The Big Picture: HDTV and

High-Resolution Systems

June 1990

OTA-BP-CIT-64

NTIS order #PB90-256108
Recommended Citation:

U.S. Congress, Office of Technology Assessment, The Big Picture: HDTV and HighResolution Systems, OTA-BP-CI’I’-64 (Washington, DC: U.S. Government Printing Office,

June 1990).

For sale by the Superintendent of Documents

U.S. Government Printing Office, Washington, DC 20402-9325

(order form can be found in the back of this report)
Foreword

As early as 1883 inventors dreamed of transmitting visual images to distant points

extending what they had already done for written messages and voice with signals carried over

the telegraph and telephone. By the 1920s, signiilcant efforts were underway to scan and

project images. Crude television images-actually little more than shadows—were demonstrated in 1926, and by 1928 even color images were achieved. Television broadcasts of the

first television drama, The Queen’s Messenger, were made from an experimental station in

Schenectady, New York in 1928. TV was still futuristic at the time of the New York World’s

fair in 1939 but finally erupted into widespread commercial use in the 1950s. Now nearly a

hti-century later, technological change drives the video revolution unabated.

Television has become the dominant entert ainment medium, and has displaced

newspapers and radio as the prime opinion midcer in American current affairs. Its influence

reaches millions of individuals daily. It has been praised as an extraordinary educational tool,

and its communication power has been credited with deeply influencing the actions of

governments, including the fast-moving democratization of Eastern Europe. On the other

hand, television is criticized as an agent of political manipulation that must share substantial

blame for increasing voter apathy, and suffers with an image of daily progr amming dedicated

to sitcoms, violence, and trivial game shows. Television has become big business, with

production, broadcasting, advertising, video tapes, and the cable industries ranking high in the

U.S. economy. Besides entertainment, this technology now profoundly affects communications, national security, research, and education.

Television technology is now on the threshold of a new evolution. We are on the verge

of combining digital-based computer technology with television. This technological marriage

promises to produce offspring that can deliver movie-quality, wide-screen programs to our

homes with stereo sound equivalent to the best compact disks. Its importance goes well

beyond home entertainent, however. High-definition television—HDTV as it is called-is

linked with many other basic technologies important to the United States. The impacts of the

development of HDTV will ripple through the U.S. economy: It will make us confront such

issues as public policy dealing with manufacturing, educational and trainin g standardization,

communications, civil and military command and control, structural economic problems, and

relationships between government and business.

This background paper was requested by Congressman George Brown, as a Member of

the Technology Assessment Board. It is a primer of HDTV technology and its relationship to

high-resolution computer systems. OTA gratefully acknowledges the contributions of the

many experts, within and outside the government, who reviewed or contributed to this

document. As with all OTA publications, however, the content is the responsibility of OTA

and does not necessarily constitute the consensus or endorsement of reviewers or the

Technology Assessment Board.

~f~

a’L# ‘ >

W

JOHN H. GIBBONS Director

. . . Ill
Workshop on High Definition TV and High-Resolution Systems, October 1989

Lynn Claudy

Staff Engineer

National Association of Broadcasters

Robert Cordell

District Manager

VLSI Systems Research

Birney Dayton

President

NVision

D. Joseph Donahue

Senior Vice President, Technology and Business

Development

Thomson Consumer Electronics

Bruce L. Egan

Special Consultant and Affiliated Research Fellow

Columbia University

Kemeth Flamm

Senior Fellow

Brookings Institution

hn Gelding

Vice President, Systems Engineering

Hughes Network Systems

Dale N. Had3eld

President

Hatiield Associates, Inc.

John G.N. Henderson

Head, Systems Technology

David Sarnoff Research Center

Wayne Luplow

Executive Systems, Electronic Systems R&D

Zenith Electronics Corp.

David G. Messerschmitt

Professor, Department of EE/CS

University of California, Berkeley

Howard Miller

Senior Vice President

Broadcast Operations & Engineering

Public Broadcasting Service

Michael Rau

Vice President, Science and Technology

National Association of Broadcasters

G-ifiith L. Resor

President

MRS Technology, Inc.

Robert L. Sanderson

Technical Assistant to the Director

Imaging Information Systems-Research

Eastman Kodak Co.

William F. Schreiber

Professor, Am Program

Massachusetts Institute of Technology

John Sie

Senior Vice President

Telecommunications, Inc.

Laurence J. Thorpe

Vice President, Production Technology

Sony Advanced Systems

Arpad’G. Toth

Chief Scientist

Advanced Television Technology

Planning and Policy Development

North American Philips

Don Walker

Director of Technical Programs

Motorola, Inc.

John Weaver

President

Liberty Television

Philip Webre

Principal Analyst

Natural Resources and Commerce Division

Congressional Budget Office

Barry Whalen

Senior Vice President

Microelectronics & Computer Technology

Corp.

NOTE: OTA appreciates and is grateful for the valuable assistance and thoughtful critiques provided by the workshop participant

members. The participants do not, however, necessarily approve, disapprove, or endorse this report. OTA assumes full

responsibility for the report and the accuracy of its contents.
OTA Project Staff: The Big Picture:

HDTV and High-Resolution Systems

John Andelin, Assistant Director, OTA Lionel S. Johns, Assistant Director, OTA

Science, Information, and Natural Resources Energy, Materials, and International Security

Division Division

James W. Cu.rlin, Program Manager Audrey Buyrn, Program Manager

Communication and Information Technologies Industry, Technology, and Employment

Samuel F. Baldwin, Senior Analyst

Energy and Materials Program

Mark S. Nadel, Analyst

Communication and Information Technologies Program

Myra Gray, Executive Trainee

OPM Women’s Executive Leadership Program

Kenneth R. Donow, Editor

Administrative Staff

Liz Emanuel

Jo Anne Price

Karolyn St. Clair

OTA Contributors

Robin Gaster, Senior Analyst

Indus~, Technology and Employment Program

Katherine Gillrnan, Senior Associate

Industry, Technology and Employment Program

Julie Gorte, Senior Analyst

Industry, Technology and Employment Program
Charles Bostian

Clayton Ayre Professor

Electrical Engineering Department

Virginia Polytechnic Institute and State University

Robert B. Cohen

Senior Economist, Industry Cooperation Council

Deputy Director & Senior Economist

New York State Financial Services Advisory

Commission

Economic Advisor to the Director of Economic

Development

Urban Development Corp.

Kenneth Donow

National Center for Telecommunication and

Information Policy

Public Service Satellite Consortium

Mark F. Eaton

Director

Associated Programs

Microelectronics & Computer Technology

Corp.

Frederick L. Ikenson

Attorney

Frederick L. Ikenson, P.C.

Clark E. Johnson, Jr.

Independent Consultant

Former Congressional Fellow

Alan McAdams

Associate Professor of Managerial Economics

Cornell University

Roy L. Beasley

consultant

Jules A. Bellisio

Division Manager

Video Systems Technology Research

Bellcore

Charles W. Bostian

Clayton Ayre Professor

Electrical Engineering Department

Virginia Polytechnic Institute and State University

Joseph A. Castellano

President

Stanford Resources, Inc.

Robert B. Cohen

Senior Economist, Industry Cooperation Council

Deputy Director & Senior Economist

New York State Financial Services Advisory

Commission

Economic Advisor to the Director of Economic

Development

Urban Development Corp.

Reviewers

Lee McKnight

Research Associate

Research program Communications Policy

Massachusetts Institute of Technology

Suzanne Neil

Research Associate

Media Laboratory

Massachusetts Institute of Technology

Peter D. Nunan

Senior MTSKufa-g Technology Development

Sematech

James Parker

Japanese Industry Analyst

TechSearch International, Inc.

Ron Powell

Scientific Assistant

Center for Electronics and Electrical Engineering

National Institute of Standards and Technology

Matt Rohde

U.S. Customs Service

Marko Shmi.rczuk

program Manager

High Definition Display Technology

DARPA

E. Jan Vardarnan

President

TechSearch Intermtional, Inc.

Lawrence R. Walders

Graham & James

Contributors

Rhonda Crane

Advisor for Science and Technology

United States Trade Representative

Kenneth R. Donow

National Center for Telecommunication and

Information Policy

Public Service Satellite Consortium

Mark F. Eaton

Director

Associated Programs

Microelectronics & Computer Technology

Corp.

Charles H. Ferguson

Research Associate

Center for Technology, Policy, and Industrial

Development

Massachusetts Institute of Technology

William Finan

Director

Quick, Finan & Associates

vi
Larry French

Corporate Vice President for Technology

North American Philips

Jeffrey Frey

Professor

Department of Electrical Engineering

University of Maryland

Jack Fuhrer

Director

Television Research Laboratory

David Sarnoff Research Center

William Glenn

Professor

Department of Electrical Engineering

Florida Atlantic University

David B. Hack

Analyst in Information in Science and Technology

Congressional Research Service

Heidi Hoffman

International Trade Specialist

U.S. Department of Commerce

C. Edward Holland, Jr.

Program Manager

OUSD(A) Resident

Semiconductor Research Corp.

William C. Holton, Ph.D.

Director, Microstructure Sciences

Semiconductor Research Corp.

James Hurd

President and Chief Executive Officer

Planar Systems, Inc.

Clark E. Johnson, Jr.

Independent Consultant

Former Congressional Fellow

Al Kelsch

Strategic Business Development

Linear Product Marketing

National Semiconductor

David M. Lewis

Technical Assistant to the Director

Electronics Research Labs

Eastman Kodak Co.

Mike Liebhold

Apple Computer

Andrew B. Lippman

Associate Director

The Media Laboratory

Massachusetts Institute of Technology

Alan McAdarns

Associate Professor of Managerial Economics

Cornell University

ke McKnight

Research Associate

Research Program Communications Policy

Massachusetts Institute of Technology

Dave Mentley

Director

Display Industry Research

Stanford Resources, Inc.

Suzanne Neil

Research Associate

Media Laboratory

Massachusetts Institute of Technology

W. Russell Neurnan

Director

Audience Research

The Media Laboratory

Massachusetts Institute of Technology

Peter D. Nunan

Senior MTS/Manufiict~g Technology Development

Sematech

Yozo Ono

Senior Engineer

NHK-North America

James G. Parker

Japanese Industry Analyst

TechSearch International, Inc.

Matthew Rohde

U.S. Customs Service

Eric J. Schirnrnel

Vice President

Telecommunications Industry Association

Richard Solomon

Research Affiliate

Research Lab of Electronics

Massachusetts Institute of Technology

David Staelin

Professor of Electrical Engineering

Massachusetts Institute of Technology

Lawrence E. Tannas, Jr.

President

Tannas Electronics

David L. Tennenhouse

Assistant Professor of Computer Science and Engineering

Massachusetts Institute of Technology

Antoon G. Uyttendaele

Director

Allocations & R.R. Systems

Broadcast Engineering

ABC Broadcast Operations & Engineering

E. Jan Vardarnan

President

TechSearch International, Inc.

Lawrence F. Weber

Senior Vice President

Plasmaco

Robin S. Whkkin

Executive Director

BIS Mackintosh

vii
Page

Chapter 1. Introduction and Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

suMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .- +...”””””””””””” 1

Manufacturing 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .....”” ““”””

Communications Infrastructure . . . . . . . . . . . . . . . . . . . . . . . . . .. .. .. .. .. .. .. ... ... ...”OO” .OO” ””O” 2

Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. ””””””””.”””.””””””””””. 4

INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

The Historical Development ofHDTV(Ch. 2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

CommunicationsT echnologies (Ch. 3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Television Technology (Ch. 4).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Technological Linkages (Ch. 5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

AdvancedTelevision Markets (Ch. 6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

U.S. Manufacturing ofHDTV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

POLICY ISSUES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

NATIONAL SECURITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

THECOMMUNICATIONSINFRASTRUCruRE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Recorded Media . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

Terrestrial Broadcasters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18

Cable Television . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

Direct Broadcast Satellites . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

Mobile Communications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

Telephone Companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

Market Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

costs . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

THE STANDARDS-SETI’ING PROCESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

Standards Setting and Marketplace Participants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

The Thnetable for Establishing Standards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

Providing Full Opportunities for All Serious Proponents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

Hybrid Standards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

Chapter 2. The Historical Development ofHDTV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

JAPAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

Research and Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

Financial Supports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

Market Promotion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

EUROPE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

Market Protection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

Eureka . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

UNITED STA~ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

Production Standards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

Transmissions tandards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36

New Initiatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36

Chapter3. Communications Technologies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39

INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39

TEHTRIAL RADIO COMMUNICATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40

SA~LLITECOMMUNI CATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44

COAXIAL CABLES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45

COPPER TELEPHONELINES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46

OPTICAL FIBER CABLES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47

Chapter 4.TVand HRS Technologies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49

INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49

CONVENTIONALTELEVISION: PRODU~ION,TRANSMISSION, AND RECEPTION . . . . . . . 49

ADVANCEDTELEWSION SYSTEMS: IDTV,EDTV, HDTV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52

VISUAL RESPONSE ANDHIGH DEFINITIONTV .......,.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52

HDTV SYSTEMS: PRODUCTION, TRANSMISSION, RECEPTION . . . . . . . . . . . . . . . . . . . . . . . . . . 55

Production Standards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56

Transmissions ystems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Page

Receivers for HDTV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58

HIGH-RESOLUTION SYSTEMS AND TECHNOLOG~ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59

Chapter 5. Linkages Between HDTV, HR& and Other Industries ● *.*..... . . . . . . . . . . .m...**..* ● 61

INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61

SEMICONDUCTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63

Digital Signal Processing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .......... .......... ...*..”.”. “...”” 63

DRAMs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65

Gallium Arsenide andOther Compound Semiconductors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66

Semiconductor M.anufa*g ..1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..... 67

DISPLAY TECHNOLOGY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68

STORAGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72

COMMUNICATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73

PACKAGING/INTERCONNE~ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74

Chapter 6. Advanced TV Markets and Market Uncer@inties .0..0..0 ● .00..0.0 ....0.0.0 ...0...0 79

INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79

SCENARIOS FOR MARKET DEV.ELOPMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............... 79

Consumer Demand forHDTV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80

Consumer Demand for Interactive Video . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81

Government Policies and Market Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82

MARKETPROJE~ONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83

MARKET PROJECTIONS ANDTHERELATIVEmRT~CE OF ~m . . . . . . . . . . . . . . . . . .85

Extrapolating Current Growth Trends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85

Comparing the Semiconductor orOther ComponentRequirements for

Assumed Market Sizes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86

Comparing Ultimate Market PenetrationRates and Comespon~g Needs peruser . . . . . . . . . . . . . . 87

TECHNOLOGYAND MARKET TRENDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88

Appendix A. The Decline of the U.S. TV Industry: Manufacturing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91

Appendix B. TheDecline of the U.S. TV I.ndustry: Trade... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93

AppendixC.TheDeclineoftheU.S.Dw~dus~:Manufac~g . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95

AppendixD.TheDecli.neoftheU.S. DIWMIndustry: Trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98

Appendix E. TheDevelopment ofthe Japanese Computer ~dus@y . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101

Appendix F. Research and Development Consortia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104

Appendix G. Acronyms and Glossary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106

Boxes

Box Page

l-1. Digital Video Information and Telecommunications Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

3-1. Fundamentals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41

4-1. Inside Today’s NTSC Analog Television . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50

4-2. Inside Analog/DigitalTelevision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53

4-3. hvelsof Receiver Compatibil.ity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ......... . . . . . 57

Figures

Figure Page

l-1. Erosion ofU.S. hdership in Semiconductor and Relat~ Technologies . . . . . . . . . . . . . . . . . . . . . . . 3

3-1. Amplitude andFrequency Modulation ofaCarrier . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41

3-2. ADigital Signal With Its Comesponding Numerical Equivalent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41

3-3. Techniques forModulating an Analog Carrier in OrderTo Send Data in aDigitid Format . . . . . . . . 42

3-4. Selected Allocat.ions of the Radio FrequencySpectrum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43

3-5. Map ofa CellularRad.io System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ........................ ~

4-1. AnalogtoDigital Conversion Using Pulse Code Modulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4-2. Comparison oftheFieldof View for anHDTVandT*y’s NTSCTVTo Havethe Same

Resolution forthe Viewer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ....”... 55

5-1. Selected Applications of Digital Signal processors v. the Speed of@emtion . . . . . . . . . . . . . . . . . . . 64

5-2. ProjectedGrowth ofthe Digiti Signal ProcessorMarkeL 1989-92 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65

5-3. ’’ResosRtie”e” for Active Mati Liquid c~stiDisplays............ . . . . . . . . . . . . . . . . . . . . . . . 69

ix
Page

5-4. Data Transmission Rates and Holding Times for Different Types of Data Communications . . . . . . . 74

5-5. Levels of Packaging/Interconnect ... ................”.....””””””””””” . . . . . . . . . . . . . . . . . . . . . . 75

5-6. Fraction of Integrated Circuits Used in Surface-Mount Packages for Japan, Europe, and

the United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77

6-1. Sales of VCRs, VCR Prices, and the Growth of VCR Tape Ilmtal Stms . . . . . . . . . . . . . . . . . . . . . . 81

6-2. Penetration of Color TVs Into American Households, Average TV Prices, and the Share of

Prime-Time Progra mming Devotedto ColorTV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. ... .. ”.. .....s 82

6-3. Sales and Projections ofVideoEntertainm ent Technologies in the United States andJapan . . . . . . . 84

Tablks

Table Page

2-1. Selected HDTV Technology Development Effofis by Japanese Companies . . . . . . . . . . . . . . . . . . . . . 29

2-2. Chronology ofTVDevelopment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ....................... ~~

2-3. Private U.S. Groups Involved With HDTV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3-1. TheU.S. Communications ~fiastmcture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39

5-1. Status ofU.S. Producers ofFlat Panel Displays in the 1980s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71

5-2. Recent Investments in AM/LCD Production Facilities inJapan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
Chapter 1

Introduction and Summary

SUMMARY

During 1989, High Definition Television

(HDTV) moved from obscurity to center stage

in the ongoing debate over the role of the Federal

Government in U.S. industrial competitiveness.

HDTV and related High-Resolution System

(HRS) technologies in the computer and communications sectors may significantly impact

U.S. electronics manufacturing, accelerate fundamental restructuring of the U.S. communications infrastructure, and provide a host of

valuable services.

Manufacturing

HDTVS must process huge quantities of

information at speeds approaching those of

today’s supercomputers in order to display a

real-time, full-color, high-definition video signal. HDTVS are able to do this at relatively low

cost through the use of circuitry dedicated to

specialized tasks. In contrast, supercomputers

are software programmable and do a much

broader range of information handling and

computation.

HDTV is driving the state-of-the-art in a

number of technologies that will be important to

future generations of computer and communications equipment. These include certain aspects

of digital signal processing for real-time video

signals; high-performance displays; fast, highdensity magnetic and optical data storage;

technologies for packaging and interconnecting

these electronics; and, as with all high-volume

consumer electronics, processes for manufacturing these sophisticated products at affordable

costs.

Consumer electronics has long been the

principal driver of important aspects of these

and other technologies. For example, television

has long pushed display technology. VCRs,

compact disks, and digital audio tape have

driven important data storage technologies.

Products such as calculators, watches, and LCD

TVs have been important in the development of

packaging/intercomect technologies such as

tape automated bonding and surface mount.

Light-emitting diodes (LEDs) in watches, calculators, and indicators; and diode lasers in

CD-players are examples of important optoelectronic technologies driven by the consumer

market. Finally, important manufacturing technologies, such as automatic insertion equipment

to place components on printed circuit boards,

were developed for the high-volume consumer

electronics industry.

Video entertainment markets will be worth

billions of dollars, whatever form they take in

the future. The economies of scale realized in

producing for markets this large combined with

the technological linkages noted before may aid

manufacturers in penetrating other markets

using similar products and technologies, particularly the computer and communications sectors.

Consumer electronics is characterized by

fierce competition, large volume production,

and low profit margins. Because of this, consumer electronics may be the equivalent of the

“coal miner’s canary” for manufacturers of

electronics—providing a sensitive indicator of

their managerial and technical performance in

design, production, and quality; of the health of

the environment they operate in (macroeconomic, regulatory, and structural); and of the

effectiveness of government policy towards

foreign trade practices. Consumer electronics

manufacturing is nearly dead in the United

States. Much of what remains is domestic

‘‘screwdriver assembly’ of components and

subassemblies produced abroad.

Congress might question the wisdom of any

further government involvement in HDTV if

they view the technology in a narrow sense—as

nothing more than a near-term improvement

over today’s TV. However, if it is viewed

–l–
2 ● The Big Pictwe: HL3TVand High-Resolution Systems

broadly—as a possible first step back into

consumer electronics manufacturing; as a principal driver of HRS technologies for future

computer and communications equipment; or as

a component of a national fiber information

network with HDTV or related products serving

as the home terminal-then Congress may find

that HDTV and related HRS technologies could

contribute to several national goals.

HDTV may also bean instructive case study

of the difficulties facing the United States in

reversing the erosion of U.S. leadership in many

electronic technologies and in global and domestic electronics markets (figure l-l). The

United States is seriously lagging technically

and/or in market share in semiconductor materials; ceramic packaging; DRAMs, gate arrays,

CMOS and ECL devices generally; LCD displays; optoelectronics; and floppy disk and

helical scanning drives (VCRS); to name only a

few. The United States will not long remain a

world leader in electronics technologies if its

technological foundation continues to crumble

in this manner.

HDTV and related HRS will not by themselves determine the fate of the entire U.S.

electronics industry. They will only have a

direct impact on technologies and products for

handling visual information, and these impacts

will not begin to be felt for several years. In the

near- to mid-term, the U.S. electronics industry

faces substantial challenges. Many technologies

must be developed—including materials, x-ray

lithography, large-area lithography, optoelectronics, packaging/interconnect, and others—

and much greater effort must be devoted to

manufacturing with quality at low cost.

The responses to these challenges should not

be viewed as independent efforts. The electronics industry is a complex and highly interdependent whole. For example, the design of

leading-edge microprocessors requires access to

high performance computers which, in turn,

depend on leading-edge materials, semiconductor manufacturing equipment, packaging/

intercomect, and other leading-edge technologies. Manufacturing these microprocessors will

become increasingly difficult if vertically integrated foreign competitors control the basic

materials and semiconductor manufacturing equipment. Selling them will be similarly difficult if

these foreign competitors control most other

components (memory and other chips, optical

and magnetic storage, displays); have superior

packaging/intercomect and assembly technologies (e.g., chip on glass); and prefer to use their

own microprocessors instead of purchasing

them from U.S. manufacturers. Although the

fragmented entrepreneurial U.S. electronics industry is remarkably imovative, giant foreign

corporations can easily invest more heavily in

critical technologies or simply buy out the U.S.

entrepreneur.

HDTV and HRS should thus be viewed as

only part of a larger and more comprehensive

effort to understand and resolve the problems

facing the U.S. electronics industry. These

include: the high cost of capital; lack of vertical

and/or horizontal integration; inattention to

manufacturing process and quality, poor design

for manufacturability, and the separation of

R&D from manufacturing; poor or adversarial

relationships with suppliers; weakness in the

U.S. educational system; industrial and trade

policies in other nations that have aided competitors; inadequate foreign protection of U.S.

intellectual property; and foreign trade violations and closed foreign markets. These issues

are discussed in greater detail in a recent OTA

report.l

Communications Infrastructure

The communications industry is currently

undergoing dramatic, technology-driven change

through the increasing use of digital electronics

and fiber optics. In the midterm, the continued

incorporation of advanced electronics and photonics into the existing public telephone netIu.S. con~ss, office of Technology fkessmen~ Making ?’/zings Beffer: Competing in A4aw.facfun”ng, OTA-~43 ~~tigto~ ~: Us.

Government Printing OffIce, February 1990).
Chapter 14ntroduction and Summary . 3

Figure l-l—Erosion of U.S. Leadership in Semiconductor and Related Technologies

Devices

Autorwtsd

Systi3m

Assembly

statistical

process

control

nics

Enabl

Technol

Ciaawoorn t!ompMertwhrmfogy integrated

manufacturing

Materials $iiiwn

matwfais

GaAs and

eptoeiectronic

matwiais

Uitra-pure

processing

cimmicais

Twhnoiogies in which the United States is lagging Japan are shown in light tones; those in which the United States and Japan are roughiy

equal are shown in medium tones; those in whioh the United States is leading Japan are shown in dark tones.

SOURCES: Adapted from the Report of the Federal Interagency Staff Working Group, ‘The Semiconductor Industry,” National Academy of Sciences, 1987;

National Research Council, Advanced Processing of Hectionic Materiak in the United States and Japan (Washington, DC: National Academy

Press, 1988); W.C. Holton, J. Dussault, D.A. Hodges, C.L. Liu, J.D. Plummer, D.E. Thomas, and B.F. Wu, “Computer Integrated Manufacturing

(CIM) and Computer Assisted Design (CAD) for the Semiconductor Industry in Japan,” JTECH Panel Report, Department of Commerce, Science

Applications International Corp., December 1988; Manufacturing Studies Board, The Future of E/ectronhs Assernb/y: Report of the Pane/ on

Strategk E/ec&onics Manufactwing Ttino/ogies (Washington, DC: National Academy Press, 1988).

work will make many new and improved making the transition to terrestrial HDTV broadinteractive information services available. Radio casting, but digital technologies offer the prosfrequency communications are also rapidly pect of more efficient use of the limited

changing due to such imovations as cellular available spectrum than is possible with today’s

telephones and other products. TV system—which is based on 40-year-old

analog electronics technologies. Some of the

HDTV could accelerate these changes in the broadcast spectrum might thus eventually be

communications infrastructure. The greater infer- freed for other uses. For example, it has been

mation content of HDTVS broadcast signal has suggested that if sufficient spectrum became

raised the most significant issues for radio available, cellular telephones could become

fkequency spectrum allocation in decades. HDTV more broadly competitive with today’s phone

bandwidth requirements present problems for system for voice communications.
4 ● The Big Picture: HDTIJ and High-Resolution Systems — ..— .

HDTV might also speed the extension of fiber

to the home by stimulating market demand for

high-quality video entertainment. In the midterm, a mixed cable TV and telephone company

network might provide a modest level of interactive video services. Whether or not such a

system can evolve into a national two-way

broadband fiber network is unclear. This is an

important consideration in establishing a financial and regulatory framework for the communications industry.2

Services

HDTV and related HRS technologies may

offer a host of important services to individuals

as well as to business and industry. Interactive

video, medical imaging, desktop publishing,

and computer graphics are examples of services

already in advanced stages of development or on

the market for high-end commercial users (box

l-l). Other services may not be developed for

many years, and many more remain to be

invented. Video information technologies will

become increasingly important in computer and

communications systems in order to make best

use of the most important human sense—vision.

The United States has the opportunity to

establish a more powerful and flexible HDTV

system than those currently being developed and

introduced in Japan and Europe. America has

many strengths in HDTV and HRS-related

component technologies, as well as in highly

innovative HDTV transmission standards and

receiver designs now under development in a

number of U.S.-based facilities.

The window of opportunity for U.S. firms to

enter or to strengthen their position in these

markets could close quickly, however, if the

strategies of foreign competitors are successful.

Many U.S. firms seriously lag in manufacturing

practices—both managerial and technological—

and there is little consumer electronics manufacturing remaining in the United States on which

to build. These deficiencies could be overcome-—

the Japanese surmounted far greater obstacles in

developing their domestic computer industry

(app. E)—but doing so would require considerable effort and discipline on the part of both

U.S. industry and government.

INTRODUCTION

HDTV is one of several possible forms for the

next generation of home video entertainment;

following Black and White (B&W) TV in the

1940s, color TV in the 1950s, and VCRs in the

1970s. It promises to deliver pictures to the

home as clear as those seen in movie theaters,

with sound comparable to compact disk players.

But HDTV is far more than just a pretty

picture. It is part of an ongoing evolution in

home electronics toward computer-like digital

technologies. This evolution began with such

things as automatic electronic tuners on stereos

and TVs, compact disk players, and electronic

controls on microwave ovens and many other

household appliances. It continues today with

the introduction of Improved Definition TV

(IDTV) that uses computer memories and other

digital techniques to provide a much better

picture even with today’s broadcasts. The evolution will continue in the future with HDTV or

other adv:~nced video entertainment products.

HDTV 1s also at the leading edge of a much

broader, though less well publicized, transition

in computers and communications equipment to

technologies that can create, manipulate, transmit, and display high-quality visual information, including full-motion video as seen on

television receivers. In many respects, Advanced TV (ATV), interactive video, computers, and communications are all gradually merging technologically. Known generically as High

Resolution Systems (F-I’M), these systems will

allow the user to interact with that being

displayed, and will have profound implications

for educat]on, entertainment, and work in the

future.

2

See, U.S. Congress, Office of Technology Assessment, Critical Connections: Comnunicatl(m jor the Future, OTA-CIT-407 (TVashingto~ DC: U.S.

Government Printing Office, January 1990).
Chapter 14ntroduction and Summary ● 5

Box l-l—Digital Video Information and Telecommunications Services

Digital video information and telecommunications technologies (DIVITECH) may potentially offer a variety

of services beyond entertainment. Some of these are listed below.

Telemedicine-13 ecause of its high resolution and true rendition of color, advanced video communications

technologies could be used to transmit medical images such as x-rays, CAT scans, or color pictures of tissue to

leading experts in distant cities for instant diagnosis. A distant expeti might even observe and provide advice during

a critical operation. People in rural areas with little access to world class medical facilities could particularly benefit.

Education—Recent advances in manipulating digital video data allow the viewer to interact directly with

real-world images. For example, the viewer can “stroll’ through ancient Athens at will, the computer selecting and

displaying the appropriate audio and video signals (prerecorded on location) in response to the viewer’s direction.

The viewer could similarly examine the effect of different strategies on the outcome of a battle; take apart and rebuild

an auto engine; or dissect a frog, with detailed information available on demand on how each part works individually

and with other parts. This ability to interact with what is being displayed will make these technologies far more

important to education than today’s TVs. Advanced video technologies could thus be used widely in education, from

pre-school through medical school.

Simulation—Engineering simulation, including computer aided design of structures, electronic components

and equipment, aircraft, and a host of others is already a vital market. As for interactive video, recent advances in

computer-generated images could extend simulations to such things as building design-where a prospective client

might take a realistic “walk” through a proposed design.

Photography—Pictures taken by electronic still cameras could be displayed on a screen or sent over a network

for immediate printing at a distant film developer. With computer assistance, photographic-quality images and

digital audio might one-day be edited almost as easily as words are today.

Telecommunications-A host of new services, ranging from videophones and teleconferencing to

telemarketing new goods could become available to the consumer. One might even design a personal telenewspaper

by using a computer program to search the news services, TV news, PBS educational programs, and others for

written or video information of particular interest that could be stored and later displayed-for example, at breakfast

time.

Publishing-Desk-top publishing using personal computers has already revolutionized the business.

Advanced video technologies will accelerate this by allowing the transmission and display of high-quality visual

material. NYNEX is now experimenting with the transmission of advertising copy between agencies and clients

over a fiber-optics network in New York City.

Defense-HRS technologies could enhance many of today’s defense technologies. Examples might include:

using electronic cameras for recomaissance to eliminate the delays and logistics in processing film; providing high

resolution maps for targeting and/or very close-in air support of ground troops; or improving cockpit displays for

pilots+verlaying information about incoming missiles, ground fire, or aircraft with fuel availability and weapons’

status on a display of the upcoming target.

SOURCES: Paul Kemezis, “HDTV Slowly Moves Into Medical Applications,” New Technology Week, Aug. 15, 1988; Arch C. Luther, “You

Are There. . . And In Control,” IEEE Spectrum, September 1988; William Booth, ‘‘BendingReality’s Borders,” Washington Post,

Oct. 23, 1989, p. A3; “What’s Ahead in Phontx and High-Resolution TV,” Science Focus, vol. 3, No. 2, Fall 1988, New York

Academy of Sciences; U.S. General Accounting Offke, “High-Defiition Television: Applications for This New Technology,”

December 1989.

Early generations of these technologies are video material in an electronic encyclopedia. At

already affecting our professional lives in im- home or in the office, this fusion of computer,

portant ways. High-performance graphics- communications, and imaging technologies will

based workstations and personal computers, make widely accessible a host of new services

laser printers, copiers, fax machines, and other (box l-l).

technologies are revolutionizing the office. Interactive video systems are becoming available Similarly, many government activities could

that allow an architect to “stroll” through a benefit from HRS technologies. For example,

building being designed, or a student to call up the Federal Aviation Administration (FAA) has
6 ● The Big picture: HDWarul High-Resolution Systems

already contracted with Sony (Japan) for highresolution displays to monitor air traffic. The

military could use these technologies for training simulators, command and control centers,

teleconferencing, and aerial recomaissance—

eliminating the delays and difficulties inherent

in processing film. NASA could use HRS

technologies for deep space exploration, remote

sensing of the Earth, and for monitoring launches.

For example, higher resolution pictures would

have aided the analysis of the Space Shuttle

Challenger tragedy. In March 1989, NASA

conducted its first test of HDTV by videotaping

the launch of the Discovery shuttle and transmitting the pictures within the Space Center and as

far away as Orlando, Florida, by fiber-optic

links.3

The role of HDTV as a consumer product in

the future information society remains unclear.

Skeptics portray HDTV as simply providing

better entertainment for ‘‘couch potatoes,” and

claim that there will not be a sufficient consumer

market to support a more complex or capable

technology. Advocates portray HDTV as the

basic technology platform on which tomorrow’s

home and perhaps even office information

services will be built—a veritable keystone for

the video information archway of the future.

Although such scenarios suggest that HDTV

might eventually become the home information

center—providing entertainment, computer, and

telecommunications services-it is perhaps more

likely that these different services will instead

continue to be primarily provided by separate,

specialized pieces of equipment. People simply

work that way. While the teenager is on the

videophone, one parent could watch video on a

big screen in the family room, while the other

parent could use the computer in the study to

balance the monthly finances.

HDTV might thus be one of three platforms

for home information services, the others being

the computer and the videophone. (In homes

that would not otherwise purchase a computer,

the HDTV might serve as an affordable means

of providing some computing power and would

then open a wide range of services.) All three

types of equipment will probably evolve common basic designs that allow easy exchange of

information among them and could significantly

overlap in the services they provide. Overtime,

it may become increasingly difficult and moot to

distinguish these different types of digital equipment from each other. The large, high-quality

screen of the HDTV might be the most notable

difference.

These video information services will neither

replace today’s media quickly, nor will they

until they provide significantly greater functionality at an affordable price. For example, simply

reprinting a newspaper story on a bulky, hard-toread ATV or computer display wiIl not induce

people to give up the convenience of newspapers, which can be carried around and read

anywhere. But video information services that

deliver more in-depth information on a news

program upon request; can send a movie clip to

a friend; or provide electronic yellow pages that

include video clips of restaurants that viewen

might want to try could attract a great many

newspaper readers (a possibility of obviously

great concern to the newspaper indust~).

Despite the potential impacts of HDTV and

related HRS technologies on U.S. electronics

manufacturing and on the U.S. communications

infrastructure, and, despite the opportunities

that new video information services may offer,

the United States significantly lags Japan and

Europe in developing and manufacturing many

of these products.

This report focuses primarily on consumer

HDTV for several reasons: HDTV raises thorny

policy issues; HDTV is driving a number of

technologies and manufacturing processes for

HRS more generally; and HDTV may significantly impact our communications infrastruc3MCM Dohe~, 6’HDTV c~er~ capture Shuttle LaunclL” EZecrronic Engineen”ng Times, m. 20, 1989, P 19.

.$tbsho~d tie U.S. R= tie Baby Bells?” Business Week, *. 12, 1990, P lx.
Chapter l-introduction andSu~w ● 7

ture through possible radio frequency spectrum

reallocation and perhaps by accelerating the

deployment of fiber-optic systems.5

MS attention is paid to intermediate forms of

Advanced TV such as Improved Definition or

Extended Definition TV (IDTV, EDTV): IDTV

has little impact on the communications infrastructure; EDTV’S impact on communications

is modest and EDTV may be bypassed if

simulcast systems are chosen; and neither IDTV

nor EDTV are driving technologies as hard as

HDTV is today.

kss attention is also given to alternative

forms of video entertainment and information

systems such as interactive video: it has little

impact on the communications infrastructure; it

may become an element of the discussion of

HDTV if flexible designs for HDTV receivers

are chosen as the U.S. standard; and it faces

many of the same questions about consumer

appeal as HDTV.

There is similarly little discussion of video

program production: it provides the United

States a net $2.5 billion trade surplus—

compared to a $5 billionb trade deficit for

consumer video equipment—and it has little

impact on either U.S. manufacturing performance or the U.S. communications infrastructure.

Finally, the market for video production

equipment is smaller than that for household

video equipment. There is less emphasis on the

much larger generic category of High Resolution Systems—which represent much of future

computer and communications systems—than

for HDTV. These areas will be referred to

briefly throughout this study, and will be

discussed in more detail in future OTA reports.

The Historical Development of HDTV (Ch. 2)

The Japanese have been selling HDTV studio

production equipment since 1984 and are now

gearing up large-scale commercial production

of HDTV receivers. The Europeans began a

crash program in June 1986 and now lag the

Japanese by just 2 to 3 years. In contrast, the

United States will not even begin testing to

establish HDTV transmission standards until

mid- 1990 and U.S.-manufactured HDTVS could

not likely be commercially available until 1993

or 1994.

The Japanese effort is particularly noteworthy. Japan considers HDTV to be an important

step into the future information society. It

foresees numerous technological linkages between HDTV, High Resolution Systems, and

other parts of its highly successful electronics

industries. As in other countries, the Japanese

face the “chicken-and-egg” problem of who

invests first: consumers will not buy HDTVS

until the price comes down and there are enough

HDTV programs to watch, but manufacturers

cannot reduce the unit price until sales volumes

are large, and movie producers and broadcasters

will not provide HDTV programs until there is

a sufficient audience. The Japanese believe that

the best way to overcome this problem is by

sharing the costs and risks between the government and the private sector. The Japanese

Government has therefore spun a complex web

of direct and indirect R&D, financial, and

market promotion efforts to stimulate the development of the HDTV market.

In contrast, all U.S.-owned firms, except

Zenith, have abandoned the TVreceivermanufactunng business. Many factors contributed to this

exodus of U.S. firms, including: the relatively

poor manufacturing performance by some U.S.

fms (see app. A); and the failure of the U.S.

Government to protect U.S. industry from

foreign trade violations (see app. B). As a result

of the loss of the U.S. TV market, the little work

done on HDTV in the United States has largely

been by or for foreign-owned consumer electronics firms or by small, underfunded university programs and entrepreneurs. The Defense

Advanced Research Projects Agency’s (DARPA)

planned R&D program is the most significant

5~e tem DWi5, on oca5iom Ud loosely to include Advanced TV system gener~lY.

6sa~ ml, ~temtio~ Trade Ahs~tioq Us. @~@ of co~er~, persod cOmrtNUlhtiO~ NOV. 16, 1989.
8 ● The Big picture: HL3TV and High-Resolution Systems

recent step to reverse this, but there are serious

questions about the Administration’s commitment to this effort.

Communications Technologies (Ch. 3)

Historical, economic, and technological factors have combined to provide the United States

five major electronic communication media:

terrestrial and satellite communications using

the radio frequency spectrum; coaxial cables for

TV; twisted copper pairs of wires in the

telephone network; and, recently, optical fiber

for the high traffic “backbones” of both the

telephone and cable TV networks.

The greater information content of HDTV’S

broadcast signal will require changes in the

allocation and use of the existing TV broadcast

channels and could potentially free spectrum for

use in mobile communications and other services. HDTV could spur the use of Direct

Broadcast Satellites (DBS) and might also speed

broader use of fiber optics in cable and possibly

telephone networks by stimulating market demand for high-quality video entertainment.

Television Technology (Ch. 4)

Video entertainment systems may take a

variety of forms in the future, including (in order

of increasing picture quality) Intermediate Definition TV, Extended Definition TV, and High

Definition TV; or perhaps various forms of

interactive video either in conjunction with

these Advanced TVs or as separate systems. Of

all ATVS currently under advanced development, HDTV may have particular consumer

appeal because of its greater potential for

providing viewers the feeling of ‘being there’

that one sometimes gets in watching a highquality motion picture up-close and, for example, having the sense of moving with a stunt

plane when it makes a fast turn.

Television systems have three general functions—production, transmission, and reception

of TV programming—all of which will require

substantial changes from today in order to make

the transition to HDTV.

Production

International efforts are currently focused on

developing common production formats that

will allow easy conversion between different

regional standards. Earlier attempts to establish

a single global production standard foundered

on the lack of compatibility between existing

systems and the cost of converting from one to

another. Earl y recognition by European interests

of the potential competitive threat to their

domestic electronics manufacturing posed by

having a single common standard based on the

Japanese system was also a factor in stopping

the establishment of a single global production

standard.

Transmission

It is difficult to squeeze the greater information content of an HDTV signal into the charnel

bandwidths allocated to terrestrial broadcasting,

especially given the inefficiencies of conventional color TV signals. The Japanese and

Europeans have therefore opted to instead

develop HDTV services through Direct Broadcast Satellite (DBS) systems operating at higher

frequencies not currently heavily used. In the

United States, the greater importance of the

existing broadcasting system, issues of localism

and programming diversity, and other factors

make the development of a terrestrial HDTV

broadcasting capability for HDTV more important than it is in Japan or Europe.

Terrestrial transmission systems proposed for

Advanced TV services in the United States are

based on augmentation of the existing NTSC

transmissions with an additional 3- or 6-MHz

signal; or on simulcasting (simultaneously broadcasting) in the charnels now left vacant to

prevent interference between stations (taboo

channels). Although the NTSC system was a

remarkable triumph when it was developed—

given the electronics technologies of the 1950s—

more efficient use of the broadcast spectrum is

now possible with today’s electronics technologies. Augmentation systems will continue to

use, in part, the NTSC system and may thus tend

to lock into place less efficient use of the
Chapter 14ntroduction and Summary ● 9

broadcast spectrum. In contrast, simulcast systems might eventually allow a large amount of

radio frequency spectrum now reserved for

NTSC broadcasts to be vacated and used for

such services as mobile communications.

Receivers

Advanced TV receivers of greatest interest in

the near-term are the Multiport Receiver and the

Open Architecture Receiver (OAR). Multiport

receivers would be adaptable to a limited range

of predetermined broadcast standards and would

provide limited access for adding voice/data/

video communications.7 OARS follow the path

pioneered by the personal computer industry

and would be adaptable to a much broader set of

broadcast standards, personal communications,

computer functions, or other services that might

be of interest to consumers. This could open a

host of new markets for entrepreneurs.

Advanced TV systems are evolving naturally

from today’s conventional, largely analog systems through the increasing use of computerlike digital electronics. This evolution of TV

technology to digital electronics is inexorable,

even if its speed is uncertain. Similarly, computer and communications systems are evolving

towards greater use of still and video images as

now seen primarily on TV. Advanced TV,

computer and telecommunications systems are

expected to continue to evolve towards reasonably common forrns— HRSS. The impact of

HDTVS and HRSS if connected to a national

fiber communications network could revolutionize information services.

