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SUBCOMMITTEE HEARING ON

THE DTV TRANSITION AND

SMALL BUSINESSES: SMALL

FIRMS CONTRIBUTING TO A

BIG CHANGE

SUBCOMMITTEE ON CONTRACTING AND 

TECHNOLOGY 

COMMITTEE ON SMALL BUSINESS 

UNITED STATES HOUSE OF 

REPRESENTATIVES

ONE HUNDRED TENTH CONGRESS

SECOND SESSION

MAY 7, 2008

Serial Number 110-91

Printed for the use of the Committee on Small Business

(

Available via the World Wide Web: http://www.access.gpo.gov/congress/house 

HOUSE COMMITTEE ON SMALL BUSINESS 

NYDIA M. VELA ́ ZQUEZ, New York, Chairwoman 

HEATH SHULER, North Carolina 

CHARLIE GONZA ́ LEZ, Texas 

RICK LARSEN, Washington 

RAUL GRIJALVA, Arizona 

MICHAEL MICHAUD, Maine 

MELISSA BEAN, Illinois 

HENRY CUELLAR, Texas 

DAN LIPINSKI, Illinois 

GWEN MOORE, Wisconsin 

JASON ALTMIRE, Pennsylvania 

BRUCE BRALEY, Iowa 

YVETTE CLARKE, New York 

BRAD ELLSWORTH, Indiana 

HANK JOHNSON, Georgia 

JOE SESTAK, Pennsylvania 

BRIAN HIGGINS, New York 

MAZIE HIRONO, Hawaii 

STEVE CHABOT, Ohio, Ranking Member 

ROSCOE BARTLETT, Maryland 

SAM GRAVES, Missouri 

TODD AKIN, Missouri 

BILL SHUSTER, Pennsylvania 

MARILYN MUSGRAVE, Colorado 

STEVE KING, Iowa 

JEFF FORTENBERRY, Nebraska 

LYNN WESTMORELAND, Georgia 

LOUIE GOHMERT, Texas 

DAVID DAVIS, Tennessee 

MARY FALLIN, Oklahoma 

VERN BUCHANAN, Florida

MICHAEL DAY, Majority Staff Director 

ADAM MINEHARDT, Deputy Staff Director 

TIM SLATTERY, Chief Counsel 

KEVIN FITZPATRICK, Minority Staff Director

Subcommittee on Contracting and Technology

BRUCE BRALEY, IOWA, Chairman 

HENRY CUELLAR, Texas 

GWEN MOORE, Wisconsin 

YVETTE CLARKE, New York 

JOE SESTAK, Pennsylvania 

DAVID DAVIS, Tennessee, Ranking 

ROSCOE BARTLETT, Maryland 

SAM GRAVES, Missouri 

TODD AKIN, Missouri 

MARY FALLIN, Oklahoma

(II) 

C O N T E N T S 

OPENING STATEMENTS 

Page

Braley, Hon. Bruce .................................................................................................. 1

Davis, Hon. David .................................................................................................... 2

WITNESSES

Hephner, Mr. Greg, Hephner TV, Wichita, KS, On behalf of the Consumer 

Electronics Retailers Coalition ............................................................................ 3

Pardini, Mr. Ed, Senior Vice-President of Operations/North Central Division, 

Mediacom Communications, West Des Moines, IA, On behalf of the American Cable Association ......................................................................................... 6

Oliver, Mr. Keith, Senior Vice President, Corporate Operations, Home Telephone Company, Inc., Moncks Corner, SC,On behalf of the Organization 

for the Promotion and Advancement of Small Telecommunications Companies (OPASTCO) ................................................................................................... 8

Dempsey, Mr. Jack D., President/General Manager, WJHL-TV/

NEWSCHANNEL 11, Johnson City, TN ............................................................ 10

APPENDIX 

Prepared Statements: 

Braley, Hon. Bruce .................................................................................................. 22

Davis, Hon. David .................................................................................................... 24

Clarke, Hon. Yvette ................................................................................................. 25

Hephner, Mr. Greg, Hephner TV, Wichita, KS, On behalf of the Consumer 

Electronics Retailers Coalition ............................................................................ 28

Pardini, Mr. Ed, Senior Vice-President of Operations/North Central Division, 

Mediacom Communications, West Des Moines, IA, On behalf of the American Cable Association ......................................................................................... 32

Oliver, Mr. Keith, Senior Vice President, Corporate Operations, Home Telephone Company, Inc., Moncks Corner, SC,On behalf of the Organization 

for the Promotion and Advancement of Small Telecommunications Companies (OPASTCO) ................................................................................................... 38

Dempsey, Mr. Jack D., President/General Manager, WJHL-TV/

NEWSCHANNEL 11, Johnson City, TN ............................................................ 44

Statements for the Record: 

Community Broadcasters Association .................................................................... 64

(III) 

(1)

SUBCOMMITTEE HEARING ON THE DTV 

TRANSITION AND SMALL BUSINESSES: 

SMALL FIRMS CONTRIBUTING TO A 

BIG CHANGE 

Wednesday, May 7, 2008

U.S. HOUSE OF REPRESENTATIVES, 

COMMITTEE ON SMALL BUSINESS, 

Washington, DC. 

The Subcommittee met, pursuant to call, at 2:00 p.m., in Room 

1539 Longworth House Office Building, Hon. Bruce Braley [chairman of the Subcommittee] presiding. 

Present: Representatives Braley, Cuellar, Clarke, Davis, and 

Akin. 

OPENING STATEMENT OF CHAIRMAN BRALEY 

Chairman BRALEY. Good afternoon. I call this hearing to order on 

The DTV Transition and Small Businesses: Small Firms Contributing to a Big Change. 

This afternoon, the Subcommittee will consider the impact of the 

Digital Television, also known as DTV, transition on small firms. 

Throughout our country, small companies are making significant 

efforts to ensure that American households are prepared for the 

changes that will occur in February 2009. Small broadcasters, electronics retailers, and cable and telecommunications companies all 

are playing a critical role in the DTV transition. 

This hearing will examine those efforts and it will also consider 

whether there are additional actions that Congress should take in 

order to minimize the burden of the transition on small firms, particularly those serving in rural areas. On February 18th of 2009, 

television broadcasters will no longer transmit over-the-air television broadcasts in an analog format. As a result, millions of 

households with analog-only televisions are faced with the prospect 

of no longer receiving a signal unless they act. They will need to 

either buy a new TV or subscribe to a new video service or these 

Americans will be forced to purchase a digital-to-analog converter 

box. This transition requires a public/private partnership. 

The government has enlisted the assistance of businesses, both 

large and small, to carry out many of these changes. Broadcasters, 

retailers, electronics manufacturers and video service companies 

are providing consumer education on the transition. Federal guidelines have also been established for equipment manufacturers and 

retailers participating in the converter box program. 

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It is critical that the efforts of the small firms are recognized and 

that the federal government’s policies are not unduly burdensome 

on small firms. This is particularly important in rural areas where 

the broadcasters, cable companies and primary retail outlets responsible for these efforts of small businesses. 

At today’s hearing we will hear testimony from a number of 

small businesses in the affected industries. I expect that this hearing will help the Subcommittee and Congress consider more fully 

the impact of the DTV transition on smaller firms. 

