 

multipoint distribution systems, satellite master antenna television, 

and open video systems.



[17] DISH allows subscribers under certain circumstances to access the 

digital signal of CBSs New York or Los Angeles affiliate. However, 

this option is not available to subscribers in the New York or Los 

Angeles markets, and thus no DISH subscribers receive local digital 

broadcasts in their own market location.



[18] During the DTV transition, a station may invoke must-carry for its 

digital signal only if that station has no analog signal and broadcasts 

only a digital signal.



[19] Notice of Proposed Rule Making on Carriage of Transmissions of 

Digital Television Broadcast Stations, CS Docket No. 98-120, released 

July 10, 1998.



[20] Direct broadcast satellite companies have a requirement somewhat 

analogous to cables must-carry. The Satellite Home Viewer Improvement 

Act of 1999 (P.L. 106-113) allows direct broadcast satellite companies 

to provide local broadcast signals, but requires in most circumstances 

that if they carry any local channels in a market, they are required to 

carry all of that markets channels.



[21] In the Matter of Carriage of Digital Television Broadcast Signals, 

CS Docket No. 98-120, First Report and Order and Further Notice of 

Proposed Rulemaking, FCC 01-22, released Jan. 23, 2001.



[22] Although these problems could be alleviated by prohibiting cable 

systems from carrying analog broadcast signals once must-carry rights 

transfer from analog signals to digital signals, such a prohibition 

would likely be challenged in court.



[23] An aspect ratio refers to the shape of the picture on the 

screen. A traditional analog television has an aspect ratio of 4:3, 

meaning that the screen is 4 units wide and 3 units high. DTV is often 

in a widescreen format, which has an aspect ratio of 16:9, similar to 

a movie theater.



[24] For a more detailed discussion of the survey results, see GAO-02-

466.



[25] P.L. 105-304, 112 Stat. 2860 (1998).



[26] 17 U.S.C. 101 et seq.



[27] Another copy protection problem is what is commonly referred to as 

the analog hole. Consumers with analog television sets can watch 

digital signals using a set-top converter box that converts the signal 

from digital to analog. However, this process currently strips the 

signal of any copy protection, meaning it would be possible to convert 

the content back into an unprotected digital form that could be 

illegally copied and redistributed. A technology similar to a broadcast 

flag could be developed to plug the analog hole, but this is still 

being negotiated by content providers and consumer electronics 

manufacturers.



[28] 464 U.S.C. 417 (1984).



[29] The fair use doctrine permits copying of copyrighted works for 

such purposes as criticism, commentary, news reporting, teaching, 

scholarship, or research. 17 U.S.C. 107. 



[30] In the Matter of Review of the Commissions Rules and Policies 

Affecting the Conversion to Digital Television, MM Docket No. 00-39, 

Second Report and Order and Second Memorandum Opinion and Order, FCC 

02-230, released Aug. 9, 2002.



[31] FCC has adopted three definitions to designate a digital 

television set as digital cable-ready. Under all three definitions, the 

set includes a digital cable tuner and a POD slot. Under two of the 

definitions, the set also includes other functionalities, such as 

digital inputs and support for interactivity. See In the Matter of 

Compatibility Between Cable Systems and Consumer Electronics Equipment, 

PP Docket No. 00-67, Report and Order, FCC 00-342 (released Sept. 15, 

2000).



[32] Letter to W. Kenneth Ferree, Federal Communications Commission, 

from Michael Petricone, Consumer Electronics Association, filed in CS 

Docket No. 97-80, Implementation of Section 304 of the 

Telecommunications Act of 1996; Commercial Availability of Navigation 

Devices, and PP Docket No. 00-67, Compatibility Between Cable Systems 

and Consumer Electronics Equipment, Sept. 11, 2002.



[33] Manufacturers can also combine more than one of these capabilities 

into a single box.



[34] A digital receiver currently on the market for use with a digital 

monitor could also, in theory, be used as a digital-to-analog converter 

box with an analog television set. However, because these receivers 

currently retail for about $600, few if any consumers use them for this 

purpose.



[35] To some extent, this may be mitigated by some consumers purchasing 

digital-to-analog converter boxes before the termination of the analog 

signals. Consumers may do this because a converter box will give them 

access to the content on digital broadcast channels (although not in 

digital format), provide a clearer picture, and provide access to 

multicasting--that is, multiple programs on a single channel.



[36] In the Matter of Review of the Commissions Rules and Policies 

Affecting the Conversion to Digital Television, MM Docket No. 00-39, 

Second Report and Order and Second Memorandum Opinion and Order, FCC 

02-230, released Aug. 9, 2002, para. 60-67. 



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