Technological Linkages (Ch. 5)

HDTV is driving the state-of-the-artin certain

digital signal processing, data storage, display,

packaging/intercomect, and other technologies,

as described above. As with consumer electronics generally, HDTV will also push the limits of

cost-effective manufacturing. This could be one

of the most important impacts of HDTV for the

United States.

The expectation of a large market is forcing

potential HDTV manufacturers to push the

state-of-the-art in several areas of HDTVrelated technologies. These technological linkages could assist HDTV producers in other HRS

markets. Simply developing technologies does

little good, however, without markets to sell in.

In the past, the United States has tended to

assume that if technologies were developed,

markets would follow. Faced with large, often

vertically integrated and aggressive foreign

competitors, market shares may be as important

as technology development. These foreign firms

are much more likely to use their own internally

developed semiconductors and other components than to buy them from a U.S. firm (as

might a vertically integrated U.S. firm). Some

foreign firms are also more likely to buy

components they don’t make internally from

local suppliers with whom they have long-term

preferential relationships. These relationships

can be very difficult to crack, regardless of the

price or performance of the ~echnology offered

by the outsider.

Controlling the market, however, is not

enough. Even with a strong technology base and

70 percent of the world’s personal computer

market, the United States still lost the (merchant) DRAM industry to Japan. This was due

to a variety of factors, including: relatively less

efficient manufacturing by some U.S. firms

(app. C); foreign trade violations and closed

foreign markets (app. D); and industry and trade

policies in Japan that encouraged heavy investment in and rapid development of their domestic

industry.

Advanced Television Markets (Ch. 6)

Forecasts based on analogies with past successji.d products, project U.S. sales of HDTVs at

10 to 15 million sets annually within 15 years.

Some expect a large business/industry market

for HDTV equipment to develop much sooner.

Yet others suggest that the HDTV market will

7AxpadG. TothandJosephDonahue, ‘‘An MuMport Receiver: Preb.inary Analysis, ’ First Report of the EIA ATVMulfiportReceiver Com”ttee,

Sept. 11, 1989.
lo ● The Big picture: HDTVand High-Resolution Systems

not develop and that consumer needs can be met

by intermediate products such as Improved

Definition TV or Extended Definition TV, or

instead byproducts such as interactive video. In

fact, there will probably be markets for all of

these products. The large uncertainties in how

video entertainment markets will develop in the

future should not obscure the underlying trend

in consumer video towards digital electronics,

high-performance fiat panel displays, highdensity optical and magnetic recording, and

other key technologies.

The HDTV market projected by these forecasts varies between $5 billion and $12 billion

(1988 dollars) by 2003. VCRs, movie production, and broadcasting equipment increase these

potential values. The overall U.S. consumer

electronics market was worth $30 billion in

factory sales in 1987 and is growing rapidly.8

The High Resolution System market will be

larger yet, encompassing a broad array of

imaging and image processing markets in the

computer, consumer electronics, and telecommunications sectors.

The relative importance of the future HDTV

market has also been compared with that of the

computer sector. Such comparisons are not very

useful; there are simply too many uncertainties.

Regardless of the precise form consumer video

products take in coming years, the consumer

electronics sector will continue to be a large and

important market, and video entertainment will

continue to be its most important component.

Computers and communications equipment will

also make greater use of still and video images,

but they will probably lag consumer video in

driving some of the key technologies such as

digital signal processing, high-performance displays, optical and magnetic storage, and certain

manufacturing processes.

U.S. Manufacturing of HDTV

Proponents argue that government support

for HDTV and related HRS R&D might serve

several national goals.

HDTV might serve as a stepping stone for

U.S. firms to reenter consumer electronics

manufacturing. Consumer electronics is a large

market; it also supports many upstream industries. For example, roughly one-fourth of Japanese semiconductor output is currently used in

consumer products, and TVs and VCRs are a

major portion of this.g Similarly, 70 percent of

the $8 billion (1988) world display industry is

for consumer products. There will continue to be

a large demand for video entertainment and

other consumer electronics equipment, regardless of the specific form these technologies take.

As noted above, consumer electronics is also an

important driver of manufacturing processes.

HDTV might serve as a principal driver of

many High Resolution System (HRS) technologies due to the exceptional demands it places on

display, video processor, storage, and other

technologies. At one time, U.S. fiis could

ignore the consumer electronics market at less

risk because analog electronics were used. With

the shift of consumer equipment to digital

electronics, the linkages to the computer and

telecommunication industries are becoming much

more important. U.S. firms can no longer ignore

the consumer market with impunity.

HRS technologies will be very important to

the computer and communication industries in

coming years. As a forerunner to video, manufacturers sold roughly 9 billion dollars’ worth of

hardware and software in the United States in

1988 for commercial graphics applications, with

sales expected to rise to over $25 billion by

1993. 10 There are similarly large markets for

display technologies; for imaging equipment

such as facsimile machines; and for telecommu8E1=moIIic Industies Association Consumer Electronics Annual Review, 1988 cd., W@@Von, DC.

g“JapanElectronics Almanac,” Dempa Publications, various years; Kenneth FlarnnL Brookings Institution personal communication VCRs alone

account for 12 percent of total Japanese IC production: “TV’s I-Iigh-Stakes, High-Tech Battle,” Fortune, Oct. 24, 1988.

IO~C~~ &apfics Revolutio@” Business Week, NOV. M 1988.
Chapter I-hu’reduction and Summary ● 11

nications equipment, including that using wideband switching and fiber optics. American firms

are increasingly lagging foreign competitors in

many of these technologies; more R&D is

needed, together with greater attention to manufacturing with quality at affordable prices.

Finally, HDTV or related HRS might serve as

the home terminal on a national fiber information network. In the midterm, the Integrated

Services Digital Network (ISDN) will make

possible a host of information services short of

high-quality real-time video. In the longer term,

a national two-way fiber network would make

possible many desirable video information services. If a national fiber network is made a

national goal, then policies to aid its implementation should be put into place in the near-term.

These might include a framework to encourage

additional effort in developing and manufacturing video information systems.

Skeptics insist that if HDTV is important,

industry will invest in it independently and will

do so more wisely than the government could;

that there is no need for government support.

Skeptics argue that HDTV is likely to be a

relatively small market (at most $30 billion in 20

years) compared to the entire world electronics

market (which is already $450 billion or more)

and can therefore be ignored. The same argument could be made about almost any segment

of a market and ignores the relative importance

of specific products in driving the state-of-theart in important technologies. For example, the

total U.S. supercomputer market was just $1.4

billion in 1988, but supercomputers are very

important in driving a number of leading-edge

technologies. DRAMs were just a $2.5 billion

market in 1987—5 percent of the total world

semiconductor market-but DRAMs drive many

important semiconductor manufacturing technologies. HDTV and related HRS are similarly

driving many important technologies (ch. 5).

In contrast to American firms, many foreign

competitors seem much more cautious about

abandoning markets. This may be due to: the

significant financial and technical skills needed

to reenter high-technology manufacturing; the

potential linkages with other existing markets;

or the new opportunities that being in a market

may create. Being in many parallel markets can

also provide economies of scale in R&D and

production of the underlying components, and

tends to insulate a firm from downturns in any

particular market segment.

Some skeptics argue that trying to outguess

the market by backing a specific product is

foolish: instead of HDTVS, consumers may

prefer lower-cost systems with somewhat less

resolution, or systems that provide much more

interactivity. This point may prove to be true.

Consumer markets will likely develop around

each of these as well as other applications.

Neither industry nor government can guess the

precise form that these markets will take; nor is

it necessary to do so. There is a clear trend

towards video information systems, which involve many of the underlying technologies now

being most strongly driven by HDTV.

Other skeptics suggest that it doesn’t matter

if HDTV and related electronics products are

manufactured abroad. They even speculate that

it helps the American consumer if these products

are dumped in U.S. markets-that this effectively gives us something for nothing. Viewed

narrowly, consumers agree. Consumers want

the best possible HDTV programs and pictures

at the lowest possible price, and without having

to pay any subsidies-+ither through taxes to

support R&D, or added fees to cable companies

or other distributors.

This argument is based on a questionable

definition of consumer interest. If U.S. consumers are to buy these goods and maintain a high

standard of living, they must have high-paying

jobs in a strong economy. The United States will

lose potential jobs-especially the skilled jobs

needed to ensure a high standard of living in the

United States-if the electronics or the displays

for HDTVS and related HRSS are produced

offshore. Consumers in other countries have

often paid taxes and price subsidies in order to
12 ● The Big picture: HDTV and High-Resolution systems

maintain their jobs and develop their manufacturing sector.

Finally, some skeptics insist that if HDTV is

potentially such a large market and so important

a driver of technology, then industry would

enter it. The implication is that U.S. industry’s

hesitation to enter indicates that HDTV is likely

to be a turkey. This might prove true, yet

Japanese and European industry have embraced

HDTV. This difference in attitude may, in part,

be due to: the history of the U.S. consumer

electronics industry; the supports Japanese and

European industry receive from their governments; and the barriers now facing prospective

U.S. entrants.

U.S. industry has largely abandoned consumer electronics manufacturing. In today’s

color TV industry, for example, the only significant American-owned f~m remaining is Zenith,

which has just 14 percent of the U.S. (2.8

percent of the world) color TV market. In order

to remain in the TV business, Zenith recently

sold its highly profitable computer division to

Groupe Bull, a 90 percent French Govemmentowned firm.ll In contrast, there are currently 10

Japanese fums, 3 European firms, 2 Korean

firms, and 1 Taiwanese firm producing TVs and

components at some 32 locations in the United

States.12 A significant portion of this work is

screwdriver assembly of electronic components

and subassemblies manufactured elsewhere.

The history of the U.S. consumer electronics

industry is long and tortured. Numerous factors

contributed to its decline. Appendixes A and B

focus on two of these many factors for the color

TV industry: less-competitive manufacturing by

some U.S. firms than their foreign competitors;

and trade violations by foreign firms coupled

with a failure of the U.S. Government to

adequately protect U.S. industry. Given this

history, U.S. industry has good reason to be

cautious about reentering consumer electronics.

American manufacturers face significant barriers if they are to reenter the consumer electronics industry and manufacture Advanced TVs:

Luw Market Share—Foreign-owned fms

control the U.S. domestic TV market.

Foreign competitors can and do use this

base to hone their manufacturing skills,

build their production and distribution

infrastructure, and generate revenues for

development of ATVS. This might also

enable foreign firms to quickly initiate

large-scale production of any imovation

developed for the U.S. market-perhaps

more quickly than the U.S. innovator.

Lznv Profi”ts-The U.S. TV market today

provides little or no profit. Zenith, for

example, has not made a full-year’s profit

on its television business since 1984.13 Few

U.S. firms could justify entering such a

business to their stockholders.

Large Capital investments—Manufacturers must risk large upfiont investments and

withstand years of losses in order to create

an ATV market. These investments are

large and are increasing rapidly as manufacturing processes grow more complex.

Forexample, capital equipment foraminimumefficient-scale, state-of-the-art DRAM fabrication facility now costs perhaps $300-

$400 million.

Manufacturing Skills—Many U.S. firms

lag behind foreign competitors in a number

of manufacturing technologies important

to the production of HDTV (ch. 5).

Inequities inForeignTra&-U.S. manufacturers may not trust the government to adequately protect them from foreign dumping; they may also have little faith that they

will be able to enter or export to the

1 IEvelyn Richards, “French to Purchase Zenith Computer Unit,” Washington Post, Oct. 3, 1989, p. Cl.

lzElectronic ~dus~es Associatio~ HDTV Info Packe~ and Suzanne Heato~ Electronic Industries AssociatiorL perSOfId CommtiatioqDec. 27,

1988.

13Jew K. pe~~m, test~onY at h~~gs ~fore tie House su~ommi~ee on Tel&omm~catiom ~d Ftice, Committee on Energy and

Commerce, Sept. 7, 1988.
Chapter I-Introduction and Summury ● 13

Japanese or to export to the European ATV

markets. Without being able to penetrate

those markets, U.S. manufacturers may be

unable to realize the same economies of

scale as their foreign competitors, who can

compete in the United States. Foreign

producers with protected home markets

can expand production with much greater

confidence that it will pay off than U.S.

producers who have no such assured markets for their sales.

POLICY ISSUES

U.S. industry thus faces significant barriers to

entering HDTV manufacturing. Japanese f~ms

struggled under somewhat different, but in

many respects even greater, disadvantages while

developing their computer industry in the 1960s

and 1970s. Yet through a variety of mechanisms

(app. E), they have developed world-class

capabilities across the spectrum of computer

technologies and products.

Developing competitive Advanced TV, consumer electronics, or HRS manufacturing industries in the United States carries many potential

benefits, especially in strengthening manufacturing abilities in electronics and in developing

technologies that have important spillover applications in other branches of the electronics

industries. To succeed in consumer electronics,

fums must meet demanding tests of manufacturing excellence: the ability to turn out reliable,

well-designed goods at high volume, while

keeping costs competitive. What firms learn in

meeting these tests for consumer electronics can

then be applied to other products, such as

computers and telecommunications equipment.

Technological linkages between HDTV/HRS

and other industries are equally significant. The

knowledge gained in developing core technologies for these systems may sometimes provide

a critical edge in competition for other markets

in this fast-paced industry. U.S. firms might also

find it difficult to get access on equal terms to

such technologies if they are developed by

foreign competitors. For example, if a small

group of like-minded foreign companies were to

gain control of an important component, such as

flat panel displays, U.S. fms might be vulnerable to overpricing or outright denial of sales.

This is not an unheard of practice. Fujitsu, which

produces both semiconductors and supercomputers, is reported to have delayed for many

months in supplying critical semiconductors to

the U.S. supercomputer company Cray Research, Inc.; and Nikon reportedly withheld its

latest and best lithographic stepper from U.S.

semiconductor manufacturers.

For the reasons outlined in the previous

section, the prospects look poor for U.S.-owned

firms to reenter manufacturing in the consumer

electronics field. A few foreign-owned firms

based in the United States are pursuing HRS

research here. Possibly, with some form of

government encouragement, either in developing technologies or in rebuilding manufacturing

capability, or both, U.S. firms might become

more interested in risking their own capital and

efforts in the field as well. That possibility

immediately raises the question of what exactly

constitutes a U.S. firm? This question is explored below. But U.S. efforts to support ATV

or HRS technologies have been fragmented and

abortive so far, in part because such support

raises policy issues that have not yet been

resolved in public debate. This report does not

attempt to resolve them either, but the following

issues should be addressed if Congress wishes to

pursue options to support a domestic HDTV/

HRS industry.

The existence of growing international competition—and the clear decline of U.S. manufacturing competitiveness—has raised the general

possibility of increased government support for

industry. This makes the question of corporate

nationality central. Government support should

go to serve the interests of American citizens in

this new global environment, but, in Robert

Reich’s words, “ Who 1s Us?”14

14Ro~ Reich, “W%O IS US?” Harvard Business Review, January-February 1990, pp. 53-62.
14 ● The Big picture: HDTV and High-Resolution systems

This question has become increasingly pressing because there have been two fundamental

changes in the American economy. First, many

large American firms have become global: they

do an increasing proportion of their business

elsewhere, and U.S.-owned firms are doing

more sales, manufacturing, and even design and

R&D off-shore, in markets like Japan or the EC,

or in low-cost platforms like Malaysia and

Thailand. Second, foreign-owned fms have

diversified into the United States, and many now

have substantial manufacturing efforts in the

United States. Foreign-owned R&D and design

facilities are also opening in the United States,

and some foreign firms have acquired U.S.

high-tech businesses in electronics and other

industries, and support their R&D as well.

Corporate nationality is an exceedingly complex issue, and only a brief overview is possible

here.15 Ownership has traditionally been the

sole criterion of nationality. The fact that

American firms were owned by Americans,

tended to site their production in the United

States, and made almost all their sales in the

United States allowed the ownership criterion to

represent all the other attributes of nationality.

In addition, there was the unspoken assumption

that American firms would in some sense act to

maintain American national interests. But the

shift toward off-shore production, technology

development, and contracting by U.S. manufacturing fms has undercut this assumption. And

ownership itself is not an unambiguous concept,

as ownership does not always mean control: a

minority share ownership can exercise control in

some cases while a majority ownership may not

be sufficient to take key decisions in others.

There is little sign that U.S. fms are in fact

putting the national interest before their own—

partly because that would be a breach of their

fiduciary duty to their shareholders.lb

Thus an alternative view of corporate nationality is now emerging, where the key criterion is

the contribution of the fm to the national

economy, or national competitiveness. Ownership is only one part of that contribution; not one

that is easily quantified. While profits are a

relatively small part of a firm’s overall direct

contribution to the economy in which it operates, they can be a critically important source of

funding for R&D, and growth and wealth. Thus,

even though their share of value is small, profits

may be disproportionately important. Nor is the

flow of profits clear: they can in part be

recaptured by foreign fms plowing back profits

into R&D or capital investments in the United

States or by Americans who are fast increasing

their holdings of foreign securities. The same is

true for foreigners, whose increasing holdings of

U.S. securities cause profits to be repatriated

elsewhere.

Aside from ownership, most value created by

a firm comes from research, development,

manufacturing, related services, and sales. Each

of these elements can be located in the United

States or elsewhere, with differing contributions

to the national economy. Recent testimony

before Congress has stressed the importance of

performance-oriented criteria for determining

whether a firm qualifies as American-the

extent to which the fm provides jobs, tax

receipts, R&D, technology transfer, and other

benefits to the United States, or contributes

positively to the U.S. trade account.17

An extension of this view is offered by Reich,

who argues that the critical contribution of a

fm to the economy lies in its support for a

world-class work force. The kind of business

15A ~ql~~~ysis ~~ & d~~l~@ ~ the fofi~q O’J’A rqrt on ~de~indus~policy. This~~the tidand hidreport Of the

assessment on Technology, Innovation and U.S. Trade, the fmt two of which were: U.S. Congress, Office of Technology Assessmen4 Paying the BiZ/:

Manz@actun”ng andAmerica’s TradeDej7cz”t, O’K4-ITE390 (Washington, DC: U.S. Government Printing Office, June 1988); and U.S. Congress, ~lce

of Technology Assessmen4 Making Things Better: Competing in Manufactun”ng, op. cit., footnote 1.

16Reic4 op. cit., footnote 14.

17Jo~ -e,ta~ony at h-s&fore the House su~o~tt~on science, Re~ch ad Technology, COmmittee on Science, SpaCC, ~d

Twhnology, and the House Subcommittee on International Scitmtiilc Cooperation Committee on Science, Space, and Technology, Nov. 1, 1989.
Chapter 14ntroducti0n and Summary ● 15

being conducted in the United States will have

implications for the kind of work force being

produced, and hence for the attractiveness of the

United States as a site for high-technology, high

value-added manufacturing.18

Some witnesses and some Representatives at

the hearing19 also underlined the importance of

reciprocity between the treatment of foreignowned firms in the United States and the

treatment of U.S.-owned firms in the corresponding foreign country. These comments

reflected views similar to those embedded in S.

1191, the FY 1990 appropriations bill for NIST

Corporate nationality becomes an extremely

complex issue once the simple but perhaps

outmoded criterion of ownership is abandoned.

First, the various activities of business—

production,R&D, support activities, sales, trade—

must be weighed against each other. Is R&D

intrinsically more valuable to the United States

than an equivalent amount of value added in

sales? How should quantitative criteria (e.g., a

certain percentage of value added) be balanced

against qualitative criteria (e.g., a commitment

to doing R&D in the United States)?

These problems can be solved in principle,

but practical application could be difficult. The

Europeans have already found difficulties even

in determining the percentage of locally produced content in some goods, and recently lost

a key anti-dumping case before a GATT tribunal, partly over this issue.20 Qualitative judgments are even more difficult. The combination

could threaten the viability of the GA~ in the

future..

Finally, the complexity is compounded by the

different definitional contexts. Definitions that

may be appropriate for controlling foreign direct

investment may not be useful when qualifying

firms for direct government support, or R&D

contracts.

Despite the difficulties, nations have found

ways in which to discriminate on the basis of

corporate nationality. The EC is funding a

number of R&D consortia. It appears that a

two-tier system of discrimination maybe evolving: firms which are foreign-owned but which

act as good corporate citizens (developing a

fully integrated manufacturing complex with the

EC, even exporting back to their country of

ownership) appear to have better access to

government support than foreign-owned firms

which are not such good citizens. The best

government support may be reserved for firms

which are not foreign-owned-even though the

explicit authority for such discrimination is

sometimes hard to find. So far, decisions have

been made case-by-case.

Advanced TV is clearly a case where the

United States must play catch-up if it is to be in

the game. All but one U.S.-owned company

have left the business of making televisions, and

the remaining company is not financially strong.

The questions are whether and how to support an

industry that is practically nonexistent, and

where foreign producers are clearly ahead. In the

past, countries that have succeeded in doing this

have relied heavily on protection from foreign

competitors—in the case of Japan, protection of

domestic markets not just against imports, but in

many cases from foreign direct investment as

well. In Europe, which is also playing catch-up

with the United States and Japan in a number of

industries, the inclination against foreign firms’

participation is less pervasive, especially in

some countries. American and Japanese firms

have been permitted to participate in some

18~Reich*~ ~cle, T~d Hixon and ~ch “Wrnball distinguish between importers, simple screw-driver assembly (like the plants that make most

cmsumer electronics products in the United States), plant complexes (which produce and even modify existing designs, but do not provide a full line

of R&D in support of new ones), and fully integrated business operations; the latter is a relatively undefined concept which stresses tight integration

of basic research development designj and production. Reichj op.cit., footnote 14.

q+~w~fom tie House Su&o~ttWon Sciace, Research and Technology, Committee on Science, Space, ~dT~huoIogY, and tie House

Subcommittee in International Scientific Cooperation Committee on Science, Space, and Technology,“What is a U.S. Company?” Nov. 1, 1989.

-illiamDullforce, “JapanScores Victory overEC onDuties,”Financial Times, Mar. 29, 1990; Peter MontagnonandLucy Kellaway, “ECRefuses

‘Ib Adopt GATT Report on Dumping, ” Financial Times, Apr. 41990.
16 ● The Big Picture: HDTV and High-Resolution Systems

EC-funded R&D programs, and foreign investment is now encouraged, especially in industries

like electronics and motor vehicles. Nonetheless, domestically owned firms still seem to

be favored for access to government-and ECfunded programs aimed at hastening technical

development.

The European and American governments

face different problems in HDTV; Europe still

has a domestic, European-owned consumer

electronics manufacturing industry. There are

companies that produce televisions, many of

them with production and even research facilities in the United States. Most are foreignowned. Sony, Philips N. A., and Thomson are

involved in ATV, and would probably be

willing and able to take advantage of any

govemment-supported program to foster HRS

technology development. Once again, that raises

the question of what criteria the U.S. Government would establish to determine the participation of companies.

The interests of firms and the interests of

nations are not always the same. American

firms, like European and Japanese firms, are

increasingly likely to be involved in a variety of

international cooperative agreements with other

fins. Multinational firms have many choices of

where they will perform R&D and manufacturing. Right now, the United States is not an

attractive location for developing and manufacturing televisions and other consumer electronics products, except for foreign-owned firms

with external sources of capital and other

advantages stemming horn foreign bases of

operation. To generate interest among domestic

fnms in reentering the business of developing

and making televisions, the government probably will need to change the rules for operating

here, including altering the capital and investment market for manufacturing in the United

States.

In the long run, the most promising way of

assuring that domestic efforts to support any

new technology will result in domestic value

added, is to make the United States a more

attractive location for manufacturing. The United

States now has disadvantages in cost compared

with many developing nations, and disadvantages in its financial environment and quality of

human resources compared with many advanced nations, including Japan and much of the

EC. In addition, the EC and Japan, among

others, have substantial government programs

to support new technology development and

diffusion of manufacturing technology. The

United States compares poorly here, too. Improvements in these areas will help to ensure

that any government support of new technologies or infant industries are more likely to lead

to domestic development and manufacturing.

NATIONAL SECURITY

High Resolution Systems (HRS) and related

technologies are likely to play an important role

in future military systems—analyzing the battlefield, targetting the enemy, or parrying the

enemy’s attack could all benefit from highquality, real-time video information (see box

l-l). HRS technologies will, however, probably

be driven primarily by the needs of the commercial sector.

The defense strategy of the United States has

long relied on technologically superior weapons

to overcome numerically superior foes. Electronic technologies are a critical element in this

strategy. The broad loss of U.S. leadership in

semiconductor and other electronics technologies, particularly in their manufacture, raises

significant concerns for U.S. defense capabilities in the future.21

Dependence on foreign-sourced technologies

generates risks to the U.S. defense posture:

supply lines might be disrupted during a crisis;

zl~w Ofthe Under Secrew of Defemefor Acquisition “Report of Defense Science Board Task Force on Defense Semiconductor Dependency,

February 1987; U.S. Congress, OffIce of Technology Assessment, The Defense Technology Base: Introduction and Overview, O’E4-ISC-374

(Washington, DC: U.S. Government Printing Oftice, March 1988); U.S. Congress, Office of Technology Assessment Holding the Edge: Maintaining

the Defense Technology Base, OTA-ISC-420 (Washingto~ DC: U.S. Government Printing Office, April 1989).
Chapter l-introduction and Summary ● 17

a supplier might withhold critical components

due to pressure from adversaries; or an adversary might gain access to critical technologies

more easily if they are foreign- rather than

U. S.-sourced. For example, the Soviet Union

was able to purchase a sophisticated milling

machine from Toshiba (Japan) and Kongsberg

(Norway) in 1987. This technology enabled the

Soviets to construct much quieter propellers for

their submarines and has thus greatly reduced

their detectability.

Foreign suppliers might also judge their

commercial interests as more important than

U.S. security interests. For example, they might

withhold state-of-the-art technologies that the

United States needs for defense applications in

order to gain a commercial edge. Such withholding may already occur in the commercial sector

for semiconductor manufacturing equipment

and certain computer chips, among others.

On the other hand, the performance attainable

by U.S. weapon systems maybe reduced in the

absence of the best available technology, some

of which is commercially available from our

allies. It may also be more expensive to procure

systems solely from domestic sources rather

than from lower cost foreign sources.

The defense market is no longer large enough

to drive the development of many electronics

technologies. In 1987, the Defense Science

Board Task Force on Semiconductor Dependency found that, in contrast to the 1950s and

1960s, DoD procurement of semiconductors

was too small compared to civilian markets to be

of much importance to the overall semiconductor industry: It concluded, however, that a

healthy semiconductor industry was critical to

national defense. Defense applications may also

lag far behind the state-of-the-art due to the long

procurement times. The same point could be

made about many other electronics technologies, from components to computers, and is

likely to be the case for FIRS technologies as

well.

The Defense Advanced Research Projects

Agency (DARI?A) is supporting generic R&D

in HRS displays and display electronics (ch. 2),

but it will not be able to leverage more than a

small fraction of the R&D that would be

conducted by a viable civilian HDTV/HRS

industry. Further, DoD and DARPA do not have

the legislative authority to directly promote a

civilian HDTV/HRS industry.

A strong civilian HRS technology base is

necessary if many HRS technologies are to be

available for defense needs at all. The low costs

realized for HRS technologies in the commercial sector, however, will not be automatically

translated into low-cost HRS for defense applications. The complexity and specialized nature

of defense systems results in long product

cycles, high R&D and engineering costs, and

stringent performance and reliability criteria

that may have little relationship to commercial

needs—such as for electronics that can withstand high levels of radiation. Further engineering development of commercially ‘available

components is often necessary; and even when

commercial components can be used, they are

often just a small fraction of the total system

cost. Byzantine procurement practices also keep

costs high.22

THE COMMUNICATIONS

INFRASTRUCTURE

HDTV could involve much of the U.S.

communications infrastructure-terrestrial, cable,

and satellite broadcasting; mobile communications; and potentially even the telephone companies. The current terrestrial broadcast spectrum

allocation and transmission standards have been

in place for nearly 40 years. Accommodating the

larger information content of an HDTV-quality

picture could force changes in the frequency

allocation and more efficient use of the spectrum. These changes would also have conversion costs and create competitive tensions

among the media. HDTV opens new opportunizz’’spec~ Issue: The Price for M@,” IEEE Spectrum, November 1988; U.S. Congress, OffIce of Technology Assessmen4 Holding the Edge:

Maintaining the Defense Technology Base, op. cit., footnote 21.
18 ● The Big picture: HDTV and High-Resolution Systems

ties to develop standards and systems that allow

for an easy and flexible transition to future

communications systems such as interactive

high-resolution video on optical fiber.

Recorded Media

HDTV might be first introduced into the U.S.

market through recorded media such as HDVCR tapes, which are not subject to FCC

regulation. The sale of HDTV-quality videotapes and associated consumer electronics equipment might create a market that would then

define a de facto standard for all U.S. media,

whether optimal or not.

HD-VCRS may not require data compression

to the extent needed for terrestrial broadcasting.

This would allow HD-VCR producers to set

higher quality standards than might be practical

for terrestrial broadcasters or cable operators. In

the longer term, wider bandwidths might continue to provide HD-VCRS or other recorded

media a competitive advantage over broadcast

media+ able, terrestrial, satellite—for certain

types of programming.

Terrestrial Broadcasters

HDTV could dramatically impact terrestrial

broadcasting. A 1988 FCC study found that with

the current geographical limits and channel

separation requirements,23 increasing the TV

channel width 50 percent (several of the HDTV

proposals would require greater bandwidth than

this) might force a quarter of today’s TV stations

off the air.”

Policymakers could use the introduction of

HDTV as an opportunity to reexamine the entire

question of spectrum allocation for the first time

since the current system was defined in 1952.25

The standards and frequency allocations made

in the early days of TV broadcasting were

intended to keep the cost of receivers within

reach of the mass market by using then current

technology. There was little need then to conserve the spectrum.

Technological advances since 1952 allow

more efficient use of the spectrum at little

additional cost, permitting more channels of

higher quality to be packed into less space. The

spectrum saved can be used for other services,

such as mobile communications.2G

The FCC could choose an augmentation

policy that would minimize the impact HDTV

technologies have on spectrum use. Existing

broadcasters would be granted a 3- or 6-MHz

chunk of spectrum—most likely one of the

‘‘taboo channels’ (one left vacant by regulation

to reduce interference between local stations)—

in addition to their existing 6-MHz NTSC

channel in order to transmit the added information that HDTV needs to create a high-quality

picture. If a taboo channel was unavailable, then

a noncontiguous charnel would be used. The

wider the frequency separation between the

main NTSC channel and the augmentation

channel, the more likely they would suffer

different types and amounts of distortion—

making it difficult to meld the two signals

seamlessly into one picture.

Systems that augment NTSC broadcasts would

tend to lock in the same inefficiencies of the

NTSC technology that currently hamper the

industry (ch. 4). This might prevent the development of additional broadcast TV channels or

prevent other uses of this spectrum.

23~wwhic lfits~q~ou~y 50 mile sep~ation if the S@OIIS are transmitting over adjacent ChtUllEk, lso tO zoo miles ~p~tion if

transmitting over the same channel. UHF charnel separation is typically one blank channel between active stations in the same geographic are% and

five blank channels between active stations in the same geographic area for VHF. Channel separation requirements are given in more detail in 47 CFR

73.609; 47 CFR 73.610.

‘“A High-Tec~ High Stakes HDTV Gamble,” Editorial Research Reports, vol. 1, No. 7, 1989.

~S&th Rqofi and &der, Television Mlocations, 41 FCC 167 (1952)+ The NTfA ~be~ a ~jor project to reassess the tdlOCzUiOIl Of r~O

fkquency spectrum. Kathleen Killette, “New NTIA Chief Tackles Agend&” iUultichunnel News, Aug. 28, 1989, p. 34.

26D~eN. ~&leldmdGene Ge~, ~~’rheOpp~~CoS& of spec~~o~t~ to Hi@ Deffition Televisio~” papapresent~atthe 16thanrNud

Arlie House Telecommunications Policy Research Conference, Arlie, VA, Oct. 30, 1988.
Chapter LMroduction and Summary ● 19

A sindcastpolicy would have a much greater

long-term impact than augmentation, depending

on how it was implemented. The simulcast

signals would not have to be compatible with

existing NTSC standards and would require few

if any taboo channels; a new set of standards

could be adopted for them that would permit

closer spacing of the new stations’ channel

assignments. As the penetration of HDTV sets

increased, the NTSC stations might be phased

out and the freed spectrum used for: 1) a next

generation of even higher quality video broadcasting technology; 2) additional new TV stations; or 3) mobile communications or other

services.

Cable TelWision

The possibly wider bandwidth of HDTV

broadcasts might require cable operators to use

more fiber-optic technology or perhaps lease

portions of the telephone companies’ fiber-optic

networks. Cable operators may also consider

using DBS to supplement cable systems.

A system using a cable company’s coaxial

cable and a telephone company’s twisted copper

pairs might be able to provide a reasonable level

of interactive video services in the midterm (ch.

3). Existing coaxial systems can provide HDTVquality programming, particularly when strengthened with a fiber optic backbone. Existing

twisted copper pairs of the telephone network

will be able to provide a data rate sufficient for

most information services-but not moderate-to

high-definition real-time video-within the

planned upgrades to the N-ISDN level of

service.

Direct Broadcast Satellites

Direct Broadcast Satellites use frequencies

too high to be of practical use to earthbound

broadcasters; there is a relatively broad range of

frequencies available; and satellite broadcasters

have not yet developed strong vested interests in

a particular allocation of these radio frequency

bands although competition for geosynchronous

orbital space is keen. It is therefore easier to

adjust the satellite transmission system to meet

the demands of HDTV. A partnership was

recently formed in the United States to establish

a DBS system by as early as 1993.27 Some

analysts believe that a DBS system could

‘‘cherry-pick’ the most lucrative HDTV opportunities and poses a formidable threat to cablebased or other delivery systems.28

Mobile Communic@”ons

The potential benefits of using additional

spectrum for HDTV broadcasting must be

balanced against the benefits of using portions

of the TV spectrum for other purposes such as

mobile communications. Due to the physics of

radio wave propagation in the atmosphere, the

most desirable frequencies for mobile communications are the same as those now used for TV.

When the current TV broadcasting system was

put into place and the channels allocated in the

1940s and early 1950s, there was no competition

for these frequencies from alternative uses; nor

did alternative distribution systems for TV—

such as cable or satellite+xist. Today, there

are many alternate means for distributing TV;

the choices for mobile communications are

more limited.

HDTV could have an enormous impact on

mobile communications such as cellular telephone, paging services, and related systems.

More spectrum might be made available for

these services during the transition to HDTV if

simulcast standards are used and charnels are

repacked. In the longer term, additional spectrum might also become available if terrestrial

broadcasters were unable to provide as highquality pictures as competitors-which could

cause their viewing audience to shift to alternative services and allow these frequencies to be

reallocated to other uses.

Additional spectrum for land mobile services

could help reduce future congestion on mobile

27Jolm Burgess, “Satellite Partnership Plans Pay-TV Systeu” Washington Post, Feb. 22, 1990, p. El.

2sDavid Rose@ “The Market for Broadband Services via Fiber to the Home,” Telemutics, vol. 6, No. 5, h%y 1989.
20 ● The Big picture: HDTV and High-Resolution Systems

frequencies, particularly during rush hours in

cities like Ims Angeles, New York, and Washington, D.C. Spectrum and digital radio technologies might allow economical and portable

personal communications to be made available

to most individuals. With sufficient spectrum,

cellular systems might someday compete effectively with local telephone companies wire-line

systems.zg Rates for telephone services might

then be left to the competitive market the way

that cellular rates are now.

To develop awidely available personal communications network, however, will require more

spectrum than is currently available. Although

the United States is still a leader in mobile

communications technologies, it could falter

unless the industry can gain similar access to

spectrum and, correspondingly, achieve similar

market scales as its competitors in foreign

markets.

Teikphone Companies

Twisted copper-pair will continue to be the

predominant medium in the local loop for the

next 10 to 20 years. With the transition to

N-ISDN (ch. 3), the existing copper-pair network will be able to handle most information

needs, including voice, data, and even some

low- to moderate-quality video. Over the midterm, mixed telephone/copper pair and cable

TV/coaxial cable networks might provide a

medium level of interactive information services: cable could provide a high flow of information (hundreds of Mbps), including high-quality

video, from a central location to the home; and

copper pairs could transmit data at a rate of 1.5

Mbps (two pair) from the home to any other

point desired through the switched network of

the public phone system.

Fiber is likely to be the medium of choice

throughout the cable and telephone networks in

the longer term. Inserting fiber in the cable

backbone as a first step significantly improves

cable capacity and performance for a relatively

small investment. In contrast, although telephone companies can replace their backbones

for roughly the same cost as cable companies,

the copper pairs in the local telephone loop to the

home do not have sufficient capacity to deliver

a high-definition signal.

Cable systems camot easily be adapted to

provide high-capacity switched two-way communications such as the public phone system

does. Regulatory and financial structures may

hamper a move to such a system. Xl An impor~nt

question confronting policymakers is whether a

mixed cable/telephone network is an important

intermediate step toward a national two-way

broadband network or an evolutionary deadend. If the former, changes in the regulatory

environment to aid this transition would be

necessary; if the latter, means of encouraging a

direct transition to a national broadband network

must be considered.

Market Share

Terrestrial broadcasters (as do all spectrum

users) have limited spectrum available to them;

in turn, this limits the quality of the pictures they

are able to deliver to viewers. If terrestrial

broadcasters cannot deliver pictures of as high

quality as cable or DBS broadcasters, they may

lose market share. Because of this, many U.S.

terrestrial broadcasters want a single uniform

transmission standard applied to all broadcast

media—terrestrial, cable, DBS, VCRs—to limit

all media to the same technical capability as

terrestrial broadcasters.

Conversely, many of the competing media

look to HDTV as an opportunity for them to

capture market share from terrestrial broadcasters by use of their greater technical potentiaI and

flexibility to transmit high-quality HDTV to the

consumer. Terrestrial broadcasters have little to

gain and a lot to lose in such a contest: they

currently have between 54 and 59 percent of the

z~~leld and AX, op. cit., footnote 26.

3~mceL. Egmand Do~g~ A. Com ‘ ‘capi@BudgefigAlte~tiv~ ForResi&nti~ Broadband Nemorh,” Center for Telecommunications ad

Information Studies, Columbia University, 1989.
Chapter LMroduction and Summary ● 21

television audience, and TV households watch

programs more than 7 hours/day .31

There is more at stake in the contest for

market share among the various media than

simply profits: it could overturn the traditional

roles that these media have played in serving the

public. Broadcast TV is a central cultural focus

in American life, providing a shared experience

and information for all. Over-the-air broadcasters are the only ones to be required by a statutory

obligation to serve local audiences—providing

news, local election coverage, public amouncements, and community affairs. Similarly, public

broadcasting stations are major providers of

educational programming. Because of these

roles and the lack of similar regulatory demands

on alternative media, there is concern that if

broadcasters are unable to provide the same

quality service as alternative media, these services could be lost. While market forces will

ensure the provision of acceptable TV programming, Congress may need to take steps to ensure

comparable services— news, community affairs,

etc.—will be fully and equitably provided to the

public by each medium.

costs #

The costs of upgrading to HDTV for program

producers, broadcasters, and consumers could

be substantial, depending on the standard chosen. Program producers will need to convert

existing studio equipment to video HDTV

production equipment, but this may reduce

production costs by eliminating delays in processing film and by facilitating editing and

incorporation of special effects in the production

process.

Estimates of the cost of upgrading terrestrial

broadcaster’s NTSC equipment to HDTV capability range from $7.4 million to $40 million.32

A simulcast system might cost less than one

using augmentation channels, because much of

the existing transmission equipment could be

used (except for the digital coding, and it would

not necessarily require new wide-band equipment) and the transmission power requirements

would be much less.33

Costs for cable companies may be less. The

FCC Advisory Committee has estimated that the

extra cost of introducing 12 channels of HDTV

programming on a sample cable system serving

100,000 subscribers would be about $1.9 million.34

Consumers, too, may find HDTV receivers

more expensive than the set they use now. By

upgrading to HDTV at the time they would

normally replace their old set, these costs could

be blunted somewhat.

Finally, if the HDTV system is more spectrum efficient, these costs must be weighed

against the benefits of freeing valuable spectrum

for other uses. Consumers camot make this

trade-off, however; policymakers must.

The chicken-and-egg problem of who invests

first might only be resolved by all acting in

concert. Color TV was successfully introduced

only through the patience and enormous investment—some $3 billion in 1988 dollars-of

RCA.35 A similar risk will have to be borne to

launch HDTV. On the other hand, UHF broadcasting was made possible by government

action through the “All Channel Receiver

Law” which requires all TV sets sold in the

SIA.C. Nie~on CO,, personal communication October 1989.

s2FcCA’TVAdvisory Committee, Systems Subcommittee, Working Party 3, Terrestrial Sp=idist Group 1, “InterimRepofi” table 1, Apr. 10,1989.

The Boston Consulting Group, “Development of a U.S. Based Am Industry,’ Preliminary Report prepared for the American Electronics Association

1989, p. 22.

ssHowmd ~fler, “me Simulcmt Strategy for HDTV,” PBS, 1989.

%tFCC Am AdvisoV Cotifiee, op. cit., f~tnote 32, a~c~ent E, ~ble 2; ~d Boston Consdfig Group, op. cit., fOO&lOte 32.

35u.s. Conwess, House su~o~tt=onTcl&omm~cations adF~ce,(Jo~ttee on Energy and Commercq c~nsorfia andthe Development

of High Dqiinition Systems, testimony presented by Barry Whale@ Sept. 13, 1988.
22 ● T~ Big Picwe: HDTVand High-Resolution Systems

United States to have both VHF and UHF

tuners.3G This prevented manufacturers from

cutting costs by eliminating the UHF tuner—

thus raising costs to’ consumers slightly-but

over time allowed the development of a sufficient market so that UHF broadcasting could be

successfully launched.

THE STANDARDS-SETTING

PROCESS

Standards can reduce or prevent confusion in

the marketplace. Standards allow manufacturers

to increase production efficiency by producing

in large volumes for a uniform market; they can

stimulate competition; and they reassure consumers that whichever brand of HDTV they buy

or wherever they use it in the United States, it

will be able to receive and display the local

broadcasts.

These lessons have been hard learned. After

unsuccessful attempts to set AM stereo radio

standards, for example, the FCC left the decision to the ‘‘marketplace’ in 1982.37 Several

incompatible systems then began to be adopted;

this increased consumer, broadcaster, and manufacturer confusion. As a result, AM stereo

broadcasting is growing very slowly, and AM

radio generally is losing market share to FM

radio.

Standards sometimes have drawbacks as

well. When a technology is rapidly changing,

standards can lock in an obsolete technology;

standards can limit choice; and if poorly designed yet widely used, standards can slow

innovation. 38 A good example might be the

QWERTY typewriter. Designed in the late

1800s, the QWERTY layout was intended to

limit typing speeds; the mechanical systems

then available could not otherwise keep up with

a fast typist and tended to jam. Since then,

however, this keyboard has proven impossible

to dislodge despite its widely acknowledged

shortcomings.

Standards have also been used to promote

national political and/or commercial interests.

Rather than using the U.S. NTSC system,

France developed and adopted its own color TV

standard, SECAM, in the early 1960s in order to

protect its color TV industry during the developmental stages. By 1976, the French TV industry

accounted for roughly 0.5 percent of the French

GNP.39 Similarly, patents on the German color

TV system, PAL, were used to help exclude

non-European manufacturers from the European market.a

In the United States, technical standards for

domestic communication technologies are currently handled almost exclusively by the FCC.