One of the issues with the transition is whether the Federal 

Communications Commission is accounting for the concerns of 

small broadcasters and cable companies. Both broadcasters and 

cable companies are actively promoting the transition having spent 

millions to educate the public and having invested in the necessary 

infrastructure to carry out the transition. 

The Subcommittee is interested in whether the regulations 

issued by the FCC have taken into account the limited resources 

of many small broadcasters and cable companies. It may be that 

a greater public investment is necessary. These changes also must 

account for the unique needs of small companies. I know there is 

a concern about the must-carry requirements; resolving this issue 

requires balancing the resource constraints of small cable companies with consumers’ legitimate interests in receiving the full benefits of digital television. 

It is critical that these cable companies remain viable while addressing the concerns of TV viewers. 

The role of small retailers must also be acknowledged in this 

transition as well. The Committee looks forward to testimony on 

how retailers are handling the converter box program. These retailers are on the front line and are the most likely source of where 

consumers will have their questions answered on the transition. 

Small retailers have made the necessary investment in new technology, training, and consumer education to become certified retailers in the converter box coupon program. For this program to be 

successful, however, these businesses cannot be left with 

unredeemable government-issued coupons or unsellable converter 

boxes if federal funds for the converter box program are exhausted. 

Congress is monitoring closely the success of these efforts as the 

public and small businesses have a huge stake in it. Indeed, all 

Members of Congress want to ensure that the transition set for 

February 18, 2009 is a smooth one. Representing a District with 

populations that are among the most likely to be affected by the 

DTV transition, I think it is critically important that the federal 

government and private sector stakeholders minimize the number 

of televisions that go dark in February. It’s clear that the DTV 

transition will not be a successful one without the important contributions of small businesses in a variety of industries. 

I look forward to the testimony of our witnesses today, and thank 

them all for participating and I now recognize my friend from Tennessee, Ranking Member David Davis for his opening statement. 

OPENING STATEMENT OF MR. DAVIS 

Mr. DAVIS. Good afternoon. Thank you, Mr. Chairman, for holding this hearing on DTV transition and its impact on small firms. 

3

I would like to thank all of the witnesses for taking time out of 

your busy schedules to come and testify before this Committee and 

most particularly, Mr. Jack Dempsey has made the trip here from 

Johnson City, Tennessee. Welcome, Jack. 

Since the Deficit Reduction Act became law on February 6, 2006, 

the days of the analog television signal have been numbered. On 

February 17, 2009, the nation will undergo a change in the way television broadcasting is transmitted over the air. On that day, all 

television stations will terminate broadcasting and log signals. 

Thereafter, only digital signals will be transmitted. Small broadcasters, electronic retailers and other small firms are at the forefront of the DTV transition. 

The switch from analog to digital transmission signals will provide television viewers with the clear pictures and more program 

choices and will free up more portions of airwaves for public safety 

communications such as police, fire and rescue and new broadband 

wireless services. All of these are admiral goals, but the DTV transition is not without cost. Since the late 1990s, television broadcasters have spent billions of dollars to build the infrastructure for 

into air digital signals while continuing to broadcast in analog. 

While all broadcasters are being asked with—tasked with making 

this change, small cable companies and broadcasters are feeling the 

pinch of these expenditures more acutely than their larger counterparts. 

Once again, I’d like to thank the witnesses for being with us 

today and I’m eager to hear your testimony. 

Thank you.

Chairman BRALEY. Thank you, Pat. 

Witnesses will be allowed five minutes to deliver their prepared 

statements. The way the lights work is when you have one minute 

remaining, the yellow light will turn on in a light fixture in front 

of you and when the time is up, the red light is on. Your written 

statements will be included in the record in their entirety and at 

this time it’s my pleasure to introduce our first witness, Mr. Greg 

Hephner is the president and owner of Hephner TV and Electronics, Incorporated. For over 50 years, Hephner TV has been a 

leading retailer of home entertainment products in Wichita, Kansas. Mr. Hephner is testifying on behalf of the Consumer Electronics Retailers Coalition. CERC is an association of established 

electronic specialty and general retailers. Welcome. And we look 

forward to your testimony. 

STATEMENT OF MR. GREG HEPHNER, PRESIDENT, HEPHNER 

TV AND ELECTRONICS, INC., WICHITA, KANSAS 

Mr. HEPHNER. Chairman Braley, Ranking Member Davis, thank 

you for inviting me to appear before your Subcommittee on behalf 

of Hephner TV and the Consumer Electronics Retailers Coalition. 

It is our privilege to offer you our perspective as an independent 

consumer electronics firm on the progress of the DTV transition in 

America’s heartland. 

Transition in the electronics industry is nothing new. Our company was established by my father, Lonnie, in 1950, long before 

which Wichita had an TV stations. We witnessed the transition 

4

from radio to TV from black and white to color and now from analog TV broadcast to digital TV broadcast. 

While technological changes can confuse and frustrate consumers, these same changes eventually enhance consumers’ lives 

and are accepted and enjoyed once they are understood. As probably the smallest member of the Consumer Electronics Retailers 

Coalition, our management team gets to observe these changes and 

consumers’ reactions to them on a daily basis in our own store. The 

sheer scope of the DTV broadcast transition is without precedent, 

leaving some small consumer electronics firms to choose not to participate in the NTIA coupon and education programs. The reasons 

given are varied, but most of these other dealers have told me that 

they wanted to avoid the hassle of redeeming coupons providing 

customer education and dealing with customer complaints. 

Our company, however, embraced the transition and our experience has been very positive. Hephner TV was an early participant 

in NTIA’s coupon eligible converter box program. In partnership 

with CLC Services, part of the IBM Team that NTIA is contracting 

with, we served as a pilot site to test the coupon redemption system prior to the general public launch. The application process 

with both NTIA and the Central Contractor Registration are simple 

and fast for a company of our size. We have redeemed coupons 

using both the retailer web site and the toll-free phone number 

with little difficulty. 

The CLS Services Retailer Support Center has been responsive 

to any questions we have had and we have received our coupon reimbursement payments in a timely manner. We have found that 

customers aren’t putting off the purchase of the converter box, thus 

the demand for the boxes should be consistent over the next 12 

months. 

In summary, we are very pleased with the coupon redemption 

processes as created by the Congress, the NTIA, and IBM CLC 

Services. Our observations are that consumers seem to have a high 

degree of awareness and interest in the DTV transition. Web sites 

dedicated to the DTV transition sponsored by the NTIA, the Consumer Electronics Retailers Coalition, the FCC, and countless others have provided a wealth of information to any consumer that 

has questions. 

In Wichita, we have cooperated with our local TV affiliates on 

news stories that educate consumers about the transition. All of 

our local TV stations have ubiquitous crawls along the bottom of 

the screen directing consumers to call or log on to web site for details about the transition. Our local newspaper, The Wichita Eagle, 

continues to run stories and updates on the coupon program. 

It is my belief that if someone is unaware that TV is changing, 

they simply haven’t been paying attention. However, we also understand that awareness doesn’t always translate to understanding. Creating consumer understanding of the transition falls 

to local retailers like us. We are on the front lines of public education, explaining the details of the transition and reassuring the 

customers that the transition will not be as draconian as some 

have assumed. 

Through this we are successfully using the free handouts provided by the NTIA on their web site. We also use reprints of pertiVerDate 0ct 09 2002 13:37 Jun 05, 2008 Jkt 033615 PO 00000 Frm 00008 Fmt 6633 Sfmt 6633 G:\CLERK SB-LD\HEARINGS\TRANSCRIPTS\40235.TXT LEANN
5

nent newspaper articles as handouts and post helpful links on our 

company web site. We have observed that once we educate customers about the transition in easy to understand terms, they are 

relieved that they won’t have to make any changes if they are on 

cable or satellite, or that the converter box solution is simpler than 

they had imagined. 

We have fielded substantially fewer complaints than I had anticipated. Very few customers have mentioned any problems with the 

coupon application process. Most customers have had little trouble 

connecting their boxes. In fact, many customers have been pleasantly surprised that they are receiving more channels via the digital box than they did with their analog tuners. 

From our vantage point, the DTV transition is progressing very 

smoothly. The coupon redemption procedures designed by the NTIA 

and IBM/CLC Services are easy to use and transparent for the retailer. We have seen little of the consumer angst that was predicted. Our customers understand the transition and are preparing 

themselves for the day that most analog broadcast end. 

We would encourage the NTIA to continue the programs that are 

currently in place. The existing systems strike a good balance between the needs of the consumer and the retailer, while offering 

reasonable security against fraud. 

Finally, Mr. Chairman, there is one area in which Members of 

your Committee could make our lives a bit easier. When we started 

ordering our boxes, we found that the price had gone up several 

dollars from the announced price, apparently due to a 5 percent 

tariff category in which the government seems to have included 

these converter boxes. Representatives Ron Kind and Kevin Brady 

have introduced a bill into Congress, Bill No. HR 5635 that would 

reform this tariff so that the government would not be assessing 

a special tax that increases the cost to us of the very products that 

it is subsidizing. 

I would hope that your Members would consider becoming cosponsors of this legislation. 

At Hephner TV we are excited to be part of one of the largest 

technical upgrades in the last 60 years. The transition has spurred 

an unparalleled public interest and enthusiasm in the products we 

sell and in our industry as a whole. 

I appreciate this Committee’s interest in us and our concerns and 

I hope you will remain in touch with us as the transition moves 

to its conclusion next year. 

[The prepared statement of Mr. Hephner may be found in the 

Appendix on page 28.]

Chairman BRALEY. Thank you, Mr. Hephner, and I certainly will 

take a good look at HR 5635 and the Committee will also follow 

up on that. I appreciate that suggestion. 

Our next witness is Mr. Ed Pardini who is a Senior Vice President of Operations in the North Central Division at Mediacom 

Communications in Des Moines, Iowa. As a Mediacom subscriber, 

I look forward to your testimony. 

Mediacom serves several smaller cities and towns throughout 

Iowa, Minnesota, and North Illinois, South Dakota and Wisconsin. 

They provide a broad array of broadband products and services, inVerDate 0ct 09 2002 13:37 Jun 05, 2008 Jkt 033615 PO 00000 Frm 00009 Fmt 6633 Sfmt 6633 G:\CLERK SB-LD\HEARINGS\TRANSCRIPTS\40235.TXT LEANN
6

cluding traditional video services, digital television, video on demand, digital video recorders, high definition televisions, high 

speed Internet access and phone service. 

Mr. Pardini is testifying on behalf of the American Cable Association which is a voice of independent cable operators. Welcome. 

STATEMENT OF MR. ED PARDINI, SENIOR VICE PRESIDENT OF 

OPERATIONS, NORTH CENTRAL DIVISION AT MEDIACOM 

COMMUNICATIONS, DES MOINES, IOWA 

Mr. PARDINI. My name is Ed Pardini, and I am Senior Vice 

President of Operations, North Central Division at Mediacom Communications, an independent cable business. My company, whose 

division is based in Des Moines, Iowa, provides essential video and 

broadband products and services to smaller cities and towns in 

many states represented by this Committee, including Iowa, Wisconsin, Missouri, and several others. 

I’m here today on behalf of the American Cable Association. The 

Association’s members range from family-run businesses serving a 

single community to multiple system operators like Mediacom that 

provide vital video, broadband, and advanced services that bridge 

the digital divide in many smaller markets. 

Small cable operators are important businesses in their communities, providing not only broadcast and cable programming, but 

also extending the geographic reach of broadcast programming to 

consumers and increasing their viewership. 

Additionally, many of ACA’s members offer exclusive local and 

community-oriented programming not carried by other operators 

like Iowa’s Mediacom Connections channel. 

As we approach next year’s digital transition, ACA and its members are fully committed to ensuring its customers have a seamless 

transition and we’re working to ensure others know how to prepare 

for the transition. ACA is an active member of the DTV Transition 

Coalition and like many ACA members, Mediacom has undertaken 

a massive education campaign to prepare consumers for the digital 

transition that includes public service announcements, information 

in our monthly billing statements and meetings with community 

groups. 

ACA and its members are committed to ensuring its subscribers 

can continue to view broadcast stations after the transition. To 

make that happen, tens of millions of dollars have been invested 

in purchasing and upgrading the equipment necessary to provide 

digital signals in a format that is viewable on both digital and traditional analog sets. 

Today, even as government broadcasters and cable operators 

work together to minimize the confusion among consumers associated with the digital transition, their collective efforts may be disrupted by broadcasters who will be negotiating retransmission consent deals with cable operators at roughly the same time. In the 

second half of 2008, the retransmission consent agreements that 

enable cable operators to offer local broadcast signals will expire 

and ACA expects a significant number of its members to face difficult negotiations. In fact, while ACA members may well have 

good relationships with WJHL, many are worried by the news from 

its parent company, Media General, and other companies’ analyst 

7

calls, and the pressure mounting from Wall Street to extract cash 

from consumers foretells a potentially very different and ominous 

experience this fall. 

As it stands, federal retransmission consent and network nonduplication rules grant broadcasters unrestrained power in these 

negotiations and broadcasters commonly leverage their power to 

demand unreasonable prices, terms and conditions from small and 

medium-sized operators. Furthermore, they use this power to demand per subscriber fees, 200 to 1100 percent higher for smaller 

operators than for larger ones for identical content without any rational justification. 

These higher costs are then borne by consumers. As a committee 

focused on the important role that small business plays in the 

economy and one that cares for consumers, I hope a growing 

awareness of this problem of discriminatory pricing will prompt 

further inquiries and action. 

As a negotiating tactic, broadcasters often threaten to force small 

cable operators to drop their signal, as a means of pressuring operators into accepting unfair deals which raise the rates on consumers. This practice, which will under the best of circumstances 

disrupt service with no regard for consumers, will cause mass confusion in the months before and after the transition. This is precisely what happened in early 2007, when 2 million television viewers in 700,000 households were disrupted by Sinclair Broadcast 

Group’s unilateral decision to pull 22 stations from Mediacom 

Cable Systems in 12 states, including Waterloo and Dubuque in the 

Chairman’s District, and other states represented on this Subcommittee. 