Not only has Congress granted the agency

virtually sole jurisdiction over broadcasting

standards,41 but the courts have also recognized

that its legislative authority permits the agency

to preempt conflicting State or local regulations

of technical standards in telephone42 or cable

television.43 Where the courts have found that

national uniformity is important to foster interstate commerce, they have prevented States

from establishing differing standards.

3647 CFR Section 15.65.

37staIIlq M. Bc~n@d Leland L. Johnsoq Compatibility Standards, Competition, andInnovation in the Broadcasting 1ndusQ (SW@ Moni~ CA:

Rand Corp., November 1986). Note that the FCC faced seveml difficulties in setting this standard, including incomplete information on theperfonnanee

of different systems, conflicting test data or data that was gathered under differing conditions, and fierce opposition from the f- that would have lost

had the tentative FCC findings been formalized.

sgDavid WC~ Librq of Congress, Congressional Research semi% “Telecommunications and Information Systems Standardization-Is America

Ready,” 87=$58 SPR, May 21, 1987.

s~on~ J. ~ane, The politics of International Stan&rds: France and the Color TV War (Norwood, NJ: Ablex fiblishing COW., 1979).

~rade policy may have played a more important role in keeping imports out.

dlsee, e.g., &g~iar~o v. United States, 366 F.2d 720, 723 (9th Cir. 1966).

dz~orth Carolina u~”litie$com-s~ion v,FC’, 537 F2d 787 (4th Cir. 1976) upholding theFcc’s s~~ds forcustornaprankes Ct@p3Jl@ (CPE).

dsciO of N@ York v. FCC, 108 S.Ct. 163’7 (1988).
Chapter I--introduction and Summary ● 23

The manner in which the FCC administers

this power can have a significant impact on

many areas of telecommunications; thus the

nature of the ATV standards-setting process

could strongly influence who benefits and who

loses from those decisions. Four aspects of the

process appear to have particularly important

impacts within the United States itself: 1) how

much discretion is delegated to the marketplace;

2) how fast the process is pushed; 3) whether all

serious proposals are fully considered; and ~)

whether the process permits the selection of a

standard that combines aspects of different

proposals. An important related issue is U.S.

participation in international standards fora; this

complex issue will be discussed elsewhere.

Standards Setting and Marketplace

Participants

Ideally, the participants in a market would

reach a consensus on the best standards to adopt

for a particular product, that maximizes their

profits at the same time that they maximize the

attractiveness of the product to the public.

Private sector firms have the technical expertise

and the best knowledge of the markets; and they

are financially accountable for their errors. The

marketplace, however, provides many incentives for firms to establish standards unrelated to

social benefit.

The FCC Advisory Committee on Advanced

Television Services provides a mechanism for

the direct input of private firm expertise. This

advisory committee is voluntary and open to all

who wish to participate. Most of those who

currently participate represent manufacturing or

media interests—they can’t afford not to participate. In contrast, representatives of labor and

consumer interests face difficulties in participating.

Private sector firms directly influence the

standards-setting process by providing regular

and extensive technical staff participation to the

committee; by conducting independent and/or

supporting studies; and by widely distributing

technical documentation. These are potentially

valuable inputs and are incorporated in FCC

30-368 - 90 - 2 : QL 3

decisionmaking. Yet there is also the potential

for abuse. Large firms may be able to fund more

staff participation and technical inputs than

those with limited resources. This can bias the

process.

Foreign TV manufacturers, for example, may

be able to channel much greater resources into

the standards-setting process than U.S. TV

manufacturers, since they now dominate the

U.S. television market. The standards promoted

by foreign manufacturers will not necessarily

represent U.S. national interests in developing

domestic communications infrastructure; these

standards almost certainly do not represent U.S.

national interests in encouraging additional U.S.

firms to reenter ATV manufacturing. Foreign

governments often do not allow reciprocal

access by U.S. firms to their standards-setting

processes for similar reasons.

IJ.S. broadcasters might oppose standards

that would make it easier for the FCC to

reallocate portions of terrestrial broadcasting

spectrum to other purposes in the future, regardless of the long-term interests of the public in

mobile communications or other services.

Finally, if market participants are unable to

reach a consensus on a single choice, there is

danger that multiple and incompatible standards

could result. This could raise uncertainty among

manufacturers and consumers and hinder the

introduction of ATV.

The Timetable for Establishing Standards

In responding to the array of issues raised by

HDTV there are two conflicting time pressures:

1) taking the necessary time to establish a

flexible standard that can support the rapidly

changing technologies and needs for the next

several decades; and 2) setting standards quickly

enough that the U.S. market can grow in parallel

with those in Europe and Japan, thus providing

U.S. producers similar opportunities for realizing economies of scale and learning in production.

If the United States acts precipitously and

establishes standards prematurely, the ATV
24 ● The Big Picture: HDT’V arid High-Resolution Systems

equipment produced under those standards might

quickly become obsolete, the Nation might have

to endure with inferior technology, or have

excessive difficulties in making the transition to

future generations of equipment.

Alternatively, if potential U.S. entrants wait

for a national fiber system, for example, before

entering the ATV market, they could wait 20

years or more. During that time, foreign competitors would have the opportunity to further

strengthen their manufacturing capabilities and

distribution systems, and would receive enormous

revenues for conducting R&D into new technologies. If additional U.S.-owned or U.S.-based

firms are to enter these markets, there is no

substitute for getting in quickly and gaining

intense day-to-day manufacturing experience.

Providing Full Opportunities for All

Serious Proponents

Without some minimum threshold for those

seeking to establish ATV standards, the FCC

could be subject to numerous quack proposals

submitted in the misguided hope of winning a

standards ‘‘lottery. ” Indeed, at least one of the

proposals submitted on paper was believed to

‘‘challenge the known laws of information

theory. ‘“ The FCC Advisory Committee currently requires standards proponents to submit a

fully developed set of broadcasting and reception hardware to the Advanced TV Test Center

(A~C) for testing; 45 and the A~C in ‘m

requires the proponent to post a $200,000 bond

to hold a time slot for testing their system (this

bond can be waived). On its face, this makes

sense. The FCC should not spend government

money to develop and test a private group’s

system, particularly if all the royalties go to that

private group.

On the other hand, designing and building a

complete set of hardware can cost several

million dollars; buying test equipment to debug

the hardware before presenting it to the A~C

can cost millions more. Even fairly large firms,

such as Zenith, are straining to find the manpower and financial resources to meet these

demands. It is not surprising, then, that other

U.S. proponents, who are generally small,

entrepreneurial or university-based efforts, are

having even greater problems. Of the more than

20 standards proposals submitted to the FCC,

only 5 or 6 appear likely to be developed into

hardware at this time due in part to the lack of

financial resources. Several of these are of

EDTV-rather than of HDTV-quality and all but

one or two are sponsored by foreign-based

manufacturers. Even the FCC Advisory Committee has obliquely noted this problem.ti

It is not entirely clear why the U.S. capital

markets have failed to provide the necessary

financing, but they have not. If financial support

is not forthcoming there is the risk that a

foreign-owned standard will be selected and

potentially hundreds of millions of dollars in

license royalties will flow to that entity, despite

the possibility of a superior U.S.-owned system

that could not be considered for lack of a few

million dollars in timely funding.

This early focus on hardware may also be

counterproductive for other reasons. Today,

complex systems are always simulated on a

computer before they are produced. For HDTV

this is particularly important because many of

the improvements in hardware that can be

expected in coming years should be assessed,

but the technologies themselves are not and will

not be available for years. For example, it may

be useful to develop a broader set of standards

that allows for the gradual upgrading of ATV to

44XC Advisory Chmnittee On AW, Systems Subcommittee, “~terim Repo@ “ Apr. 10, 1989, SS/WPI Interim Progress Report, Feb. 12, 1989.

ds~c~d E. Wiley, ~<smnd ~te~ Repofl of tie KC Advisory Committee on Advanced Television Service,” Apr. 26, 1989.

@’FCC Advisory Committee on Advanced Television Service,’ Systems Subcommittee,“InterimRepO%” Apr. 10, 1989; “AnAssessment of the

ATV Systems and Technologies Presented at the Nov. 14-18 Meeting of SWWPI,” p. 3. “MIThas provided outstanding technical inforrnationranging

ffom technical papers on psychophysical aspects of television to ATV system proposals. At the “marathon” meeting MIT presented very interesting

results from computer simulation studies on A’IW transmission in low quality analog channels . . . . l?mtl MIT. . .k dectied to submit mw~e for

testing.”
Chapter 14ntroduction and flummary ● 25

a fiber system, or that can handle the differing

requirements of commercial or industrial users.

The standards process is already falling

behind schedule. This is due, in part, to the rapid

evolution of the technology and the difficulty of

developing a broadcast standard for HDTV—

which many groups are beginning to more fully

appreciate. Ultimately, of course, any proposed

standard must be proven in full-scale tests with

real hardware before it can be formally adopted.

Full-scale manufacturing and marketing will

require a firm with enormous financial resources

and skilled manpower.

Hybrid Standards

The current requirement that proponents provide their own hardware combined with the

FCC’s limited technical and financial resources

for designing and testing ATV systems may

hinder the synthesis of a standard ffom the best

features of several proposals. Proponents of

particular standards might also object to such a

synthesis, gambling instead for their proposal to

be chosen exclusively.

In Europe and Japan the governments have

maintained extensive staff experience through

their national telecommunications services and

broadcasting organizations. Raising the level of

technical manpower and financial resources

within the FCC and possibly utilizing the

expertise within universities and National Laboratories, including the U.S. Department of

Commerce’s National Institute of Science and

Technology (NIST), might enable the government to play a greater role in protecting U.S.

national interests and reduce U.S. reliance on

foreign industry groups with potentially conflicting agendas.

Alternatively, a small elite group of industry

and university technical experts might be

formed and funded to work together, or in

parallel, to synthesize the best possible standard

from the numerous competing proposals. A

corresponding patent pool might be formed with

appropriate safeguards for the interests of the

individuals and companies involved and to pay

back the government its investment from royalties. Some portion of these patent pool royalties

might also be used to fund R&D in video

entertainment technologies, ranging from camera to broadcasting to receiver display technologies.

Royalties to RCA similarly supported a

significant fraction of the R&D in consumer

electronics done in the United States. RCA was

established by GE, Westinghouse, and AT&Tin

1919 at the request of high U.S. Government

officials (including the Acting Secretary of the

Navy, Franklin D. Roosevelt) who wished to

prevent foreign domination of the growing

transatlantic communications services.47

ATUnde~cableswere a,lreadyundesforeign (if friendly) control. Incontras4 the ‘wireless” stations of British owned American Marcoti Compmy

had been held by the U.S. Government during WWI for wartime purposes. Rather than return these stations to foreign control, RCA was formed and

these stations were transferred to it in 1920. RCA Corp. “RCA: Unhistorical Perspective,” 1978. For a discussion of the development and fate of RCA

See: “The U.S. Television Set Market, Prewar to 1970”; Donald ChristianseU “A Stirring Gian4° IEEE Spectrum, February 1986; Nhora

Cortes-Comerer, “A Venerable Giant Sharpens its Claws,” IEEE Spectrum, February 1986; Herb Brody, “Picking Up The Pieces of RCA,” High

Technology Business, May 1988.
Chapter 2

The Historical Development of HDTV

INTRODUCTION

Japan is currently the world leader in HDTV

development. Sony began selling HDTV studio

production equipment in 1984 and HDTV receivers

are now being sold commercially. Regular satellite

broadcasts in Japan began in June 1989 and, by

1991, NHK (the state-owned Japan Broadcasting

Corporation) plans to broadcast 6 to 7 hours of

HDTV prograrnming daily.

Driven by the threat of Japanese domination of

European consumer electronics markets, industry in

19 European countries initiated Eureka95 in 1986-

a collaborative crash HDTV development effort—

that has made rapid progress in developing a

European HDTV system. They have since demonstrated numerous pieces of production, transmission, and reception equipment and they plan to begin

Extended Definition ED-MAC broadcasts in 1991.

U.S. electronics manufacturers have a signtilcant

set of handicaps as they move to meet the competition. U.S. broadcast standards are not scheduled to

be established until 1992. U. S.-manufactured HDTV

consumer equipment probably could not be commercially available until 1993 or 1994. U.S. manufacturers are running a distant third in a three-way

race.

This chapter addresses the history of HDTV

development. By far the most detail is provided on

Japan’s efforts because of theti magnitude and

complexity. The HDTV work in the United States

and Europe will be briefly examined here.

JAPAN1

NHK researchers began investigating HDTV

following the 1964 TolgTo Olympics. A formal

research program was begun in 1970. In 1972, NHK

proposed an HDTV research program to the CCIR

(the ConsultativeCommitteeon InternationalRadio).2

Development of techniques for program production

and to make broadcasting practical followed. In

1979, NHK began experimental transmission tests.3

Sony began marketing HDTV studio production

equipment in 1984 and introduced a second generation of HDTV studio equipment in 1989.4 NHK

experimentally broadcast HDTV pictures of the

Seoul Olympic Games in 1988 via optical fibers and

satellite, and began daily l-hour experimentalHDTV

broadcasts in June 1989 using satellite BS-2. Limited HDTV “HiVision’ satellite broadcasts are

scheduled to begin in 1990 using tie BS-3A

satellite; regular broadcasts will begin in 1991 with

BS-3B.5

At the same time, Japanese TV manufacturers

have developed Improved Definition TVs (IDTV)

which use digital electronics to improve the picture

attainable with current NTSC broadcasts. In August

1989, private Japanese Broadcasters began terresl~e p~cip~somes for this section me: James G. Parker and E. Jan VardamaQ “HDTV Developments in Japau” T~hs~ch~t~tiO~, ‘C”*

Austir.L TX, 1989; MarkEatoq MCC, personal communications, Aust@ w May 11,1989, Oct. 12,17, and 18, 1989; and Pamela Doughmanand Mark

Eato~ “HDS Projects and Developments in Europe and Japan,”unpublished manuscrip~ MCC, Aust@ ~ August 1988; See also: Takao Shirnizu,

“High Defiition Television: Comparison of Research and Development Strategies,” M.SC Thesis, Sloan School, Massachusetts Institute of

Technology, May 1989; Chalmers Johnson, “MITI,~ and the Telecom Wars: How Japan Makes Policy for High Technology,” in Politics and

Productivity: The Real Story of Why Japan Works, Chalmers Johnson, Laura D’Andrea Tysoq JohrI Zysman (Cambridge, MA: Ba.llinger Publishing,

1989); Robert B. Coheu “A Profile of Japan’s HDTV Industry, Its Links to Other Sectors, and Policies Adopted to Promote HDTV Development”

for the JTEC Panel Repo@ National Academy of Sciences, draft.

2~e cc~ is an orga~tion ~volved with ~temtio~ telecoH@cation5 s~n~ds se~g. It is ~sociated with the h.WI’MtiOnd

Telecommunications Union and chartered under the United Nations. The ITU was founded in 1865 and has been a United Nations organization since

1947. Currently 160 members strong and headquartered in Genev% Switzerland, it is the supreme international organiza tion dealing with issues of

telecommunications and standards setting. For more information see: George A. Codding, The International Telecommunications Union in a Changing

World (Dedham, MA: Artech House, 1982).

sKe~ethR. Donow, “HDTV: ~arming for ActiorL” National Association of Broadcasters, WashingtorL DC, April 1988. Note that these early tests

werewideband-Birney Dayto@ NVisiou personal communication Oct. 12, 1989; William Schreiber, Massachusetts Institute of Technology, personal

communication Oct. 12, 1989.

A“Super Television “ Business Week, Jan. 30, 1989; “Development of MUSE Family Systems,” NHK, Nov. 15, 1988, mimeo; David Sanger,

“Japanese Test Illustrates Big had in TV of Future,”New York Times, Mar. 21, 1989; and, Larry Thorpe, Sony COT., personal communication Oct.

12, 1989,

sp~ker and v~m~ op. cit., footnote 1; Eato~ OP. cit.. foo~ote 1.

–27–
28 ● The Big picture: HDTVand High-Resolution Systems

trial broadcasts of an NTSC compatible Extended

Deftition TV (EDTV) System known as “ClearVision” in the Tokyo and Osaka area. Later phases of

this project will provide a wider screen picture and

add digital soundtracks.b

The Japanese may not have begun their quest for

HDTV in the 1960s with anything more in mind than

high-quality pictures and the prospects offered by

large consumer electronics markets. Beginning in

1983 with the emergence of the “teletopia”7 concept, HDTV became something more than that-an

integral part of their information society of the

future. The Japanese envision not a service economy

but an information economy with more and higher

value-added manufacturing than today. By the year

2000, the Japanese expect fidly one-third of their

industrial investment to be in manufacturing related

to information technologies and products.8

In developing such an economy, several principles are shaping their policies, including: “technology fusion, ”9 or the potential of a technology to

impact a broad range of other technologies and

industries; sharing risk between companies and the

government; the promotion of consortia designed to

stimulate competitiveness; and the importance of

developing mutually supporting markets.

Within this framework, the Japanese Government

is providing an intricate web of direct and indirect

supports for the development of HDTV. In addition,

the government has worked with industry to establish standards and has aggressively promoted these

standards and Japanese commercial interests worldwide.

Research and Development

The Japanese Government performed the initial

high-risk R&D for an HDTV system under the

umbrella of the state-owned NHK. Once the major

system parameters were developed, NHK ‘ ‘encouraged” equipment suppliers to participate in the

development of the system components. Companies

were assigned spectlc research areas and sometimes

even specific production tasks, the results of which

were shared with NHK and the other pmticipating

companies for at most a nominal licensing fee.

NHK divided the development of specialized

integrated circuits (ASICS) for the MUSE HDTV

receiver, for example, among six different companies to avoid the duplication of effort and cost if each

fm had to design a complete set of ASICS itself.

Thus, Toshiba developed motion compensation

chips; NEC developed color signal processing chips;

Matsushita developed audio processing chips; and

s. On.lo s~wly, MUSE to NTSC convefler cfiP

set development was divided between Sanyo, Mitsubishi, and Matsushita. These designs were then

shared by all participants.

Numerous fms are involved in other joint (or

perhaps more accurately described as partitioned)

R&D efforts on HDTV-related technologies that are

coordinated by NHK, MITI, MPT, or the Key

Technology Center. 11 These include the development of: camera sensors (CCDS) and related camera

equipment; CRT, projection, and LCD displays;

analog and digital HD-VCRS; optical recording

technologies; bandwidth compression equipment;

and graphics software. Examples of the HDTVrelated R&D and product development of various

Japanese companies are shown in table 2-1.

Some types of production are being partitioned as

well. For example, to minimize duplication and

ensure economies of scale, NHX assigned the highly

capital-intensive development and production of a

35-inch color picture tube for HDTV to Mitsubishi.

In turn Mitsubishi agreed to provide competitors

picture tubes off the same production line on an

equally shared basis. They continued to share

production even when the capacity proved to be

insufficient for the unexpectedly large market.12

GBob whis~ BIS Mackintos4 personal communicatio~ Mar. 29, 1989.

7Note tit “teletopi=” we one set of approaches to local and regional information system development effOfis. There ~e ~nY other approaches.

More broadly, one should speak of these many efforts under the rubric of “information society.’

gp~ker and Va@~ op. cit., footnote 1.

9F3atou op. cit., footnote 1.

l~~hseach ~temtio~, kc., ~SE Decoder B1ock Die fiorn Nikkei Elec@ofics, Aug. ‘7, 1989, pp.126-127; md “Report Of the JTEC

Evaluation Team on HDTV Developments in Jap~” National Science Foundatio~ July 26, 1989.

1 Ipmka md Vmda op. cit., footnote 1.

lzHow~d Wer, PBS, personal communicatio~ IWiy & 1989; Oct. 12, 19*9.
Chapter 2—The Historical Development of HDTV ● 29

Table 2-l—Selected HDTV Technology Development Efforts by Japanese Companies

Displays Total corporate

Cameras Recording Transmitter/receiver Projection sales (est. 1989)

Firm Tube CCD Optical Digital Analog Encoder/demder CRT CRT SS FPD ($ billions)

Canon . . . . . . . - -

Fujitsu . . . . . . . - R

Hitachi . . . . . . R -

Ikegami . . . . . . C R

Matsushita . . . R R

Mitsubishi . . . . - -

NEC . . . . . . . . - R

Pioneer . . . . . . - -

Sanyo . . . . . . . R R

Sharp . . . . . . . R R

Sony . . . . . . . . C R

Toshiba . . . . . . - R

JVC . . . . . . . . . R R

R

R

R

R

R

R

R

R

R

c

R

R

R

R

R

R

c

R

c

R

R

c

c

R

c

R

:

R

c

R

R

c

R

CR- R

RC-R

cc - -

CC- R

CC- R

CCRR

CR - -

CCRR

CCRR

CC- R

CC- R

CR - -

$8. 9

17.8

46.0

0.4

40.0

19.2

22.4

1.5

10.7

10.0

15.5

29.2

5.9

NOTES: R—research; ~ommercializing. Camera tubes are similar to those used today; CCDS (charg~oupled devices) are a type of solid-state sensing

element. Optical recording systems are typically optical disks; digital recording systems are usually for studio use; and analog reeording systems are

primarily for home use, although some using l-inch tape are for use in the studio. CRT (cathode ray tube) displays area large, highquality version

of the picture tubes used at home today. SS (solid-state) projection displays are typically either LCDS (liquid crystal displays-like those used on many

laptop computers) or deformable membranes from which light is refleeted. FPD (flat panel displays) are usually LCDS but plasma display panels and

other types of thin displays (ch. 5) are also under development by some firms. Whether or not the technology is under research or being

commercialized is a subjective judgment because the status of these technologies is changing rapidly and because these same firms are often

marketing similar technologies in less demanding applications today.

SOURCE: James G. Parker and E. Jan Vardaman, “HDTV Developments in Japan,” TechSearch International, Inc., Austin, TX, 1989, citing Nikkei Electronics,

Oct. 3,1988, p.1 14; and Mark Eaton, personal communications, MCC, Austin, TX. Please note that many other developments, such as equipment

for studio production or satellite transmission, or subcomponents of some of the above listed systems, are not included here. Development efforts

by Fujitsu General are shown as part of Fujitsu Ltd. even though it is only 33 percent owned by Fujitsu Ltd.

Through this mechanism, the competitive efforts

of the participating firms are being redirected from

early, high-risk basic system design to secondary

features such as overall product quality, ease of

operation, and manufacturing cost.13

The development of large area LCD displays

presents a particularly interesting example of the

numerous linkages-’ ’technology fusion’ ’-that is

in part guiding Japanese policy. The most ambitious

LCD effort, known as the Giant Electronics Project,

is planned by MITI to be a 7-year approximately

$100 million project to develop a 40-inch diagonal

flat panel display by 1996.

MITI foresees a variety of technological linkages

and potential spinoffs to result from this effort.

Participants will have to: produce an alkali-free

glass substrate with less than O.001-inch (20-

microns) variation in thickness over the entire

40-inch diagonal area; deposit a high-precision

thin-fti on this substrate; develop the manufacturing skills to etch circuitry into this fti to a precision

of roughly O.0001-inch (3 microns) over this entire

area; develop precision techniques for automatically

attaching leads and assembling the display; and

invent new technologies to test it. It is relatively easy

to achieve such precision in the confines of today’s

tiny integrated circuits, but doing so across large

areas poses formidable technological challenges.14

MITI expects these capabilities to be applied in

such diverse products as: ultra-high-density optical

recording systems; ultra-thin photocopying systems;

solar cells; optical engraving; large flat-light sources;

high-precision electronic components; and “chip-onglass’ electronic packaging and assembly. The

‘‘chip-on-glass’ packaging and assembly technologies in particular offer the potential for significant

13u.s. Conpess, House Committe onlhergyand Commerce, Subcommittee on Telecommunications and Finance, Report of the PublicBroadcasting

Service and Comments of the Association of Maximum Service Telecasters, Inc. on High-definition Television, Hearings March 1989, Print No. 101-E;

This approach has been used quite generally in Japa~ and in several of the exceptions where basic system design was done independently at difkrent

companies; there have been serious conflicts and losses as a result. One of the best known such cases was the Sony development of Betarnax and the

Matsushita development of VHS Video Cassette Recorders. Although many believe that the Betarnax was technically superior, the marketing muscle

of Matsushita successfully made VHS the industry standard.

14WsWOfktemtioti Trade ~d~dusq, “Development of Basic Technology for Large Surface Circuit Elements, ’ Tokyo, September 1988;

English translationprovided by Parker and Vardama~ op. cit., footuote 1; Gary Stix, ‘ ‘Manufacturing Hurdles Challenge Large-LCD Developers,’ IEEE

Spectrum, September 1989.
30 ● The Big picture: HDTV and High-Resolution Systems

improvements in the production and the performance of advanced electronic systems (ch. 5).15

Since the mid-1960s, the total investment of NHK

in HDTV R&D and related activities has been about

$150 million. The projects funded through MITI,

MPT, and the Key Technology Center, as well as

investments by private fm greatly increases the

total R&D expenditure. Including the costs of

setting up production lines, private sector investment is estimated to range horn $700 million to as

much as $1.3 billion. Japanese Government financial policies have provided an enormous pool of

low-cost capital that greatly aids such investments

by individual fins.

The Japanese Government is supporting much

more than just HDTV. They are, for example,

funding both R&D and construction of networking,

database, and other information infh.structure at

levels 10 to 100 times greater than their support of

HDTV.lG Some argue that this indicates the greater

importance of these activities; others argue that the

technology and manufacturing infrastructure for

producing the terminals (HDTV and related technologies) for these information networks is now in-hand

and that the Japanese Government has simply

moved on to the next step in developing their

information society.

Financial Supports

A variety of direct and indirect government

financial mechanisms are supporting the development of HDTV in Japan. NHK performed much of

the initial research on HDTV. Funding for NHK is

from a mandatory household color TV subscription

fee of Y107O ($8)17 per month from television

households. In August 1989, this fee was increased

to Y2000 ($14) for homes with satellite broadcast

reception.

The Key Technology Center (KTC) was founded

by MITI and MPT in 1985. It is funded in part by

dividends horn government-owned shares of NIT

and Japan Tobacco, Inc., and direct contributions

horn government financial institutions and the

private sector. 18 By fi&1989, the KTC had ‘“Pported some 141 company projects and 75 consortia,

of which several are HDTV-related.19 Loans of up to

70 percent of the total outlay are available with no

payments due on the principal or interest for up to 5

years. The principal is then repaid within 10 years of

completion of the project. There is a ceiling on the

interest of about 5 percent which is paid tithe project

is successful, but is waived entirely if the R&D

project fails. An advisory board to the KTC passes

judgment on the degree of success of a project and

the amount of interest to be repaid.m

A web of financial supports is also being provided

for HiVision development and promotion efforts. In

the MITI HiVision Communities program, special

loans are available from the Japan Development

Bank and the Hokkaido Tohoku Development Fund

for HiVision equipment, software, or promotion.

The loans will cover up to 40 percent of the costs at

5 percent interest with up to 3-year grace periods and

15-year repayment times. No-interest loans for

facility construction are available with similar grace

periods and repayment times.21

Small and medium-sized businesses are included

in the MITI plan. Performing R&D, initiating a

business, or promoting a market related to HiVision,

or purchasing HiVision-related products can make

one eligible to receive a 15-year loan of up to Y1OO

million ($700,000) at 3.5 percent interest the frost 3

years and 5.4 percent after. Even more favorable

loan rates are available to small businesses in

smaller towns and rural areas.22

15MITI, “Development of Basic TechrIoIogy for Large Surface circuit Elements, ” Op. Cit., fOOtnOte 14.

16Cohe~ op. cit., fw~ote 1; DemM Kogyo Geppo, Mar. 1989, pp. 2-11; Kenneth Flamm, Brookings hti~tio~ Persod comm~catiom; ‘t” 13

and Oct. 25, 1989.

17Bm~ on ylLI&$I.00 and m~ded off.

lsp~ti and Vardm op. cit., footnote 1.

ls~kfitoq MCC, pmso~comm~catio% &t. 17, 1989. Note tit&e KTC fwwtions much like an investment bank. It creates new COlllpallieS

in the form of consortia and provides up to 70 percent of the capital. If the effort of the consotia looks like it will be successm the companies involved

will then fund anincreasingportion of the work until, after 5-7 years, it is a stand-alone company. Other activities of the KTC include: lending to projects

within companies, mediating (especially technology transfer) between the mtional laboratories and private companies; supporting contract research;

creating and promoting databases; and handling trust funds to sponsor foreign researchers in Japanese labs.

20p~m and Viid- op. cit., footnote 1.

zl~“HiVision Application Guide, HiVision Community Concept,” July 31, 1989, p. 31; Translation provided by Eato% op. cit., footnote 1.

2z~op. cit., fOOtnOte 21-
Chapter 2—The Historical Development of HDTV ● 31

Potentially significant tax benefits are provided in

the MITI plan as well. For example, expenditures on

HiVision promotion in MITI HiVision Communities can be taken as a loss for tax purposes.23 Tax

advantages can occur in a wide range of other

settings. For example, small and medium-sized

businesses that buy or lease satellite communication

facilities can receive accelerated depreciation or

other tax considerations.x

The government has also directly reduced risk to

fms by acting as a holding company-purchasing

expensive equipment and then leasing it back to

firms. The MPT is now pl arming to establish a $740

million holding company for the BS-4 satellite due

to be launched in 1997. Companies will then be able

to lease HDTV channels on that satellite according

to market conditions.

Using satellites for HDTV is an example of the

Japanese effort to develop mutually supporting

markets. Although the satellite systems for HDTV

could have been purchased from the United States,

the Japanese Government has instead pursued a

program of developing a domestic space industry.

This effort began with the February 1983 launch of

Japan’s frost commercial communications satellite,

which cost three times more than similar or better

systems that could have been purchased from the

United States.25 Japanese efforts to create a domestic

HDTV industry are thus channeled into supporting

the domestic space industry as well.

Fin~y, ~WS will not be purchased if HDTVcompatible programrning is not available. Thus,

both MPT and MITI have established leasing

companies. Nippon HiVision was formed in April

1989 by the Mm, NHK, and 40 private companies

to purchase and then lease HDTV equipment to

broadcasters. MITI is establishing a leasing company with about 30 private companies to lease

HDTV equipment and software to movie producers,

electronic publishers, and non-profit groups such as

schools and museums. These leasing companies

reduce risks for both manufacturers and users of

HDTV equipment—by guaranteeing sales for producers, providing equipment to users at low cost,

and ensuring that movies and TV programs of

HDTV quality are produced for viewers to watch.

Sony’s recent purchase of Columbia Pictures for

$5.6 billion is seen by some as a move to ensure that

there will be programrnin g available for Sony

manufactured HDTVS.26

Market Promotion

R&D and financial supports can assist in getting

the products to market, but will not sell them. To

stimulate market demand, the MPT and MIT’I have

established a number of promotional committees

and councils. These groups are staging public events

with HDTV and have begun extensive procurement

efforts.

The MPT HiVision Promotion Council, for example, broadcast the Seoul Olympics to 205 HiVision

sets at 81 public sites across Japan. Other promotional efforts organized by NHK, MITI, and MPT

include: The World Fashion Fair held in Osaka

Kobe, and Kyoto during HiVision week (Nov.

18-26, 1989); the HiVision Gallery for the Gifu

Museum of Art-in which nearly half of their works

have been put into an electronic ffle system for

viewing on a large screen; the Exposition of Flowers

and Greenery in Osaka (April to September 1990);

and many others.27 MITI’s HiVision Promotion

Center also helps set standards for industrial HDTV

equipment and surveys new uses for industrial use of

HDTV,28

Private fms and consortia are also investing

heavily. Recently, Japan Victor Company (JVC)

contracted with a Hollywood producer for $100

million to produce ftis.29 It had earlier considered

purchasing a Hollywood studio but backed off for

~~id.

up~ker md V~d_ op. cit., footnote 1.

fiJo~o~ Op. Cit., fOOtnOte 1.

“’WhySony is Plugging Into Columbia,” Business Week, Oct. 16,1989, p. 56. There have been other notable deals forU.S. entertainmentcompanies

recently, including Australian Qintex Entertainen~ Inc. purchase of MGM/UA Communications, Inc. for $1.5 billion. Such deals are not related to

the development of HDTV nor the penetration of the potential U.S. HDTV marke~ however. “Invasion of the Studio Snatchers,” Business Week, Oct.

16, 1989, p. 52.

27p@w ~dVmd- op. cit., footnote 1.

uJ~es G. p~a,T~hsemch International, Inc. personal communicatio~Wt. 6, 1989.

%lichard W. Stevenson, “Japanese Put Up $100 Million To Back Fihns in Hollywoo&” New York Times, Aug. 21, 1989.
32 ● The Big picture: HDTV and High-Resolution Systems

fear of a consumer backlash to the large number of

recent foreign purchases of Hollywood companies.30

The parallel MPT HiVision Cities and MITI

HiVision Communities programs are among the

more ambitious of these market development efforts.31 These projects are intended to demonstrate

HiVision hardware and software, stimulate the

purchase and use of HiVision equipment, and

provide a test market for HiVision applications.32

The MPT HiVision Cities program, for example,

selected 14 cities from 71 proposals in March 1989

to receive support in purchasing and using HiVision

equipment. These cities are pilot projects to study

uses for HDTV, including developing video and

graphics databases for museums, schools, and other

public uses, and to use leading-edge information

technologies and services to stimulate the local

economy .33

By American standards the Japanese seem to be

marching in lock step, but there are inevitable

tensions. The development of HDTV has created

conflicts between NHK and private broadcasters.

Similarly, the numerous parallel programs described

above indicate the intensity of the competition

between MITI and MPT to take the lead in HDTV—

which both see as the gateway to Japan’s information society of the future.~ For MITI, this maybe

a particularly important turf battle as their traditional

role of ‘‘protecting and nurturing Japanese industries until they could compete in any market in the

world’ ’35 is ending and they must find new roles to

play.36

It is too early to tell whether this competition

between MITI-MPT will slow or speed Japanese

efforts in HDTV and telecommunications. For

example, MJ.TI proposed its “New Media Conmmnity’ ‘ and MPT countered with its ‘‘teletopia’

program in the summer of 1983. The combined

costs, however, proved too much for the Diet (the

Japanese parliament), and both proposals were

dropped in 1984. Not until 1986 was a compromise

found that allowed them to move forward.37 In other

cases, competition might heighten efforts.

Given their lead in developing HDTV technology

and their desire to penetrate foreign markets, the

Japanese have worked intensively to ensure that

their standard was adopted worldwide. This effort

stalled at the May 1986 meeting of the CCIR in

Dubrovnik, Yugoslavia, when European countries

refused to accept the Japanese standard. Their

refhsal was based on: the lack of compatibility38 of

this standard with existing European systems and the

cost of converting between these formats; the

competitive threat they foresaw to European domestic television manufacturers posed by the Japanese;

and the haste with which the single standard was

being pushed on them.39

EUROPE

Europeans formed a joint venture HDTV development effort in June 1986 known as ‘‘Eureka Project

95.” The project is charged with development of

European production, transmission, display, recording standards, and equipment. Proposals are expected to be ready forpresentationto the 1990 and/or

1994 Plenary Assembly of the CCIR for acceptance

“’Invasion of the Studio Smtchers,” Business Week, Oct. 14, 1989, p. 54.

qlNote that ~e~ are no reliable estimat~ of how much the MITI Communities and MPT Cities plans are going to C@ it all depen~ on how WY

projects apply and how much is requested by each. The MPT program reportedly has roughly $100 million pending in requests; there are no figures

available for MITI. So-called “third sector” enterprises are being created to actually run the trial cities and communities programs once they have been

formed. Mark Eato~ MCC, personal communicatio~ Oct. 18, 1989.

3ZU.S. Congrws, House Committee on Energy and Commerce, House Subcommittee on Telecommunications and Finance, Consom”a adthe

Development of High Definition Systems, testimony presented by Barry H. w’hale~ Sept. 5, 1989.

qspmk= and Vard+ op. cit., footnote 1.

34Jo~o% op. cit., footnote 1.

ssJodo~ Op. cit., footnote 1, p. 183.

36David E. Sanger, “Mighty MITI Imses Its Grip,” New York Times, July 9, 1989, p. El.

37Jo~ou 0p. Cit., footnote 1.

38~s lack of ~mpatibili~ is ~liev~by some to ~ve~n a s~tegic choice by Japanese manufac~e~ to force~ej-g of existing ~Uipmen4

to increase their companies sales, and to squeeze competitors-who generally cannot afford to risk the long payback times that an incompatible system

would require due to its slow acceptance. At the same time, the lack of compatibility with present TV sets was the fundamental flaw of the Japanese

system which allowed it to be successfully attacked. Adam Watson Brow “Towards the Triumph of the Matte Black Box,” vol. 16, No. l, Zntennedia,

January 1988.

3qJoseph Roizeu “Dubrovnik Impasse Puts High-Definition TV On Hold,” IEEE Spectrum, September 1986.
Chapter 2—The Historical Development of HDTV ● 33

as a co-world standard. NV Philips Co. (Netherlands) is President of Eureka Project 95 and Thomson SA (France) is Vice President. Robert Bosch

GmbH (Federal Republic of Germany), Them/EMI

(United Kingdom), and more than 200therorgan.izations from 9 countries are participating in the effort

as well. Approximately 1,700 engineers, technicians, and support personnel have been involved full

time in the project.a

The first phase of the Eureka Project 95 ended in

December 1989 and cost an estimated $318 million.41 Sixty percent of these funds were private.

Europeans plan to begin public broadcasts of

digital sound and provide a slightly improved

picture to viewers through their MAC (Multiplexed

Analog Components) system in 1990. Broadcasts

using the Extended Deftition wide-screen EDMAC system are scheduled for late 1991, and ftdl

HDTV-MAC broadcasts are plamed for 1994.42 By

1995, European broadcasters plan to offer full

HDTV satellite and cable services.43 Like the

Japanese, the major focus of European HDTV

efforts has been Direct Broadcast Satellite systems.~

HDTV promotional efforts currently scheduled

include broadcasts of the 1990 World Cup Soccer

Championships horn Italy; and broadcasts of the

1992 Summer Olympics from Barcelona, Spain.

One thousand public receivers will be scattered

throughout Europe to receive these broadcasts.45 As

in Japan, there have also been efforts in Europe to

extend the performance of existing TV systems

rather than proceeding to new and completely

incompatible systems. There is some concern that

such a move could slow the market acceptance of

their MAC system.4G

Market Protection

The Europeans formed the Eureka Project 95 in

part to support their domestic consumer electronics

industries. In addition to stimulating R&D to ensure

competitiveness, the Europeans have aggressively

enforced antidumping statutes and have imposed

domestic content requirements in those sectors

where dumping has occurred. In electronics, for

example, there are now domestic content requirements

for both systems and components. Regulations

require the skilI-intensive integrated circuit fabrication steps, for example, to be done in Europe.

Minimum prices have been set on DRAMs, as in the

United States!7 Regulations have also been implemented that prevent products from simply being

transshipped through other countries (including the

United States) with minimal additional manufacturing.~

Similarly, Europe is concerned with protecting its

domestic movie and TV-program producers as well

as its cultural identity. As Direct Broadcast Satellites

(with conventional TV broadcasts) begin operations

over new charnels in Europe they are ffig air time

with U.S. TV programs and movies.49 Faced by a

deluge of U.S. programs, the European Community

‘%ureka $ecretaria~ project documents.

4

1 Peter De Selding, “Europeans Feeling Cocky When It Comes to HDTV,” New Technology Week, Sept. 11, 1989; Eureka Secretariat project

information. The budget for 1988-90 is 270 million ECU.

dzNote that tie Europea.11 system is compatible with existing standards only by using electronic conv~ers in their satellite rtiivtigWipment to

change the MAC transmissions to PAL or SECAM. William Schreiber, Massachusetts Institute of Technology, personal communication Oct. 12, 1989.

Aswmley R. Iverso~ “U.S. (3ropes for Unity on HDTV,” Electronics, March 1989; Bob Whisk@ BIS Mackintosh, Pmsoti com.mtication, ~.

28, 1989; Hugh Carter Donahue, “Choosing the TV of the Future, ” Technology Review, April 1989.

‘Paul Gregg, “Satellite TV Flies European Flag, “ Electronics Weekly, Sept. 27, 1989.

AsRoger wroo~ougk “World.ClaSs HDTV,” Electronic Engineering Times, Sept. 11, 1989, P. lg.

“’German EDTV Tests,” TV Digest, vol. 29, No. 32, Aug. 7, 1989, p. 15.

LtT~~w pollack, “E~pe Sets Prices for Japan’s chips, ” New York Times, Jan. 24,1990. Note that EC regulations have recently been successfully

challenged under GATT See, William Dullforce, “Japan Scores Victory Over EC on Duties,” Financial Times, Lxmdon, Mar. 29, 1990; and Peter

Montagnon and Lucy Kellaway, ‘‘EC Refuses To Adopt GATT Report on Dumping, “ Financial Times, Imndou Apr. 4, 1990.

~~e new EEC ~les rq~e mat tie most substitial process in producing a semiconductor be done in Europe. European ~ar~ef%esf, vol. m No.

6, June 1989, p. 9.

49Jacques Neher, “A Revolution Brews In European Television@” Washington Post, Mar. 5, 1989.
34 ● The Big picture: HDTV and High-Resolution Systems

recently set guidelines to devote the majority of air

time “where practical” to European programs.50

Eureka

The Eureka Project 95 to develop HDTV is part of

the much larger Eureka program begun in July 1985

by 19 European nations to support collaborative

multinational efforts in high-technology R&D, manufacturing, and services. Eureka was founded on the

recognition that many of the European national

markets are too small for a “national champion”

fii to achieve a level of sales capable of recovering

development and manufacturing costs for many

high-technology items. For example, the R&D costs

for a new generation of public phone switching

equipment have been estimated at $700 million to $1

billion and it would require sales of $14 billion to

recoup these costs.51 As a consequence, numerous

European collaborative R&D efforts have been

launched in recent years, including the $1.5 billion

RACE project in telecommunications, the $5 billion

JESSI project in semiconductors, and several others.52

Procedures for establishing a project under Eureka are both fast and flexible. Industry groups

define and propose their project to their respective

national governments. If they do not already have

partners to work with, the Eureka Secretariat tries to

identify such groups. With the agreement of the

respective national governments, the proposal begins a 45-day period of circulation and discussion.

At the end of this period a gentleman’s agreement or,

sometimes, an early formal agreement is reached on

whether or not to move the project forward.

European nations are also moving rapidly to

upgrade their communications systems through the

implementation of ISDN (Integrated Services Digital Network). ISDN allows voice, video, and data to

be carried over telephone networks in a digital

format (ch. 3) and is the next important step in

telecommunications systems. European efforts in

HDTV and telecommunications promise to

them important competitors in these markets.