In September 2007, the FCC issued a rulemaking seeking comment on revisions to the Commission’s program access and retransmission consent rules. The ACA filed comments in this proceeding 

describing the broadcasters’ discriminatory conduct towards small 

cable operators and proposing and prohibiting these tactics. 

More recently, Mediacom and several other cable operators filed 

a petition with the FCC, asking the Commission to promptly adopt 

a retransmission consent ′′quiet period′′ to ensure that these disputes in the months surrounding the digital transition do not trigger consumer confusion or service disruptions. To put an end to the 

discriminatory retransmission consent practices that harm consumers and to ensure uninterrupted service for ACA’s members’ 

subscribers during this transition, we encourage this Committee to 

conduct a further review of these issues.We also urge every Member of Congress to play an active role in monitoring negotiations in 

their own districts. 

Chairman Braley, Ranking Member Davis and Members of the 

Subcommittee, thank you again for your opportunity to testify. 

[The prepared statement of Mr. Pardini may be found in the Appendix on page 32.]

Chairman BRALEY. Thank you. 

Our next witness is Keith Oliver, who is the Senior Vice President of Corporate Operations for Home Telephone Company in 

Moncks Corner, South Carolina. Home Telephone also provides 

8

voice services, broadband and video services to the homes and 

small business in their community. 

Mr. Oliver also serves as chairman of OPATSCO, the Organization for the Promotion and Advancement of Small Telecommunications Companies. OPATSCO is a national trade association made 

up of more than 600 small, local telecommunications carriers serving rural areas. 

Welcome. 

STATEMENT OF MR. KEITH OLIVER, SENIOR VICE PRESIDENT 

OF CORPORATE OPERATIONS FOR HOME TELEPHONE COMPANY, MONCKS CORNER, SOUTH CAROLINA 

Mr. OLIVER. Good afternoon, Mr. Chairman, Ranking Member 

Davis, and Members of the Committee. 

I appreciate the opportunity to testify before you today. My name 

is Keith Oliver and I am Senior Vice President of Corporate Operations for Home Telephone Company which is a small business located on Moncks Corner, South Carolina. 

We provide voice, broadband, and video service to the small businesses and homes in the communities in which we serve. But I’m 

also here today in my role as chairman of OPATSCO, the Organization for the Promotion and Advancement of Small Telecommunications Companies. OPATSCO is a national trade organization 

made up of more than 600 small phone companies that provide 

modern communication services to customers in the rural areas of 

47 states. These areas are often too sparsely populated to attract 

the major national providers. 

You may remember that OPATSCO was part of the High-Tech 

DTV Coalition which encouraged Congress’ decision to institute a 

hard date in the DTV transition. We supported this effort because 

the 700 megahertz spectrum involved in this transition was ideally 

suited to delivering broadband services to small communities. 

OPATSCO had hoped that the auction of the 700 megahertz 

spectrum would facilitate this goal. For our members, the DTV 

transition has always been about deploying more broadband in the 

rural areas in America. 

Unfortunately, Federal Communications Commission decided to 

auction the spectrum off in large geographic licensing areas which 

most small carriers could not afford. When measured in terms of 

population coverage and spectrum blocks in the 700 MHz auction, 

the rural telecom group found that the small companies obtained 

less than 1.5 percent of the coverage. This result is not in accordance with the intent of Congress. Congress knew that large carriers 

do not have incentives to serve sparsely populated areas. Therefore, 

in Section 309(j) of the Communication Act, Congress directed the 

FCC to ensure that small entities specifically including rural carriers had a reasonable chance of obtaining spectrum.We have repeatedly asked the FCC to adhere to this goal by returning to 

smaller geographic licensing areas. The 700- MHz auction represents a lost opportunity. 

I’d now like to turn my intention to the customer notification requirements of the DTV transition. Small carriers understand the 

need to help inform the public about the DTV transition and we’re 

happy to do our part. The FCC has required small carriers to notify 

9

certain customers about the DTV transition by including information in their telephone bills. But it has barely acknowledged that 

there are any costs associated with this requirement. And the FCC 

is now considering expanding this requirement to all consumers of 

telecommunications services. 

But how will small companies recover costs such as printing and 

extra postage? In my own company’s case such cost alone will exceed $23,000. That’s a lot of money for a small company. But in addition to the hard costs, we must also consider the staff training 

and the manpower costs. When we include new information on 

phone bills, customers understandably call the carrier who sent 

them the information. We have to take extra time to train our customer service representatives on this issue and the small carriers, 

we have limited staffs. This is one reason that we’re very encouraged by the introduction in the Senate, S.2902, the Independent 

Office Advocacy in Small Business Regulatory Reform Act. This bill 

will enhance efforts to consider the impacts of new rules on small 

businesses. 

We hope that the House Small Business Committee will give 

similar legislation serious consideration. 

Finally, I’d like to mention several areas where it appears the 

FCC is moving in the right direction. The Commission has found 

that when video and broadband services are provide together, more 

customers buy broadband. The FCC has also found instances of 

large programmers discriminating against their small competitors 

which hurts both broadband deployment and video competition. 

The FCC is to be commended for its on-going proceedings that are 

considering helpful reform to program access rules. Currently, force 

tying of unwanted programming content and outmoded retransmission consent results in higher prices for our consumers and the 

terrestrial loophole in programming access rules allows large programmers to restrict access to some content. 

We’re hopeful that the Committee will encourage the Commission to implement reform in all of these areas. Let me emphasize, 

however, OPATSCO does not favor intrusion regulation of the video 

content market. We only seek updates to existing rules in order to 

recognize new technologies and competition. 

In conclusion, let me stress again the need for the government 

to consider the impact on small broadband providers when it imposes new regulation. Smaller licensing areas and wireless auctions 

can market opening reform to program access rules and help expand broadband deployment. 

Thank you for your attention and I look forward to your questions. 

[The prepared statement of Mr. Oliver may be found in the Appendix on page 38.]

Chairman BRALEY. Thank you, Mr. Oliver. 

Our next witness will be introduced by the Ranking Member. 

Mr. DAVIS. Thank you Mr. Chairman. It is a pleasure to introduce our next witness from my District back in Tennessee. Mr. 

Jack Dempsey started his professional career with WAXU AM-FM 

Radio in Georgetown, Kentucky. He then went on to work as account executive for WKWT-TV in Lexington, Kentucky and 

10

WOWK-TV in Huntington, West Virginia before moving to the TriCities area of Tennessee in 1985. 

In August of 1985, Mr. Dempsey jointed WJHL-TV as a general 

sales manager. He became president and general manager of 

WJHL-TV in May of 1989. Mr. Dempsey is actively involved in numerous organizations in the Tri-Cities such as the Rotary Club of 

Johnson City, Barter Theater Board of Directors, United Way of 

Greater Kingsport, Board of Directors, United—the Johnson City 

and Bristol Chamber of Commerce. 

Mr. Dempsey, welcome. We look forward to your testimony. 

STATEMENT OF MR. JACK DEMPSEY, PRESIDENT AND 

GENERAL MANAGER OF WJHL-TV, JOHNSON CITY, TENNESSEE 

Mr. DEMPSEY.Good afternoon, Chairman Braley, Ranking Member Davis and Members of the Subcommittee. Thank you for inviting me to testify on what is my station’s number one priority, a 

successful digital television transition. 

My name is Jack Dempsey and I’m the general manager of 

Media General’s WJHL-TV in Johnson City, Tennessee. I’m located 

in a smaller market, the 91st rated market out of 210 markets in 

the country. I’m happy to be here to offer my perspective on the 

role of small broadcasters in the upcoming digital television conversation. 

Broadcasters are fully committed to ensuring that no viewer 

loses access to free television after the transition, but I want you 

to be aware that broadcasters, particularly small broadcasters are 

making this transition at a significant cost. To give you some scope 

of the investment, broadcasters nationwide have spent in excess of 

$5 billion upgrading equipment to migrate to an all-digital world 

in 2009. 

My station alone has spent over $6 million to make the DTV 

transition a reality. What many people don’t realize is that DTV 

transition costs are the same in a small market as in a large market. The equipment costs are the same whether you’re in Johnson 

City or New York City. Unfortunately, the DTV transition has produced virtually no increase in our revenues that can be used to offset the significant costs broadcasters have had to incur. 

Take my station, for example. In first constructing WJHL’s transitional DTV facility, we had to buy and install a new antenna on 

the side of our tower keeping our analog antenna on the top. In addition to a new antenna, we had to install a new DTV transmitter, 

a new filter and new transmission lines. We completed construction 

of our initial DTV facility in early 2002. Since 2005, we’ve been 

broadcasting in full power in both analog and digital which entails 

running two facilities with two electric bills. 

Almost a third of the $6 million we are spending will go toward 

transitional equipment that we will no longer use after February 

17, 2009. Unfortunately, this equipment has no resale value and as 

a result about $2 million of our DTV transition expenses cannot be 

recouped. 

In addition to the cost of transitioning WJHL’s technical facilities 

to DTV, we have undertaken extensive efforts to educate the public 

about the transition. In fact, most full power commercial stations 

are participating in the National Association of Broadcasters’ PubVerDate 0ct 09 2002 13:37 Jun 05, 2008 Jkt 033615 PO 00000 Frm 00014 Fmt 6633 Sfmt 6633 G:\CLERK SB-LD\HEARINGS\TRANSCRIPTS\40235.TXT LEANN
11

lic/Private Partnership, adopted by the Federal Communications 

Commission on March 3rd. Those broadcasters, like WJHL, that 

have opted into the partnership have agreed to air public service 

announcements, crawls, snipes, news tickers, a 100-day countdown 

clock and a 30-minute DTV informational television program in 

English and Spanish. 

All tolled, the value of this national, multi-platform, multi-faceted campaign is estimated at more than $1 billion and will generate 132 billion audience impressions, meaning the country will 

view these images 132 billion times. All said, every viewer will see 

this message approximately 642 times. 

Certainly, broadcasters are excited about the possibility that digital broadcasting brings, but there continue to be challenges that 

we face. First, in the current must-carry retransmission consent 

cycle, we have not received any fees from cable systems carrying 

our signals, be it analog or digital. Broadcasters provide the most 

watched content on television and I believe we should be fairly 

compensated by cable companies for that content. 

Secondly, a digital world allows broadcasters to offer additional 

streams for multi-cast channels so we can provide more local programming. We offer a 24-hour local weather channel, but we have 

very limited cable carriage for this multi-cast channel and it affects 

our ability to obtain any new advertising revenue from the channel. 

Although we have arranged for its carriage on the two largest cable 

systems serving our market, they carry the channel only on their 

digital tier, which reaches only 35 to 40 percent of the cable homes 

in the market. 

Finally, as much as we would like to sell more advertising on our 

multi-cast weather channel, we are hampered by the lack of ratings 

information for that channel. In addition, there’s no commercially 

available ratings information measuring the viewership of our primary DTV channel separate and apart from our analog channel. 

Without ratings data, we are stymied with coming up with other 

ways to gain more advertising revenue from our DTV investment. 

This is a historic moment in broadcasting and we, as local television broadcasters remain fully committed to the DTV transition. 

I believe that through our efforts and sacrifices, the public will 

be well prepared on February 17, 2009. I thank you for the opportunity to testify, and I look forward to answering any questions you 

may have. 

[The prepared statement of Mr. Dempsey may be found in the 

Appendix on page 44.]

Chairman BRALEY. Thank you, Mr. Dempsey. 

Mr. Hephner, let me start with you. I grew up in a small town 

of 1500 people. I remember going down to Foster’s TV back when 

there were very few models available and it was a big, big deal in 

a family to purchase a black and white television set, back when 

looking a test pattern was considered excitement on a late night. 

One of the things that we know is that your business has 

changed dramatically because of the impact of big box retailers and 

competition for the products that you sell. 

12

In your testimony, you indicated that the NTIA rules governing 

the government’s converter-box program helped to facilitate the 

participation of small electronic retailers. 

Can you share with us some of the observations you had about 

the specific rules that NTIA did or did not impose that allowed this 

voluntary program to assist small retailers like yourself. 

Mr. HEPHNER. Sure. One of the major considerations was the fact 

that we wouldn’t have to spend a ton of money coming up with 

some kind of, or buying or having to rewrite a computer system. 

The NITA/IBM CLC services system allows us to go on to a standard Internet connection, redeem the cards, track the payments, see 

how many coupons have been requested for our zip code. All of that 

is very simple and easy for us to access through normal, off-theshelf Internet capable computers which we have in the store. 

The other thing that we really liked was that there were essentially five major rules, none of them were very stringent as far as—

they were common sense rules. You have to provide backup material in case somebody wants to audit. That’s reasonable. 

And yet, there wasn’t any rule that seemed to be—put us in a 

position where if we made an honest error in accounting or something of that nature, we were going to be hit with some large fine. 

The system was simple, fair, easy for us to understand and implement. 

Chairman BRALEY. Thank you. 

Mr. Dempsey, one of the things that we all have had experience 

with is having day-to-day impact by what comes out of our local 

broadcasters. Many of us depend on them for the news that we 

watch and inform us about what’s going on in our communities. 

And I imagine, given the length of time you’ve spent in the Johnson City area, you’ve had a good opportunity to observe how your 

market depends on the station to provide them with news and information. 

Your testimony highlights many of the benefits that people 

should see as a result of the DTV transition. Do you have any concerns that people like the citizens I represent in the rural parts of 

my District in Iowa may not receive the full benefits of this transition? 

Mr. DEMPSEY. Yes. Mr. Chairman, we have concerns really about 

three groups. And this is really where we focus our efforts: elderly 

folks, people with lower incomes, and then people in very remote 

areas that don’t have access to other forms of delivery. 

I think thus far we’ve done a really good job of letting the public 

know what’s coming. When we first started this I spoke in February to a group in Bristol, the Bristol Rotary Club. And I asked 

them the question have you heard about the date February 17, 

2009? One person in that group raised their hand. These were business people, people ′′in the know.′′ The last group I spoke to was the Kingsport Kiwanis Club and 

I asked that same question. And every hand in the room went up. 

So I think we have at least made people aware that a major change 

is coming. 

The next step that we’re concerned about is how this is actually 

going to take place because it’s tricky. A lot of folks cannot connect 

these devices to their television. They simply don’t know how to do 

13

it. There are going to be some antenna issues that I think need to 

be addressed for people to pick these signals up. And those would 

be the two groups that we would be most concerned with at this 

time. 