UNITED STATES

make

After black and white TV was introduced in the

1940s and color TV in the 1950s, American researchers looked for ways to fi.uther improve resolution, color, and picture quality during the late 1950s

and 1960s. They achieved resolutions in experimental systems roughly comparable to those now

being demonstrated by the Japanese.53 These advanced capabilities, however, were not pursued: the

costs of these systems would have been far too high

for consumer use; the newness of the medium had

not yet whetted consumers’ appetites for dramatic

improvements in picture resolution; and practical

transmission technologies (e.g., bandwidth compression) were not available. By the late 1970s when

electronics technologies had matured sufficiently to

make consumer HDTV systems a reasonable goal,

U.S. fms were rapidly ceding TV manufacturing to

foreign fms (see table 1-2). These factors limited

further development of HDTV in the United States

until recently.

RCA’s Sarnoff labs began research in HDTV in

the late 1970s. By mid-1987, some $40 million had

been spent overall on its advanced television work,

with an estimated $35 million required to finish

development of the system they are proposing to the

FCC.54 CBS has also worked on HDTV. h 1981,

CBS requested permission from the FCC for use of

the 12 GHz spectrum and began terrestrial broadcast

experiments in 1982.55 Some foreign firms have

been active in HDTV research in the United States

as well, including Philips (Netherlands) and, with its

recent purchase of RCA, Thomson (France).

~Steve L,Ohr, “EurOp~nTvS vast Growth: Cultural Effect Stirs Concerq’ New York Times, Mar. 16, 1989, p. Al; U.S. Congress, House COmmittw

on Energy and Commerce, Subcommittee on ‘Telecommunications and Finance, Television Broadcasting and the European Conznzuw”ty, Hearings July

26, 1989, Serial No. 101-84; Edward Cody, “EC Adopts European TV Program Quot&” Washington Post, Oct. 4, 1989, p. Fl; Paul Farti “U.S. to

Fight EC Directive Limiting Foreign TV Shows,’ Washington Post, Oct. 11, 1989, p. F1.

51 G~efioy Dmg N@Ye% ~~Empem R&D PolicY for Tele~OmmuniCatiOns3* K~MS~ einer s~die im A~trag des ~,Bad Homef, Apd

1989, Nr. 49.

52Steven Greenhouse, “Europeans United To Compete With Japan and U.S.,” New York Times, Aug. 21, 1989.

53wiI~Glenn, FIori& Atl~tic University, Boca Raton, Feb. 10, 1989; Schreiber, op. cit., fOO@te 42.

54u.s. Con=ess, House co~tt= on Energy ~d Commerce, Subcommittee on Telecommunications and Fimmce, Testi~ny o~Steven Bo~”ca!

Serial No. 100-188, Oct. 8, 1987.

Sscorey P. C@O~, “History of High Defiinitio~” paper presented at the “HDTV: The Second Annual conference and Exhibition on High

Deftition Television,” Arlingto~ VA, Feb. 12, 1990.
Chapter 2—The Historical Development of HDTV ● 35

Other HDTV efforts that began in the late 1970s

and early 1980s include those by: Zenith; William

Glenn, New York Institute of Technology5b; William Schreiber, Massachusetts Institute of Technology; Yves Faroudja of Faroudja Laboratories;

Richard Iredale, Del Rey Group; and others. The

small size of most of these efforts, however, has

limited the extent and rate of progress in HDTV and

related technologies in the United States. Total

private expenditures on HDTV R&D in the United

States were roughly $70 million57 as of early 1988.

There has been little public-private cooperation in

the U.S. HDTV effort compared to Japan and

Europe. Significant amounts of money have been

spent, however, on related technologies such as

digital signal processing for military radar and sonar

applications.58

Production Standards

HDTV requires new standards for producing

video material. These standards might include such

factors as the number of lines (resolution), the frame

rate (50 in Europe v. 59.94 in the United States), and

the type of scarming (interlaced or progressive). If

these production standards differ horn one region to

another, expensive transcoding might be required

for programs produced in the United States to be

shown in Europe and vice versa. This could dampen

international trade in movies and TV programs.

Many U.S. movie and TV-program producers

have promoted a single international production

standard to avoid this possibility. A single worldwide production standard would aid the exchange of

video material between countries and help U.S.

program producers maintain their current $2.5 billion annual export market.59 Everyone is interested

in improving international communication and understanding: uniform world standards might help

achieve this ideal.

The Society of Motion Picture and TV Engineers

(SMITE) formed a Working Group on High Deftition Electronic Production in 1977 and began work

in 1981 on a production standard. One concern of

this group was to document and standardize HDTVproduction equipment development. A second concern of the SMPTE was that differing European,

American, and Asian production standards would

limit the U.S. producers global marketing of their

programs.

The work done by the SMFTE resulted in a set of

parameters which differed slightly horn the NHK

1125/60 system, then the only system available in

the world and one of the focuses of the SMFTE

work. These parameters were adopted by the Japanese.m The U.S. Advanced Television Systems

Committeebl (ATSC) recommended the resulting

1125/60 standard to the U.S. State Department and

it was supported by the official U.S. delegation at the

Dubrovnik meeting of the CCIR in May 1986. A

chronology of all these various activities within the

United States is listed in table 2-2 and many of the

groups actively involved with Advanced TV development in the United States are listed in table 2-3.

A number of domestic groups, however, opposed

the 1125/60 standard developed by the SMPTE and

others. NBC and ABC, for example, have opposed

approval of the 1125/60 format because they expect

that conversion from 1125/60 to whatever standard

is chosen for the United States, such as 1050/59.94,

will be costly and will introduce unacceptable flaws

in the picture-thus hurting their domestic broadcasting market.b2 Instead, they believe that a transmission standard should be chosen first that meets

U.S. needs. Following that, a family of international

production standaxds can be established to best fit

the national needs of each country. American

broadcasters are also concerned with the potential

costs of converting their equipment to HDTV and

fire. Gl~is c~nfly with Florida Atlantic University, Boca RiXOn.

57~FQ Dwby, “~onomic potenti~ of Advanced Television prOdUctS, “ National Telecommunications and Information Administration+ Apr. 7,

1988.

5sFor res~h directly related to HDTV, relatively little has been spent, with NASA a particularly important supporter of HDn-like~D.

5~sis the netuos. tie for 1988 fimotion pic~s and ~ progr~s. Motion picture &sOc~tionof Americ@-fotion piCluI’C %port Association

of Americ% “Fact Sheet: Film and Video Piracy.”

@The SMPTE began their work assuming no parameters and spent several years looking at a variety of factors such as chromaticity before setting

line and fmrne rates. Birney Dayton, NVisiom personal communicatio~ Oct. 12, 1989.

61~ ad hoc SOUP fom~in 1984 by v~ous groups (s= Box 3.’3) to develop VOl~~stamkds for ~Tv.

62 C$HDTV pr~uction: The Future IS Almost Now,” Broudcusting, Oct. 17, 1988, P. 39.
36 ● The Big picture: HDTV and High-Resolution Systems

Table 2-2-Chronology of N development

1928

1936

1939

1941

1953

1960s

1964

1964

1972

1977

1979

1981

1982

1982

1983

1984

1984

Radio Manufacturers Association begins planning for

B&WTV

RCA demonstrates prototype B&W TV

First public TV broadcast done at New York World’s Fair

NTSC standards are set for B&W TV

NTSC standards are set for color TV that is compatible

with B&W sets

U.S. firms develop prototype high-resolution TV systems

All-Channel Receiver Law enacted

Japanese state-owned broadcasting system NHK begins

HDTV development

NHK submits draft HDTV study program to CCIR

Society of Motion Picture and TV Engineers (SMPTE)

begins study of HDTV

NHK conducts first satellite transmission tests of HDTV

First demonstration of HDTV in US; SMPTE recommends

action on HDTV in US

CBS conducts transmission tests in satellite broadcasting frequencies

CBS announces two-channel HDTV system

The Center for Advanced Television Studies (CATS) is

formed

The Advanoed Television Systems Committee (ATSC) is

formed

Japanese NHK establishes the MUSE transmission

standard for DBS

1984

1985

1986

1986

1986

1987

1987

1988

1988

1988

1988

1988

1989

FCC allows the introduction of stereo sound broadcasts

ATSC recommends the NHK production standard to

Department of State

National Association of Broadcasters forms task Force

on HDTV

U.S. Department of State and Japanese propose NHK

production standard to CCIR

Europeans begin Eureka projeot to develop their own

HDTV system

National Cable Television Association forms Comnittee

on HDTV

FCC creates Advisory Committee on Advanced Television Services (ACATS)

Electronic industries Association forms an Advanced TV

Committee

American Electronics Association forms a task force on

HDTV

Advanced Television Test Center established

Bell South/Belicore transmits HDTV by fiber at Democratic National Convention

FCC tentatively decides HDTV must be compatible/

simulcast with NTSC; no additional spectrum will be

made available outside existing bands

DARPA announces $30 million of funding for HDTV R&D

SOURCE: Adapted from: “A Chronology of High-Definition Television Development,” VarjetV, Oct. 12, 1988, m. 74-75: Tonv Uvttendaele, ABC, wmonal

communication, Sept. 7, 19&; and Electronic Industries Association, “Chronology-of TV and” AT/ D6~elopment,” N&v. ~0, 1988, Washin~on, DC.

are considering intermediate EDTV quality systems

as a substitute.

Ofllcial U.S. support for the Japanese/ATSC

1125/60 standard was reversed in May 1989 due to

the unsuitability of its use within the United States;

the recognition that 1125/60 would not be adopted

as a world standard due to European opposition; and

political opposition to handing the Japanese a

competitive advantage in manufacturing HDTVS.63

Program production standards that can easily be

transcoded from one system to the other (which the

original Japanese NHK system cannot) are, however, still possible and desirable.~ Work on such a

“Common Image Format” was proposed by the

U.S. delegation and endorsed for further study at the

May 1989 CCIR Extraordinary Meeting for HDTV.

Transmission Standards

The FCC formed the Advisory Committee on

Advanced Television Service in 1987. The Advisory

committee formed three subcornmittee8- Planning,

Systems, and Implementation-to review proposed

terrestrial broadcasting standards for the United

States.

In September 1988, the FCC issued a tentative

decision that whatever new transmission standard

was chosen, HDTV broadcasts should also be

available to those with today’s NTSC sets. Further,

additional spectrum outside of today’s UHF and

VHF bands for TV broadcasting would not be made

available for HDTV, although individual stations

might get as much as 6 MHz additional spectrum

within these bands.

New Initiatives

U.S. Government efforts in support of HDTV

R&D have increased during 1989. In December

1988, Defense Advanced Research Projects Agency

announced a $30 million, 3-year R&D program for

high-resolution displays and supporting electronics.

63John Burgess, “U.S. Withdraws Support for Studio HDTV Standard,” Washington Post, May 6, 1989; Lucy Reilly, “State Department Changes

Stance On HDTV Standards,” New Technology Week, May 1, 1989.

@w. F. Schreikr, “A)?riendly Family of Transmission Standards For All Media and All Frame Rates,’ Draf4 Feb. 12,1989, Massachusetts Institute

of Technology, Cambridge, MA.
Chapter 2—The Historical Development of HDTV ● 37

Table 2-3-Private U.S. Groups Involved With HDTVa

Group Purpose Members

. . . . . . .

Ad Hoc Group on An

Advanced TV Research Program (ATRP)

Advanced TV Systems Committee (ATSC)

AdvancdlVTestCenter (A~C)

American Electronics Association (AEA)

American Nationai Standards

Institute (ANSI)

Association of Maximum Service Telecasters (MST)

Broadcast Technology Center

Cabie TV Labs. Inc.

Center for Advanced TV Studies (CATS)

Electronic Industries Association (EIA)

HDTV 1125/60 Group

Institute of Electrical and ElectronicsEnginsers (lEEE)Tdnology Activities Council

Motion Picture Association of

America (MPAA)

National Cable TV Association

(NCTA)

Nationat Association of Broadcasters

Society of Motion Picture and

TV Engineers (SMPTE)

Telecommunications Industry

Association (TIA)

To reoommend policy to aid U.S. HDTV efforts

R&D for advanced TV systems and Associated

Regulatory Policies

Develop voluntary standards for HDTV

Testing of ATV systems

To assist U.S. firms in electronics manufacturing

A national standard setting organization that sets

voluntary standards for the U.S. and helps

develop U.S. position internationaily

To find means for 100al stations to provide HD

service

R&D for broadcasters into HDTV

R&D in HDTV for the cable TV industry

Funding for independent TV R&D

To recommend policies on Advanced TV

To promote the 1125/60 (modified version of

original NHK) production standard

To recommend policy to promote U.S. interests in

electronics

Trade Association for U.S. motion picture industry

To assess HDTV systems for cable applications

Trade Association for U.S. radio and TV broadcasters

Tdnicai society deveiophg voiuntary recommended

standards and practices

To present position of telecommunications supply

companies on HDTV

Various; organized by researchers at Ml I

ABC; NBC; HBO; PBS; Ampex Tektronix; RCA;

Zenith; Kodak; Generai Instruments; etc.

Electronic Industries Association; IEEE; Nationai

Association of Broadcasters; Nationai Cabie

TV Association; Society of Motion Picture and

TV Engineers; etc.

Nationai Association of Broadcasters; Association

of Maximum Service Telecasters; Association

of Independent TV Stations; Capitai Cities/

ABC; CBS; NBC; PBS; etc.

U.S. hi-tech electronics firms inciuding: AT&T;

iBM; Hewiett-Packard; Motoroia; intei; ilT

DEC; National Semiconductor; Tektronix; Ti;

Zenith; etc.

Various

270 iooai stations: independent ornetworkaffiiiate

Nationai Association of Broadcasters; CBS; etc.

63 cable TV companies with over 75% of U.S.

cabie subscribers

ABC; Ampex; CBS; Kodak; Zenith; NBC; PBS;

RCA; HBO; 3M Co.; Harris Corp.

Foreign and U.S. firms: Foreign consumer electronics firms inciude: Mitsubishi, NEC, Sony,

Phiiips, Panasonic, Thomson, Hitachi, etc.

Sony; NEC; Panasonic; JVC; Toshiba; Chyron;

Cinema Produots; Compression Labs; Dynair

Electronics; etc.

Represents 240,000 engineers in the U.S.

Various

Teiecabie; Scientific Atianta; Generai Instrument;

HBO; ESPN United Artists Cabie; Fox Cabie;

Warner Cabie; etc.

Various

Various end users, manufacturers, and individual

engineers from the TV and fiim industry

Aicatei, NA; AT&T; Corning Giass; GTE; Hughes;

IBM; Motorola; Scientific-Atianta

~his list is not inclusive.

SOURCE: Electronic Industries Association, “Non-Governmental Groups Involved With HOW,” HDTV Information Packet, Washington, DC, Nov. 30, 1988;

Greg Depriest, Association of Maximum Serviee Telecasters, personal communication, Jan. 18, 1990.

DANA received 87 proposals requesting roughly U.S. commercial interests have also attempted to

$200 million. By November 1989, 11 contractors forge a basis for public-private cooperation. In May

had been named.G5 Congress appropriated $20 rnil- 1989, the American Electronics Association (AEA)

lion for this R&D in the fiscal 1990 budget, but Advanced Television Task Force, representing 36

stipulated that the money could not be spent until the U.S.-owned firms, proposed a $1.35 billion (governAdministration had developed a comprehensive ment share) 6-year program of R&D, low-cost loans,

program for HDTV. and loan guarantees to assist U.S. manufacturers in

tiBfiRob~oq ‘‘DARPA Names DTV ContractorS,” Electronic Engineering Times, June 19, 1989, p. 11; Richard Doherty, “Six Firms Get

DARPA HDTV Nod,” Electronic Engineering Times, Oct. 30, 1989, p. 1.
38 ● The Big picture: HDTVand High-Resolution Systems

designing, developing, and producing HDTVs.ti

This effort, however, met considerable skepticism.

A report fi-om the Congressional Budget ~lce

(CBO) in July 1989 questioned the premise-that

HDTV was an important market that U.S. fm

should enter.G7

Lacking support at home, the tentative unity of

U.S. industry groups began to hay. In November

1989, an initial agreement was reached between the

U.S. Semiconductor Industry Association and the

Electronic Industry Association of Japan for U.S.

fms to supply Japanese HDTV manufacturers with

chips.~ Some observers cited this action as a good

faith effort on the part of Japan to increase use of

American chips.

Skeptics, however, noted that U.S. producers

received no guarantees as to what proportion of the

semiconductors in Japansese HDTVS would be

sourced from them. The general failure of the

Semiconductor Trade Agreement to substantially

increase U.S. chip sales in the Japanese market was

offered as a basis for questioning the value of this

HDTV accord. Skeptics suggested that the Japanese

might use this agreement to influence the debate in

the United States over which broadcast standards are

chosen. If Japanese HDTVS contain a si@lcant

tiaction of U. S.-sourced semiconductors, it would

be much more dilllcult to restrict imports in favor of

U.S.-developed or U.S.-produced HDTVS. In that

case, it might also be more d~lcult to just@

supporting the development of a domestic HDTV

industry.

fi~en=n Elec@onics Association, “Development of a U.S.-Based ATV Industry,” May 9, 1989.

cTCongressio@ Budget OffIce, “The Scope of the High-Definition Television Market and Its Implications for Competitiveness,” Staff Working

Paper, July 1989.

‘David Sanger, “Industries in U.S. and Japan Form Alliances on New TV Technology,” New York Times, Nov. 9, 1989, p. Al.
Chapter 3

Communications Technologies

INTRODUCTION

The U.S. electronic communication infrastructure

is a mixture of five media: 1) terrestrial radioflequency transmissions; 2) satellite radiofrequency

transmissions; 3) paired copper wires; 4) coaxial

cables; and 5) optical fibers.l Each plays a role in

providing efficient communication services for the

United States (table 3-l). Rapid technological and

economic changes are reshaping the roles these

media play in our communication system.

Terrestrial broadcasting and coaxial cables distribute the major share of television to consumers

today. Satellite transmission has ffled the need of

those not served by cable TV (CATV) or who are too

far from broadcast stations to receive a reliable

signal. HDTV could change the competitive balance

between these various media and may stimulate the

delivery of television services by other means,

including direct broadcast satellite and, in the

long-term, switched optical fibers through the telephone system. HDTV may also allow significant

improvements in the efficiency of spectrum use.

This might enable services now constrained by a

lack of spectrum to be expanded.

The shift towards a digital operating environment

is making the media perform more alike. Digitization can provide a common format that allows

Table 3-l—The U.S. Communications Infrastructure

Service

Year Approximate Available industry

Technology Businesses began Current capacity number of nodes audience revenues

Copper pairs Telephone, data

communication

(LANs, WANS,

MANs)

Coaxial cable Cable IV

Optical fiber Voice, data,

and video

communication

Terrestrial AM radio

communication FM radio

VHF TV

UHFTV

ITFS & OFS TV

MMDS TV

Cellular telephone

Satellite

communication Voice, data, video

1876

1948

1978

1920s

1920s

1946

1952

1963

1962/83

1983

1962

L band Radio RDSS paging 1989

C band BroadcasVcable 1976

Ku band Medium-powerDBS 1983

Ku Band High-oower -. DBS 1987

From 3 kHz for single analog voice

channel 144 kbps for basic ISDN

Up to 550 MHz or 80 video channels

1.76 Gbps common and higher rates

rapidly becoming available

Total’ Spectrum Channels

spectrum; /channel; /market

1070 kHz 10 kHz; 27

20 MHz; 200 kHz; 50

72 MHz; 6 MHz; 7

330 MHz; 6 MHz; 10

138 MHz; 6 MHz; N/A

60 MHz; 6 MHz; N/A

50 MHz; 30 kHz; varies

16 MHz;

1 GHz; 40 MHz;

1 GHz; 40 MHz;

1 GHz; 15 MHz;

23,000 exchanges

240,000 PBXS

11,000 headends

Overlaps with copper pair and coaxial

cable systems

5,000 AM stations

5,600 FM stations

703 [i300 ~Sfns

Same

800 stations

24 stations

700 systems

530 Civ. transponders

1 sat/7 slots

19** sats/35 slots

14 sats/35 slots

O sats/8 slots

93Y0 wlphones $140 billion

20% WIPCS

8Y0 w/modems

81Y0 of homes $14 billion

passed;

56% subscribe

98% population $2 billion

98% population $4.5 billion

98% population $24 billion

Same

N/A

O.l YO population

1% population $3 billion

1‘Yo direct

* Note that the total spectrum available and the spectrum per channel are set by regulation. The channels usable per market are also set by regulation in order

to control interference between stations in the same geographic location.

● * Four satellites serve both C-band and medium-power DBS Ku-band; slots are orbital slots where satellites might be placed, with varying numbers of

transponders per satellite.

SOURCE: Adapted from U.S. Department of Commerce, National Telecommunications and Information Administration, Te/scom 2000, NTIA Special

Publication 88-21, October 1988.

Iucs, c~nge~~, offi~ of Tm~ol~~ &sessmen~ C~’tiCal connections: co~nicafion for the Fu~re, Ow-~-407 (%bh@toll, ~; U.S.

Government Printing OffIce, January 1990). More detail of the technologies and analyses of communication issues maybe found in this report.

-39–
40.- ● The — Bi~ Picture: HDTV and High-Resolution Systems u

signals to be easily moved among media-terrestrial

broadcast, microwave, satellite, cable, optical fiber—

without distortion.

TERRESTRIAL RADIO

COMMUNICATIONS

Terrestrial radio frequency communication includes mass media such as AM and FM radio and

television; mobile radio links such as cellular

telephone and police radio; and special services—

amateur radio and aeronautical and marine navigation. Ground-based microwave links are also used

for long-distance telephone, data and video transmissions. (Fundamentals of communication technologies are listed in box 3-l.)

Each service using the radio frequency spectrum

is assigned a range of frequencies that matches the

technical needs of the user and reduces interference

from others sharing the spectrum (figure 3-4).2

The ikquencies from about 30 MHz to 1 GHz are

well suited for terrestrial, short-distance communication. As the frequencies increase above 30 MHz,

radio transmissions become limited to direct line-ofsight (reflections from the ionosphere decrease),

with less interference between stations. Below 1

GHz, the strength of radio waves are not signifl

cantly reduced by rainfall or other atmospheric

effects. Above 10 GHz, attenuation from rainfall and

other atmospheric factors increases rapidly and limit

the use of these higher frequencies to short-haul

links or for satellite communications where the

signal must pass through only a few miles of

atmosphere to the receiver.3

Competition for spectrum space is often keen. As

technology develops new and better communications systems, user demand can cause crowding and

overuse of some bands. Cellular telephone and other

mobile services are assigned frequencies adjacent to

the UHF TV bands. These services have experienced

phenomenal growth in several urban areas, where

they now suffer horn congestion.

The Federal Communications Commission was

considering the reallocation of the upper parts of the

underutilized UHF TV spectrum to these other

services when the potential needs of broadcasters for

additional frequencies to broadcast HDTV led the

regulatory agency to stay its action.4

Microwave systems are important links in the

national telephone network and are also used in

private nets. Modern digital microwave systems can

achieve data rates of hundreds of megabits per

second. Microwave provides line-of-sight communication, and repeaters are spaced at different

intervals (commonly 20 to 30 miles) depending on

terrain, weather conditions, obstructions, and frequencies.

Microwave systems operating in the 2-, 6-, and

11-GHz bands are typically used for long-distance

transmission, while 18- and 23-GHz systems are

better suited to short hauls due to the greater

attenuation by rain at higher frequencies.

Sufficient bandwidth is available in the microwave bands to carry high-resolution, fill-motion

television. Microwave-based mtitichannel multipoint

distribution systems (MMDS) have been licensed to

deliver video services in some metropolitan areas. In

general, these ventures have had difficulty competing with conventional CATV service.

Cellular telephone is perhaps the best example of

the tremendous changes taking place in the use of the

radio spectrum as a result of technological advances.

Conventional radio telephone service-the predecessor of cellular-has a capacity of about 25

channels, each able to carry one call. Radio telephone required a high-power transmitter and a

receiver capable of communication up to 50 miles.

Cellular telephone technology dramatically increased the capacity for mobile telephone communication by breaking the service area into many

‘‘cells, ’ each served by its own transmitter and

receiver coupled to a computer-controlled system

(figure 3-5). Each cell operates at low power and

short range. Neighboring cells use different frequencies to avoid interference, but cells far enough apart

to avoid interference may share the same frequency.

If a customer moves into the range of another cell

during a call, the fkequency is automatically

switched to that cell without the caller knowing.

These techniques greatly increase the carrying

capacity of the limited spectrum available for

2For details of these services, see FCC Rules, 47 CFR 90 to 100.

3whme tie ~tellite is n= the hofion, the dis~~ through the lower atmosph~e cotid be much longer, perhaps 50 mileS Or mOre.

dF~mS-of the~~dMobile fidio seti~, Ordti, 2 FCC 6441 (1987).
Chupter 3-Communications Technologies ● 41

Box 3-1—Fundamentals

Information can be electronically communicated in an

analog or digital format. Other characteristics that must be

considered include: how frequently the signal must be

amplified to make up for losses in the medium; how to

carry several independent signals in a medium without

interference; and how much information can be carried.

Analog—The analog format sends a continuously

varying electronic signal proportional to the information.

For example, a microphone generates a signal with a

voltage proportiona.I to the loudness of the speaker’s

voice. For applications such as radio and TV broadcasting, this signal modulates a carrier wave, most commonly

by varying the amplitude (AM) or frequency (FM), figure

3-1.

Digital—For digital communications, the continuously varying signals of the real world—sound, light,

etc.—are first converted to numbers (usually in a binary

format, that is, as a string of “0s” and “ls”l ) 

proportional to their loudness or brightness. (See box 4-2.) These

binary digits, orbits, can then be sent as a series of “on’

or ‘‘off pulses (figure 3-2) or can be modulated onto a

carrier wave. Typical modulation techniques vary the

frequency, amplitude, and/or phase of the carrier wave

according to whether the signal is” 1“ or “O.” Examples

of these techniques are shown in figure 3-3.2

Amplifiers (Analog Repeaters)—Transmitted over

long distances, signals are inevitably attenuated. To boost

their strength, analog signals are electronically amplified

by repeaters at points along the way. With each amplification, there is a tiny amount of distortion because the

electronics are not perfect. In turn, because the analog

signal is continuously varying, it is extremely difficult to

detect or correct the distortions that creep in.

Digital or Regenerative Repeaters-digital signals

are also attenuated over long distances, but digital signals

are either “l” or “O.” Therefore, instead of simply

amplifying the digital sigmil along the way and introducing more distortion each time, the data in the signal—

‘‘1s” or “Os”-are recovered and anew digital signal is

generated. As long as the signal is not so severely

attenuated or distorted that a “1“ appears like a “O” or

vice versa, there is no degradation of the data. Of course,

digital signals can also be transmitted over analog systems

and their signal simply amplified. Digital repeaters are

also known as “regenerative repeaters. ”

Figure 3-l—Amplitude and Frequency

Modulation of a Carrier

Carrier

Wu

Modulating sine-wave signal

Amplitude-modulated wave

Frequency-modulated wave

SOURCE: William Stallings, Data and Computer Ccxnmunieations

(New York, NY: MacMillan Publishing Co., 1985). Used

with permission.

Figure 3-2—A Digital Signal With Its

Corresponding Numerical Equivalent

Data

Iransmllec [1 1 c 1 1 0 0 1 100101 0

SOURCE: William Stallings, Data and Computer Communications

(New York, NY: MacMillan Publishing Co., 1985). Used

with permission.

I

l~us, to count from () m 15 in binary gives the following series: 0000; 0001; 0010; 0011; 0100; 0101; 0110; 0111; Im, lal; 101Q

1011; 1100; 1101; 1110; 1111. Each position from the right corresponds to a power of 2 just as in the decimal system we commonly use, each

position from the right corresponds to a power of 10.

2L. Bre~ Glms, C ‘M~e~M~~Me~ods,” Byte, June 1989; William s~~gs, Data a~~COmp~ter Co?rl?nunicarions (NeW YOr~ NY:

Machfillanl%blishing, 1985).

Continued on next page
42 ● The Big pic~re: HDTVand High-Resolution Systems

Box 3-1—Fundamentals<ontin ued

Repeater Spacing—High frequencies are attenuated more rapidly than lower frequencies-whether over

copper pair, coaxial cable, optical fiber, or terrestrial or

satellite broadcasting through the atmosphe~and this

limits the range of carrier frequencies that can be used or

else requires analog or digital repeaters to be spaced more

closely.

Multiplexing—To carry more than one stream of

information in a medium at a time, signals are multiplexed. Frequency division multiplexing (FDM) uses

carrier waves of different frequencies so that a number of

signals can share the same medium without interfering

with one another. FDM is used in radio and TV

broadcasting, and the frequency of the carrier wave

corresponds to the channel. Time division multiplexing

breaks the data into srnallerpackets and intersperses them.

(See bOX 4-2.)

Bandwidth—Modulating a signal onto a carrier

wave-whether by AM or FM-causes the frequency of

the signal to vary from that of the carrier and creates

‘‘sidebands’ with the signal occupying a range of

frequencies about the carrier frequency. This can be most

easily seen in figure 4-3 for flequency modulation. To

prevent interference between radio or TV stations, the

range of frequencies of a signal are not allowed to overlap.

This range is known as the bandwidth, and is about 3 kHz3

for a telephone conversation; 10 kHz for an AM radio

station; 200 kHz for an FM radio station; and 6 MHz for

a TV station.4

The maximum potential information content or

carrying capacity of an analog signal is given by its

Figure 3-3-Techniques for Modulating an

Analog Carrier in Order To Send Data in

a Digital Format

0011010001 0

Amplitude-shift keying

0011010001 0

I

Frequency-shift keying

0 0 1 1010001 0

Phase-shift keying

SOURCE: William Stallings, Data and Computer Communications

(New York, NY: MacMillan Publishing Co., 1985). Used

with permission.

bandwidth (but is limited by the noise present). The higher information content of HD~ requires either wider

bandwidths than today’s allotted 6 MHz or much more efficient use of that available.

Data Rates-The information content of a digital signal, or data rate, is measured by the number of bits per

second (bps) that are transmitted. When digital signals modulate a carrie~, the data rate is determined by how

efficient the encoding process is and the available bandwidth of the carrier. Ttiy, data rates of as high as 7.5 bps

per Hz of bandwidth are achievable with electronic signals, although at these very high rates transmission errors

are more likely.6 Due to technical limitations in the semiconductor lasers that drive light through optical fibers and

the sensors that detect this light, encoding efficiencies (bps/Hz) for optical transmissions are not as great as for

electronic signals. Optical fibers are nevertheless able to carry much more information than twisted pairs or coaxial

cables because of the greater range of frequencies they can carry without excessive attenuation.

s~e ICHZ is 1,000 cycles psaond; 1 MHz is 1 million cycles per second; 1 GHz is 1 billion CyChX pm -rid.

4For AM and FM tiese include guardbsnds; for TV, adjacent channels cannot be assigned in the same g~gr$ptic region $nd ~~o~

as taboo channels.

5Note that all cfiers are analog.

6D~e ~~eld, ~CRep@ on tie pot~~ for Extreme Band~d~ Compression of Digi~ized HDTV Signrds,” Hhgs bSfOre he

Committee on Science, Space, and Technology, U.S. House of Representatives, Mar. 22, 1989.
Chapter 3-Communications Technologies ● 43

Figure 3-4-Selected Allocations of the Radio Frequency Spectrum

Frequency

Electromagnetic (hertz)

Spectrum

~“”

t

102’

X-rays

and

t

10’ 0

Gamma rays

t

10”

I

4’0Ultraviolet t

10 ‘

Infrared

t

10 ‘

– lo”

Radio frequency – 10 ’

bands

Frequency

3oGH/

/

10GHI

EHF

SHF

t

l o ”

UHF

I

10’

VHF I HF

[

10

(shortwave)

10‘

l’- 10

LF

}

104

VLF

1- 10

I

10’

J,o

3 GHI

1 GH,

300 MH/

100 MH/

MF

30 MH

10 MH7

\

300 KH

U S Frequency

Allocations

Amateur

4

UHF

TV broadcast

channels 14-69

4

VHF TV broadcast

channels 7-13

4-

FM broadcast

VHF TV broadcast

channels 2-6

Land mobile

(lncludl~g police)

Amateur and CB

4

Aeronautical

Pohce

Amateur

AM broadcast

—

> C Band

- ITFS

- MMDS

Cellular

- telephone

– Citizens’ radio

— Land mobile

(including police)

Land mobile

~lncluding police)

- Marine

SOURCE: Adapted from: Encyclopedia Americana, vol. 23, 1986, p. 160; and FCC Rules, 47 CFR 90 to 100.
44 . The Big Picture: HDTV and High-Resolution Systems

Figure 3-5—Map of a Cellular Radio System

w Mobile telecommunications ❑ switching office(MTSO)

o Cell site

Cellular radio layout

SOURCE: William Stallings, Data and Computer Communications (New

York, NY: MacMillan Publishing Co., 1985). Used with permission.

cellular phones. Digital cellular, now coming on the

scene, promises to improve spectrum utilization

even more.

A cellular system can grow to meet demand.

Initial service to a metropolitan area might require a

few large cells. As demand grows, cells can be

subdivided and distant cells can use the same

frequency. The system is quite flexible, but there are

limitations.5

The FCC has allocated 50 MHz in the UHFregion

of the spectrum to the mobile telephone service. This

spectrum is subdivided into 832 pairs of 30 kHz

bands (two-way conversations require one pair).

Overall, this is sufficient capacity to handle the

roughly 3 million users in the United States today,

but there is significant congestion in some areas. In

Ims Angeles, New York, and Washington, DC, the

cellular channels are overloaded during peak tirnes.6

Faced with an explosion in demand for cellular

service and little prospect for acquiring additional

frequencies, the industry is focusing on technologies

that will use the assigned frequencies more efficiently. The most promising is end-to-end digital

transmission, which is being adopted as an industry

standard.

Digitization will increase the capacity of the

assigned spectrum by as much as three to eight times

or 9 to 24 million calls. The cost of conversion could

be more than $4 billion.7 Trends toward miniaturization leading to pocket-size cellular phones could

boost demand even further.8 Some industry analysts

believe that cordless, mobile telephones may be the

trend of the future, and that if provided sufficient

spectrum for expansion, they could be substantial

competition for the local telephone companies.9

With the prospect of advanced TV (ATV)services

looming in the future, competition between Am

and cellular for the UHF TV bands will heighten.

Both services may suffer spectrum compaction at

that point unless technology can improve the efficiency of spectrum use or new transmission schemes

are devised.

SATELLITE COMMUNICATIONS

Satellite systems are long-distance links for telephone, data, and television transmissions to distant

ground-based stations. Although currently used

primarily for feeds to broadcast stations and cable

systems in the United States, another generation of

satellites called Direct Broadcast Satellites (DBS)

could be used to beam HDTV signals directly to

home viewers in the future. Japan and European

countries are planning to use DBS to deliver HDTV.

The Japanese are introducing HDTV via DBS as a

new service, and not as a replacement for NTSC,

which will continue to be broadcast terrestrially.

Satellites are ‘‘parked’ in geostationary orbits

22,000 miles above the Earth-about one-tenth the

distance to the Moon. By staying in the same

position, their “footprint” (area of coverage) remains the same. Time delays for signals to and from

Earth at that altitude disturb voice communications,

but have no practical effect on video signals.

sDaleN. Ha&le]d and GeneG.@‘‘The opportunity CoStS of Spectrum Allocated to High Deftition Television,” paper presented at The Sixtemth

Annual Telecommunications Policy Research Conference, Airlie House, Airlie, VA, oct. 30 to Nov. 1, 1988; William Stallings, Data & Computer

Communications (New York, NY: MacMillarL 1985).

6~dusv a~ystsfor-ttit by 1995 there w~ be abut 20 million cellular phones compared to 2.6 millioniII SemiCe today. See “Cell~m phone

Industry’s Numbers,” Washington Post, June 8, 1989, p. El, E6.

TC~v~ SiLUS, C’Meeting Mobile Phone Demand,” New York Times, July 19, 1989, p. D1.

gFr@ James, “Bat~e of Miniature Cellular Telephones Heat Up with Launch of Motorola Model,” Wall Street Journal, May 5, 1989, p. B1.

%Iatfield and Ax, op. cit., footnote 5.
Chapter 3-Communications Technologies ● 45

Fixed Satellite Services (FSS)1° are assigned

orbital positions in space with separation between

satellites arranged to minimize interference according to power levels and frequencies.11 Spacing

requirements limit the number of satellites in orbit

for each band to about 40 for FSS or 8 for DBS.12

Satellite transponders receive signals at one

frequency and relay them to Earth on a second

frequency. The FCC has allocated 1 GHz of bandwidth in the spectrum (500 MHz for the uplink

(ground to satellite) and 500 MHz for the downlink

(satellite to ground). C-band satellites were the first

domestic satellites in operation and carry the majority of satellite voice, data, and video communication. The Ku-band and the Ka-band (when operational) will carry increasingly more traffic.

The FCC regulates the broadcast power of C-band

transponders to reduce the potential of interference

with terrestrial communications, e.g., point-to-point

microwave links.13 Imw power requires the use of

large receiving dishes (C-band antennas are 10 to 12

feet in diameter). Antenna eftlciency is improving

through new technology, and 4-foot diameter antennas are now used for TV terminals.14

Ku-band transponders operate at higher frequencies than are commordy used for terrestrial communication, so the FCC allows them to operate at higher

power. Higher power allows the use of smaller

receiving dishes (3 feet in diameter), but the higher

frequencies are subject to interference horn rain and

other atmospheric conditions.

There are currently no high-powered DBS TV

services in the United States. The FCC promulgated

regulations for DBS in 1982, but the medium has

faced economic uncertainties that have slowed

development. M ~ssi~tion dramatically changed

recently with the announcement of a partnership to

establish a DBS system for the United States by as

early as 1993.16

DBS can be received on antemas of 1 foot in

diameter. This scale-down could overcome some of

the objections and limitations imposed by some

municipalities on Television Receive-Only (TVRO)

home satellite dishes that receive low-power sigmds

horn the C-band satellites. Others argue that cable

companies installed plant and equipment in urban

areas minimizes the incremental cost of adding new

customers or HDTV progr amming and limits DBSS

advantage to largely rural areas.]7

COAXIAL CABLES

Coaxial cables are widely used for distributing

television to subscribers.18 About 80 percent of

American homes have access to cable TV, and 55 to

60 percent currently subscribe.

Cable TV systems generally use a cable trunk that

carries up to 80 frequency division multiplexed

analog video signals. Taps from the coaxial trunk are

fed to each subscriber. Signal strength in the trunk

diminishes with distance. Therefore, analog amplifiers are placed at regular intervals within the system

to boost the signal strength; but each amplifier adds

noise to the signal. To avoid excessive loss of picture

quality, cable operators limit the length of the trunk

system. Improvements in amplifiers and their closer

spacing might increase coaxial cable bandwidths up

to 1 GHz.19

l~re~SeV~ chses of~s mtel.lit= OWrat@ at different frequencies and different power levels, e.g., C-band (4/6 GH.z), Ku-bnd (1 1-12/14

GH.z), and in the future, Ka-band (20/30 GHz).

ll~simentof ~bi~ Locations to Space StatiOnS in the Domestic Fixed-Satellite Service, 50 Fed. Reg. 35228 (1985).

12TJIis rePesents tie n-r of ~tellites that can cover between about 60 to 140 degrees longitude across the United States. Fewer Mtellites wotid

fit into the range of 85 to 130 degrees longitude (hat provides full useful coverage.

13Timo@ fia~ ~d tiles W. Bos@ satellite co~nications (New York ~: Job Wiley & SC)IIS, 1986); ~d ChdeS W. Bost@ Virginia

Polytechnic Institute, personal communication, Sept. 29, 1989.

14Harry Jessell and Peter Lamb@ “The Uncertain Future of DBS,” Broadcasting, Mar. 13, 1989, p. 42.

lssee f~DBs vi~ility Questioned,” TV Digest, July 31, 1989, p. 8; David Rose~ “The Market for Broadband Services via Fiber to the Home,”

Telematics, May 1989, vol. 6, No. 5.

lbJobn Burgess, ‘‘Satellite Partnership Plans Pay-TV System,”Washington Post, Feb. 22, 1990, p. El.

ITJolM Sic, Telecommunications, hlC., pCrSOIlrd commmUnicatiow Oct. 12, 1989.

18cofi c~1e8 &ve a ~en~ COPF me ~o~d~ by ~fi~tor wi~ a fiely br~ded COpper stield around the outside of the insulator. The

unit is encased in plastic or rubber armor. The concentric geometry allows higher frequencies to be carried W can pairs of copper wire. Most coaxial

cable systems now inusehave bandwidths of about 300 to 400MHz, and some go as high as 550 MHz. Tbis is sufficient to carry 35 to 80video cbannels.

See, Trudy E, Bell, “The New Television: Looking Behind the ‘IWc,” IEEE Spectrum, September 1984, p. 53.

l~~e ~~lel~Hatlleld Associates, he., personal Communication% oct. 12, 1989.
46 ● The Big picture: HDTV and High-Resolution Systems

Many cable operators are considering replacing

the “backbone” of their cable system with optical

fiber.20 This would greatly reduce the number of

existing arnp~lers between the cable headend and

any customer and correspondingly improve signal

quality and channel capacity .21 This could, by some

estimates, be achieved for as little as $50 to $75 per

subscriberazz This comparatively inexpensive upgrade of the system by the addition of an optical fiber

backbone might provide today’s cable TV operators

a significant performance and cost advantage over

potential competitors (such as the telephone companies) in distributing HDTV in the near- to midterm.23 Such a system might not easily evolve into

a two-way broadband system supporting interactive

services as a fully fiber-baspd telephone system

would.

A broadband telephone network is not likely to be

widely available for 20 or more years, however, and

some believe that an integrated cable TV-telephone

network may provide some of the advantages of an

interactive broadband system in the interim.wTtiay’s

telephone network using N-ISDN can provide sufficient capacity for many information services (but not

high-quality video) and the coaxial cable network

can provide one-way distribution of high-quality

video entertainent, possibly even called up over

the telephone network. Whether such a cable/telco

system is an evolutionary dead-end that slows or

prevents the development of a fully switched broadband network by skimmm“ g off the most lucrative

services or is an important interim step in the

development of such a broadband network must be

carefully considered.

COPPER TELEPHONE LINES

Often referred to as “twisted pairs,” the telephone lines leading into nearly every residence and

business are the backbone of the telephone system.

A number of twisted pairs are combined into a

“cable system,” and these cables may be bundled

into several rope-like “binder groups” (screened

cables). These are currently being replaced by

optical fibers between large central telephone switches

and in high-traffic sections of the long-distance

network. The economies resulting horn the immense

carrying capacity of optical fiber are driving the

substitution of fiber for copper. Fiber is on the

threshold of being cheap enough to replace copper to

the home in new, high-density residential developments. As many as 250,000 homes are projected to

be comected by fiber by the year 1992.X Its

penetration into existing residences and low-density

areas will be slower because of its higher cost in

these applications.

The information carrying capacity of a twisted

pair is limited to typically just a few hundred kHz to

a few MHz, depending on the distance between

analog or digital repeaters along the line. The

bandwidth for an analog (voice) signal on a telephone is much more limited still. It is normally

specified to range from about 0.3 to 3.1 kHz. This

range is restricted so as to limit the amount of

information transmitted by the many calls being

carried at any one time in certain portions of the

telephone network, such as the microwave links

used for long-distance calls. This increases the

number of calls that can be handled.