Chairman BRALEY. Thank you. 

Mr. Pardini, you happen to mention the city of Dubuque which 

is where my wife was born and where I spent a good deal of my 

time back in the first District of Iowa. And in my former life, I had 

the opportunity to represent a UHF-ABC affiliate named KDUB, 

back in a time when the whole issue of must-carry rules and the 

impact they were having on different types of markets in the cable 

that were being served by the cable industry were being impacted. 

In terms of Mediacom’s experience, what I’d like you to do is 

share with us your perspective on the impact that Iowa subscribers 

and other subscribers around the country should expect to receive 

on February 18th, for example, after this DTV transition will all 

of the Iowa subscribers that you serve be able to view all of the 

channels that they can today? 

Mr. PARDINI. Absolutely, all of our cable subscribers will continue 

to receive all of the traditional off-air signals that they currently 

receive. So on February 19th, the sun will rise, the birds will sing 

and the Today Show will be on. Mediacom cable subscribers will 

not need to buy additional equipment in order to receive those signals. 

We’re very thankful that the chairman of the FCC, Chairman 

Martin, has announced a waiver for small cable operators with less 

than 552 MHz of capacity from dual carriage requirements under 

must-carry. This will allow them to continue to carry these signals 

and minimize the investment of very scarce resources so that small 

cable operators can continue to provide these valuable local services to their customer base. 

Chairman BRALEY. One of the reasons I mentioned Dubuque is 

because I was surprised to learn that Dubuque was one of the pioneers in the cable TV industry in this country because of the geography and the topography and the bluffs around Dubuque located 

on the Mississippi River. 

Mr. PARDINI. Well, the terrain of Dubuque is a challenging terrain to receive an off-air signal and that’s one of the benefits that 

cable operators provide the broadcast community. And in exchange 

for the valuable entertainment services that the broadcast community provides, cable operators extend the range of their signals to 

places where off-air signals wouldn’t normally go. They generally 

improve the picture quality over that terrain so that you have a 

very watchable snow-free picture, and thereby increase the 

viewership and the eyeballs that are enjoying the program offerings that are being put forth by the broadcast community. 

So I think that it’s very much a win-win situation until you get 

into the area of retransmission consent where government regulation has created an extraordinary and unusual market that allows 

broadcasters, some broadcasters to use an unhealthy degree of leverage to extract fees from consumers that they wouldn’t normally 

receive in the course of their business policy. 

Mr. DEMPSEY. May I address that, Mr. Chairman? 

Chairman BRALEY. You may. 

14

Mr. DEMPSEY. I can’t speak, of course, to Mr. Pardini’s experience, but in my market we receive no retransmission consent fees 

from any cable operator. In our market, probably 80 percent of the 

homes who receive cable are subscribers to either Charter or 

Comcast, so we’ve never really had any position to go to them with 

demands for compensation. I want to echo Mr. Pardini’s comments 

that we think that we’ve helped each other. We certainly recognize 

the value that the cable systems bring us and we know from our 

own ratings information that we bring a great deal of value to 

them because the broadcast over-the-air stations are viewed significantly more than the cable sources on their own cable systems. 

So while we look at this as basically a market matter, I want to 

point out that we have never in the history of our station threatened anyone to remove our signal except one time back in 1993 because they wouldn’t sign the agreement. It had no money attached 

to it. We just couldn’t get the agreement. 

Chairman BRALEY. Thank you. 

Mr. Oliver, I want to talk to you a little bit about something we 

hear about called triple play. 

More and more of the telecommunications companies are offering 

their customers a triple play of voice, Internet and video services 

and we heard Mr. Pardini talk about some of the services that his 

company provides. 

How do you expect the DTV transition may affect consumer demand for video services provided by telecommunications companies? 

Mr. OLIVER. That’s an interesting question and it’s somewhat difficult probably for us to tell in many respects. I would not think 

that it would have significant impact because of again we’re talking 

about the consumers receiving their TV signal off-the-air as being 

ones that are impacted. 

Our company, for instance, does provide video. We’ve got roughly 

6800 video subscribers that we currently serve. And I wouldn’t necessarily expect that it’s going to be tremendously increased as a result of the DTV transition. 

I don’t think it’s going to have tremendous impact but as you 

say, the triple play has been a tremendous success for us as rural 

carriers in our ability to deliver the broadband signal out to our 

customers. There’s been a number of studies and the FCC has even 

concluded that the provision of video signal along with broadband 

tremendously increases that penetration rate and that’s what we 

strive to do in rural areas is to ensure that the facilities that we’re 

putting out there which are high cost to start with have as much 

subscribership as possible. So our interest in this is again from 

that broadband deployment side and being in a position to continue 

to link that video with that broadband service. 

Chairman BRALEY. Thank you. At this time I yield to the Ranking Member. 

Mr. DAVIS. Thank you, Mr. Chairman, and again I’d like to 

thank the panel. You did a wonderful job, thank you. 

I’d like to start with Mr. Oliver, if I may. You briefly mentioned 

problems with technological issues related to the equipment in your 

testimony. Would you like to go into a little more detail so we could 

understand some of those technological issues? 

15

Mr. OLIVER. I am not certain exactly what you’re referring to in 

my testimony to tell you the truth. 

Mr. DAVIS. If you could, the equipment that you’re using, the 

transition, do you feel like the equipment is working well? 

Mr. OLIVER. Again, most of my testimony related more to the 

telephone side. We do have video proponents out there as well that 

we’re serving. And yes, sir. I think that we are finding not major 

problems at this point, and at this point in time we would see a 

relatively smooth transition from our standpoint as a cable service 

provider. 

Mr. DAVIS. Okay, thank you for that. 

Mr. Dempsey, thank you for being here. It’s good to have you in Washington. You mentioned $6 million it’s cost your station so far. 

Is that pretty typical standard for most small stations? 

Mr. DEMPSEY. Oh, yes. Again, you may refer to my testimony, 

whether you’re in Johnson City or New York City, the cost to make 

this transition are basically the same. So it’s very burdensome and 

we’re the 91st market so we’re kind of midway in the country. You 

get into the markets that are 150 and on up, it’s even more difficult 

because they have less of a revenue stream. 

Mr. DAVIS. How do you hope to absorb that cost, that $6 million 

that you’ve had to outlay? How do you plan on bringing that money 

back into your business? 

Mr. DEMPSEY. Well, one of the ways that we hope to is the fact 

that we’re able now to provide other streams of programming. For 

example, WJHL-TV has a second channel. It’s a 24-hour local 

weather and we hope once we get access to all of the homes in the 

market via cable or satellite, we think that that service will be in 

need, that it will get ratings and we’ll be able to sell the advertising on that.And maybe a third channel and a fourth channel. 

Mr. DAVIS. The $6 million that you’ve paid to date, do you foresee still the on-going increases and expanse until you make the 

transition in February? 

Mr. DEMPSEY. Yes, sir. 

Mr. DAVIS. Do you have any idea how much that costs? 

Mr. DEMPSEY. It would probably be another million and a half. 

Because when you make this transition, for example, when you go 

to the full digital signal, for example, you’re going to have to have 

basically new equipment because when we broadcast in high definition, you basically have to reconfigure your set to fill that 16 by 

9 ratio screen versus what we’ve had. So that’s just one example. 