The capacity of a twisted pair for transmitting

digital data varies considerably according to the

efficiency of the encoding, modulation, and multiplexing processes, and to the amount of noise and

interference on the line. Telephone line modems for

today’s analog system with transmission rates of 9.6

thousand bits per second (kbps) are now common

mA r~ent poll of cable television MSO and System managers found tbat two-thirds expect fiber to replace coaxial cable in their networks. “Fiber

Optics Handboo~” Cablevision, Apr. 24,1989.

ZlRo~ti PepPm, ~~~oughthe ~o~g G~s: ~tegrat~Brotitid Networks, Re@atory Policies ~d ~StihItiOXld -e,” 4 FCC Rcd 13M~

1307 (November 1988); U.S. Department of Commerce, National Teleummmrdcations and Information Administration, Telecom 2000, NTIA Special

Publication 88-21, October 1988, p. 268.

=tfiel& op. cit., footnote 19; David P. Reed and Marvin A. Sirbu, “Integrated Broadband Networks: The Role of the Cable Companies,” 1989

Telecommunications Policy Research Conference, Airlie House, Airlie, VA, Oct. 1-3, 1989; “Fiber Optic: Backbone for CA~,” IEEE Spectrum,

September 1988, p. 26. Note that the various estimates of cost correspond only to within a factor of 2.

~BmceL. Egan~d Dough A. co- “capi~ Budgeting ~te~tives fOrR~iden~ Bro~b~dNetworb,’ Center for Telecommunications and

Information Studies, Graduate School of Business, Columbia University, October 1989.

~John Sic, Telecommunications, Inc., “Proposal for a Telco/Cable Interface,” paper presented at the Telecommunications Reports’ Conference on

Telco-Cable, Washingto~ DC, Sept. 22, 1989.

~John ~koff, “Here Comes the Fiber-Optic Home,” New York Times, NOV. 5, 1989, sec. 3.
Chapter 3-Communications Technologies ● 47

and rates twice this are becoming available.x

Analog transmission over twisted pairs will continue

to be the principal technology for the midterm,

although Integrated Services Digital Network (ISDN)

are gradually being installed in some areas, primarily for business service.

ISDN can carry voice, data, and video information

over switched telephone networks in a digital

format. It is a set of transmission, switching, and

signaling technologies that support advanced digital

semicesozT ISDN was designed to use existing

subscriber loops consisting of copper pairs for

digital transmission. The Basic Rate Interface (BRI)

of 144 kbps spec~les two 64 kbps channels for

subscriber use and a 16 kbps channel for signaling

and some slow-speed digital subscriber service.

Most homes today are wired with two pairs of

twisted copper lines. When using the full capacity of

N-ISDN, these two pairs will be able to carry data

rates of 1.544 Mbps.28 This rate is sufficient for a

variety of interactive digital computer information

services, but is not able to deliver real-time, highresolution video services. By “compressing’ the

digital signal (see box 4-2), it is possible to transmit

a modest quality video signal for teleconferencing.29

For conventional TV, ATV, or HDTV, higher

capacity transmission media are required, e.g.,

coaxial cable or optical cable.

The public telephone network could bean important medium for delivering HDTV to the home. The

goal of “universal service’ set forth in the Communications Act of 1934 is nearly a reality. It permits

point-to-point routing for voice services through a

switched network30 to nearly all residences and

businesses in the United States. It provides two-way

communication, which could bean important attribute should HDTV evolve into an information

‘‘appliance’ for the interactive exchange of information.

Large investments will be needed if the telephone

network is to provide the bandwidth and switching

necessary for carrying real-time, high-resolution,

full-motion video. If this is to happen, optical fiber

technology and optoelectronic switching devices

will hold the key.

OPTICAL FIBER CABLES

Fiber optics technology enables inforrnation—

voice, data, and vide~to be transmitted as light

pulses through glass fibers. Optical fibershave many

advantages over cables and wires. These include

wider bandwidth and longer spacings between

repeaters, lower weight, immunity to electrical

interference, higher reliability, and lower maintenance costs.31 Because of this, shielding is not

required for fiber to meet FCC requirements. Glass

fibers do not conduct electricity, thus a lightning

strike cannot send a pulse down a fiber to cripple

equipment on the network.

Because optical fibers do not conduct electricity,

providing power to the system on the customer’s

premises may require using the customers’ power

source. This would likely not be as reliable as

today’s conventional system where backup power is

provided by the central telephone exchange. Using

rechargeable batteries on the customer premises

could provide backup power in the event of an

outage, but might lead to significant maintenance

problems. Fiber systems are still more expensive

than copper pair systems,32 but costs are coming

down rapidly.

An optical fiber transmission system includes one

or more optical fibers housed in a protective cable,

and devices for converting electrical signals into

light pulses and back again. Repeaters are used to

XL. Brett GIass, “Modern Modem Methods, ” Byte, June 1989; Eli No-, “The Political Economy of ISDN: European Network Integration vs.

Anerican System Fragmentation%” Apr. 23, 1986, p.5; ‘‘V.32 Modems,’ High Technology Business, November-December 1989, p. 45.

27~ere ~W. ~en~c fom of ISDN: Narrow band ISDN (N-ISDN) that can c~ voice or data wiw its bandwidth, and broadband ISDN

(B-ISDN) with suftlcient bandwidth to carry high-resolution full-motion video but requires coaxial cable or optical fiber in addition to a wide-band

switching network. See David Hack+ Telecommunications and information-Systernx Standardizatior+Js America Ready 87-458 @%shingto~ DC:

Congressional Research Service, 1987).

X’rhe T1 rate of 1,544 ~p~ was chosen based on the typi~ distance betw~n @ole cover%where atiog m digital ~ptXtterS $113 Or Ca13 be

placed-in the current telephone system. Bob Mercer, Hattleld Associates, Inc., personal communication Nov. 13, 1989.

29Ric~d Dohe~, “system PUtS Real-time Squeeze on Color Video, “ Electronic Engineering Times, Feb. 27, 1989.

m~y c~c~t-s~tch~system win k discussed here. Packet-switched systems and otiers are also possible.

slpep~r, op. cit., footnote 21.

32J+E. D~er, ~~whenDWs FibM&e Sense?” Business Co-nications Review, February 1989.
48 ● The Big Picture: HDTV and High-Resolution Systems

regenerate the signal over long distances, and

multiplexing can be used to increase the carrying

capacity of fiber links (see box 4-2). Data rates of

565 Mbps (8,064 voice channels) on optical fibers

are common; rates of 1.76 Gbps are available;33 and

experimental systems have reached 16 Gbps.”

Technologies to achieve much higher rates are being

researched.

The versatility and technological capacity of

optical fiber makes it superior to copper in many

ways. Its bandwidth suits it to the transmission of

HDTV signals as well as high-volume telephone

trunk circuits. Many long-distance lines have been

converted to optical fibers, but little fiber has been

installed in the local telephone loops. A number of

optical fiber demonstrations to residential subscribers have been undertaken in selected municipalities

by the Bell Operating Companies and others,

including: Heathrow, Florida (BellSouth); Perryopolis, Pemsylvania (Bell Atlantic); and Cerritos,

California (GTE) .35

The cost of broadband switching equipment and

rewiring the local loop to existing buildings will

delay widespread installation of fiber to residences.

It may take 20 years or more before fiber becomes

common in households. There me currently few

services that demand broadband telephone service to

residential subscribers. Telephone companies view

the delivery of video dial-tone services and the

potential delivery of HDTV to the home as an

important driving force for the installation of fiber

over the “last mile. ”

33JoM~n fiaush~, “Fiber Deployment Update, ” FCC, Common Carrier Bureau, Industry ha.lysis DivisioU Feb. 17, 1989, p. 3.

34Miyoko Wkarai, “semi ‘Trailblamr ,‘ “ Electronic Engineering Times, Feb. 20, 1989.

sspa~ W. Shumate, Jr., “Optical Fibers Reach Into Homes,” IEEE Spectrum, February 1989; Herb Brody, “The Rewiring of Americ%” High

Technology Business, February 1988; Michael Warr, “Southern Bell Switched-video Plans on Traclq” Telephony, May 15, 1989, p. 11.
Chapter 4

TV and HRS Technologies

INTRODUCTION

As an entertainment medium, HDTV is not

revolutionary. It is simply another step in the

ongoing evolution of television that began with

black and white (B&W) TV in the 1940s and will

continue into the future with as yet undreamed of

technologies. Each successive generation of TV

technology attempts to provide a more realistic

picture and sound within the constraints of low-cost,

easy-to-use consumer technology.

Here we describe conventional NTSC1 television,

Advanced Television (ATV) systems, and some of

their underlying technologies (box 4-l). The convergence of ATVS, computer and telecommunications

equipment toward High Resolution Systems (HRS)

is discussed later.

CONVENTIONAL TELEVISION:

PRODUCTION, TRANSMISSION,

AND RECEPTION

Television systems involve three distinct activities: l)production, 2) transmission, and 3) display of

the TV program.

TV cameras begin the process by creating, for

each of the three primary colors (red, green, blue), an

electronic signal proportional to the brightness of

light at each point of a scene. This signal is

transmitted immediately or recorded on magnetic

tape for later use. 2 The quality of the transmitted

picture is determined by the range of fiequencies—

‘‘bandwidth’ —that can be used, and by the efficiency with which the video signal is encoded and

then modulated onto this bandwidth.3 At the receiver, the transmitted signal is reconverted to a

picture on the TV screen by scanning electron beams

(one for each primary color) across the picture tube

and varying their intensity in exact synchronism

with the original picture signal.

The 1950s technologies used today to bring color

TV pictures to the home have a variety of shortcomings and imperfections that modern systems can

correct. TV production formats, established in the

1930s and 40s, were originally based on 35-mm

motion picture film. This gave today’s TV picture its

nearly square shape (or aspect ratio) of 4 units wide

by 3 high (4:3). Research has found, however, a

strong viewer preference for screens 5 to 6 units

wide by 3 units high—as seen in today’s theatres—

that correspond to the human field of vision.4

The original motion picture standard was 16

pictures per second—manually cranked cameras

could go no faster.5 At that rate the viewer saw a

significant ‘flicker’ in the picture displayed (hence

the term, the ‘flicks’ ‘).6 In developing TV transmission standards, engineers sought a system that sent

pictures often enough that viewers did not see them

flickering, yet did not send so many that the needed

bandwidth (information camying capacity) was excessive. The effective picture resolution (or ability to

show detail), its color fidelity, and its range of

brightness were all limited in order to meet these

bandwidth constraints.

Other shortcomings of today’s NTSC system

include: the blurring of bright colors around the

edges; the generation of rainbow colors where

brightness varies rapidly, such as striped shirts; and

susceptibility to “ghosts,” snow, interference from

other stations, and image distortions.

INatio~ Television Systems Committebthe group that formulated the B&W and color TV standards in use kl the United SmtestodaY.

2fiowW p~duction ficluda, of come, editing, the insertion of special effects, audio, etc.

sFor tems~~ broadcasters, the available bandwid~ is set by the Federal COmmtiQtiOIIS commission (FCC), which brokers comPe~g cfor the limited radio- fkquency speetrum.

4*,ue Mc.@~ w. Russe~ Ne~~, ~kRepolds, sham 0’Dormell, and Steve Schneider, “me Stipe of ~gs ‘0 come: 

A S~dY ‘f

Subjective Responses to Aspect Ratio and Screen Size,’ ATRP-T-87, MIT Media Lab, May 17, 1988.

5R,ic~d J. Solomon, “Broadband Communications as a Development Probleu” International Seminar on Science, Technology and Economic

Grow@ OECD, June 6, 1989, Paris. This was later increased to 24 frames per second to give better sound qurdity.

%lu-y Lu, “High Deftition TV Comes At A High Cost,” High Technology, July 1983, p. 45.

-49-
50 ● The Big pic~re: HDWand High-Resolution systems

Box 4-l—Inside Today’s NTSC Analog Television

The production of a TV show begins with a TV camera. TV cameras separate the primary colors-red,

green, and blu=f the scene with optics and filters and then focus the scene for each color on separate sheets

of light-sensitive material. This material generates an electric charge that varies in size by the amount of light

that falls on it. The charge on this sheet is then used to control an electron beam that scans across the sheet

fkom left to right and top to bottom-just as we read text. By this means, three “electronic” pictures are

formed, one for each color, every 1/30th of a second.

The three pictures thus formed consist of 483 active lines vertically. Each line has the equivalent of about

427 horizontal picture elements.1 An additional 42 vertical lines and the equivalent of 82 horizontal picture

elements could, in principle, be displayed. Instea& the time is allotted to generating vertical and horizontal

synchronization, or sync, signals. These sync signals note the beginning of each new picture and of each

horizontal line within the picture.

This electronic picture is encoded into a composite signal, including brightness, color, and sound. The

composite then modulates the amplitude of a carrier (corresponding to a particular TV channel) which is

transmitted over-the-air, through cable, or by other means. To be compatible with B&W TV, the brightness

(luminance) signal transmitted is a complicated mix of the Red, Green, and Blue signals and corresponds to

the relative sensitivity of the eye to these different hues. The “color” signal (chrominance) contains the rest

of the information needed for the receiver to decode these combined signals back into the primary colors.

At the home, the transmitted signal induces a tiny voltage in the TV antenna or provides it directly via

cable. The electronic picture, or video signal, is separated from the carrier and amplified. The same sync

signals used by the camera now tell the receiver when to start scanning the electron beam across the inside

surface of the picture tube for each new picture, as well as for each horizontal line composing the picture. As

the electron-beam smoothly scans across the picture tube, its intensity is varied according to the brightness

of the image as originally measured by the TV camera, and is thus reproduced on the phosphors of the picture

tube. Color TVs do this simultaneously with three different electron-beams, one for each color of phosphor.

This type of electronics, where the information content is represented by a continuously varying voltage or

current, is known as analog electronics.

This system is much like writing on a blackboard at a distance using a set of strings to pull the pen back

and forth. What is written onto the camera is reproduced on the picture tube. If there are errors in the

transmission process, they are likewise written onto the TV screen at the other end. With the picture

information carried by a continuously varying voltage, it is very difficult to tell if an error has crept in, let alone

correct it.

Such a system was all that 1950s electronics technology was capable of. This approach carries with it

a variety of impairments, including the use of interlaced scan, errors in displaying colors, an excessive

susceptibility to transmission degradations, and inefficient use of the broadcast spectrum.

In developing TV transmission standards, engineers had to send pictures often enough that viewers did

not see them flickering, yet did not send so many that the needed bandwidth, or information carrying capacity,

was excessive. Both of these were accomplished by showing each picture twice using an “interlaced scan’

technique. First, the odd horizontal lines (numbered consecutively from top to bottom) of the picture are sent;

next, the even lines are sent. In this way, the 525 lines of today’s TV (NTSC) set are displayed half (or a field)

at a time, l/60th of a second apart. An entire picture, or frame, is then seen every l/30th of a

second-minimizing bandwidth and flicker simultaneously.

Although the vertical resolution of such a picture could be 483 lines, it is normally much lower than this.

As one example, when an interlaced scan system displays an odd horizontal line as black and the even line

next to it as white, there can be an annoying flicker to the picture every l/30th of a second-easily perceivable

by viewers. Consequently, the vertical resolution of the studio camera was reduced to, at most, 330 lines (by

ltiog TV d~s not really have discrete horizontal picture elements, but rather a continuous horizontal scan. me tX@v~ence

here is based on the scanning times and picture resolution.
Chapter kTVand HRS Technologies ● 51

changing the spot size of the scanning e-beam within the camera) and the horizontal resolution was reduced

by roughly the same amount. Progressive scan systems, in which every line is sent, odd or even, in a single

pass down the picture do not suffer this problem of flicker and can thus give much higher effective resolutions

for a given line count.

The transition in the 1950s horn B&W to color was achieved by reducing the resolution of the brightness

signal and inserting a color signal as described above. This led to a slightly lower resolution for B&W TVs,

among other problems. For color TVs, the manner in which the color and brightness signals were intermixed

could cause bright colors, especially red, to blur at the edges; and places where the brightness varied rapidly,

such as striped shirts and checked jackets, to degenerate into rainbow colors.

In the past, the interference between the brightness and color signals was minimized by further reducing

the resolution of the receiver’s circuits-to about 250 lines horizontal resolution. In 1978-79, special circuits

(comb filters) were introduced which allowed more of the entire range of brightness to be displayed; in 1984,

other special circuits were introduced that allowed the entire range of colors to be displayed with somewhat

less susceptibility to the above degradations.

Other errors, or artifacts, in today’s TV picture are also widely noted. Viewed up close, today’s NTSC

TV looks like an ant’s nest with the dots and lines “crawling” around the picture. These are again due to the

manner in which the color and brightness signals are intermixed and subsequently decoded by the receiver.

Under certain conditions, NTSC sets have a tendency to switch between different colors. For this reason, the

NTSC system has sometimes been disparaged as Never-Twice-the-Same-Color.

The NTSC system is also highly sensitive to transmission degradation. When the broadcast signal

reflects off obstacles, viewers may see ‘ghosts’ and if reception is weak, viewers may see ‘snow’ or noise.

Finally, the NTSC system uses the broadcast spectrum inefficiently. These old electronics technologies

and the use of lowquality home antennas required very strong sync signals to ensure proper operation.

Further, the signals transmitted by broadcasters are all in the same format.2 Because of this, TV stations cannot

be operated on adjacent channels within the same geographic region without visibly interfering with each

other. Thus, in the VHF band (channels 2-13) stations are separated by one blank-’ ‘taboo’ ‘-channel; in the

UHF band, stations are separated by as many as five taboo channels. These channels have not been usable

for other purposes. Improved ante~as, and P&haps other changes, might enable significant reductions in the

channel and geographic separation requirements at a very small cost. This would enable closer packing of TV

channels and might save spectrum for other purposes, but has not been required by the FCC.

Even within the normal 6-MHz bandwidth of a single channel the NTSC signal makes inefficient use

of the available spectrum. Much of the available spectrum corresponding to extreme brightness or the most

vivid colors, for example, is rarely used. It was such a “hole” in the spectrum that allowed the original B&W

NTSC standard to be turned into a compatible color system. By slightly reducing the maximum B&W

resolution, all of the color information could be squeezed in. Similarly, the EDTV proposals today offer

alternative means of further exploiting NTSC’S poor bandwidth use3 to provide higher resolution and a wider

screen without requiring a wider channel bandwidth.

Although the NTSC system has many shortcomings, it was a remarkable achievement in its day. The

engineers that developed NTSC were working at the very limits of analog technologies in the 40s and 50s,

with an overriding constraint to make the receivers as low cost as possible. Their remarkable achievements

resulted in a system that has served us well for 40 years. With today’ ~ technologies, however, we can do better.

References: “TelevisionEngineering Handbeo~” K. Blair Benson (cd.); Trudy E. Bell, “The New Television: Looking Behind

the ‘lWe,” ZEEE Spectrum, August 1984; Ronald K. Jurgen, “High-Deftition Television Update.” IEEE Specfrum, April 1988;

personal communications: Andrew Lipp~MIT Aug. 16, 1989; William Schreiber, MIT Oct. 12, 1989; John Henderson, Sarnoff

Labs, Oct. 12, 1989.

2T’he sips me tr~fitted in the same raster scanned format as generated by the camera. Consequently, they are cohermt.

Sother ~efflciencies h spectrum use by NTSC include: the vertical and horizontal retrace intervals, d-wtich additio~

picture information could be sent the manner in which the carrier is modulated, including the use of a separate sound carrier; and the

transmission of the entire picture in every frame, including redundant information within and between frames.
S2 ● The Big Picture: HDTV and High-Resolution Systems

ADVANCED TELEVISION

SYSTEMS: IDTV, EDTV, HDTV

Modern computer-like digital electronics can

reduce many of the defects found in today’s NTSC

system. Three levels of improvement in television

technology are either now under advanced development or are entering commercial markets.

The fiist level is Improved Definition TV

(IDTV). IDTVreceivers take the standard broadcast

and convert the continuously varying, analog voltage of the NTSC transmission into a digital signal.

This digital signal represents the information content of the picture as a series of numbers spec@ng

the color and brightness of each point in the image.

A simple example of analog-to-digital conversion is

shown in box 4-2.

The advantage of converting the analog broadcast

to a digital signal within the receiver is that the

picture information can then be manipulated (modified, adjusted, corrected, etc.) by digital signal

processing techniques and/or stored in memory.

This is similar to the way computers manipulate and

store data. Special techniques can be used to reduce

flicker, ghosts7

, snow, and other picture imperfections, and to improve apparent resolution and color.

NA Philips (Netherlands) began marketing IDTVS

in the United States in the spring of 1989.

Extended Definition TV (EDTV) is tie next step

in the evolution of TV technology. It requires

modest improvements in today’s TV transmissions

and small changes in the broadcast standards. The

improved TV signal will still be compatible with

today’s TVs, and it will not carry so much additional

information as to require greater bandwidth than is

available in today’s 6-MHz TV channel.

EDTVS will use digital memory and signal

processing techniques. In most proposals EDTV

provides a widescreen picture and somewhat higher

resolution than is now possible. Japan was scheduled to begin EDTV broadcasts in 1989, and Europe

plans to do so in 1990. Some believe that the

improvements in TV picture possible from IDTV

and EDTV will significantly reduce the future

market for HDTV (ch. 6).

High Definition TV (HDTV) is the third major

step up from today’s NTSC system. HDTV is

typically portrayed as having roughly twice the

vertical and horizontal resolution as is theoretically

possible for current TVs; a widescreen picture

(aspect ratio of at least 5:3) displayed on a large

screen; better color; and compact disk (CD)-quality

digital sound. The much higher quality pictures of

HDTV, however, will require the transmission of

substantially more information than current TV

systems. The original Japanese NHK production

system, forexample, required 30 MHzofbandwidththe equivalent of five TV channels. To reduce this to

manageable proportions, a number of tricks are used,

beginning with an analysis of what the human eye

can actually perceive.

VISUAL RESPONSE AND

HIGH DEFINITION TV

Human vision responds rapidly to the gross

details of bright or moving objects, particularly in

peripheral vision, but does not perceive their fine

detail or color well. Conversely, to perceive fine

details or color requires the object to be stationary

for longer periods+r for the eye to track a slowly

moving object and ‘‘freeze” it on the retina. Thus,

efforts to avoid flicker by transmitting all of the

color and detail of both moving and stationary

images at the same maximurn rate, i.e., 60 pictures

per second (as an analog TV would), are unnecessary; the eye cannot perceive all of it.

The groups developing HDTV systems have used

knowledge gathered in experimental work on visual

perception to reduce the picture information that

must be transmitted. Digital processing techniques

are used to send the picture in low resolution at a

rapid rate so that rapidly moving portions of the

picture are seen quickly; and to also send the picture

in high resolution and full color at slower rates so

that the still portions can be seen in detail.g The TV

receiver then uses digital signal processing techniques to reconstruct the picture in memory, from

which it is flashed onto the screen 60 times a second.

These techniques reduce the bandwidth required

to transmit the TV picture to a fraction of that of the

7Ghost c~ce~tion usually requires adding a speciid test sigmd to the~“tted signal.

8T0 ~mfit this ~omtion my r-ea Combfition of water b~dwidth, much mom efficient enc- and modulation tahlliques, VWiOUS

digital compression techniques, and good signal to noise ratios, among others.

~illiam F. Schreiber and Anchew B. Lippma~ “Bandwidth-Efficient Advanced Television Systems,” MIT Media Lab, no date.
Chapter 6TV and HRS Technologies ● 53

Box 4-2—Inside Analog/Digital Television

The various proposals for advanced TV systems

use combinations of analog and digital techniques to

improve the picture seen on the receiver. The process

of generating a picture is described in box 4-1. This

process results in an analog signal coming from the

camera-that is, with a continuously varying voltage

or current proportional to the brightness of each point

of the scene.

Selected portions or all, as desired, of the analog

signal from the camera are then converted into a digital

format for storage and/or transmission. In some cases,

such as IDTV, the analog to digital conversion is only

done in the receiver. A particularly simple example of

analog to digital (A/D) conversion is Pulse Code

Modulation (PCM).

The PCM process begins by sampling the continuously varying analog signal, as shown in figure 4-1.

The sampling rate is usually at least twice the highest

frequency of the analog signal. The result is a series of

pulses whose amplitudes correspond to the analog

signal at regular, discrete times.

These pulse amplitudes are next converted into

numerical values by comparing them to a set of

discrete amplitude steps. This does introduce errors,

depending on how many discrete steps are used and

how well the pulse amplitude matches the closest step.

This error can be reduced by increasing the number of

steps, but at the same time increases the circuit

complexity and the amount of numerical information

that must be transmitted.

The precision of this quantization is normally

given by the number of steps used and is commonly

cited in terms of the “bits” of binary information that

result, each bit representing an additional power of 2

Figure 4-1—AnaIog to Digital Conversion Using Pulse

Code Modulation

B — — 1 [

I I 1

I

I I 1’

1

Amphtude

modulated 1

— III I 1 pulses _

II 1 I I 1

— II I.-—

001 001 111 000 101

c -J.... _nnl__.._.JMlL____ncul

A. The analog signal is sampled at regular intervals.

B. The amplitude of these samples is then compared to a set of

discrete amplitude steps and converted into numerical vatues.

These values are shown written in binary.

C. The numerical values can then be transmitted in a digital

format. Information from other signals can be sent between these

samples in a time division multiplexed format.

SOURCE: Kamilo Feher, Advanced Digita/Communic40ns: Systems and

signa/ Processing Techniques (Englewood Cliffs, NJ: PrenticeHall, Inc., 1987). Used with permission.

in the number of steps. Thus, 2 bits equals 4 steps; 3 bits equals 8 steps; 4 bits equals 16 steps; and so on. Some

256 steps, or 8 bits, are usually sufficient to encode the brightness information for each primary color—red, green,

and blue-of a studio TV signal. This is a total of 24 bits.

The binary information representing the picture can now be stored in a computer-like memory, manipulated,

or transmitted with little degradation. Each “bit” of information, for example, can be transmitted as either “on”

or “off.” At the receiver, even if the amplitude of “on” was greatly reduced or distorted due to transmission

problems, the receiver can usually still detect that it was ‘‘on’ and correct its value to the nominal level. In contrast,

an analog receiver normally has no way of knowing whether or not a signal is distorted. It can only reproduce what

it receives, errors and all.

In two-way transmissions of data, such as by a modem, a digital signal can also include information that tells

the receiver how to check for errors in the transmission. For example, eight bits of information could be sent with

a‘ ‘parity” bit. The “parity” bit is “on” if the number of 1s” sent is even; “off” if the number of “1s ” sent is

odd. The receiver can check to see if the number of 1s’ received and the parity bit correspond. In this way, at least

some of the transmission errors so serious as to cause “on” to appear “off” and vice versa can be detected. More

complex techniques will be used to reduce the number of errors in transmitting HDTV pictures and to ensure the

correct transmission of critical components of the signal.

(continued on nexfpage)
54 ● The Big Picture: HDTV and High-Resolution Systems

Box 4-2—Inside AnaloglDigital Television-Continued

The basic digital signal for an HDTV picture carries an enormous amount of information-as much as 1.2

billion bits per second (1.2 Gbps). In comparison, a phone conversation uses less than 64 thousand bits per second

(64 kbps). A personal computer uses just 16,000 bits of information internally to represent a screenful of text and,

on a standard monochrome monitor, just 250,000 bits are needed to display this text—which often remains

unchanged for long periods while one ponders what to write next. 1 To transmit the total 1.2 Gbps of the HDTV signal

requires far more bandwidth than is available in all but the most advanced fiber or short-haul cable systems. Thus,

digital signal compression techniques are used to make transmission to households practical.

Digital signal compression eliminates the redundant information in a signal. For example, a large expanse of

blue sky in a picture carries little or no new information from one point to the next. Special “intrahrne”

compression techniques effectively tell the receiver that these picture elements are the same, and allow the

repetitious “blue sky,” “blue sky,” . . . information to be eliminated.

Similarly, the stationary portions of a picture do not change from one frame to the next. There is no need to

transmit such redundant information 60 times per second in full detail. In fact, if nothing moves no new information

need be transmitted at all. In this case, one frame is compared to the next to do “interframe compression’ and only

the differences are transmitted. Interframeprocessing, however, may result in other types of errors such as inaccurate

depiction of moving objects.

As already noted, the eye is least sensitive to the color and detail of those parts of the picture which are moving.

This information can be reduced simply by sending the rapidly moving portions at lower resolution.

Together, these techniques greatly reduce the information content of the transmitted signal and, in fact, make

the transmission of HDTV pictures practicable. The Japanese MUSE HDTV system, for example, reduces the signal

bandwidth horn 60 to 8 MHz using such techniques.2 Digital systems might reduce the information content from

some 1.2 Gbps to 70-80 Mbps. Subsequently, the transmitted signal is decoded and turned back into a viewable

picture in the receiver.

In some cases, it may also be desirable to fit additional information into the HDTV signal. This is illustrated

in figure 4-1. This technique is known as “time division multiplexing” and is especially valuable in cases where

the transmission media is filled close to capacity or is being used inefficiently.

TVs that use analog electronics alone cannot do this type of image manipulation. Because analog signals vary

continuously, it is impossible to do such signal compression before transmission, to catch and correct transmission

errors, to recreate the picture in memory at the receiver, to multiplex the signal, or to do a host of other advanced

signal manipulations, Instead, purely analog systems are constrained to simply write the picture as transmitted

directly on the screen, like chalk guided by a string.

References: Kamilo Feher, “AdvancedDigital Communications”; “ Television Engineering Handbook” K. Blair Benson (cd.); William

Schreiber, various papers, op. cit.; Submissions to the FCC, various. Dale N. Hattleld, “Report on the Potential for Extreme Bandwidth

Compression of Digitized HDTV Signals,” Mar. 20, 1989; “Television Technology Today, ” Theodore S. Rzeszewski (cd.). Other references

as in box 4-1.

1A screefil of text has 25 rows by 80 characten per row and 8 bits per character when handled as ASCII text intetily. A s@ndard

graphics based monochrome monitor has 720 by 348 pixels, each either “on’ or ‘off.’ Assuming that the text on the screen remains unchanged,

this requires 250,560 bits to represent. If the text was being changed at 60 times per second, the data rate would be 15 Mbits per second.

Zllis total is for the component signals-30 MHi for lumina rice, 15 MHz for Red, and 15 MHz for blue. Larry Thorpe, Sony Corp.,

personal communicatio~ Oct. 12, 1989.

basic unprocessed analog signal. Only the use of decode the signal. In large-scale production, today’s

these and other (box 4-2) digital signal processing semiconductor technologies can minimize these

techniques makes HDTV practical. Such digital added costs.

signal processing, however, comes at a price. In It is uncertain whether or not such visual tricks

general, the greater signal compression required to will work as well on the large screen that will likely

reduce the bandwidth, the greater the complexity be used for HDTV. Some note that, especially on

and cost of the receiver’s electronics needed to large screens, the eye is able to track relatively
Chapter 4+TVand HRS Technologies ● 55

slow-moving objects and freeze them on the retina.

In such cases, the digital signal processing might

remove visual informah“on that the eye does Pemeivb

reducing the visual quality of the picture.

The most important attribute of an HDTV may be

the much larger field of view it provides. The region

of greatest visual acuity of the human eye is within

the central one degree of the visual field. Viewers

tend to move away horn the screen to view moving

objects in order to maximize the ii-action of the

image within this central one degree field, and stop

when the details of the image begin to be lost. The

ideal viewing position for an NTSC set (525 lines)

is experimentally found to be roughly 7 screen

heights fkom the receiver, providing the viewer an 8

by 11 degree field of view. For the typical HDTV

system (1125 line Japanese system), the preferred

viewing distance is found to be about 3.3 screen

heights away, providing the viewer a 17 by 28

degree field of view. These are compared in figure

4-2.

Thus, viewers position themselves for roughly the

same resolution on the eye, but they have a much

larger viewing angle with HDTV, contributing to a

sense of “telepresence.”lo Although the higher

resolution and picture quality of HDTV would be

visible on a smaller screen TV, there would be less

incentive to purchase such an HDTV. It would not

provide the same sense of telepresence, and many

people would find it difi3cult to focus on or

experience discomfort if close enough to benefit

flom the higher resolution.

“Telepresence’ or the sense of “being there” is

a potentially powerful market inducement for large

screen, high resolution displays. An example of this

sense might be the feeling, when viewing a very

high-quality motion picture screen up close, of

moving with the airplane or roller coaster when it

makes a fast turn, or of unconsciously putting your

foot on the brake to prevent an accident. In watching

sports, it allows one to have a greater sense of being

in the stadium itself-being able to watch clearly

and in detail the entire scene of a quarterback

completing a pass to a receiver, rather than relying

Figure 4-2-Comparison of the Field of View for

an HDTV and Today’s NTSC TV To Have the

Same Resolution for the Viewer

I ‘N’. \

/

\

\

SOURCE: William E. Glenn and Karen G. Glenn, “High Definition Transmission, Signal Processing, and Display,” paper presented at

the SMPTE Conference, San Francisco, CA, January 1989.

Used wfth permission.

on instant replays of the separate tight closeups of

the quarterback and receiver that are used today.

HDTV SYSTEMS: PRODUCTION,

TRANSMISSION, RECEPTION

The key attributes of HDTV-twice the resolution of today’s television, a wider screen, truer color,

and digital sound-will require significantly more

information to be transmitted than is currently the

case. This cannot be done while simultaneously

remaining compatible with today’s TVreceivers and

charnel bandwidths. Significant changes are necessary in production, transmission, and reception

standards and equipment to achieve such high

defiition pictures.

lowil~ E. G]e~ “H@ Defiition Television,” Society for Information Display, 1988.

30-368 - 90 - 3 : QL 3
56 ● The Big pic~re: HDW and High-Resolution Systems

Production Standards

Today’s production standards are based on 24

hrne per second motion picture f~l or on video

tape for television. Although the different world

standards for color TV—NTSC (USA, Japan),

SECAM (France, Eastern Europe), and PAL (Western Europe)-vary in their frame rate and number of

lines scannedll, equipment to convert horn one

standard to another (transcoding) with little loss in

quality has been technically quite successful. The

most dfilcult aspect of transcoding is to convert

between formats with different ftame rates. This

requires interpolation between pictures in order to

show motion smoothly. The conversion from interlaced scanning to progressive scanning has also been

difficult.

Lower-cost and more flexible electronic video

production systems will become increasingly important in coming years. Such systems will compete

with fti for many applications and complement

cinema photography in cases such as special effects.

Each medium-NTSC, HDTV, and fti-has its

own artistic “look and feel” according to its

technical characteristics and format. NTSC video

tape, for example, can generate the afternoon soap

opera’ look under various conditions. This is due to

the sensitivity and response characteristics of the

electronic camera used. The low resolution of NTSC

systems also forces the program producer to emphasize closeups or tight shots of the actors.

In contrast, the greater sensitivity, color, and

brightness range of film and the better match of

film’s response to that of the human eye gives fti

a much more natural look for scenery; its higher

resolution allows the producer to step back and use

more wide-angle views. These characteristics give

different artistic feels to the media, which are likely

to persist well into the HDTV era.

In the longer term, however, electronic capabilities are likely to bring video media closer to the

capabilities of film. In addition, electronic media

offer advantages over fti by eliminating processing

and allowing, in the filly digital case, an endless

number of overlays of special effects or addition of

other material. These potential new applications and

cross-technology interactions highlight the importance of production standards.

Although it is now unlikely that a single world

standard for HDTV production will be adopted (ch.

2), international program exchange standards may

yet be developed that allow easy transcoding horn

one system to another.12

Transmission Systems

HDTV transmission systems must take into account a variety of media as well as different degrees

of compatibility with existing receivers and channel

requirements. Although the U.S. communications

infrastructure includes cable, satellite, VCRs, and

will someday encompass fiber to the home, terrestrial broadcasting has been the major focus for U.S.

HDTV development. This is due to its market

importance and the constraints it faces in spectrum

allocation. The technical requirements for terrestrial

broadcasting are also significantly different than for

the Direct Broadcast Satellite systems approach

followed by Japan and Europe.

The FCC has received nearly 20 proposals for

terrestrial transmission standards, although only a

handful of these appear likely to be developed.

These proposals encompass such issues as: the

degree of compatibility with existing NTSC receivers and the current channel bandwidth; the means of

adding additional information needed to improve

picture resolution, including the video encoding

technique; methods of widening the picture; and the

manner in which the picture is scanned-interlaced

or progressive. 13 ~ general, the proposals Ca k

grouped in the following four categories: NTSC

Receiver-Compatible HDTV; Channel-Compatible

or Simulcast HDTV; Alternative Media HDTV; and

Non-Compatible Recorded Media HDTV.

In September 1988, the FCC tentatively ruled that

broadcasters must continue to transmit signals that

can be received on today’s TVs; and that no

additional radio spectrum would be allocated for

HDTV broadcasting outside the existing spectrum

ll~sc shows 59$94 fields ~r s~ond in a 525 he in~r~c~ scam or @v~~fly, about ’30 fr~es pa ~nd. SECAM (Squentkd Color with

Memory) and PAL (Phase Alternation by Line) show 50 fields or 2S frames per second at 625 lines per frame.

lw.F.sc~i~, ‘CA Friendly Family of Transmission Standards for All Media ~d All Frame wta” (~‘dge, MA: Massachusetts Institute of

Technology, Feb. 12, 1989), draft.

13See, for example: “FCC Advisory Committee on Advanced Television Service: Systems Subcommittee, Interim Repor4° Apr. 10, 1989.
Chapter &TVandHRS Technologies ● 57

allocations for TV.14 Together, these effectively rule

out noncompatible HDTVS such as the original

Japanese MUSE system, but would allow either the

receiver-compatible or simulcasting approaches for

terrestrial broadcasting (box 4-3).15

Today’s TV audience views a picture far worse

than what is theoretically possible, and might easily

mistake a studio quality NTSC picture for HDTV.

NTSC is susceptible to a variety of transmission

problems-ghosts, snow (noise), interference from

other stations, etc. (box 4-l). Further, NTSC does

not use the available spectrum efficiently: more

information could be packed into the existing

bandwidth; and large amounts of spectrum are

unusabl~very other channel in VHF and typically five out of six channels in UHF are not used

because of interference problems. To the extent that

EDTV and HDTV require compatibility with the

existing NTSC system, they could lock in these

technical flaws for many years in the future. Better

antemas and modem electronics can reduce some of

these problems. Development of a new system,

however, might achieve far more.

NTSC Receiver-Compatible HDTV

The transition from B&W TV to Color TV was

done by altering the NTSC signal to include color

while degrading the performance of B&W sets

receiving color broadcasts only slightly-thus maintaining compatibility. This is also the most frequent

proposal for making the transition to HDTV. The

inefficiency of the current NTSC signal, however,

means that only modest improvements can be

achieved in the picture while staying within the

current 6-MHz channel bandwidth. (The 6-MHz,

NTSC-compatible HDTV proposals are here termed

EDTV.)

HDTV quality and fill receiver-compatibility

require additional spectrum. The full 6-MHz channel (with some motilcations) plus an additional

one-half or full channel (3- or 6-MHz) someplace

else in the spectrum must be used to augment the

signal and to provide the additional detail needed for

a high-quality picture. Standards proposals of this

type include those from: FaroudjaLabs (U. S.), Japan

Broadcasting Corporation (NHK),MIT(U.S.), North

Box 4-3—Levels of Receiver Compatibili~

o.

1.

2.

3.

The current receiver is unable to display, in any

form, HDTV transmissions; the HDTV receiver

is tiable to display NTSC transmissions.

An adapter box can be purchased separately so

that existing NTSC receivers can display HDTV

transmissions at the NTSC level of quality;

HDTV receivers can display either HDTV

tmnsrnissionsat high definition orNTSCtransmissions at NTSC quality.

An NTSC system can display HDTV transmissions at somewhat reduced quality compared

to conventional transmissions. This is what

happened in the conversion from B&W to color

broadcasts. HDTV receivers, as above.

An NTSC can display HDTV transmissions at

the same quality as a normal NTSC transmission; HDTV receivers, as above.

American Philips (Netherlands), Samoff Labs for

Thomson (France) and NBC.lG

Channel-Compatible or Simulcast HDTV

An HDTV-quality picture could be broadcast

within the current 6-MHz channel bandwidth, but

only if the constraint of NTSC-compatibility is

removed so that the bandwidth can be used more

efficiently. In this case, a standard NTSC signal

would be transmitted with no changes on one

channel; an HDTV signal would be simulcast

independently on another channel. With proper

design of the signal, now unused “taboo channels”

could likely provide the needed broadcast spectrum

for such simulcasts. Over a long period of time, the

conventional NTSC channels could be gradually

phased out and replaced with the simulcast signal

alone. The portion of the spectrum vacated could

then be used for the next generation of television

technologies or for other uses such as mobile

communications.

Zenith and MIT are the principal proponents of

such systems, with NHK (Japan) also recently

offering a simulcast system and North American

Philips announcing that they are developing one.
58 ● The Big Picture: HDTVandHigh-Resolution Systems

These latter proposals indicate the increasing atten-

, tion and interest in the simulcast approach.

Alternative Media HDTV

These systems are designed for use with media

other than temestrial broadcasting. They are primarily oriented toward satellite broadcasts. NHK (Japan),

North American Philips (Netherlands), and Scientific Atlanta are among the proponents of such

systems.

Noncompatible Recorded Media

HD-VCRS or HD-Video disks in the noncompatible Japanese MUSE format might be introduced in

the United States as early as 1991. These systems do

not require FCC approval, but are a concern to

broadcasters because they might accelerate the

ongoing erosion of broadcasters market share. As a

result, these media have been an important driving

force behind the current FCC study of advanced

television.

Receivers for HDTV

The various proposals for HDTV receivers respond to the current debate over transmission

standards-speci.flea.lly, whether the transmission

system will be receiver-or channel-compatible, and

whether there will be one standard or many for the

different media. Receivers now envisioned can be

classified as “closed,” “multiport,’ ‘‘open,’ or

‘‘smart.

Closed Receivers

Closed receivers are similar to those used today.

They are possible only if a single standard is set

industry-wide for all media. Such a system has no

flexibility to allow future changes in broadcast

standards or to allow later options to be added to the

HDTV without substantial modifications to the

receiver.17

Over the near-term, these systems might cost

somewhat less than more flexible designs discussed

below. The current rapid pace of technological

change might, however, make closed systems quickly

obsolete-increasing the costs to consumers over

the longer term.

Multiport Receivers

Multiport receivers will have multiple jacks or

inputs that could accept several incompatible signals: one for terrestrial broadcasts, a second for

cable, a third for DBS, and so on. Such HDTVS

would have less flexibility to adapt to fiture changes

or to allow the addition of various options than those

described below. The costs of multiport (and other)

receivers may be increased if they must accommodate several radically different standards.

Open Architecture Receivers

These receivers would be designed to accept a

variety of standard plug-in circuit boards. The sets

could be moMled over time (at a price) to accept a

wide variety of signals and standards, yet properly

display the picture. These systems migM also be

adapted to provide other services-such as home

computing and telecommunications-just as today’s

personal computers can have circuit boards added to

increase their versatility and power. Open Architecture Receivers might also create new business

opportunities for third-party vendors of equipment

and services.

Opponents of the Open Architecture Receiver

argue that this approach would increase costs and

complexity for users. Proponents point out that the

rapid changes in technology demand flexible open

systems and that such systems may ultimately lower

overall costs to users. Nor are such systems necessarily complex. A simple channel selector and

volume control like today’s can be provided for

those who want only to watch TV.

“SmartJJ Receivers

Smart receivers are the most technologically

advanced receivers currently conceived. They would

adjust to a wide variety of transmission standards by

automatically decoding the transmission format.

Such sets could even adjust to a format that varied

according to the type of material displayed—

scenery with little motion could be shown in very

high resolution, whereas rapid action sports wouId

emphasize the display of motion.18 Smart receivers

would probably be more expensive for the near term

ITTheorig~~SC stidmd~~nupgraded overtime-with color, stereo, closed captioning, etc. However, the rapid changes incommuni@tions

technologies and electronics capabilities suggest that much more dramatic changes may be possible in the near future.

lgwil~F.sc~ei~r ad~&ew B. Lipp~ “single.kel ~~ systems, compatible and NonCorn@ible,’ hhs~ch~tts hlstihlte Of

Technology, Mar. 11, 1988.
Chapter &TVand HRS Technologies ● 59

due to the high cost of the electronics required for

such advanced data manipulation.

HIGH-RESOLUTION SYSTEMS

AND TECHNOLOGIES

The evolution of television technology towards

digital electronics is converging with the evolution

of computing towards multi-media presentations

(including text, data, graphics, and full-motion

video) .19 The underlying storage, processing, transmission, and display technologies of high-resolution

entert ainment video and multi-media computing are

becoming largely indistinguishable.20

All of these technologies which emphasize highquality imaging or displays can generically be

termed High Resolution Systems (HRSS). HRSS

encompass an enormous range of markets-ATVs

generally and HDTV in particular; multi-media PCs;

engineering workstations; scanning and imaging

equipment for electronic document storage; digital

photocopiers and facsimile machines; and many

others.

The applications of HRSS are equally diverse.

These could include: video entertainment (HDTV),

interactive video systems, electronic imaging for

document storage21, desktop publishing, graphics

for engineering workstations, and many others.

Many foresee these markets merging. For example,

an HDTV/PC might be able to receive or record an

HDTV program, search a video database, or include

a video clip in a report along with text and graphics.

Such systems are potentially interactive, allowing

the HDTV/PC viewer to request additional information of a news clip, or even to mod@ the picture

being watched.

HDTV plays a particularly important role in the

development of High Resolution Systems. HDTVS

must handle enormous information flows and so

require immense processing power. These demands

make HDTV a sign~lcant driver of certain technologies (ch. 5). The high demand for video entertainment may aid the penetration of these powerful

systems into the residential market. This might

allow the HDTV/PC of the future to become the

home terminal-an ‘information appliance’ ‘-on a

national fiber network. It is this vision of the

information society of the future that is being

promoted by MITI and MPT (ch. 2). Whether or not

HDTV can fulfill such a role in the United States is

a matter of public debate (ch. 6).

lg’’Moving Beyond VGA,” Electronics, July 1989.

2oThere are, of course, differences in terms of the signal transmission formats, receiver processing, and the brightness and size of the display, ete.

Z1’’Imaging,” Electronics, July 1989.
Chapter 5

Linkages Between HDTV, HRS, and Other Industries

INTRODUCTION

HDTV is possible only through the intensive use

of digital electronics; signiilcantly higher quality

pictures than today’s NTSC cannot be delivered to

the home by any other means because of bandwidth

constraints. As a result, the core technologies of

HDTV-production, storage, transmission, processing, and display of information-are the same as

those used in computer and telecommunications

devices.

It is often overlooked in the current debate that

HDTV is a development vehicle for “HighResolution Systems” (HRS) generic to all information systems. HDTV proponents, for example, argue

that the ability to produce high-performance displays and other technologies gained from a presence

in the HDTV market will give manufacturers

significant advantages in producing related components and systems for the computer and telecommunications markets. Skeptics resist the linkage argument as an unproven hypothesis and insist that these

technologies can be developed by the computer and

telecommunications industries independently.

OTA found evidence that HDTV developments

are driving the state-of-the-art in several of these

technologies more rapidly than are developments in

computer or telecommunication systems. The enormous

amount of information in a real-time, full-color

HDTV signal-some 1.2 billion bits per secondl

(1.2 Gbps) in the uncompressed signal-places

severe demands on today’s technologies. This contrasts sharply with the conventional stereotype of

consumer electronics as low-technology products

lagging far behind the leading edge of computers and

telecommunications.

HDTVS must handle huge information flows and

require special hardware to provide high computational speeds to convert a signal compressed for

transmission back into a viewable picture. Digital

Signal Processors (IMP) tailored to this specific task

are meeting that requirement. In contrast, engineering workstations, for example, must flexibly perform a broader range of calculations than an HDTV;

therefore, they are software programmable.2

The major technological bottleneck for the workstation today is the computational speed and the

flexibility of its microprocessor and graphics display

chips. Workstations put less stress on communications, storage, and certain aspects of display technologies than HDTV because they do not yet approach

the information flows or the (specialized) computational speeds demanded of HDTVS.

Other High-Resolution Systems (HRS), such as

desktop publishing and medical imaging, place

different and often lower demands on DSP, storage,

and communications technologies than does HDTV.

They typically do not operate in real-time and

accordingly have lower rates of information flow.

Many of these other applications also place lower

demands on display technologies than does HDTV.

They work well enough with slower response times,

limited colors, lower brightness, or smaller display

areas. Providing sharp images of stationary objects

as is usually the case with computer applications is,

in many respects, technologically easier than providing high-resolution, real-time, fill-motion video.

These other HRSS often require, however, higher

resolutions than currently planned for HDTV displays.3

While many of the linkages between these technologies are obvious, they are not easily measurable.

Nevertheless, these linkages can have an enormous

impact on widely scattered technologies and markets. Simple analyses in which the projected fhture

value of an industry is discounted to the present

cannot account for the new and unforeseen opportunities that might be created by being in a market.

Sony’s and Philips’ development of the compact

disk player, for example, has opened huge markets

in computer data storage. Similarly, flat panel

1’IMS is for the NHK system. Other systems might have somewhat higher or lower data rates.

?Note that “smart” HDTVS would have the capability to be somewhat software programmable, but are not incIuded here as they are not likely to

be sufficiently low in cost for consumer use for some time. Their development will push the state-of-the-art significantly in programmable DSP.

sB~use ~omputer ~sp~ys me nom~ly viewed closeup and fiere are eye fati~e issues, some of the design criteria are different.

-61–
62 ● The Big Picture: HDTVand High-Resolution Systems

plasma and electroluminescent displays, among

others,4 drove the initial development of Power

Integrated Circuits (Power ICS) which, in turn, are

revolutionizing the distribution and control of electric power in equipment ranging from aircraft to

air-conditioners.

The linkage argument does have limitations. For

example, unlike leading-edge PCs or workstations

where performance is everything and price a secondary consideration, HDTVS must be produced and

marketed at a price within reach of consumers. This

demands exacting design and manufacturing discipline that is often lacking in narrower or more

specialized markets, such as the military or medical

imaging.

The large potential size of the HDTV market

could enable signiilcant improvements in manufacturing technology as firms seek to lower production

costs. In some cases, low-cost manufacturing will

require pushing the state-of-the-art in component

technologies; in others, it will mean that HDTV will

let the computer or telecom markets push the

state-of-the-art and will then use those results.

Above all, HDTV-asfor allconsumerelectronics—

will require pushing the limits of cost-effective

manufacturing of sophisticated electronic systems.

This might be one of the most important impacts of

HDTV.

Whether or not a consumer HDTV market develops, the expectation that there will be a large market

is forcing manufacturers who wish to participate to

push the state-of-the-art in the various HDTVrelated technologies. If the market does develop,

then large-volume production might give the producer economies of scale in a number of other

components and products.

Having a technology matters little if markets are

closed to innovators or the entry barriers are

effectively insurmountable. As a result, it is also

important for those that develop the technology to

capture a si~lcant share of the market. In the past,

the United States has assumed that if the technology

was developed, markets would follow. Faced with

large, usually vertically (and horizontally) integrated, aggressive foreign competitors; and confronted with increasingly skill- and capital-intensive

R&D and manufacturing to produce high-technology

goods, this assumption is no longer valid.

Neither linkages nor market share nor volume

production of computers were su.flicient to save the

U.S. DRAM business. U.S. firms produce about 70

percent of the world’ spersonal computers today and

lead the world in PC design. Nevertheless, domestic

fms have lost the market for DRAMs to Japanese

fins. A combination of factors, including less

efficient manufacturing by some U.S. fiis on one

hand and aggressive foreign trade practices on the

other, forced most U.S. manufacturers out of this

important market.

The United States has also lost important HRS

imaging markets such as low-end copiers, as well as

many other pieces of the electronics industry,

despite having a predominant market share in many

of these just a few years ago.

Startups in the U.S. electronics industry are

increasingly focusing on design alone and depend on

foreign operations for the highly capital-intensive

manufacturing operations5—they cannot secure the

capital necessary to do the manufacturing themselves. In contrast, a number of foreign firms with

little expertise in advanced electronics are becoming

important manufacturers of electronics through heavy

and long-term investments and careful attention to

the manufacturing process. For example, NMB

Semiconductor, a new subsidiary of a Japanese

ball-bearing company, Minebea, in just 5 years

entered and became the world leader in very fast

DRAMs.6 Kubota, a Japanese agricultural equipment company, is now manufacturing rninisupercomputers designed in the United States.7

Similarly, Korean semiconductor f-s are now

becoming “mportantproducers of commodity DRAMs.

The United States cannot survive by performing

R&D alone. Manufacturing provides far more jobs,

‘@thers include non-impact printers and multiplexing automobile wiring. In particular, automotive applications are expected to become an

increasingly important driverof tbis technology in thenextfew years. Martin Gold, ‘Autos Drive Smart Power IC R&D,” Electronic Engineen”ng Times,

Jan. 15, 1990, p. 39.

s~tep~ Cillxlit @*l@ Corp., “Mid-Term 1988,’ Scottsdale, AZ, lists 18 startups during 1984-87 that chose not to build their own

fabrication facilities. Of these, at least one-third were using fabrication facilities in Japu ‘hiwa~ and Korea.

6$~How~ Took @er ~FmtD~-et,” Electronics, NOVedXX 1988, p. 188; Bob Johtone, “Chips and Sum’ FarEastern Economic

Review, July 20, 1989, p. 52.

~avid E. Sanger, “U.S. Parts, Japanese Computer, ” New York Times, Sept. 7, 1988, p. D].
Chapter $+Linkages Between HDTV HRS, and Other IndWries ● 63

greater value-added, and larger cash flows than

R&D, and these are needed if future investments are

to be made in R&D or production. Nor can we expect

every American to earn a living as a design engineer.

With the increasingly tight linkages between R&D

and manufacturing due to the exacting requirements

of modern manufacturing processes and quality

control, and due to the need to design for manufacturability, R&D is merging with the manufacturing

process. In many cases, when the United States loses

manufacturing, the loss of R&D is not far behind.

The problems facing the U.S. electronics industry

are much broader than simply HDTV. Although

HDTV maybe an important element of any broader

U.S. strategy in electronics, by itself HDTV will

neither seal the fate nor save the U.S. electronics

industry. There are undeniable linkages-some

strong, some weak-that should be recognized, but

the problems facing the U. S. industry extend into

many other financial and structural factors. These

include: the higher cost of capital in the United

States resulting, in part, in lower capital and R&D

investments than our competitors; inattention to

manufacturing process and quality, poor design for

manufacturability, and separation of R&D horn

manufacturing; foreign dumping and foreign market

protection; and smallness of scale and/or lack of

vertical/horizontal integration compared to foreign

competitors. Some of these broader issues facing

U.S. manufacturing are discussed in a recent OTA

report ‘‘Making Things Better. ’

SEMICONDUCTORS

The rapid technological advances and cost reductions of digital electronics will likely make HDTV

affordable in the not-too-distant future. During the

past 10 years, the capacity of leading-edge memory

chips (DRAMs) has increased by 250 times while

the cost per unit memory has decreased nearly 100

times.9 Each generation of advanced TVs will use

increasingly complex digital semiconductors to

provide a better quality picture at a lower cost.

In turn, HDTV will directly push the state-of-theart in various aspects of digital signal processor

(DSP), display, data storage, and possibly semiconductorpackaging technologies, among others. HDTV

may indirectly impact a much broader range of

components as well as computer and telecommunication systems as a result of these technological

advancements.

Digital Signal Processing

There are three steps in digital signal processing.

First, the continuously varying analog signals of the

real world—sound, light, temperature, etc.—are

converted into a digital form usable by computers

with an analog to digital (A/D) converter. (See box

4-2.) Second, the signal is processed with a Digital

Signal Processor-to decode the tightly compressed

broadcast signal back into a recognizable picture, or

reduce ghosts and snow (noise) to produce a

near-flawless picture. Third, the digital signal is

converted back into an analog form-sound and

pictures, etc. that people can understand-with a

digital to analog (D/A) converter.

A digital signal can be manipulated (as in signal

compression), analyzed, transmitted with greater

reliability, and stored in computer memory. In

general, the more the broadcast signal is compressed

to fit into a narrow bandwidth, the more digital

signal processing power is required for its reconstruction.l”

Digital signal processing is used today in compact

disk players, facsimile mail, long-distance telephone

lines, computer modems, and in other applications.

Human hearing and vision are analog, so digital

signal processing will play an increasingly important role in providing an ‘interface’ between people

and information systems in the future as we come to

rely more on images and sound instead of alphanumeric text.

Digital signal processing chips (A/D, DSP, D/A)

and digital signal processors in particular for HDTVS

are at the leading edge of many aspects of the

technology (figure 5-l). For example, at the 1989

International Solid-State Circuits Conference (the

most important international conference for unveiling new chip technologies), some of the fastest DSP

chips ever developed were specifically designed for

SU.S. Congms, Of3ice of Technology Assessment, Making Things Better: Competing in A4an@acturing, OTA-ITE-443 (Wash@on, DC: U.S.

Government Printing Ofllce, Febrwuy 1990).

%tegrated Circuit Engineering Corp., op. cit., footnote 5.

l~e development of ~tter video si~ ~~p~essio~ ~gori~s is ~ impo~nt non.~dw~ ~~t of cment work kl DTV tht k dSO Critid

to the success of interactive video systems.
64 ● The Big Picture: HDTV and High-Resolution Systems

Figure 5-1-Selected Applications of Digital Signal Processors v. the Speed of Operation

Satellite communications

I I

Radar and sonar

I

I

Imaae cvocessina

Speech recognition

I I

Telephone, modems, and fax Conventional TV tfDTV Multiply-accumulate

I [ ~~

cycle time

Ordinary microprocessors

1 I

DSP microprocessors

HDTV is among the most demanding of applications in terms of speed

SOURCE: Jack Shandle, “Signal Processors Open Up New Territory in Communieations,” Hectronics, April 1989, p. 79. Used with permission.

HDTV or related color video signal processing.11

The only comparably demanding applications today,

at least in terms of speed and throughput, are military

radar and sonar (highly specialized and low-volume

markets), and image processing that is closely

related to HDTV.

An uncompressed HDTV signal contains about

1.2 billion bits per second (1.2 Gbps) of information.

In comparison, today’s advanced engineering workstation hits peak speeds internally of roughly onehalf gigabit per second.12 This signal is compressed,

transmitted, and is then converted back into a

viewable picture by the receiver. The amount of

computation needed to decode this varies with the

standard chosen, but can be as much as 2 to 3 billion

mathematical operations per second. DSPS are able

to handle these huge information flows and computational speeds—roughly comparable to those attained by today’s supercomputers—at a cost consumers can pay only through specialized designs

tailored for specific tasks. Unlike HDTVS, supercomputers are able to handle a broad range of

computations and to do so much more flexibly .13

The development of certain important computer

technologies may be aided in part through efforts in

developing digital signal processing for HDTV. For

example, the ‘Ctestbeds” built by the Japanese to

develop DSPS have required extensive work with

massively parallel processor systems—the ability to

hook-up many microprocessors in parallel to speed

up computations. At Nippon Telephone & Telegraph, for example, the National Academy of

Sciences Panel reviewing Japanese HDTV development efforts observed a system with 1024 processors

in parallel, far fewer than some U.S. systems but still

a notable achievement. Parallel processing has been

a significant weakness in Japanese supercomputer

technology, and a primary area in which U.S. fms

have managed to maintain their edge. The experience with parallel processing hardware that the

Japanese have gained in their HDTV development

efforts may have spinoffs to their supercomputer

systems.

Similarly, HDTV research at the David Sarnoff

Research Center has led to the development of a

video-supercomputer capable of an information

flow rate of 1.4 Gbps and computational speeds of

Illlickd Doherty, “At ISSCC, Pamllel Signal processing, “ Electronic Engineering Times, Feb. 27, 1989.

lz~c~d McComc~ “Supercomputer Highway co~d Be a co~&y Road, Say Industry Executive, “ New Technology Week, Aug. 14, 1989.

]sDavid Mes~m~~~tt, Dep~ment of El&~c~En@eefig, univ~sity of C~ifomia-Berkeley, pmSOIXd COml!lUl unicatiom July 31, Oct. 12 and

13, 1989.

141bid.
Chapter 5-Linkages Between HDW, HRS, and Other Industries ● 65

some 1.4 trillion mathematical operations per second at a cost of less than one-tenth that of other

supercomputers.ls

The DSP market is growing rapidly. It is expected

to increase from about $650 million per year to $1.6

billion by 1992 (figure 5-2). If the HDTV market

develops, HDTVS will use an enormous amount of

digital signal processing. For example, the Japanese

MUSE-9 system uses some 500,000 gates—a measure of processing power—to convert the highly

compressed signal back to a picture. 16 DSP requirements may be less or more than this, however,

depending on the eventual choice of transmission

and receiver standards.

If high rates of growth are realized for the HDTV

market in the United States, Japan, and Europe,17

then 15 years from now the use of digital signal

processing chips in HDTVS alone could be 10 times

today’s total world demand (measured by processing

capacity-’ gates”) for all microprocessor and related applications and roughly 100 times today’s

demand for DSP.18 Such estimates are speculative;

their qualifications are discussed below. Depending

on the relative growth of the computer, telecommunications, and other markets, this may or may not be

important compared to the entire microprocessor

and microcontroller market in 15 years. It would,

however, almost certainly have a strong impact on

the cost of DSPS for video processing. Even under

low-growth scenarios a tenth as large, HDTV would

likely have a strong impact on the cost of DSPS for

video processing.

The United States currently has a stronger position in DSP design than Japan and is about equal to

Japan in the production and performance of DSP

chips. Domestic firms have managed to maintain a

dominant market position in DSP because they have

better software for developing these chips. Texas

Instruments currently has 60 percent of the world

DSP market; NEC is second with 11 percent.19

Production of DSPS for HDTV could significantly

1989

1990

1991

1992

Figure 5-2—Projected Growth of the Digital Signal

Processor Market, 1989-92

Small IDSP Markets Grow Fast — —

— E=I:-ml

O 65

IEzI

090

H----”-

i

1 25

— — - ..———— —. I

I

1625 I

l— I

I —J–- -J—-. L– -. L. _ I

I 72 () 4 06 08 1 0 1 2 1 4 1 6

Worldw!de DSP-product revenues ($ bllltons)

_ Consumer ~ industrial ~ Government and mllltary

D$ lenLe and en{]lneerlng ~ Commumcations

SOURCE: Jonah McLeod, “DSP,” Ektronics, April 1989, p. 71.

change these market positions, depending on a

firm’s presence in HDTV. Such concerns may have

been a factor in Texas Instruments’ recent decision

to purchase the Japanese HDTV chip designs and

technology from Japan’s NHK in order to participate

in the Japanese HDTV market.20

DRAMs

HDTVS similarly place heavy requirements on

memory technology. Access times needed for HDTV

memory chips must be roughly 20 nanoseconds

(ns)—20 billionths of a second. Today’s fastest

DRAMs have typical access times of 60 to 80 ns.

Leading-edge PCs and workstations are providing

a significant market pull for the special techniques

and faster types of memory devices such as SRAMS

(Static Random Access Memory) necessag to

operate at high speeds. If the HDTV market develops, it could provide an additional pull for leadingedge fast DRAMs. Matsushita’s 8 Mb Video RAM,

for example, has a serial access time of 20 ns, 1.5

times faster than current VRAM technology.

IsDavid s~off R~earch Center, “The Princeton Engine: A Video-Supercomputer, ’ SWIIOff ~bs, Sept. 28, 1989-

16David Lammers, “U.S. ASICS on TV, ” Electronic Engineering Times, Feb. 27, 1989.

17Cone5pon&g Uket projections are those by the Electronic Industries Association (EM) for the United States and the Japanese ~stry of posts

and Telecommunications (MOPT). Similar sales rates were assumed for Europe with appropriate reductions for the observed lower rates of household

penetration for color TVs.

Igworld logic Gate production in 1987 is estited by O’IA to be about 2 trillion gates for microprocessors, microcontrollers, and ASICS.The

comparison is made by multiplying the high growth projections for HDTV by 500,000 gates per set.

Iwdfim I. s~auss, “Fe@-Genemtion DSPS Will Debut Next Year,” Electronic Engineenng Times, Aug. 7, 1989, p. 55.

‘Jacob Schlesinger, “Texas Instruments Agrees To Buy HDTV Technology From Japw ” Wall Sfreet.lourmd, Sept. 14, 1989.
& ● The Big Pictire: HDTV and High-Resolution Systems

HDTV could also become a si~lcant new

market for DRAMs. An HDTV might use as much

as 32 million bits (Mb), equivalent to 4 million bytes

(MB) of DRAM, to store the HDTV picture in

memory.21 Assurning rapid growth of the HDTV

market as above, then the use of DRAMs in HDTVS

alone in 15 years could be five times the total 1987

world demand (by memory capacity-bits) for all

DIUM applications.” Depending on the relative

growth of the computer, telecommunications, and

other markets, this may or may not represent a

significant tiaction of world DRAM use at that time.

Japanese firms are, however, already establishing

major new DRAM production facilities with the

expectation that their output will be used in Advanced TVS.

23

These scenarios for DRAMs and DSPS are subject

to a number of quali.flcations and uncertainties. If the

standard chosen for HDTV uses significantly lessor

more memory and digital signal processing, then the

projections would be adjusted accordingly. If the

development of the IDTV market, for example,

substitutes for HDTV and prevents HDTV market

growth, then the DRAM projections would be

reduced by a factor of 4 because the typical IDTV is

expected to use about a quarter of the memory used

in an HDTV.W If consumers instead move progressively upscale, buying IDTVS and EDTVS first and

then move to HDTV, relegating their IDTVs/

EDTVS to use as a second set as they did B&W sets

when moving to color, then chip demands could be

25 to 50 percent greater than projected. If strong

commercial markets for HDTV develop, as predicted by the Japanese MPT, then chip demand

could be twice the projections above. Factoring in

production and broadcasting equipment sales could

increase these projections by 10 to 15 percent.m

Finally, some believe that progressively more sophisticated systems will be developed beyond HDTV,

requiring even more memory and signal processing.

Fifteen years ago the United States had more than

90 percent of the world market in DRAMs; today the

United States makes less than 15 percent of the

DRAMs purchased in world (merchant) markets.

Texas Instruments, Micron Technologies, Motorola

with technology licensed horn Toshiba, and IBM

(for internal consumption) are the only U.S. firms

still producing DRAMs. The recent effort to forma

consortium, U.S. Memories, might have improved

somewhat the U.S. position. For a variety of reasons,

however, it failed to attract sufficient support horn

U.S. firms to even be launched.

Gallium Arsenide and Other Compound

Semiconductors

Receiver-compatible HDTV systems propose use

of the standard 6 MHz NTSC signal, which would

then be augmented with a second signal 3 to 6 MHz

wide to provide the additional information for the

higher quality picture. The wider bandwidth of such

HDTV systems may require GaAs (Gallium Arsenide) chips in the tuner due to their wider

bandwidth capability and their ability to handle

overloads.~

GaAs and related materials are now used in a

variety of applications, ranging fkom some leadingedge supercomputers to the lasers in CD-players and

in fiber-optic systems. The use of GaAs remains

limited, however, due to the difficulty of producing

high-quality stock material and fabricating semiconductor devices from it. If HDTV provides a large

market for GaAs devices, the additional production

volume might help some of these difficulties to be

overcome. Improved GaAs materials production and

fabrication techniques could have spinoffs to a

variety of markets.

The United States seriously lags Japan in a variety

of GaAs and related materials, processing, and

ZISome re-hers&lieve that fairly high resolutions can be achieved without such large use of memory; Others insisttitth=e tie signifi~nt

advantages in having a full frame memory, or 20 to 32 Mbits, depending on the standard, etc. Ultimately, the mezno~ and digital signal processor

demands will depend strongly on the particular standard chosen, but will also likely increase over time. (A Byte equals 8 bits and can represent one

character on a keyboard.)

%Estimated 1987 world DRAM production is 2.3x1014 bits. Integrated Circuit Engineering Corp., op. cit., footnote 5.

Z+N~onKoWoS-J@y b, 1989, cit~~B~ w’haltm and Mark Eato~ “Prospects for Development of au.s. ~~~dustry,” CO@~

on GovemrnentaJ Affairs, U.S. Senate, Hearing 101-226, Aug. 1, 1989, p. 516.

%Xuules L. Cohen+ “NEC ‘Ihkes An E!arly bad in Improved-Definition TV,” E2ecrronics, Dec. 17, 1987.

fiw-G1e@ norida Atlantic University, Boca Raton, personal cmnmunicatiom Feb. 10, 1989.

%~ Kel~ Natio@ s~~ndu~tor, pm~ ~mmuuication, ~. 21, 1989; Birney r)ayto~ Nvisio~ p~~ communi~o~ ~. & @t. 12

and 13, 1989; Ronald Rosenzweig, Testimony at hearings before the House Committee on Science, Space and Technology, Mar. 22, 1989.
Chapter Uinkages Between HD~ HRS, and Other Industries . 67

device technologies.27 Despite pioneering the development of many of these semiconductor devices, the

United States today buys much of the unprocessed

GaAs material horn Japan as well as the semiconductor devices fabricated from it. AT&T invented

the solid-state laser, but in some cases has purchased

semiconductor lasers from Japan to drive its fiber

cable.

Semiconductor Manufacturing

Highly disciplined and cost-effective manufacturing is required for a large HDTV market to develop

and for a firm to successfully compete within it.

Technology will have to squeeze even more circuitry

onto the same sliver of silicon to bring the cost of

HDTVS to reasonable levels. Reductions of the total

number of chips in this manner reduces costs-of

components, of assembling and testing the HDTV,

of repairing defects, and by increasing reliability.

Reducing the number of parts in color TVs was an

important aspect of the competition between the

U.S. and Japanese producers in the 1970s—and an

aspect in which U.S. producers seriously lagged.

The quest to reduce the number of chips in systems

is responsible for the explosion in ASIC (Application SpecKlc Integrated Circuits) production, which

now accounts for about a quarter of all merchant

integrated circuit Production.x

Efforts to reduce the number of chips needed can

already be widely seen in ATV development. NEC,

for example, reduced the number of chips in its

IDTV horn 1,800 to 30.29 An early prototype of the

Japanese MUSE HDTV system had 40 printed

circuit boards, each centaining 200 chips for a total

of 8,000 chips. In contrast, the latest generation of

MUSE decoders unveiled in June 1989 has less than

100 chips. Half of these were ASICS with 26

different designs. To minimke the burden on any

one manufacturer in developing these numerous and

complex ASIC designs, NHK divided the effort

among 6 different manufacturers, and then distributed the designs among all the participants (ch. 2).

Manufacturers are also pushing the design of

conventional memory chips. Matsushita recently

unveiled an 8 Mb Video RAM designed spectilcally

for application in HDTV, and intends to begin

commercial sampling in 1990.30

Eventually, nearly all of the required memory and

DSP for an HDTV might be combined on a single

chip. Increasing levels of chip integration will

require a significant increase in current capabilities,

and correspond to the expected leading edge of

semiconductor technology for the next decade.31

The extent to which this drives the state-of-the-art

will depend on the relative size of the HDTV,

computer, telecommunications, and other markets.

A number of important studies have documented

the current U.S. lag behind Japan in a broad range of

semiconductor process technologies:

●

●

●

The Federal Interagency Thsk Force found the

United States lagging Japan in 14 semiconductor process and product areas; the United States

was ahead in just six categories and its lead was

found to be slipping in five of these (figure

1-1).32

The National Academy of Sciences found the

Japanese leading in 8 of 11 semiconductor

process technologies that will be critical in the

‘ihture.33 -

A recent study by the Department of Commerce

found Japanese semiconductor plants had a

5-year lead over the United States in the use of

computer integrated manufacturing techniques.x

27Rqoti Ofthe F~~~temgency SW working Group, ‘ ‘The Semiconductor ~dus~, “ National Science FoundatioxL Washington DC, Nov. 16,

1987.

~Mm~~nt pr~ucem we those ~hic.h ~11 on tie open market and ficlude ~ Japanese and most U.S. wmiwnductor producers. Captive prOdUCerS

are those which use the semiconductors they produce themselves and do not sell them outside the fm. The world’s top three ASIC producers are Fujitsu,

‘lbshib& and NI?C.

3Cohe~ op. cit., footnote ~.

3oM,iyoko Mku@ “8 Mbit VRAM for HDTV,” Electronic Engineering Times, Apr. 3, 1989.

slDa~o~ op. cit., fm~ote 26; and* onpmj~tions by Craig R. Btumt~ “TechnoIow Dixwtions for~tegfated circ~ts~” Se minar at O’IA, June

15, 1989.

32RepoII of a R&ml Interagency staff wO&@ @XIp, Op. cit., fOOtnOte 27.

qsNatio~ Rmearch Comc& ~$Advanc~ fio~ss~ of Elec@onic Mate& in the United States and Japa~” National Academy Pm.w, 1986.

%T.C. Holto~ J. Dussaul~ D.A. Hodges, C.L. Liu, J.D. plummer, D.E. Thomas, and B.F. Wu, “Computer Integrated Manufacturing (CIM) and

Computer Assisted Design (CAD) for the Semiconductor Industry in Japa%” JTECH Panel Repo@ Department of Commerce, Science Applications

International Corp., December 1988.
68 ● The Big picture: HDW and High-Resolution Systems

These techniques have allowed the Japanese to

reduce turnaround time by 42 percent, increase

unit output by 50 percent, increase equipment

uptime by 32 percent, and reduce direct labor

requirements by 25 percent.

The Japanese have also rapidly improved their

plant and equipment to take advantage of the more

technically demanding, but cost-saving, large wafer

technology. From a position of parity in 1984, they

now use, on average, wafers that are nearly 35

percent larger in area than their American competitors.35 IBM, however, is pioneering very large,

8-inch, wafer technology.

DISPLAY TECHNOLOGY

HDTV drives display technology perhaps more

than any other single area. To truly appreciate

HDTV, much larger high-resolution displays are

needed than are generally available today. Indeed,

some analysts believe that the HDTV market will

not take off until large display s40-inch diagonal

and preferably larger-are available at reasonable

cost. A HDTV display must have fairly high

resolution—lOOO lines or more; superb color; rapid

response times; large size; good brightness, contrast,

and efficiency; and low cost.

Numerous display technologies are being developed, including: improvements in conventional

picture tubes; advanced projection displays using

either CRTs, LCDS, or deformable membranes3G;

and large-area flat panel liquid crystal displays,

among others.

Conventional picture tubes will undoubtedly continue to be the display of choice over the next few

years. They perform well, they are efficient, and they

are low in cost due to the many years of experience

man~facturing them. In the longer term, however,

there will be a shift away from direct view picture

tubes. In the larger sizes desired for HDTV, directview CRTs are bul@ and heavy in addition to being

fi-agi.le. Although work is being done to reduce their

depth37, CRTs currently are nearly as deep as they

are wide-few houses have either doors wide

enough to accommodate large CRT displays (40-

inch or more) or living rooms large enough to

conveniently house them. Furthermore, the weight

of a 40-inch CRT display is several hundred pounds.

By the mid-1990s, many analysts expect that

high-performance projection systems will be available that provide the larger viewing areas needed for

HDTV. Toshiba, NHK, Hitachi, Sanyo, Mitsubishi,

and Philips have all developed projection systems

for HDTV with screen sizes as large as 50 feet

diagonal. 38 LCD and deformable membrane projection systems are also under development with some

indications that the deformable membrane may have

advantages in efllciency, brightness, contrast, and

response time.

By the late 1990s, yet another display technology

may become available-the active matrix flat panel

liquid crystal display, or AM/LCD. Nine Japanese

companies demonstrated 10- to 14-inch color LCD

displays with resolutions of 640 by 400 pixels at the

1989 Tokyo Business Show.39 IBM recently unveiled an experimental high-resolution 14-inch diagonal color liquid crystal display that it codeveloped with Toshiba.40 Figure 5-3 illustrates the

current progress in developing AM/LCD displays

and a few of the firms that have led the way.41 The

Japanese recently began a 7-year, $100 million

collaborative research program to develop very

large, 40-inch diagonal, color flat panel AM/LCD

displays for HDTV and other applications (ch. 2).

Other display technologies are being investigated,

but barring fundamental breakthroughs,42 they are

less likely to be applied to HDTV. (In contrast, for

350T- ~~~p.

~cRTs ~e cathode-ray tubes, the basic technology used today for TV picture tubes. LCDS are liquid crystal displays, the basic twbology used today

in pocket watches, calculators, and many of the laptop PC displays. Deformable membranes work by reflecting light off a membrane that is deformed

point by point to either focus or diffuse the light so as to generate a picture.

sTDavid tires, “IWMSUShita Flattens CRT,” Electronic Engineen”ng Times, my 29, 1989, p. 29.

3s~WenceEo ~ws, “~TvandHDTVDisplays: Evolv~gfiJap~” JT’Ec!HP~el Review of HDTV~Jap~presen~tion atNational Academy

of Sciences, July 26, 1989.

sgElec&onics, Septaba 1989, p. 100; Special Advertising SmtiOn on JaP~.

@AshOk Bin@ 46F1at panel AdV~ceS had SID,” EleC~Onl’c EngineeringTimes, Apr. 24, 1989, p. 35.

41wfl~ c. Sctieider, ~l~L.Resor, “~gh.volume fioduction of ~ge F~l.Color Liquid-Crys@l Displays,” Znfonnution Display, February

1989, p. 8.

AzFor e~ple, if a good blue phosphor can be fo~d for ekctrol uminescent displays, they might become a strong competitor with LCDS.
Chapter S-Linkages Between HDW, HRS, and Other Industries ● 69

Fiaure “ 5-3--’ ’Ressr’s Rule” for Active Matrix Licauid

Crystal Displays (AM/LCDs) -

MITI goal

‘1

(1 meter by 1996) ,’”

/ ’

/

/ ’

/

/

/ ’

/ ’

/

/ ’

/

Research

/

/

&

/ ’

Development ,/” ,4

‘% /’ /

/

/

/

,

/

/

/

/

/

/ /

/

—19” TV—— -- “

-——/ — —– /

/’ / /’ / ,’ / /

,

.9/’ Toshiba ,/’ I

ing cost are critical factors for each of these display

technologies. Progress in these technologies, however, is being made: the Japanese NHK Laboratory

recently announced an experirnenta.1 20-inch diagonal plasma displaf18, and some believe that new

technologies might give plasma displays an edge

over A.M/LCDs.49

Production of large flat-panel displays will require signii3cant advances in a number of important

technologies. These include: high-throughput lowcost lithography tools for large area, highperformance patterning of circuitry onto the panel;

large-area, high precision glass sheet production;

and large-area, high precision thin-film technology.

/

T Sharp .’ I

+ Matsushita,.”< Commercial /

I Such capabilities may have applications in many

Seiko Epson ~

I /

Production I / Seiko Epson

J ‘-

‘Seiko Epson Matsushita

-+ i - - l - l

1982 1984 1986 1988 1990

Year of Introduction

This shows the trend in display size by ye:

t t A

992 1994 1996

r for displays under

R&D and in mmmercial produ~on. Display size, as measured by

the diagonal inch, is increasing at the rate of 3 inches (75mm) per

year. Commercial introduction follows R&D production by approximately 3 years.

SOURCE: MRS Technology, Inc., Chelmsford, MA. Used with permission.

flat panel LCD displays the technical limitations are

now believed to largely be in engineering.) Among

these displays are light-emitting diodes43, Plasma

Display Panelsw

, thin-film electroluminescent displays45, and fiber-optic expanders4G, among others.47

Size and weight, cost, brightness, power consumption, viewing angle, response time, and manufacturother arefi as well. High prec~~on control of thin

ftis, for example, is generic to a variety of

industries, from semiconductors to the production of

optical disks. Large-area lithography is expected to

be used to develop very high-density printed circuit

boards, or “chips on glass” by the Japanese Key

Technology Center AM/LCD research consortium.

This could be a very important development and is

discussed below.

Linkages such as these are difficult to anticipate.

Simple accounting may overlook them, but they can

sometimes lead to enormous new markets. Consider

the example of the Power htegrated Circuit. The

Power IC was initially developed and its costs were

driven down, in part, by the demands of such devices

as plasma and electrolti escent displays, among

others,so for IC drivers capable of handling mediumlevel voltages (100 volts instead of the typically 5 or

so volts used in computer circuits) and relatively

high currents.

43LEDs ~ve gener~y IOW efficiency in emitting lighg and there is an enormous variation in output and efilciency between different colo~, m*g

them hard to match. LEDs also have a fairly variable light output from device to device There is relatively little new research going on now in LEDs.

44plasm Display panels io~e a gas ~~ ~ medi~.level vol~ge (i.e., 100 volw) ~using the gas to glow. Disadv~tag~ include the cost C)f the

electronics to deliver this voltage, low efficiency, and a limited color range.

4sElectroluminescent Displays work by applying a medium voltage across a material causing it to glow. Limitations me its low eftlciency and limited

color range. Planar (U.S.), in particular, hm been working on developing a better “blue’ color as well as better manufacturing processes and electronics

that can vary the intensity of the colors. Tom Manuel,“A Full-Color EL Display Is Demonstrated by Planar,” Electronics, May 26, 1988, p. 73.

46Fi&r-optic expanders ~ve co~iderable profi5e, but we Cmenfly embrofied fi a patent ~pute. See G~rge Gilder, “Severed H-ds and Wasted

Resources,” Forbes, June 26, 1989.

470~em ~clude Vacum fluoreSmnt display5, ~ which Fu~&., ~c, and Ise hold the #l, z, ‘3 market positions; cold cathode emitter d.kphiyS; ~d

electrophoretic displays.

48Ashok B~&% ‘fFlat panel Advances bad SID, ” E/ec~onic EngineeringTimes, Apr. 24, 1989, p. 35.

A9David Lie~~~ ‘ ‘Plasma’s HDTV FOCUS, “ Electronic Engineering Times, June 12, 1989.

~othem include nonimpact printers and multiplexing automobile* g, etc. Athough apphCatiOfL3 in automobiles ordy began to be realized much

more recently, they were a long-term goal for some manufacturers.
70 ● The Big picture: lfLITV and High-Resolution Systems

Plasma and electrolumin escent displays area tiny

fraction of the display market and Power ICS for

these panels are a still smaller market. Despite such

humble beginnings, Power ICS are now beginnin g to

fmd applications across a host of industries with

important benefits. These range horn potentially

signiilcant reductions in the weight and cost of

aircraft wiring and controlssl to large improvements

in the efficiency of refrigerators, room airconditioners, and a host of other appliances.52

With the expected transition to flat panels and

other advanced display technologies, the United

States has a fleeting opportunity to regain a strong

market position in display technologies. In recent

years the United States strength in display technologies and markets has slipped away to the Japanese.

The United States still has a few scattered experts in

basic CRT technology at Zenith, Tektronix, GE,

Raytheon, Corning and a few other fins, but it lacks

the broad-based talent of the Japanese, particularly

in manufacturing.

U.S. fms are still competitive in some aspects of

flat-panel display technologies: in design, in the

production of the basic materials, in some of the

manufacturing equipment, and in some state-of-theart displays. Coming makes the best glass substrate

in the world for AM/LCD displays and currently

holds 90 percent of the Japanese market.53 MRS

Technologies, a Massachusetts venture startup, currently makes the world’s best lithography tools for

producing large flat panel displays.54 U.S. fms also

held half the 1988 world market in electroluminescent displays compared to Japan’s 29 percent; and a

quarter of the 1988 world market for plasma

displays—down from 57 percent in 1984—

compared to Japan’s 68 percent.55

These strengths are unlikely to last. In AM/LCD

displays, there are five significant R&D groups in

the United States-Sarnoff Labs, Ovonic, Magnascreen, Xerox, and Philips Labs (Briarcliff).5G GE

recently dropped its research program in LCDS.

There are more than a dozen fii in Japan doing

R&D in AM/LCD displays, most of them with more

projects and people involved than any of the U.S.

teams.57 Tables 5-1 and 5-2 illustrate the disparity

between U.S. and Japanese efforts in developing and

producing flat-panel displays.

No AM/LCD production lines are now operating

in the United States; essentially all of the world’s

production comes from Japan-which holds roughly

96 percent of the world market for (small pixel)

passive matrix LCDS and virtually IOOpercent of the

market for active matrix LCDS.58 Even if the United

States were to make breakthroughs, the manufacturing infrastructure to produce the displays would not

be in place. Without production, there will likely be

little revenue to continue a long high-level research

program-particularly considering the large capital

investment and engineering effort required for

producing very large area screens.

Already, the remainin g U.S. strengths are being

challenged. For example, a MITI-sponsored consortium, the New Glass Forum, was begun in 1985 to do

R&D in glasses, some of which may have applications to AM/LCDs. Nikon (Japan) recently announced a lithography system with a higher throughput than that of MRS Technologies.59

The market for displays for all purposes is large.

Worldwide sales of flat panel displays of all types

was $2.4 billion in 1988, out of a total display market

of $8.2 billion. The flat panel market is expected to

approach $6.3 billion by 1995, out of a total display

market of $14 billion.a Other estimates place the

slvl~~ Rume~ “power Devi&s Are In The Chips,” ZEEE Spectrum, July 1985.

Szswuel F. Baldw@ “Energy.EfflCient Electric Motor Drive Systems, “ in Electricity: Eflcient End-Use and New Generation Technologies, and

Their Planning Zmp/ications, Thomas B. JohanssoP Bi-rgit Bodlund, and Robert H. Williams (eds.) (Lund, Sweden: Lund University Press, 1989).

SSGW Stk ‘‘~n~ac~g Hurdles Cwenge Large-LCD Developers, ’ IEEE Spectrum, September 19*9, P. ~.

mNote, however, that it has lower throughput than the recent Nikon offering. See Stix, op. cit., footnote 53.

ssHeidiHo-U.S. Department of Commerce, personal communication, NOV. 29, 19*9.

fi~lti Resor, ~S T~~ologies, persomd communicatio~ Oct. 12, 19*9.