That alone will probably be $150,000 to $200,000. 

Mr. DAVIS. One thing I have noticed when I’m back home, you 

are running are PSAs and you actually started those before federal 

mandates kicked in to make you do those things. 

Can you tell me how that’s working and the feedback you’re getting on your PSAs? 

Mr. DEMPSEY. I think it’s working very well. This is so important 

to us because we don’t want to lose one set of eyes. We don’t want 

to lose one household to this transition because they’re all important to us. 

We’ve undertaken in the last few months this education program 

that I think is working. We noticed from the calls we get at our 

station in addition to what we run that’s broadcast, we also have 

16

basically a grass roots approach where in my case I go and speak 

to civic groups or say the First Tennessee Development Council on 

Aging which was one of the best, by the way, I ever visited, because it really did help folks understand what they were going to 

have to do. 

So I think we have the public. They now know that a huge 

change is coming and I think we’ve been very successful in doing 

that. 

Mr. DAVIS. Thank you. Mr. Hephner, in your testimony you mentioned that many retailers are hesitant to participant in the coupon 

program. What concerns do they have that are preventing them 

from participating? 

Mr. HEPHNER. Well, from the feedback from the dealers around 

me, they first of all thought the coupon program was going to be 

very difficult. They looked it up on the web site and they saw these 

four or five pages of participation rules. I think they just felt overwhelmed by it, thought they were going to have to do more than 

they have to do. 

I understand that there were a lot more odious prior to CERC 

getting involved, that there was a lot more regulations, but it got 

streamlined down. When we started, it seemed fairly simple. I 

mean once you read it through you realize it’s really not as bad as 

it seems. Plus they feel like it’s going to be a hassle to redeem the 

coupons and deal with the customers. They would just rather say 

go buy your box at Wal-Mart. 

For us, that wasn’t an option. We have positioned ourselves over 

the last 58 years to be the expert in our market area for TV. We’re 

going to get those calls anyway, so we have to have a solution period. 

Mr. DAVIS. So do you think those concerns have been valid? 

Mr. HEPHNER. No, I don’t at all. 

Mr. DAVIS. The Government Accountability Office recently released a report regarding the progress of DTV transition. In this 

report, the GAO found that many small retailers had to make costly changes to their point-of-sale process to accommodate the government-issued coupons. Did you need to make any changes to 

your point-of-sale process? 

Mr. HEPHNER. The only change we made was to add a link on 

our computer screen that said redeem coupon that took us to the 

NTIA’s web site. 

Mr. DAVIS. Very good. I started my question—this will be last 

question to Mr. Oliver and I’m going to go back and ask that same 

question to everyone on the panel if anyone would like to answer, 

talking about any problems or technological issues related to the 

equipment. Have any of you seen that happening and if you could, 

if you could respond to the question? 

Mr. PARDINI. Sure, I’ll talk to the point which will hopefully in 

the next few weeks become moot. For example, with Mediacom, 

there are some 45 signal processing centers in small communities 

that service less than 100 customers. To upgrade these centers 

with the necessary equipment would average approximately 

$15,000 per location. So in essence, what we’re looking at was an 

investment on the order of $650,000 to service 4500 customers. 

That means an investment of roughly $1,000 per customer. There’s 

17

very few businesses in this country that can survive when a resource demand is placed on them to put $1,000 down on your 

house. And this is on top of an already highly-pressured great 

structure. So we looked at this, and many small cable operators 

looked at this as being a potential deal breaker in their business 

model and in their ability to conduct businesses after that, after 

the February 17th transition date. 

The FCC, as I mentioned, recently indicated that it was going to 

adopt an order that would provide a waiver of the dual-carriage requirements that would require such a huge financial outlay for 

small cable operators and that’s why we applaud the FCC’s actions. 

We hope that they will adopt the order in the next coming, few 

coming weeks and prevent small cable operators from having to go 

through such an excessive investment for very little return. 

Mr. DAVIS. Would anyone else like to answer that question? 

Mr. DEMPSEY. I would just like to say that we tested getting coupons. We purchased converter boxes. The last display when I spoke 

to the group on aging was in the Millennium Center and I took a 

10-inch monitor over there and rabbit ears and it picked up the signal. So I think they’re going to be, by and large, they work great. 

There will be some areas, particularly in our region with mountains that will be some challenges, but thus far, the coupons, we’ve 

had various people say you know, we ordered them up, they came 

right in and we’ve had basically all positive comments. 

Mr. DAVIS. Thank you. I yield back. 

Chairman BRALEY. The chair recognizes the gentleman from 

Texas for five minutes. 

Mr. CUELLAR. I appreciate what you’re all doing and I do understand the difficulty when we have a major transition. The general 

question I will ask you has to do a little bit more with some of the 

TV stations that deal with the Spanish-speaking individuals which 

I think provides extra challenges from the ones that you all are 

talking about. And I understand what you all are going through. 

What do you do with the—what’s the impact of the DTV transition stations that do not have the must-carry rides like several of 

the Univision stations? Does anybody have an idea? 

Mr. PARDINI. Well, I can tell you in Iowa we carry two off-air 

Hispanic language stations. We also offer a tier of Hispanic language services in our service area on our digital tier that enable 

Hispanic households which represent the largest-growing population segment in Iowa to receive services. So we do carry all fullpower Hispanic language stations in our service areas. 

Mr. CUELLAR. What about the—have you all voiced as an industry the cable plan to move Class A and lower power broadcast stations whose transmission agreement have expired off their analog 

cable tier? 

Mr. PARDINI. I think that that’s on a market-by-market basis dependent upon the station. I do think that low power, Class A stations under the regulations do not have a mandatory right of carriage on cable systems. I think that for cable operators that are 

sensitive to local market conditions, they’ll continue to carry and 

make that service available, simply as a matter of business survival. 

18

Mr. CUELLAR. And I appreciate that, whether it’s in your state 

or certainly in Texas. The Hispanic population is just growing by 

large amounts and Texas I think it’s almost like 36 percent is already Hispanic. Texas, as a whole, to the last census has grown, 

is now—I don’t know if this is a right term, minority majority 

state, mainly with Hispanics and if you look at different states you 

see this growth. I know on the border we have a different type of 

situation because as we move to transition right across the river, 

the Mexicans are not doing that. So they’re staying on that, so that 

means some sort of impact, economic impact to our TV stations on 

the U.S. side. I know that that’s a different subject, Mr. Chairman, 

but whatever you all can do to help some of those minority businesses and keep that in consideration we would appreciate it. 

Thank you. 

Chairman BRALEY. Thank you. We’ll continue on with a second 

round of questioning and we’re watching to see what happens with 

more votes, but as long as we’re on a roll, we’ll just keep going. 

This is a very, very timely topic and I think that it’s been very informative, so I’m going to continue to explore some of these issues 

and hopefully, we’ll be able to shed some light on some additional 

things. 

Mr. Hephner, one of the things you’ve talked about was the intimidation factor of these four to five pages of participation rules, 

do you remember that? 

Mr. HEPHNER. Yes. 