57Lawrence Tannas, l?mnas Electronics, personal communication, Aug 9, 1989.

sgBob w’his~ BIS wc~tosh I.xmdo~ personal communicatio~ Mar. 29, 1989.

59s~, op. cit., fOOmOte 53.

6f)~~u.s. Brains for a De~rate Fight ~ F~t p~els,” EZec~onics, DWember 1988.
Chapter Uinkages Between HDIY HRS, and Other Industries ● 71

Table 5-lAtatus of U.S. Producers of Flat Panel Displays in the 1980s

Company EL LCD PDP Other

Alphasil . . . . . . . . . . . . . . . . . . . . .

AT&T . . . . . . . . . . . . . . . . . . . . . . .

Cherry . . . . . . . . . . . . . . . . . . . . . . Production

Coloray . . . . . . . . . . . . . . . . . . . . .

Control Data . . . . . . . . . . . . . . . . .

Crystal Vision... . . . . . . . . . . . . .

Eleotro-Plasma . . . . . . . . . . . . . . .

EPID/Exxon . . . . . . . . . . . . . . . . . .

Kylex/Exxon . . . . . . . . . . . . . . . . . .

GE . . . . . . . . . . . . . . . . . . . . . . . . .

GTE . . . . . . . . . . . . . . . . . . . . . . . . Closed 1987

IBM . . . . . . . . . . . . . . . . . . . . . . . .

LC Systems . . . . . . . . . . . . . . . . . .

Magnasoreen . . . . . . . . . . . . . . . .

NCR . . . . . . . . . . . . . . . . . . . . . . . .

Ovonic . . . . . . . . . . . . . . . . . . . . . .

Panelvision . . . . . . . . . . . . . . . . . .

Photonios . . . . . . . . . . . . . . . . . . . .

Planar . . . . . . . . . . . . . . . . . . . . . . . Production

Plasma Graphics . . . . . . . . . . . . . .

Plasmaoo . . . . . . . . . . . . . . . . . . . .

Safnoff Labs . . . . . . . . . . . . . . . . .

Sigmatron Nova . . . . . . . . . . . . . . Closed 1988

TI . . . . . . . . . . . . . . . . . . . . . . . . . .

Xerox . . . . . . . . . . . . . . . . . . . . . . .

Closed 1988

Closed1984

Sold 1983

Sold 1989

Closed1988

Researoh

Researoh

Sold1986

Researoh

Research

Closed 1987

Seeking funding

Closed 1980

Production

Closed1986

Sold1987

CIosed 1984

Production

Closed 1985

Research/Prod.

Closed 1983

SOURCE: DaveMentley, Stanfofd Resources,lncvSanJose,CA,personalcommunication,Apr. 25,1990;JimHurd,

Planar Systems, Inc. Portland, OR, personal communication, May 1, 1990; Larry Weber, Plasmaco,

Highland, NYj personal eommunieation, May 1, 1990; and Defense Scienee Board, “High Definition

Systems Task Force, Final Report,” Washington, DC, forthcoming.

Tabie 5-2—Recent Investments in AM/LCD Production Facilities in Japan

Investment Faotory

Company (U.S. $million)a Operational Iooation Technology

Alps . . . . . . . . . . . . . . . . . . . . . . . .

Fuji-Xerox . . . . . . . . . . . . . . . . . . .

Hitaohi . . . . . . . . . . . . . . . . . . . . . .

Matsushita . . . . . . . . . . . . . . . . . . .

NEC . . . . . . . . . . . . . . . . . . . . . . . .

Seiko Epson . . . . . . . . . . . . . . . . .

Seiko Instruments . . . . . . . . . . . . .

Sharp . . . . . . . . . . . . . . . . . . . . . .

Toshiba/lBM-J . . . . . . . . . . . . . . . .

$33

80

134+67/yr

230

67

167

20

447

134

1992

ND

ND

4Q1991

ND

ND

ND

3Q1993

2Q1991

Iwaki

Ebina

Mobara Osaka

Kagoshima

Nagano Pref.

Akita Pref.

Tenrie/Mie

Himeii

TIT

a-Si TR

a-Si TtT

Poly-Si TIT

T~

TIT

Diode Matrix

a-Si TIT

a-Si TH

Worwertecf at U.S.$1.150 Yen.

KEY: TIT-thin fiim transistor; a-Si-am orphous-sii.kxm; Poly-S+poiy-siiicon

SOURCE: Dave Mentley, Stanfotd Resources, Inc., San Jose, CA, personaf communication, Apr. 25, 1990; and

Defense Science Board, “High Definition Systems Task Force, Finai Report,” Washington, DC, forthcoming.

flat panel market as high as $11.7 billion by 1996.61 The market for displays for HDTV could also be

The display market is also primarily driven by large. For example, if AM/LCDs became the display

consumer applications: 70 percent of the 1988 of choice, using the high-growth scenario above,

market was for consumer electronics; just 18 percent screen production for HDTV would be nearly 6,000

for computer applications.b2 times total world production of active matrix LCD

61Da~d fiemmCccolofi FUtUK for Flat panels,” Electronic Engineering Times, Jm 8, 1990, P. 71.

%dmond Branger, “Flat Panels in Focus, ’’Electronic Engineering Times, Mar, 20, 1989.
72 ● The Big picture: HDTV an.d High-Resolution Systems

screens today. 63 HDTV might then be an irnport~t

driver of flat panel display technology as well as

contributing to economies of scale in production.

Even with a small market for HDTV, the special

requirements of HDTV will drive large-area AM/

LCD or other flat panel technology development.

STORAGE

The state-of-the-art in magnetic and optical storage technologies for studio use is already being

pushed by the large volume and high rate of

information flow requirements for HDTV and, to a

lesser extent, related HRS.@ Digital VCRs for

studios will require much higher magnetic recording

densities and information transfer rates through the

use of improved magnetic materials, recording

heads, and other techniques.G5 Sony, for example,

has developed a prototype studio VCR that has a

recording speed of 1.2 Gbps—five times faster than

the previous record.fi To similarly extend recording

times on compact disks, the semiconductor lasers

used will have to operate at higher frequencies than

those used today, requiring advances in semiconductor lasers and reductions in production costs.G7

Matsushita has recently succeeded in storing 2.6 GB

of video information on a single 12-inch optical

disk.G8 These recording technologies will have many

applications in the computer industry.G9

Such spinoffs horn consumer electronics have

already been widely seen. Magnetic and optical

(compact disks) storage technologies were both

originally developed for the consumer electronics

market, but are now used widely in the computer

industry. In particular, compact disks are expected to

have a profound impact on information handling

generally.

Similarly, Digital Audio Tape (DAT) drives,

originally developed for the consumer market, are

expected to have a si@lcant impact on the

computer data storage market. DAT sales in the U.S.

consumer market have been limited due to U. S.-

Japan trade friction and issues of copyright protection; therefore, prices are expected to remain higher

than if large volume sales had already been achieved.

If approved, legislation currently pending in the

Congress that requires copy-controlling devices in

DAT machines may open up U.S. markets. DAT will

be able to store about 1.3 GB of data on a cassette the

size of a credit card and about 3/8-inch thick and will

have data rates of roughly 1.4 Mbps.70

There are also spinoffs between technologies. The

hard drives used in computers are made by coating

a very thin, high-quality layer of magnetic material

on a metal disk. The technology to do this, and even

the processing equipment, originally came horn

semiconductor wafer fabrication. A key technology

for Iarge-area, flat-panel displays will similarly be

putting extremely thin, high-precision coatings over

very wide areas. Once developed, this could have an

impact on the production of semiconductors, and on

magnetic and optical storage. The converse is also

true. Thin-film technologies developed for the

semiconductor industry could initially have an

impact on flat panel production, although the

impacts will likely decrease as the panel areas

increase.

Gsworld toti pr~uction of small pixel (not watches or calculators) passive LCD displays in 1988 was roughly 6.13 million tits, of which Japmese

firms produced 96 Pemeng U.S. firms 4 percent. World production of active matrix displays was 0.21 million units in 1988, essentially by allJapanese

firms. Assuming a distribution of 60 percen~ 3- to 6-inch diagonal, and 40 percent, 6- to 12-inch diagonal and averaging, the area is approxirnately4.6

million square inches of active matrix panels; and 135 million square inches of passive matrix LCDS. If high growth rate projections are realized,

assuming each HDTV has a40-inch diagonal (or 768 square inches for a 16:9 aspect ratio), then the total active matrix screen area produced will be 5,844

times today’s production of active matrix screens; 200 times today’s production of passive matrix. For the large areas required for HDTV, active matrix

screens will be necessary. World LCD production figures for 1988 were supplied by Bob Whisk@ BIS Mackintosh London.

‘Note that for consumer use, the extensive signal compression brings storage densities to near the level of current technology, which is doubling its

storage capacity every 2.5 years. The video signal is not compressed before storage in the studio, however, to prevent the introduction of errors or artifacts.

GsOthe~ might include improved error correction algorithms or data coding techniques.

66’’HDTV Faces Many Hurdles in Japan, ” Electronic Engineering Times, Apr. 10, 1989. And Messerschmi~ op. ci~ footnote 13.

67~~HD~ Faces ~ny H~dles in Japa~” op. cit., footnote 66. Increasing information stomge on today’s ~S k diffhdt beCaUSe the spot she on

the CD is approaching the wavelength of the lasers used-the system is approaching the diffraction limit. To increase &ta storage, higher frequencies

are needed.

@“Digital HDTV Goes On Record,” ZEEE Spectrum, September 1988, p. 26. Please note that gigabytes (GB) is a volume of information-like a

bucket of water; whereas gigabits per second (Gbps) is a rate of information flow—like the rate of flow through a hose. These cannot be compared.

6s~~~c~ves ~ -tie,”PC Magazine, Jan. 31, 1989.

70Terry COStiOW, “TechDiscord Rips Tape Industry,” Electronic Engineering Times, May 29, 1989, p. 53; Eng T&I and Bert Vermeule~ “Digital

Audio Tape for Data Storage,”IEEE Spectrum, October 1989, p. 34.
Chapter Minkuges Between HDW, HRS, and Other IndMries . 73

Precision motors like those used in HD-VCRS

will also be used in computer tape and disk drives,

robotics, and elsewhere. Ttiay, Japan is the world’s

largest producer of precision motors due to this

synergy of uses among electronic products.71

The high-precision helical scan drives for VCRs

are now made primmily in Japan, although a few are

made in Korea. Exabyte of Boulder, Colorado

purchases off-the-shelf 8mm camcorder-type tape

drive mechanisms from Sony and uses them in a 2.3

GB tape system (the highest storage capacity to date)

for computer data storage;72 they are totally dependent on the Japanese source. With the continuing

move to higher density storage systems, firms that

produce computer tape storage systems, but do not

have access to helical scanning (VCR-type) tape

drives are unlikely to survive.73

The United States continues to hold a strong R&D

and market position in some storage technologies,

but has seriously lost ground in others. The United

States has largely lost the floppy drive business,

holding just 2 percent of world sales in 1987; but in

the hard drive market, U.S. fms have fought back

successfidly and still hold a 60 percent or better

share. 3M continues to be a major world-class

producer of magnetic tape; but no U.S. fm produces the high-performance helical scan recorder

drives. Only one domestic fii, Recording Physics

in California, has the capability to produce the very

high-performance materials needed for read/write

VCR heads.74

The United States lags in many areas of optical

storage research, and has littIe presence in the

manufacture of optical storage devices. Over a dozen

Japanese firms are developing or selling advanced

rewritable optical disks and/or drives.7s The optical

data storage device market is expected to grow from

$400 million in the United States in 1988 to $7.3

billion by 1993.76

COMMUNICATIONS

With the declining costs of fiber, the extension of

fiber to the home is expected to become more

affordable. Some estimate fiber may be costeffective for large, new housing developments by

1992. There are optimistic projections that 17

million homes and small businesses could be hooked

up to fiber by 1999.77 The very high information

carrying capacity of fiber may make it the carrier of

choice for HDTV in the fhture; and if the HDTV

market develops, it could further stimulate the use of

fiber-initially in the cable backbone and later to the

home.78 In the near- to mid-term, however, coaxial

cable will continue to be the most important medium

for carrying video signals to the home.79

As HDTV begins to be networked via fiberoptic, it could be an important force behind the next

generation of telecommunications equipment. HDTV

will require wide bandwidths and, correspondingly,

a wide bandwidth switching and control system at a

cost consumers will pay (figure 5-4). Similarly,

low-cost techniques will have to be developed for

installing optical fibers to households. Software to

operate and manage a fiber network must also be

developed. Today, sofsvare is a significant fraction

of the expense of telecommunications80 and recent

71Yuji Akiy% “tiO* D

emands of Precision Motors Are Supported by AV Equipment Industial Robots,” JEE, February 1986, pp. 3@35. IiI

particular, he notes that 40 percent of Japan’s precision motors go to audio video equipment. Further, fewer than 10 producers in Japan are able to make

motors of the precision needed for home VCRs, with a core deviation of less than 2 microns, a speed deviation of less than 0.02 percent and a price less

than 1,500 yen.

~Pleme note that this is the standard VCR tape drive ti.s used by COn8umers today. Its recording capacity is in GBytes and cannot be compared to the

experimental Sony HDTV studio tape drive above with a recording speed of 1.2 Gbits per second.

TsCkk Johnso~ consultan~ personal communication, Aug. 11, 1989; Oct. 26, 1989.

7%id.

75~e5e ~clude Sony, S-, (&nou Nikoq ol~pus, ~~ushi~, ~shib~ Mitsubishi, fitachi, Fujitsu, NEC, Ricoh, Pioneer. EZectroru”cs,

September 1989, Special Advertising Section on Japan, p. 105. Roughly one-sixth of optical disk drive production for computer data storage applications,

on a $-basis, is done in the United States but essentially none for consumer applications is made here, and this is a far Imger market today. Ron Powel~

NIST personal communication, Nov. 14, 1989.

7sManny Fernandez, “Forecast ‘89-Mixed Emotions,” Electronic Engineering Times, June 12, 1989.

“‘Fiber Optics: Getting Cheap Enough To Start Rewiring America,” Business Week, July 31, 1989, p. 86.

78Larry Wailer, “Fiber’s New Battleground: Closing the Local Loop,” Electronics, February 1989, p. 94.

7~mes~~ broadcas~g, of cow~e, is the second most important in terms of household amess and wfi confiue to serve a VW hrlporbnt rOle.

Whether delivered by cable or terrestrial broadcasting, the three major networks are the most important source of programmhyz.

~Ju]es Be~sio, BellCore, personal cOJnmlmiCatiOn, Mar. 15, 1989.
74 ● The Big picture: HDTV and High-Resolution Systems

Figure 5-4-Data Transmission Rates and Holding

Times for Different Types of Data Communications

Entertainment

-–- video video

— audi o Compact-disk I ~– —_-

— dat a audio / ! 1

nl I I

I1

Teleconferencing I

I wdeo / II I I

L

nd

ton

Telemetry

I

1 \ I I

I I I

r , J , , 1 , I I

10 10 10’ 104 10 10’ 10 10” 10’ 10 ‘

(1 kdoblt) (1 megabit) (1 gigabit)

Channel data rate btts per second

High-resolution video is among the most demanding of applications in terms of channel data rates, and also requires long holding

times.

SOURCE: Stephen B. Weinstein, “Teleeommunieations in the Coming

Decades,” IEEE Speetrum, November 1987, p. 62. Used with

permission.

failures in the telephone system caused by software

suggest that additional development may be needed.

Consumer electronics has already had an enormous

impact on opto-electronics. Much of the leading

research in solid-state lasers has been, for example,

by the companies that produce compact disk players.

(Related high-performance solid-state lasers power

fiber-optic networks.) These revenues have in turn

provided the capacity to further advance the state-ofthe-art.81

Despite pioneering fiber-optics and the electronics that drive signals through the fibers, the United

States now lags Japan in many aspects of R&D and

the production of fiber and associated electronic

components. The United States still leads Japan,

however, in linking these components together into

complete communications systerns.82

PACKAGING/INTERCONNECT

Packaging/Interconnect (P/1) is the set of technologies that connect all of these component8-

semiconductors, displays, storage, and communications-into fictional systems. To connect a silicon

chip to the outside world, the chip is mounted in a

da.stic or ceramic package that has tens to hundreds

~f metal leads. ~-ese p;ckaged chips axe mounted

on printed circuit boards which, in turn, me interconnected via standard multipin connectors on a motherboard or a backplane (figure 5-5).

The cost of these comections increases rapidly at

each level. Within the chip itself there are millions

of tiny wires of aluminurn comecting the transistors

formed in the silicon. Despite their complexity,

these comections typically cost just $0.0000001

each because they are all formed in a single step

using a photomask. The cost of the comections

between the chip and the package it is mounted on

are roughly $0.01. The cost of comections between

the package and the printed circuit boaxd are roughly

$0.10 each. And the cost of comecting the printed

circuit board to the backplane are roughly $1.00

each.83 Overall, the cost of packaging/intercomecting and assembling the electronic components,

together with testing the system, accounts for

roughly 30 to 50 percent of the total for a complex

electronic system. Most system reliability problems

are due to intercomect failures, and P/I technologies

are a principal barrier today to achieving higher

system performance.

Today’s printed circuit board technology, for

example, etches individual circuit patterns in copper

foil laminated to sheets of fiberglass-reinforced

epoxy. Multiple layers of unique circuit patterns can

be kuninated together with more epoxy. Packaged

semiconductors and other components are then

mounted on the board and intercomected via

copper-plated holes to specific circuit patterns on

different layers of the board. These holes account for

a large fraction of the total board area and limit

wiring densities and component spacing, and thus

slow attainable system speeds while increasing

system size, weight, and costs. The mechanical

drilling process used to form these holes limits

further reductions in their size.

81JWe~ J+ ‘1’ietje~ David S~offRese~h cater, Testimony kfore the Senate COtitt= on ~v~en~Afffi> ‘ug. 1, 1989”

82, ,Asesstig Japan’s Role in Telwomticatiom,“ IEEE Spectrum, June 1986.

‘sJohn S. h&yO, “Materials for Information and Cornmu.nicatiou” Scientific American, October 1986, p. 61.
Chapter 5-+5inkages Between HDW, HRS, and Other Industries ● 75

Figure 5-5-Levels of Packaging/Interconnect

Hybrid Mlcrocircult/

Multichlp package

IC chips

e

!-v

Board

Unit assembly

Backplane

Single chip package

Transistors are interconnected via metal leads on the integrated circuit and is then mounted in a plastic or ceramic package. The packaged

integrated circuit is mounted on a printed circuit board which, in turn, is mounted on a motherboard or a backplane.

SOURCE: Adapted from: National Security Industrial Association, Electronics Packaging/lntereonneet Task Force, “Eleetronies Packaging/lntereonneet: The

Next Crisis for Cost-Effeetive Military Eleetronies,” Washington, DC, draft, 1989.

As an example, intercomecting the 200 or so

chips of a supercomputer processor, each chip

having 250 input/output leads or more, would

require a board with 40 layers of circuitry.~

Advanced ICS may require 500 to 1,000 inches of

intercomect wiring per square inch of board-two

to three times the current practical limit. Designing

and building such boards reliably is very difficult.

Small, high-density multichip modules are one

means of improving P/I performance that is now

gaining favor.85 IBM’s 3090 mainframe, for example, combines many chips in a ceramic module with

44 layers of wiring. These modules are then mounted

and interconnected via a printed circuit board with

relatively few layers.

In the longer term, the Japanese MITI and Key

Technology Center flat-panel display consortium

(ch. 2) intends to use the lithography and thi.n-fti

technologies developed for large-area flat panel

displays to advance these printed circuit board

densities through improved and lower-cost ‘Chip-onGlass” technologies.

C’hip-On-Glass technology mounts “bare” integrated circuits directly on lithographically printed

glass substrates. This has several important advantages. Fine-line lithographic printing can provide

perhaps ten times the wiring density attainable with

the conventional copper-epoxy printed circuit

boards described above. Increasing the wiring density also reduces the number of layers necessary.

This reduces the space that must be allotted to the

interconnections between layers. The savings are

multiplicative. A conventional printed circuit board

with 40 layers of copper-epoxy interconnect might

be replaced with a lithographically printed glass

substrate with just two layers of intercomect.8c This

provides substantial cost savings in both design and

production.87

Mounting the bare IC directly on the substrate

bypasses several conventional packaging and interconnect steps with further corresponding cost savings and improvements in reliability. Together, the

higher wiring density and use of bare chips can allow

substantial increases in how close components are

~Samuel Wekr, “For VLf+I, Multichip Modules May Beeome the Wckages Of ~oice, ” Electronics, April 1989, p. 106. This is roughly equivalent

to a Fujitsu supercomputer.

8%id.

~~ically, a total of five layers might be needed: one for bonding pads for the chips, two for intereonnee~ one for power, and one for ground.

LWBW ~mMCC, ~so~ Comxmmicat,iou My 12, Oct. 12 and 13, 1989; Jan. 23, 1~.
76 ● The Big Picture: HDW and High-Resolution Systems

packed. This allows higher speeds and reduces

system size and weight.

Chip-On-Glass technologies are used in special,

high-performance cases today, but could be applied

much more widely if large area lithography tools and

related technologies were available. These techniques would allow many glass substrates to be

produced at once on a large sheet, rather than

tediously one-at-a-time.

The complexity and high speed of the chips used

for HDTV will require the use of high-performance

printed circuit boards. Complex multilayer printed

circuit boards will be necessary and new materials

may have to be developed to handle the high speeds

at an affordable cost.88 Although these are all

available today in high-end commercial and military

markets, manufacturing in volume for the HDTV

market might force rapid improvements in production technology and dramatically lower their price.

The United States seriously lags Japan in many of

these P/I and related assembly technologies. A

recent National Academy of Sciences study found

the majority of U.S. companies 4 to 5 years behind

Japanese competitors in manufacturing process control and in factory automation for fabricating,

assembling, and testing electronics products.89 The

United States also lags Japan and Europe in the use

of surface-mount technology for connecting the chip

to the printed circuit board (figure 5-6).W This

technology saves space, increases reliability and

performance, and reduces assembly costs. Tape

Automated Bonding (TAB) technologies for packaging semiconductors, invented in the United States

by GE but used more widely in Japan, offm

significant increases in reliability at greatly reduced

labor and cost.gl In addition, TAB significantly

improves semiconductor Performance.g

*

Producing P/I equipment and materials for HDTV

or, more generally, for the flat-panel display market

may provide economies of scale to a firm as well.

Shindo Denshi, the largest Japanese producer of

TAB tape, currently gets half of its sales from

supplying producers of LCD displays. Some Japanese companies, such as Toshiba and Matsushit%

have also developed proprietary “outer leti bonders” for comecting wires to the display. This

technology is not for sale and might make it more

difficult for U.S. firms to enter the market.93

Many P/I and related technologies-assefily,

test, surface-mount, tape-automated bonding-have

been pushed the hardest by the consumer electronics

market. The Sony Watchman television, for example, uses higher performance TM than the NEC

SX-2 supercomputer.w The consumer electronics

market demands high reliability, small size, and low

cost, but at the same time provides very large volume

markets that allow even expensive, yet innovative,

technologies to pay for themselves through longterm productivity improvements as experience is

gained.

Because of these characteristics, consumer electronics often pushes the state-of-the-art in manufacturing technologies harder than lower-volume but

higher-profit markets-especially for assembling

components or systems. If the HDTV market develops, it may similarly provide manufacturers a testing

ground for developing new assembly technologies

with the volume needed to pay for themselves, as

well as gaining valuable experience in assembly of

sophisticated electronic systems that can be transferred to many other products.

88J~&W, s~~ff~bs~~~~communi~tioq h. 15 ~dzo, 1989; Daytoq op. ci~, footnote 26. Attheveryh@ expected prOct%+ShlgspWds,

better PC board material maybe needed than standard epoxy as it is too absorptive at these high frequencies. Teflon boards have desirable dielectric

properties and are now used in high-speed computers, but will be too expensive for the co nsumer market. It may be necessary to develop new materials

that: are low-loss dielectrics; have good tempmture characteristics; and bond well to copper. Alternatively, some labs are trying to avoid these high

speeds on the board itself, which would require higher quality materials, by putting bus speed multipliers on each chip and thus running at the higher

speeds only within the chip itself.

g-~aca Studies Bored, “The Future of Electronics Assembly: Report of the Panel on Strategic Electronics Manufacturing Teclmologies”

(W@@tOU DC: National Academy Press, 1988),

%esley R. Iversoq “Surface-Mount Technology Catches On With U.S. Equipment Makers-Finally,” Electronics, December 1988.

gIJq L= ~J15 ~m ~elu=i*5 Big @le F~y Pay@ Off’?” Electroru”cs, Feb. 17, 1986; “~ON~ghlights *Do*t ‘O1e

‘Ih~Automated Bonding Is Taking, “ Electronics, Feb. 18.1988. David Lsmmers and Ashok Bin@ “Tape Automated Bonding Sparks Renewed

Interest” Electronic Engineering Times, July 10, 1989, p. 53.

%?~e~r Burg-, “~ for ~gh U() ad figh S@,” Se~”conductor Znternationul, June 1988.

g3J~~ G. pm= ad E. J~V=- “HDTV D~elopm~tsin Jap~” TechSearch Internatio~ h., AUStiXLw 1989.

~“l%e Future of Electronics Assembly,” op. cit. footnote 89.
Chapter S=Linkages Between HDW HRS, and Other Industries ● 77

Figure 5-6-Fraction of Integrated Circuits Used in Surface-Mount Packages

for Japan, Europe, and the United States

‘“~-–– –

60

50

40

30

20

10

D

B

B

B

‘~~

1987 1988 1989 1990 1991 1992

SOURCE: Wesley R. Iverson, “Surface-Mount Technology Catches On With U.S. Equipment Makere-Finally,” E/ecfronic.s, December 1966, p. 116. Used

with permission.
Chapter 6

Advanced TV Markets and Market Uncertainties

INTRODUCTION

The future growth and ultimate size of the various

advanced TV and related markets is unknown. This

may be unimportant for ATV-related R&D. The

mere expectation of a large market seems to be

inducement enough for many manufacturers to push

the state-of-the-art in ATV technologies (ch. 5). In

contrast, the growth rate and size of these various

markets directly determines the economies of scale

in production of the component technologies (e.g.,

displays, semiconductors, and data storage) as well

as in the manufacturing processes for sophisticated

electronic systems.

Development of HDTV markets depends on many

complicated and unpredictable factors.1 How much

consumers will be willing to pay for HDTV-quality

pictures is a matter of speculation. Consumers may

prefer to spend their disposable income on a wider

variety of progr-g choices, other entertainment systems, lower resolution interactive video

systems, or more basic staples or amenities. For

those consumers that are interested in purchasing

HDTVS, there remain a series of “chicken-andegg’ problems to overcome:

●

●

Consumers are unlikely to buy receivers until a

wide variety of HDTV broadcasting is available; but broadcasters hesitate to offer HDTV

programs until there are enough viewers to

make it worthwhile.

Consumers are unlikely to buy receivers until

the cost comes down to acceptable levels; but

manufacturers can’t get the cost of receivers

down until millions of consumers are purchasing HDTVS and enable large-scale mass production and streamlined manufacturing processes.

In contrast to the U.S. market-driven approach,

the Japanese are actively trying to overcome these

problems in the interest of developing their domestic

market. This approach carries both risks and potential benefits: they may fail at a large scale but their

chances of success are improved.

The uncertainties in the details of how the HDTV

and other ATV markets will develop should not

obscure important underlying trends in the technology. No matter what form video entertainment

systems take in the future, they will increasingly use

digital electronics for higher performance at reduced

costs. For example, digital microprocessors are

already common in television tuners and IDTVS

have recently come on the market.

The rate at which fiber-optics is extended to the

home and how it is connected may be similarly

debated, but not its eventual widespread use. Improved economics and superior performance of fiber

systems make this transition inevitable. The merging of digital video entertainent systems and fiber

might then make a host of new information services

possible. The question is how to provide a flexible

fiameworkfor linking fiber to the home amibringing

digital video systems into the home with the least

overall disruption to the national telecommunications tiastructure-all at an affordable price.

A few of the possible market scenarios will first

be examined qualitatively; then market projections

by several leading groups will be discussed. The

trend in technology towards digital/fiber systems

will be reviewed. Finally, some of the market

conflicts generated by the coming introduction of

ATV services will be examined.

SCENARIOS FOR MARKET

DEVELOPMENT

No one knows how the ATV market will develop.

HDTV might prove irresistible to consumers and the

market may grow rapidly, with corresponding economies of scale quickly lowering costs and making

HDTV available to most families-perhaps even a

second set. The HDTV market might grow more

slowly: growing only after much larger and improved display technologies are available; after

consumers are sensitized to the value of its higher

1~~ iS fO~u.sed on ~p~~~~~yhme ~~~se it represen~ a si~lc~t c~~tive c~ge from to~y’s TV ht~y Or may nOt h made ill mU@y

one step, depending on the choice of transmission standards.

-79–

30-368 - 90 - 4 : QL 3
80 ● The Big Pictlu-e: HDTV and High-Resolution Systems

picture quality; and after quality programming is

available.2 Less advanced versions of ATV such as

IDTV or EDTV might prove more than adequate for

most consumers, limiting HDTV to a small high-end

residential market and to movie theaters, bars, or

restaurants. Or perhaps lower resolution interactive

video systems will reach a level of performance

sufficient to stimulate signiilcant consumer interest

and vie with advanced TVs for consumer dollars.

An advanced form of HDTV might become the

home information center, providing entertainment,

computer, and telecommunications services in a

single generalized piece of equipment. Alternatively, and perhaps more likely, these different

services will instead continue to be primarily provided by separate, somewhat specialized pieces of

equipment. Even in this case, the continuing decline

in the cost of computer and advanced telecom

systems will allow them into an ever larger fraction

of households; while the home ATV continues to

primarily provide entertainment.

In the longer term, having an advanced HDTV

with the capability of interactivity-the equivalent

of a computer, but for video images-might be very

attractive to consumers. These systems might allow

consumers to create personalized newspapers;

browse distant databases; request more in-depth

information on a news program; transmit an interesting movie clip to a friend; or even use an electronic

yellow pages to see a video clip of the inside of a

restaurant they want to try. Alternatively, such

services might be provided by a telecom/computer

system while the HDTV, again, simply provides

entertainment. Or consumers may decide that such

interactivity is not worth the cost or effort in either

case.

Consumer Demand for HDTV

Little reliable information is available on consumer demand for high-quality video entertainment;

the consumer response to higher quality pictures is

ambiguous. Many consumers watch TV without the

benefit of either rooftop antennas or cable, depending instead on rabbit ears or internal antennas. Many

viewers still watch black and white TVs, at least as

a second set—some 3.5 million B&W TVs were sold

in the United States in 1987.3 On the other hand,

cable TV has now penetrated over half of American

households—both for the higher quality of picture it

provides, and especially for the increased variety of

programs it offers. Further, large screens are popular

despite their high cost? The market for 25-inch and

larger screens increased from 2.8 million in 1982 to

5.5 million in 1987.5

HDTV market research is similarly ambiguous.

The few studies performed indicate that when

compared to studio quality NTSC on today’s relatively small displays, the viewer preference for

HDTV is tempered by program content and viewing

conditions.G For example, when these (18- and

28-inch) displays were viewed horn a distance

where the additional detail provided by HDTV was

lost, then viewers naturally had little preference. But

viewed up close, 75 percent of the viewers prefemed

HDTV. These tests may simply reaffirm that to

appreciate HDTV large displays are needed. Sony,

for example, believes that a 72-inch diagonal is

required to portray the full capability of their

1125/60 system.7

It is important to note that the pictures shown in

these tests were studio quality. For NTSC, this is a

significant improvement over what viewers normally see at home: the quality of NTSC TV is often

poor due to transmission degradations.8 For any new

WCC Advisory Committee on Advanced Television Services, PIarming Subcommittee Working Party 7: Audience Researcb Repo% Feb. 14,1989.

Tbis report notes the potentkddi.ftlculties posed by an audience tbat becomes more sensitive to flaws after a fixed standard is locked into place.

sElec~onics ~dus~es Associatio~ Consumer E2ecrronics Annuu/ Review, 1988 cd., Wmhingtoq DC.

d~eMc~ght, W. Russell Neurn~ Mark Reynolds, Shawn O’Domell, and Steve Scbneider, ‘‘The Shape of Things to Come: A Study of Subjective

Responses to Aspect Ratio and Screen Size,” ATRP-T-87, Massachusetts Institute of Technology Media Lab, May 17, 1989.

5~omson Commer E1ec~ofics, E]~@onics rndus~es Association, HDTV ~ol-mation packet 1989. Elec&onics Industries Association

Consumer Electronics Annual Review, 1988 cd., Washington, DC.

6W+ Ru~sell Ne~an, Summe Ctibliss Neil, he Mc~@~ and s~~ O’Donnell, “Action Merno,” House &lbCOmXdfiee O n

Telecommunications and Finance, Feb. 1, 1989; W. Russell Neurnan,‘‘The Mass Audience Looks at HDTV: An Early Experiment,” paper presented

at National Association of Broadcasters’ Annual Conventio~ Las Vegas, NV, Apr. 11, 1988.

7LW ~oqe, Sony Cow., perSOnaI communicatio~ Oct. 12, 19*9.

gwi~w F. Sctieiber, Massachusetts IrMitute of Technology, ‘‘Comments Before the FCC on Advanced Television Systems and Their Impact on

the Existing Television Service, ” Nov. 30, 1988.
Chapter Udvanced TV Markets and Market Uncertainties ● 81

standard, its susceptibility to transmission degradations are a key consideration (ch. 4).

Consumer demand for HDTV receivers will

depend on the cost of the set and the availability of

program material to view. In turn, receiver costs and

program availability will be determined by the size

of the market. These factors delayed the takeoff of

the color TV market by some 6 or 7 years, from

roughly 1955 to the early 1960s. Only the perseverance of RCA, led by David Sarnoff, and the

investment of about $3 billion (1988 dollars) kept

color TV alive until the necessary critical mass of

color programming became available and enabled

the market to grow. Similarly, VCRs took off when

rental stores for tapes became common (figure 6-1 ).9

The response of broadcasters to market demand

for color programming in the early 1960s was less

ambiguous. Broadcaster costs are roughly constant.

A small change in market share (or ratings) then has

a signitlcant impact on profit margins. Therefore,

broadcasters must compete vigorously for every

possible market advantage. Between 1963 and 1966

the share of prime-time hours offered in color went

horn 20 to 100 percent, even though less than 10

percent of all households had a color TV (figure 6-2).

Small changes in market share had enormous

leverage over the broadcasters.

Consumer Demand for Interactive Video

Similarly, little reliable information is available

on consumer demand for interactive video. Computers, rather than HDTVS, could be the platform for

interactive services in the future. Interactivity is

largely a fimction of flexible computing power and

good software-in sharp contrast to the very high

speed but relatively inflexible signal processing

done by an HDTV. Declining costs have already

brought computers into about 20 percent of American homes.l” A recent survey, however, found that

home computers are used, on average, just twice per

week; and many question whether they will penetrate the remaining 80 percent of households any

Fiaure 6-l—Sales of VCRs, VCR Prices, and the

Growth of VCR Tape Rental Stores

1 500 ~ -- T– ----––-

.

4

Mean >.....,

& 1 250

/

VCR “...,

: : 1 alla-l . . . price . .

4

. . . ~Q

m. 7’)0 Video ““”””-...

;g

500

i

specialty “-... “%. ..,..

: stores .. ...,,

2(>0

o }-—--——---

144

1 2J

21L

- 3 0

(000s) -25

- 2 0

- 1 5

- o

- 5

75 76 77 78 79 80 81 82 83 84 85 86 87

Note that the growth of the VCR market corresponds more olosely

with the opening of VCR tape rental stores than with the decline

of VCR prices.

SOURCE: Boston Consulting Group, “Development of a U.S.-based ATV

Industry,” May 9, 1989 for the American Electronics Association. Used with permission.

time soon. On the other hand, the potentially large

household penetration of advanced TVs might allow

the delivery of a limited range of user friendly

interactive information services to more of the

public.

Although interactive videotex systems interest

many, experimental systems tested by KnightRidder in Miami (1983-86) and Times Mirror in

southern California (1984-86) failed. New efforts

are underway by Bell South in Atlanta, NYNEX in

Vermont, and IBM/Sear’s Prodigy throughout the

Nation.1 1

In France, the Government-backed interactive

Minitel system has been widely noted as a success.

There are already some 4 million subscribers,

although figures for 1988 showed an 8 percent

decrease in residential use of Minitel services over

the previous year. ~z Minitel succeeded by making

use of the existing telephone network; by giving the

subscribers interactive terminals; by keeping the

gsome~venot~ ~t~eBe~~ VCR format and RCA videodisc were hurt by a corresponding lack of pro~g.Othersnote ~ttheProblems

witb both those systems were inadequate technology: the Betamax format only provided 1.5 hours of recording time; the VHS format could give

sign.i.flcantly more. Similarly the videodisc technology generated fuzzy pictures compared to alternatives. John Weaver, Liberty Television personal

COIIlllMdCdiO~ Oct. 12, 1989.

lw.s. Dep~ent of Commerce, Bureau of the census, “Statistical Abstract of the United States,” table 1286, 1988 ed.

llFr~c Sal.mier, “The~blic Network Goes On-Line, ” Te2ephony, Apr. 3, 1989, p. 26; John Markoff, “Betting on a Different Videotex Ida” New

York Times, July 15, 1989, p. D5.

12~e.Mfie RouSSel, “~tel Gets New T~~~,” Communications Week, Apr. 17, 1989, p. 52.
82 ● The Big pic~re: HDIVand High-Resolution Systems

Figure 6-2—Penetration of Color TVs Into American Households, Average TV Prices, and the Share of Prim*Time

Programming Devoted to Color TV

Color TV penetrahon

programming and real prices

‘001——————

90

I

Price of

“ \ average

\ color TV

80 \

\

I \

I

Percent of 10 \\ \

prime time \

----

and CTV \

households G. - .

\

\

‘ - — .

50

r

— Pnme-time

hours In

/ color(%) I

2,500

/

-— - - -1 \

TV households

\

\

with color TV

\

(%) ,

-.

40-

Price of

30- average

B&W TV

20-

lo7

. \\ \ \

o

1954

I I

1957

I I ----

1960 1963 1966

-~~

1969 1972

Year

-2,000

Prices In

real dollars

(1988)

-1,500

-1,000

-500

Note that the prime-time hours in color increased very rapidly beginning in 1963 and that the household penetration of color TVs followed,

while the price of color TVs deolined only slowly.

SOURCE: Boston Consulting Group, “Development of a U.S.-based ATV Industry,” May 9, 19S9 for the Ameriean Electronics Association. Used with

permission.

terminals simple13 and their use intuitive; and by

providing service on a pay-as-you-go basis.14 This

kept total investment down; allowed potential users

to experiment without having to invest heavily

before knowing what they were going to get; and

avoided the ‘chicken-and-egg’ problems with users

demanding abroad range of services before signing

on, and service vendors requiring many users before

providing services. At this point, Minitel appears to

be no more than a niche market, which has yet to pay

for itself (at least in accounting terms), and maybe

shifting towards more of a business market.15

Government Policies and Market Development

Government policies, particularly those of the

FCC, could have a powerful influence on the way the

HDTV market develops. The marketplace might

establish early standards for VCRs (which are not

overseen by the government), for example, that are

incompatible with government-backed standards for

terrestrial and satellite broadcasting. If such incompatibilities arise between different media or if there

is confusion in implementing the standards, consumers may hesitate in purchasing an expensive ATV

that has only limited applicability. This could

sign~lcantly slow ATV market development.

If the FCC allows ATV standards to improve

incrementally, with IDTV, EDTV, and other gradual

improvements in performance, then consumers may

decide to stop short—at least in the near-term-f

full HDTV quality, depending on price and viewing

13~~ t~are now believed to have been too simple and are being upgraded.

ldJ~n ~efiw and Gorges Nshou “A Videotex Suczess Story,” Telephony, July 27, 1989, P. 46.

ISJsrnes Ma&harq “France’sMinitel Seeks a Niche,” New York Times, Nov. 8, 1988, p. D1.; Roussel, op. cit., foofnote 12; Steven J. Marcus, “The

French Videotex Connection” Zssues in Science and Technology, fall 1987.
Chapter t%4dvanced TViWarkets andillarket Uncertainties ● 83

preferences. If the standards do not include intermediate enhancements, but move directly to full

HDTV, then that market may or may not develop

depending on consumers’ perceptions of the products usefulness. If NTSC were phased out over a

number of yearn in order to make better use of the

broadcasting spectrum, then consumers would have

no choice but to buy A~s.

If the FCC requires stations to show the same

picture in both NTSC and in HDTV simultaneously,

then consumers may decide that the additional

quality for the same programming is not worth it.

Alternatively, HDTV quality programs and broadcasts might be reserved for special high-end markets, such as pay-cable. Producing and broadcasting

HDTV quality programs on special, high-end channels alone presents the same “chicken-and-egg”

problems: who invests first-viewers, broadcasters,

or program producers? Even detailed consumer

studies and market tests can not resolve some of

these questions. Ultimately, risks must be taken,

particularly by program producers and broadcasters

to provide pictures that consumers will want to see.

Clear and consistent government policies may be

important if potential investors are to take these

risks.

MARKET PROJECTIONS

Despite the lack of audience-based HDTV market

research, a number of analysts have projected HDTV

markets in the United States. Their forecasts have

been made by analogy, i.e., by modeling HDTV

penetration rates after those of previous successful

consumer products such as black and white TV in

the late 1940s, color TV in the early 1960s, and

VCRs in the late 1970s.16 There are a number of

remarkable market successes such as these. There

have also been many market failures, such as the

videodisc, quadraphonic sound, stereo AM radio,

and others, due to factors ranging from poor

technical performance and confusion over standards,

to misperception of consumer interests.17

Most market projections for HDTV begin by

examining the high-end markets where expensive,

early production sets will likely be sold. Market

analysts then estimate the rate at which cost reductions from economies of scale can bring the price of

sets within reach of middle and lower income

markets. These models implicitly assume that HDTV

will eventually be successful. Furthermore, most of

these models assume that the availability of IDTVS

and EDTVS will not dampen the market for HDTV,

but will instead be part of a natural progression to

HDTV.

The projected market penetration rates for successfulproducts normally follow an S-shaped curve.18

Sales are initially slow. When sales reach a market

“take-off” point-typically observed to be a few

percent of household penetration-they then grow

rapidly. After several years of rapid growth, the

market begins to saturate and sales level off to

replacement levels. This behavior can be seen in the

B&W TV, Color TV, and VCR markets for the

United States and Japan (figure 6-3). Eventually,

new products may come along that displace the

earlier model and cause its sales to declin~such as

the case of Color TV replacing B&W. The two

principal variables in such scenarios are: 1) at what

time the market ‘takes off’ and 2) how rapidly the

market grows after take-off.

HDTV market projections generally follow this

form. The Japanese Ministry of Posts and Telecommunications (MOPT) assumes that the Japanese

market will take off in 1993. In the United States, the

Electronic Industries Association (HA), National

Telecommunications andInformationAgency (NTIA),

and American Electronics Association (AEA) assume that the market will take off in roughly 1994,

1997, and 2000 respectively. All four of these

studies have reasonably similar rates of growth once

the take-off point is reached (figure 6-2).