Chairman BRALEY. I’m hopeful that my Plain Language in Government Communications Act which has passed the House recently 

by an overwhelming bipartisan majority, will have a positive impact on reducing the length and the intimidation portion of those 

participation rules. 

One of the things we are all concerned about is reducing the imposition on small businesses by regulatory communications from 

our federal agencies. So one of the other concerns I had is this 

whole issue of the profit margins and the impact that these requirements have on the sale of the digital analog converter box. If 

electronic retailers do not stand to make a profit on the sale of 

those devices, do you believe that there are currently adequate incentives for those retailers to participate in the program and if so, 

what are they? 

Mr. HEPHNER. In our case, being a small business, we don’t just 

look at the bottom line, we look at the long term. We’ve been in 

business for 58 years. Customers come to us for answers. If we 

don’t have the answers, they’ll go someplace else. So we have to 

have the answers. We did not think about not participating in the 

program just because we knew we were going to have to. So ours 

is more of a customer service incentive versus a profit incentive because there is no profit incentive when you make $10 on a sale 

that’s going to take you a lot more time than most sales.Our margins are very, very slim. 

As for that tariff issue, every couple bucks we can take off the 

cost side helps us. But for us, it was being there for customer service. The customer is going to call us with these questions and 

they’re going to expect us to know and that’s our incentive, customer service. 

19

Chairman BRALEY. One of the things we know about your business is that it changes with the change in consumer products and 

consumer demand. And obviously one of the side impacts of this decision is probably going to have a negative impact on companies 

that manufacture TV antennas or if you look at it another way depending on some of the waivers that are being allowed by the FCC, 

it could increase market demand. So as you look at your particular 

business industry, what do you see as some of the challenges ahead 

that could be directly or indirectly related to this change? 

Mr. HEPHNER. Speaking specifically to the antenna issue, we 

have seen an increase in antenna sales just because customers generally need a little bit better antenna to pull in the digital signals. 

They tend to have what I’ve heard the ′′cliff′′ effect. They go along 

great, but then once they drop below a certain signal strength, they 

just drop off and they’re gone. So if a customer is used to using an 

old antenna where they got a snowy picture, now they can’t use 

that same antenna. They’re going to need something better. So I 

think in the short term, things like antennas, we’re seeing an increase; cable wires, antenna masts to attach them to, all those 

things are going to be increased. But there obviously is going to be 

a bubble effect. Once they put the antenna in, that’s not going to 

continue on down the road. 

And obviously, the life expectancy of this product is fairly short 

term. As people’s analog TVs die, they’re going to be replaced with 

these new digital televisions which have those tuners already. So 

this whole concept of the box and all that is fairly narrow, in our 

time frame anyway, it is a fairly narrow situation we’re going to 

be in. In a couple of years, it probably will not be a big issue for 

us. 

Chairman BRALEY. Mr. Oliver, I understand that many cable 

companies are seeking an exemption from the FCC regs issued on 

September 11 of 2007 and the concern that the ACA and these 

small operators have is that the dual-carriage requirements would 

overwhelm the limited band width for many small cable companies. 

Do small telecommunications companies have similar concerns 

about the FCC’s dual-carriage requirements and how they impact 

small cable companies? 

Mr. OLIVER. Mr. Chairman, I am not a technological expert, but 

I can say that in most cases that really doesn’t have a major impact on us as telephone providers because in most cases that’s 

being provided over either a provider to the home which is digital 

or over our DSL product which is again a strong tie back to 

broadband which is already a digital signal as well. 

So on the telephone side, we do find ourselves in a little bit of 

a different situation than typical cable companies. 

Chairman BRALEY. Mr. Pardini, you talked a little bit about the 

upcoming FCC application for a waiver of the must-carry rules, the 

dual-carriage requirements and one of questions I have for you is 

assuming a possible scenario that would not include full relief from 

that request, what, if anything, is the ACA and small cable companies doing in order to plan for how they would proceed? 

Mr. PARDINI. I think without the waiver, you’re likely to see that 

a number of signal processing centers will be shut down which 

means that cable customers in that part of the country will have 

20

to switch to satellite, or find some other way to do that because you 

simply can’t afford to invest in the equipment necessary to deliver 

all of these duplicative programming outlets. 

So I think that there are going to be some companies that simply 

look to refer their customers to satellite at that point which means 

that there’s going to be a local business in a small town that is 

shutting down and losing jobs and those jobs are going out of state 

and potentially with some competitors going out of the country. 

So I think that it’s very important that the FCC understand the 

impact that this will have on main street America, especially in 

these small communities. Within Mediacom, where you certainly 

have some degree of size and scope, we’re not the big boys like 

Comcast and Time Warner, but where you have some size and 

scope you might be able to justify the break even on the equipment, 

but there would be a disruption in services as operators, either 

trade service areas in order to get those economies of scale or look 

to exit the business. And I think that what we all agree here, my 

fellow panelists, is that we’re trying desperately to provide a minimum of disruption to the consumer. This digital transition should 

be transparent when it’s done extremely well. And I think much of 

this partnership has done that. 

There are a few bumps in the road. There are some threats to 

what is now a very smooth transition process that could loom 

ahead unless oversight is exercised by you folks on the Committee. 

Chairman BRALEY. Thank you. Mr. Davis, any further comments 

or questions for the record? 

Mr. DAVIS. Just a follow-up of what you just said. There’s some 

threats looming, have you outlined those in the hearing today? 

Mr. PARDINI. Yes, I have. The one threat which we believe will 

become a moot point in the next couple of weeks is this FCC waiver 

for small cable operators at 552 MHz or less. The other one is the 

upcoming retransmission consent cycle in which some broadcasters 

may be seeking to use excessive leverage to extract fees from consumers and withhold programming and that may be a point of confusion as to whether it’s a retransmission issue or whether it’s part 

of the digital transition and we want to be very clear about that. 

We think there are some things by adopting a ′′quiet period′′ in the 

months before and after this transition where negotiations can continue without necessarily withholding programming. We believe 

that that’s a very sincere step that would allow market conditions 

to dictate an outcome for these agreements to take place that reflect the value that cable and broadcasters provide each other without necessarily disrupting consumers. 

Mr. DAVIS. It appears we put a panel together that can work together as we move towards the February time line for that. Thank 

you for being here today. I have no further questions. I yield back. 

Chairman BRALEY. Well, I would like to thank all of our panelists. It’s been a very enlightening, informative discussion. I think 

one of the things that this hearing has highlighted is what an enormous impact on this country this DTV transition is going to have 

despite the incredible volume of public service announcements and 

crawlers and other forms of communication. Mr. Dempsey, I think 

your personal description of some of the conversations you’ve had 

with people in your ADI are probably representative of what other 

21

consumers around the country are facing in terms of their lack of 

awareness of this problem is rapidly approaching. I think some of 

the stops and starts and when the DTV requirements are actually 

going to be implemented has probably led to some of that confusion, but I think this hearing has helped focus the attention on the 

importance of everyone to do what we can to get the word out and 

help make this transition as seamless as possible. 

I would also like to make sure that we have unanimous consent 

that Members will have five days to submit statements and supporting materials for the record. Without objection, so ordered. This 

hearing is now adjourned. 

[Whereupon, at 4:16 p.m., the Subcommittee was adjourned.]

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Æ


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