16E~ples of such st@ies include: Robert R. Nathan Associates, kc., “Television Manufacturing in the United States: Economic

Contributions--Past, PresenC and Future,” Washington DC, Electronic Industries Associatio~ Nov. 22, 1988; David Russell, “High Definition

Television @D’f’V): Economic Analysis of Impact,” Washington DC, American Electronics Associatio~ November 1988; Larry F. Darby, “Economic

Potential of Advanced Television Products,” Washington DC, National Telecommunications and Information Administration+ Apr. 7, 1988. Reviews

of these and other market studies are included in: Shawn O’Donnell, “Forecasting the HDTV Marke6° Neumam et al., Feb. 1, 1989, op. cit., footnote

6, appendix; and in Kenneth R. Donow, “EIDTV: P1 arming for Actio%” Satellite Systems Engineering Inc., Bethesda, MD, for National Association

of Broadcasters, April 1988.

17Steven p+ scm, M~ga*”~take~: F~r~~~~li~~ ~~ the MYth of Rapid Technological c~nge (New York NY: Free press, 1988).

WIISUCCCSSfUI products foffow other paths, including upside down “u” S.
84 ● The Big Picture: HDTVand High-Resolution Systems

Figure 6-3-Sales and Projections of Video Entertainment Technologies in the United States and Japan

U.S. domeatic sales (miilion.a)

20

1 5

10

5

o

45 55 65 75 85 95 105 115

Calendar year

— Black 6 white TV ‘+ Color TV * VC R

= HDTV, Darby - HDTV, Nathan + HDTV, Ruatell

8

6

4

2

0

Japanese domestic aale.9 (milliona)

455 0 55 60 65 70 75 80 85 90 95 100 105 110

Calendar year

— Black & white T V

+ Color T V- VCR a + HDTV

SOURCES: United States: Electronic Industries Association, “Consumer Electronics Annual Review,” various years; Robert R. Nathan As-”ates, Inc.,

“Television Manufacturing in the United States: Economic Contributions-Past, Present, and Future,” Washington, DC, Electronic industries

Association, Nov. 22, 1988; David Russell, “High Definition Television (HDTV): Economic Analysis of Impact,” Washington, DC, American

Electronics Association, November 1988; Larry F. Darby, “Economic Potential of Advanced Television Produets,” Washington, DC, National

Teleeommunieations and Information Administration, Apr. 7, 1988.

SOURCES: Japan: Eleetronie Industries Association of Japan, various years; James Howard Wooster, “lndustnal Policy and International Competitiveness:

A Cass Study of U.S.-Japan @repetition in the Television Reeeiver Manufacturing Industry,” Ph.D. Thesis, University of Massachusetts, 1986;

Bob Johnstone, “Programming Better Quality TV,” Far Eastern Econornk Review, Aug. 11, 1988, p. 53.

Others have suggested that the HDTV market

could be a big flop,lg emphasizing the high initial

price of HDTVs and questioning whether consumers

will see enough additional value over their current

sets to justify paying the difference. IDTV and

EDTV may themselves fill consumers’ needs. Interactive video might create a new competing market,

limiting sales of HDTVS (if Open Architecture

Receiver designs are chosen as a standard then

interactive video and HDTV might be the same

market). The experts-the managers of many of the

world’s consumer electronics fins-have already

bet more than $1 billion that there will be a big

market for HDTV. Whether they are right or wrong

will only be clear in hindsight.

The value of the HDTV market is potentially very

large. The Electronic Industries Association has

estimated that HDTV receiver sales in the United

States could total 13 million units worth about $12

billion20 retail (1988 dollars) in 2003, $4 billion

more than would be the case if the market continued

with standard TVs alone. The manufacture of movie

production and broadcasting equipment would increase these values even more. Lower estimates

include the NTIA Report with sales of $5 to $10

billion in 2003 for 12 million receivers and $3 to $6

billion for 10 million VCRs; and the American

Electronics Association report with 2003 sales of 5

million HDTV sets in the United States worth about

$5 billion and world sales of about $14 billion. AEA

projections give VCR sales of 4 million units adding

about $3 billion in the United States; with $8 billion

in sales worldwide in 2003. In comparison, the

overall U.S. consumer electronics market was worth

$30 billion in factory sales in 1987.21

These estimates are for home entertainment alone.

Commercial and industrial uses may also be important. The Japanese MITI, for example, estimates that

sales of consumer goods will be just 60 percent of

the total sales of HDTV by 2000.22

lgsee, for example, Bob Davis, “Will High-Definition TV Be A Tbrn-Off?” Wall Street JournuZ, Jan. 20, 1989, p. B1.

20M1 v~um here me given h 1988 dollars. EL+ values were discounted to 1988 dollars at 3.5 percent -ud~ationrate ~mtie~es~te ‘f

$20 billion in 2003. NTIA and AEA published values were assumed to already be in 1988 dollars as they cited no inflation rates.

21 Ekxtrcrnics Industries Association, op. cit., footnote 3.

earning of a Wide Crispness, ” =4 <Television Makers h ‘rBusiness Week, Dec. 21, 1987; and James G. Psrker, TechSearch International, Inc.,

personal communicatio~ Oct. 6, 1989.
Chapter (A4dvanced TV Markets and A4arket Uncertainties ● 85

Many widely circulated projections also contain

highly questionable assumptions and numerous

internal inconsistencies. For example, one report

projects that the total TV market in the United States

will double in the next 15 years, from 21 to 40

million sets-without identifying who will purchase

all these sets as population growth slows and the

population ages. It insists that most of the value

added will take place in the United States, but

glosses over the fact that the high-value manufacturing of electronics for tie consumer TV market is

today almost entirely offshore-leaving primarily

screwdriver assembly operations in the United

States. This report also ignores that with the longer

term transition to flat panels or projection systems,

much of the manufacturing and assembly remaining

in the United States could also move offshore. The

report assumes that IDTV and EDTV will have no

impact on the HDTV market.

The precise course that Am technology will take

and the pace that it will enter cannot be predicted.

The development of the ATV market will depend on

a variety of factors, including: the rate of technological advance and the achievement of large economies of scale and learning; the consumer response to

IDTV, EDTV and HDTV; the development of

movies and programs at the appropriate level of

visual quality for the ATV technology of choice; and

the policies and standards chosen by the government, among others. Improvements in television

technology are inevitable, but when and in what

form they will take is largely unknown in the longer

term.

MARKET PROJECTIONS AND THE

RELATIVE IMPORTANCE OF HDTV

Forecasters have typically compared the relative

importance of the HDTV, computer, and other

markets by: 1) projecting constant growth rates into

the future; 2) comparing the semiconductor content

or other component demands for assumed market

sizes; or 3) comparing ultimate market penetration

rates and corresponding needs per user. None of

these are very satisfactory or illuminating.

Extrapolating Current Growth Trends

Extrapolating current or expected growth trends at

the same compound amual rate far into the future

has been one of the most common techniques for

making projections, but this form of analysis can

lead to highly exaggerated claims if done carelessly.

For example, one report (“A”), has projected

constant growth rates of about 5 percent in U.S. TV

sales-with about 40 million TVs sold by 2003. A

second report (’‘B”) has projected a constant annual

growth rate of 10 percent for the computer industry

and 7 to 8 percent for the semiconductor industry

through 2008. Similarly, a third report (“C”) has

projected constant annual growth rates of HDTVS

and PCs, resulting in annual world sales reaching

180 million HDTVS and 135 million PCs by 2008.

These projections ignore the simple point that

sales cannot grow exponentially forever. Markets

inevitably saturate. For example, assume that the

HDTV market will primarily be in the industrialized

countries over the next 20 or so years and that

replacements rates will be similar to the 7 year norm

experienced for color TV today. With these assumptions, Report C’s projection of 180 million HDTVS

sold annually in 2008 is roughly equivalent to an

ultimate penetration rate of 1.25 HDTVS for every

man, woman, and child in the industrial countries.

Their projection for personal computer sales, 135

million annually in 2008, gives similarly high

penetration rates. These are remarkable, and perhaps

unrealistic, penetration ratios.

One can foresee a time that most people in the

industrialized world will have a personal computer

and an advanced TV. Most people in the United

States today have direct access to both a TV and a

telephone. There will also be a growing demand for

computer technology from the developing countries.

Making constant growth projections, as these reports

do, is reasonable over short periods of time. Over

longer periods markets are likely to saturate and

growth projections must be reduced for when this

occurs. Even if these very high levels of penetration

are reached in the next 20 years, some market

saturation will likely occur; but this is not considered in the constant growth rate projections made by

these groups.

Comparison of two markets in the distant future

based on constant annual growth rates is extremely

sensitive to the assumptions. For example, report

“C” assumes that personal computer sales will

grow from current annual sales of 20 milhon at a rate

of 10 percent; and that HDTV sales will grow from

sales of about 5 million in 1994 at a rate of about 30

percent annually. At these rates, HDTV sales are

greater than PC sales after the year 2000. But if
86 ● The Big picture: HDTV and High-Resolution Systems

HDTV sales instead grow at a still remarkable pace

of 20 percent annually, their total sales are slightly

less than half those of PCs in the year 2008. Such

sensitivity to (as yet) totally unknown underlying

parameters makes such forecasting unreliable.

Comparing the Semiconductor or Other

Component Requirements for Assumed

Market Sizes

Forecasters have also compared the importance of

different markets by the relative requirements for

semiconductors and other components. This compounds the uncertainties of market growth rates with

a lack of regard for the relative importance of various

types of components. For example, some have

compared the semiconductor content of HDTVS on

a simple dollar basis with that of the entire semiconductor industry-rather than within the relevant

market segments-and then dismissed HDTV as

unimportant as its total semiconductor demand

might be relatively small.

With such logic almost any market segment, when

compared to the entire industry, can be dismissed as

too small to be important. Supercomputers, minisupers, and parallel machines combined were a market

of just $1.36 billion in 1988.23 Assumin g a semiconductor content of 10 percent, they would consume

just $136 million in semiconductors, compared to a

total world semiconductor market of some $54

billion in 1988. Few would argue that the supercomputer industry is unimportant, however; it drives the

state-of-the-art in a variety of chip, packaging

intercomect, and other technologies as well as that

of computers.

Similarly, (MOS) DRAMs were just a $2.5 billion

market in 1987 (before the price was driven up by the

MITI-coordinated production cutbacks),24 or less

than 5 percent of the total world semiconductor

market. But DRAMs drive many important semiconductor manufacturing technologies and the loss

of DRAM manufacturing has been a serious concern

for both U.S. semiconductor producers and U.S.

computer makers. Few would argue that we can do

without this market segment despite its small size.

Semiconductors are expected to account for some

10 percent of the retail cost of HDTV receivers.~

World sales of HDTVS in the various high-growth

scenarios might reach $25 billion or more by 2003.

The corresponding HDTV semiconductor content

would be $2.5 billion. In comparison, the world

market for semiconductors today is ah-eady more

than $50 billion with continued dramatic growth

expected. Obviously, HDTV would not drive the

entire semiconductor industry, but it could add to

demand.

It would be a mistake, however, to dismiss the

importance of HDTV within specific market segments. In high-growth scenarios, world HDTV use

of DRAMs in 2003 could be as much as five times

total world DRAM production in 1987 (ch. 5). But

this says nothing about the relative importance of

this market for DRAMs compared to other uses in

2003. Consider the following scenarios of demand.

Both high and low (a tenth as large as the high)

scenarios are presented to show the sensitivity of the

forecast to underlying assumptions and to caution

against the potential pitfalls in extrapolating constant growth trends into the future described above.

Assuming that the world computer, office automation, and telecom/fax markets (the principal users

of DRAMs today) grow at an annual rate (by number

of units) of 10 percent over the next 15 years and that

the intensity of memory use within these products

also increases, the resulting total annual growth rate

in memory demand (by capacity) over this period

would be 20 to 40 percent.2G At a 20 percent growth

rate for all DRAMs, the high-growth scenario

suggests that HDTV would represent 25 percent of

the total world demand in 2003. But at a 40 percent

growth rate for all DRAMs, HDTV would account

for just 3 percent of the world DRAM demand. Low

~Te~s. perry and Glenn Zorpette, “Supercomputer Experts Predict Expansive Grow” IEEE Spectrum, February 1989, p. 26.

24C~1es H. Ferguso@ “D~,s, Component Supplies, and the World Electronics Industry: An hematiOMl Stitegic ~Ysis*” ‘1‘emo

89-554, August 1989, Massachusetts Institute of Technology, Cambridge, MA; Kenneth Flamm, ‘‘Policy and Politics in therntemational Semiconductor

Industry,” SEMI 1SS Seminar, Newport BeacL CA, Jan. 16, 1989; and Kenneth Flamm, Brookings Institution personal conmmnicatiow Oct. 25,1989.

~El~@ofics ~dus~es Association “Commer Elec@onics, HDTV, and the Competitiveness of the U.S. Wonomy,” House SUbCOlllrrdttee On

Telecommunications and Finance, Feb. 1, 1989. Semiconductors will account for a much higher fraction of factory costs, typically 20 percent or more.

In the early stages of HDTV production the semiconductor content will probably be higher yet.

z6B=ause the -ket v~ue per~t capability has decked so rapidly for computers and their underlying semiconductor t~hnologies> it is ‘i~~t

here to specify that this is by unit capacity rather than by dollar value.
Chapter (L4dvanced TV Markets and Market Uncertainties . 87

growth scenarios for HDTV would reduce these

market shares to 2.5 and 0.3 percent respectively.

In high-growth scenarios, the demand for digital

signal and other processing chips for HDTV in 2003

(measured by processing capacity) could similarly

be as much as 10 times world production of all logic

chips in 1987 (ch. 5). HDTVS might contribute a

small to signMcant additional demand to the total

logic market, depending on the assumptions one

chooses about growth in the computer and other

sectors. In 1989, however, DSPS are forecast to be

just 4 percent of the total dollar-value of the logic

market. 27 DSP production for all other purposes

would therefore have to increase at a phenomenal 45

percent annually for the next 15 years, or 250 times

total, just to equal the high-growth scenario demand

of HDTV.X Even in low-growth scenarios one-tenth

this size, HDTV would still provide a siqi.ficant

demand for digital signal processing chips.

More generally, High-Resolution Systems (which

include many computer, office automation, and

telecom/fax markets) are likely to account for an

important share of DRAM and DSP use in almost

any scenario, due to the special processing requirements of video imaging.

If HDTV does provide a large market share for

particular semiconductors such as DSPS, it could

provide a firm significant economies in production.

This has been widely observed for other consumer

electronics components and markets. Producing a

particular 16-bit digital-to-analog (D/A) converter

chip for the large CD-player market, for example,

drove their price from $75.00 each to just $3.75,

while the price of less complicated 14-bit D/A chips

that did not benefit born such a large market demand

stayed at $60.00.29 Such production economies can

also extend to individual firms that have the benefit

of supplying several markets. This will also tend to

insulate the firm from the cyclical swings in demand

from a single narrow product segment.

As notedin ch. 5, HDTV is driving the state-of-theart in many aspects of display technology, and the

production volume of displays for HDTV is potentially enormous-as much as 6,000 times larger area

of AM/LCD display than is currently produced in

the world. Whatever form video entertainment takes

in the future, it is likely to continue to be a principal

driver of technology and production economies of

scale for displays.

Finally, the production of HDTVS may be important in driving the state-of-the-art in some aspects of

themanufacturingof sophisticated electronics. Highvolume production of consumer electronics has long

driven the state-of-the-art in system manufacturing

and has had important spinoffs to many other

sectors. For example, all the Apple Macintosh’s

produced for the North American market are made

on a TV assembly line in California that was

imported from Japan.30 The development of Tape

Automated Bonding, surface mount technologies,

and much automated insertion equipment was similarly driven by the consumer electronics industry

(ch. 5). Large-volume manufacturing of HDTVS

might also teach important lessons in manufacturing, especially because of the sophistication of its

electronics.

Comparing Ul$i”mate MarketPenetration Rates

and Corresponding Needs per User

Although technological progress will continue,

the total production volume of computers, AWS,

and telecommunications equipment, etc. will at

some point in the future likely slow to roughly

replacement levels: there will be a limit to the

number of computers, ATVS, videophones, etc.

people will be able to put to effective use. At that

time, the number of such devices used per person

and their relative semiconductor and other component requirements will determine the importance of

each market to the semiconductor industry.

Each household, for example, might have an

ATV, computer, and videophone at home; a car with

some electronics; and a computer/videophone at the

office. In addition, there would be a number of

‘‘smart’ devices such as microwave ovens, washing

machines, coffee makers, and others that would use

mS= Ch. 5; and k~gmted Circuit Engineering Corp., “Mid-Term 1988, ” Scottsdale, AZ.

~su~h ~~is po~~ible,~ s=n ~ tie Pmt in tie D~~dother ~ets. H -h~o@tion or other such system enter the market ill hge

numbers over the next 15 years, DSP market growth might be signifkantly larger than this. This assumes that the cost per gate for DSP is the same as

for the larger logic market.

mAI Ke~ck Natio@ Semiconductor, personal communication, MM. 15, 1989.

~erguso~ op. cit., foomote 24.
88 ● The Big Picture: HDTV and High-Resolution Systems

some semiconductors.31 In this scenario, the AW

would probably have the highest value display. It

might then be the principal driver of display

electronics and screen technologies and of their

production costs. The computer would continue to

be the principal driver of microprocessor technology

and costs. The computer, videophone, and ATV

would all play a role in driving fiber and wideband

switching technologies, with the Am perhaps

playing an especially important role in leveraging

the extension of fiber to the home. The computer and

AW would share in driving magnetic and optical

storage media technology and costs, with the ATV

taking a leading role in the near future due to its

higher rate of information flow. From this perspective, Advanced TV could play an important role in

several sectors.

Basing policy decisions on precise predictions of

fhture markets in the electronics sector is clearly

impractical. The market for HDTV, as envisioned

today, may or may not develop. HDTV might open

up entire new markets unforeseen today; or even

substitute for personal computers and telecommunications equipment both at home and in the office.

Alternatively, HDTV might be a flop and interactive

computer systems prove to be a winner. Such market

uncertainty makes investment decisions and policy

formulation difficult; in the final analysis, faith may

be an important factor in market success.

TECHNOLOGY AND

MARKET TRENDS

The important underlying trends in the technology should not be obscured by the uncertainties in

how the HDTV and other ATV markets will

develop. No matter what form video entertainment

systems take in the future, they will increasingly use

digital electronics.

Digital systems allow the manipulation and processing of video information in ways that analog

systems camot. Significant improvements in the

quality of the picture presented (ch. 4) and the

potential for interactivity will be the result. Digital

microprocessors are already common in television

tuners, and IDTVS are now on the market. In the

longer term, these advantages make the increasing

use of digital electronics in TVs inevitable.

HDTV currently exerts greater demands than

computer or telecommunications equipment for

full-color, high-resolution, W-motion, real-time

video. As a result, HDTV is pushing the state-of-theart in a variety of display, display processor, storage,

and certain related technologies. The mutual convergence of Advanced TVs, computers, and telecommunications towards digital video systems and the

strong technological push provided by consumer

video may result in significant linkages between

these sectors.

Technological linkages between components and

market segments are undeniably important and not

easily quantiiled. Such linkages, however, can be

overstated. For example, report “B” cited above

stated that if the U.S. share of the HDTV maxket is

10 percent or less (weak), then the U.S. share of the

world PC market would decline horn today’s 70

percent to just 35 percent in 2010; and the U.S. share

of the world semiconductor market would decline

from 41 to 20 percent in the same time period. The

report is done so haphazardly, however, that it shows

these drops in U.S. marketshare beginning in 1990.

Thus, in their scenario the U.S. share of the world PC

market even next year oscillates between $34 billion

and $17 billion depending on whether or not we have

less than 10 percent or greater than 50 percent of an

HDTV market that is all but nonexistent-according

to their estimate, worth just $4 million in the United

States and $92 million worldwide.

As discussed in the previous chapter, there are

numerous and important technological linkages

between certain aspects of the technologies underlying HDTV, computers, and telecommunications

equipment. Some of these linkages are strong; some

are weak. In some areas, HDTV will drive the

technology; in others computers or telecom equipment will drive the technology. For example,

automatic test equipment will be primarily driven by

the demands of the computer and telecommunication industries due to the greater complexity, variety,

and flexibility of the circuits. Some HDTV proponents have sacri.iiced credibility and trivialized the

importance of these linkages by arbitrarily assuming

31~s i=ores tie i.lldus~ and military segments which are much s~kr.
Chapter tidvanced TV Markets and Market Uncertainties ● 89

an instant, across-the-board reduction in market

share.32 Linkages are usually much more subtle, are

more often identtiled only in hindsight, and their

impact on related industries and markets is often

slow to develop.

The consumer demand for video entertainment

and for consumer electronics equipment will always

be large regardless of the spectilc course taken by

Am markets. The Japanese semiconductor industry

today is strongly supported by sales of consumer

electronics. Roughly one-fourth of total Japanese

semiconductor output is currently used in consumer

electronics, and TVs and VCRs are a major portion

of this.33

Perhaps more significantly, large volume mass

production, typical of consumer electronics, drives

the state-of-the-art in manufacturing technology for

systems. These manufacturing technologies, as well

as the management practices that go with them, will

be important for producers of computer and telecommunications equipment.

In the past, U.S. firms could ignore the consumer

electronics market at relatively less cost because

analog technologies were used. With the shift of

consumer equipment to digital electronics, the

linkages to the computer and telecommunication

industries are becoming quite important and U.S.

fiis can no longer ignore this market with impunity.

The rate at which fiber-optics is extended to the

home and the details of how it is comected and made

use of is also uncertain. Fiber has already begun

replacing the backbone of cable TV and telephone

systems. In the midterm, mixed fiber, coaxial cable

and copper pair systems (ch. 3) of the telephone and

cable TV companies could provide a limited range

of interactive video services.

In the longer term, most agree that the improved

performance and ultimately lower costs of fiber (and

associated electronic equipment) guarantee that it

will eventually be used in all new construction and

perhaps to replace copper pairs in existing buildings

when maintenance costs become excessive. Ultimately, fiber will likely penetrate most households

and could then provide a wide range of high-quality

information services, however long that may take.

The policy question is not whether or not to allow or

promote this, but rather how to provide a fimnework

for it to happen most flexibly with the least overall

disruption to society.

szhp~es of this IOSS of credibility can be seen in: Congressional Budget office, “The Scope of the High-Defiition Television Market and Its

Implications for Competitiveness,” July 1989; David Wessel, “Mossbacher’s Initiative on HDTV Is Getting Scuttled, Sources Say,” Wa2Z Street

Journal, Aug. 2, 1989, p. B2; and Peter Passell, “The Uneasy Case for Subsidy of High-Technology Efforts,” New York Times, Aug. 11, 1989, p. Al.

SSF1-,op. cit., fwmote 24; Japan’s v~ pr~uction a~olmts for 12 percent of toM Jap~ese chip production: “~’s H@-S@kW,Hi@-Tech

Battle,” Fortune, Oct. 24, 1988. .
Appendix A

The Decline of the U.S. TV Industry: Manufacturing

U.S. firms led the world in TV technology and

production until the early 1970s. Then, foreign-owned

firms gradually took control of the U.S. market. In

particular, superior design and manufacturing techniques

were implemented by Japanese manufacturers, in a

financial and business environment that the Japanese

Government took pains to make favorable to technology

development and capital investment. Their government

also assisted in developing overseas markets through a

variety of export promotion incentives and protected the

emerging Japanese companies from competition. The

decline of the U.S. television industry was also hastened

by dumping on the part of Japanese (and, later, other

foreign) firms, and by the sluggish and inadequate

response of the U.S. Government to that unfair trade

practice. Finally, the diversification of Japanese producers from small, portable televisions into larger, higher

value segments probably was speeded by Orderly Marketing Agreements, which limited the number of units

that could be sold here.

Solid-state electronics were almost entirely invented in

the United States, yet the Japanese pursued solid-state TV

designs more vigorously. To reduce energy consumption

by TVs, manufacturers requested that MITI sponsor a

multi-company project to study the replacement of

vacuum tubes with transistors. MITI assigned particular

responsibilities to specific companies, and then circulated

the results among all participants. The new designs,

introduced in 1969 and 1970, used less than half the

power of the older models.

MITI followed this with another multi-company research program on the use of integrated circuits (IC) in

color TV. The change to ICS allowed dramatic reductions

in the number of electrical components used in a TV.

From an average of 1,200 components per color TV in

1971, Japanese firms reduced the count to just 480 by

1975. In the same time period, U.S. firms only managed

to reduce the component count from an average of 1,150

to 880 (figure A-l).

This enabled all the components to be squeezed onto a

singIe printed circuit board, which reduced the number of

contact points and made the TV both easier to assemble

and more reliable. In contrast, American firms continued

to use multiple-board designs for their ease of service.

Thus, while Japanese fiis designed faults out, American

firms accepted faults as inevitable, designed for them, and

in the process introduced them.

This difference in design philosophy could be seen at

every stage of the manufacturing process. Japanese

manufacturers worked to ensure ‘‘zero” defects by:

performing elaborate pre-production testing of new designs; coordinating closely with suppliers to eliminate

defects in incoming parts; and adopting automated

assembly. By 1978,65 to 80 percent of components were

inserted automatically in Japan compared to 40 percent in

the United States. This insistence on perfection even

extended to the boxes that the finished TVs were shipped

in. When Sanyo took over the Arkansas facilities of

Warwick (U.S.), over a year was spent working with

suppliers until the cardboard was flawless and the

lettering perfect.

In contrast, American manufacturers allowed a certain

percentage of incoming components to be defective, and

relied on testing during and after the production process

to catch the problems. As a result, typically less than 1 in

100 TVs had to be reworked during production due to

Figure A-l—Average Number of Electrical

Components Per TV for U.S.-and Japanese-Made

Color TVs

Electrical component per standard set

1600

1400- &

1000-

800

600 1

400

L , , , , , ,

200

K

0

64 6 6 6 8 7 0 7 2 7 6 7 8 8 0

Calendar yea~4

— Us. h Japan

SOURCE: Based on data in lra C. Magaziner and Robert B. Reich, Minding

America’s Bushess (New Yorkr NY: Random House, 1983).

l~mes for MS ~tion iIKIu&: Harvad Business School Cases, “The U.S. Television Set Marke~ Wwti to 1970, “ “The U.S. Television Set Market, 1970-1979,”

“SanyoMauufaeturing Corporation-Forest City, Arkansas,““TheTelevisimSet Industry in 1979: Jaw Europe and Newly Industrializing Countries.” Ira C Magaziner

and Robefi B. Reich “Minding America’s Business” (New York NY: Random House, 1983). J.M. J~ ‘‘Japanese and Western QuaLity-A Contrast,” @ahiy Progress,

December 1978. James Howard Wooster, “Industrial Policy and International Competitiveness: A Case Study of U.S. Japanese Competition in the Television Receiver

Manufacturing Industry,” Ph.D. l%esis, University of Massachusetts, 1986. Developing World Industry and Technology, Inc., “Soume s of Japan’s International

Competitiveness in the Consumer Electronics Industry: An Examir@‘on of Selected Issues,” contractor report for the Office of Technology Assessment, 1980. James E.

Millste@ “DecliueinanExpauding Industry: Japanese Competition in Color Televisio~” inAmericanIndustry in Internatiomzl Competition, John Zysman and bura~son

(eds.) (Ithaca, NY: Cornell University Press, 1983).

–91–
92 ● The Big picture: HDTV and High-Resolution Systems

defects in Japan; many U.S. factories had to rework 50

percent or more. Strict control of the quality of incoming

parts is also important if automation is to succeed. For

example, Philco’s automated circuit board assembly plant

in Brazil ran for 3 months before they discovered that

every IC from one of their suppliers had been defective.

The cost of replacing the circuit board of every color TV

produced during this period was an important factor in

their owner’s (Ford Motor Co.) decision to sell Philco to

GTE-Sylvania and Zenith in 1973-74.

Reduced re-working of TVs during production, automation, and other factors reduced the assembly time for

color TVs to 0.8 hours in Japan versus 2.6 hours in the

United States in 1979 (figure A-2). Their TVs were also

more reliable. Service calls for U.S.-made color TVs were

five times more frequent than for Japanese-made TVs in

1974, dropping to two times the frequency by 1979 as

U.S.-made sets improved.

These changes in failure rates had other impacts as

well. Because of early reliability problems, many U.S.

firms had developed dealer networks to sell and service

TVs in the 1950s, as had Japanese electronics firms in

Japan. The increasing reliability of TVs and the ability to

market them through mass merchandisers in the United

States, however, freed Japanese firms from supporting

such dealers in the United States, and thus converted these

dealer networks from a potential barrier to market entry

into a liability for U.S. firms.

Meanwhile, the Japanese producers were protected

from foreign competition at home. The government

maintained strict controls on foreign direct investment,

restricted import and currency exchange licenses, and set

import quotas. Even without them, Japan’s distribution

systems and traditional business practices posed a formidable practical barrier to American exporters.

Some U.S. firms were competitive in manufacturing,

however, and survived till quite recently (GE, RCA) or to

Figure A-2—Man-hours To Assemble Color TVs in —

U.S. and Japanese Factories

Aa8embly man-hours per atandard set

‘;[5;,<\

4

2

0

64

L

66

-—–

6 8 70

k

72 74 76 78 8 0

Calendar year

— U s . + Japa n

SOURCE: Based on data in in Ira C. Magaziner and Robert B. Reich,

Minding America’s Business (New York, NY: Random House,

19s3).

the present (Zenith) even in the face of dumping by some

foreign firms. Had this dumping and other trade violations

not occurred, other U.S. firms might have had the time to

learn and apply superior quality control and production

techniques, and have had the profit margins needed to

invest in R&D and automation to be fully competitive. In

this context, it is important to note that U.S. manufacturing practices were superior to those of the Japanese in

terms of component counts and assembly man-hours

(figures A-1 and A-2) until the early 1970s.

Foreign-owned firms now dominate the U.S. TV

industry and much of the skill-intensive design and

production of electronic components and subassemblies

is done abroad, in many cases leaving primarily screwdriver assembly operations to be done in the United

States.
Appendix B

The Decline of the U.S. TV Industry: Trade

Foreign t.mde pmctices were an important factor in the

decline of U.S. television manufacturers. Domestic protection and coordinated pricing policies permitted Japanese firms to sell televisions in the American market at

prices substantially below what comparable sets were

sold for in Japan. The U.S. response to this dumping was

sluggish and ineffective-in part because a statutory

change that enabled a more effective response was not

made until 197%xposing American firms to competition that drove down profit margins and increased the

difficulty of making the needed investments to improve

their manufacturing. The Japanese Government protected

domestic producers flom imports as welI as foreign direct

investment, and the nation’s distribution system acted as

a barrier to any firm that could surmount the government’s restrictions.

Japanese TV manufacturers have high fixed costs, in

part due to their customs of providing permanent employment and of maintaining exclusive distribution outlets.

High-volume production was needed to cover these fixed

costs but also provided significant economies of scale.

Government fiscal policies and other factors encouraged

heavy investment in plant capacity by Japanese manufacturers-in excess of domestic needs-to achieve these

volumes. The large output was sold at a high profit in the

protected domestic market and at low- or no-profit

abroad: Japanese producers maintained domestic retail

prices at least 50 to 60 percent higher than for comparable

sets sold in the United States. 1 Imports would have broken

this arrangement but were blocked.

The Japanese Government protected the profitability of

domestic sales through tariffs, quotas, import and foreign

exchange licensing, and restrictions on foreign direct

investment. Tariffs on color TV imports were 30 percent

in Japan until 1968 compared to 10 to 7.5 percent in the

United States over the same period. Commodity taxes

were reduced to less than 10 percent on sets entirely of

domestic origin, but were maintained at 30 percent on

those with larger imported picture tubes. Import certification took much longer and was more costly and stringent

than the U.S. equivalent.

The Japanese industry blocked imports by denying

distribution through their extensive network of franchised

dealers, who carried only one manufacturer’s products,

excluding all others. Sales through large retailers also

proved difficult. In 1973, for example, Zenith attempted

to export to Japan to take advantage of the exceptionally

high prices for TVs there, but MITT reportedly pressured

Zenith’s trading partners and retail chains to limit

distribution efforts.

As a result of these and other factors, sales of color TV

imports in Japan totaled only 16,000 in 1974, 11,000 in

1975, and 452 in 1976-out of total color TV sales of

almost 5 million.

At the same time, Japanese sold TVs at rock bottom

prices in the United States. To ensure that the impact of

this was on U.S. rather than Japanese producers, Japanese

firms (including Hitachi, Matsushita, Mitsubishi, Sanyo,

Sharp, and Toshiba) a.IIocated U.S. retailers among

themselves according to the so-called “five company”

rule to eliminate intra-Japanese competition.

U.S. firms challenged the unfairness of Japanese trade

practices, both in courts and through administrative

processes. Action was taken on at least five separate

fronts.

The first and longest proceeding began in 1968 when

U.S. Customs received complaints about dumping violations. In 1971 the Department of Treasury found Japanese

producers guilty of dumping,2 but virtually no duties were

collected or other actions taken until Congress overhauled

the antidumping duty 1aw in 1979.3 At that point, the

Secretary of Commerce negotiated a settlement of approximately $77 million for antidumping duties and other

penalties. Zenith, having estimated its own damages as

much larger than this, unsuccessfully appealed the

settlement. The case was finally closed in 1987 when the

government unsuccessfully tried to force Zenith to forfeit

the $250,000 bond it had been required to post in

challenging this settlement.4

This and subsequent dumping findings against Korea,

Taiwan, and Japan (most recently for 1986-87)5 resulted

in the imposition of duties on TVs imported from these

countries. Foreign efforts to rescind the duties have failed,

but duties have reportedly sometimes been avoided by

shipping TVs or components to the United States through

third countries. For example, by transshipping through

IKozo Yamamura and Jan Vandenberg, “Japan’s Rapid-Growth Policy on Trial: The Television Case, ” Luw and Trade Issues of the Japanese Economy, Gary R.

Saxonhouse and hzo Yamamura (eds.) (We, WA: University of Washington Pxess, 1986).

2T.D. 71-76,5 cw. B. and Dec. 151,36 Fed. Reg. 4597 (1971).

3Ke~Kennedy,finithR&io Corp. v. UnitedStates: TheNadir@the U.S. TradeReliefProcess, Nofi CiUOlirMJbof bh~d Law md CO~ xial Re@tion

(1988), VOI. 13, p. 226.

4&ni~h R@~ COT. V. Unit&states, 823 F.2nd 518 @d. Cir. 1987)

s“Televisim R~iVers, M~~~ and Color, Fmm Jaw” 54 FR 13917, 1989.

-93–
94 ● The Big picture: HDWand High-Resolution Systems

Mexico, Matsushita was reportedly able to cut its tariff

bill horn 15 to 5 percent on color picture tubes.6

Second, the National Union Electric Corp. (U. S.) filed

suit in 1970 and Zenith filed suit in 1974 against eight

Japanese firms and their subsidiaries for violations of

antitrust and antidumping laws. Most of the evidence in

the case was ruled inadmissible by the District Court in

1981, including, for example, thousands of pages of

documents seized by the Japan Fair Trade Commission in

raids on corporate offices.7

The District Court’s decisions were largely reversed by

the Third Circuit Court of Appeals, which concluded that

there was direct evidence of concerted action among the

Japanese, including price fixing, use of the “fivecompany’ rule, and false-invoice-and-kickbacks to avoid

U.S. Customs regulations and antidumping penalties. The

Court recommended that the case be sent to a jury.8

The Third Circuit Court of Appeals findings were

narrowly reversed, 5+ by the Supreme Court in 1986.

The Supreme Court ruled that the direct evidence of

concerted action among the Japanese found by the Third

Circuit Court was irrelevant, because the Japanese could

not have a motive to engage in predatory pricing in the

United States—it would require the Japanese to sustain

years of “substantial losses in order to recover uncertain

gains. “9 Pricing behavior in the Japanese market was also

deemed irrelevant to the antitrust charges because ‘American antitrust laws do not regulate the competitive

conditions of other nations’ economies. “1°

The legal arguments notwithstanding, the Japanese

firms’ actions at issue in the case caused significant

damage to U.S. firms. Both U.S. and Japanese firms had

to cover their fixed costs. The Japanese Government

permitted, if not encouraged, the creation of a protected

domestic market in which the Japanese firms were

allowed to recover all of their fixed costs, Iiee of any

significant foreign competition. Japanese firms could

then charge much lower prices in foreign markets,

including the United States, while U.S. firms were forced

to charge prices that covered their average total costs.

Third, Zenith petitioned the Treasury Department in

1970, requesting the imposition of a countervailing duty

to offset the effective rebate of the commodity tax

generally due on TVs which Japanese producers were

receiving from their government for exports. In 1976, the

Treasury Department found that the rebate was neither a

“bounty” nor a “grant,” either of which would have

triggered the imposition of a duty. The decision was

upheld unanimously by the U.S. Supreme Court in

1978. 11

Fourth, in 1972 the U.S. Department of Justice

undertook investigations of collusion and of false-invoiceand-kickback schemes run by Japanese firms to circumvent U.S. dumping tariffs and penalties.12 In 1977, Justice

concluded that there was no evidence of collusion, but it

brought charges against a number of fiis for these

kickback schemes. At least one U.S. retailer pled guilty,13

and at least one case was still unresolved in September

1989. 14

Fifth, in 1976 a GTE request to the U.S. International

Trade Commission (ITC) to investigate unfair acts by five

Japanese firms was dismissed, but a request by COMPA(X15 led to a 1977 ITC holding that there was injury

due to increased imports. While the ITC therefore

recommended higher tariffs on color TVs, the Administration responded instead by negotiating a voluntary

Orderly Marketing Agreement.

6Co~~ ~ pmwme AIUSriC~ Color Televisio~ U. S. Co~ss, House subcotittee on Tekcmnmwn “cations and Finance, Ckuruittee on lhergy and Cormmrce,

“Recommended Oovemment Policies to promote the Evolution of a U.S. High Definition Television Industry,” Cornmittoe Print 101E, March 1989.

7~nith R~io COP. v. Matsushita Elec. Id. CO.,” 494 F. Supp. 1190 (1980), 505 F. Supp. 1125 (1980), and 513 F. Supp. 1100 (1981)

s’c~ Re Japse Hectroldc kdlCtS,” 723 F.2nd 238 (1983). See also “Japanese Electronic Products Antitrust Litigation,” 807 F.2nd 44 (1986) for the discussion of

the case following the Supreme Court decision.

9~leg~ Scholw ~~d~~~~ @ysis of @ov tit ~w ~ l~ge pm -d ~ fie -St “c~serv~ve S&OOl of ~~ght ti the debate Over Pdation,”

that of Bork-McOee-Easterbmok. See: Randolph Sherman, “TheMatsushitaC ase: Tightened Concepts of Conspiracy and Predation?” Curdozo LzwReview, vol. 8, p. 1121,

1987.

~OMatsushita E[ecwic Industrial CO. v. Zenith Radio COW., 475 U.S. 574 (1986).

ll~nith V. United States, 437 U.S. 443 (1978).

12’iWm&& ~ckbxks k Living Color,” Time, June 13, 1977, p. 63.

13David Staelin et al., “The Decline of U.S. Consumer Electronics Manufacturing,” Massachusetts Institute of Technology Cmnnis sion on Industrial Productivity,

December 1988.

l~s cW~ ~~ck ~d fofimmP@ apP~s ~d ~-ds. 647 F.&d 902 (9~ Cir. 1981); m~&d to 5]8 F. Supp 179 (C!. J). Cal 1981); reviewed 719 F. 2nd

1386 (9th Cir. 1983); cext. dm 104 S. Ct. 1441 (1984); 579 F. Supp. 1055 (C.D. Cal 1984); reviewed 785 F.2d 777 (9th Cir. 1986); cat den. 479 U.S. 988 (1986); 677 F.

Supp. 1042 (CD. Cal 1988); reviewed 866 F. 2nd 1128 (9th Cir 1989).
Appendix C

The Decline of the U.S. DRAM Industry: Manufacturing

U.S. firms led the world in DRAM technology until the

early 1980s. Japanese firms then gradually took control of

the world market, in part because many U.S. producers

could not match Japanese efforts at critical points in the

technology’s lifecycle. Heavy investment of money and

manpower and close attention to highquality manufacturing were important factors in the Japanese success. In

addition, Japanese efforts have been abetted by violations

of trade law. As a result, Japanese firms now control 70

percent of the total world DIL4M market and 85 percent

of the advanced 1 Mbit DRAM market.

Two engineers designed Intel’s (U. S.) pioneering IK

(1,000 bits or binary memory cells) DRAM in 1970-71

and just three engineers designed Intel’s 16K DRAM. In

contrast, one of today’s major Japanese DRAM producers

reportedly assigned 50 select engineers to design their IK

DRAM and 100 to design their 16K DRAM. This allowed

greater specialization, more careful attention to issues of

manufacturability, and more rapid development of the

designs.

Japanese firms invested heavily in pIant and equipment

in the mid-1970s. In contrast, U.S. producers cut investments due to the 1974-75 recession and were then unable

to meet the demand when U.S. semiconductor markets

boomed in 1979. Japanese producers stepped in—

offering 16K DRAMs as licensed second sources for the

industry-standard Mostek (U. S.) design—and, by the end

of 1979, had captured40 percent of the world 16K DRAM

market.

Manufacturing quality began to appear as an issue in

the late 1970s. Japanese 16K DRAMs, for example, had

much lower failure rates than those of U.S. firms (table

C-l)-even though nearly all began with the Mostek

design. It took several years for U.S. firms to reduce

failure rates to comparable or lower levels.

Table C-l—U.S.-Japan 16K DRAM Failure Rates

(parts per miiiion)

1978 1979 1980 1981 1982

Japanese vendors . . . . . . . . . 0.24 0.20 0.16 0.17 0.05

U.S. vendors . . . . . . . . . . . . . . 1.00 1.32 0.78 0.18 0.02

SOURCE: Hewlett Packard, WNiam F. Finan, and Annette M. Lamond,

“Sustahing U.S. Competitiveness in MicroElectronics: The

Challenge to U.S. Policy,” in U.S. Competitiverress in the 144dd

Edortorny, Bruce R. Scott and George C. Imdge (eds.) (Boston,

MA: Harvard Business School Press, 19S5).

U.S. firms lost even more of the DRAM market in the

next generation due, in part, to relatively less competitive

manufacturing. Chiprnakers normally design chips as

small as possible to reduce the likelihood that any one

chip is contaminated by a stray microscopic dust particle

and to increase the number of chips produced per wafer

processed. Determined to leapfrog the Japanese in quality

and cost, most U.S. producers designed much smaller and

more sophisticated 64K chips than the Japanese, but were

consequently slower than the Japanese in completing the

designs and in solving related manufacturing problems.

In contrast, the Japanese successfully produced 64K

DRAMs by slightly modifying and scaling up &eir 16K

DRAM designs. The resulting chip was nearly 50 percent

larger than the leading American designs, but they

achieved good yields by using higher purity chemicals, by

greater capital investment in cleanrooms and automation,

and by superior quality-control techniques.

The simple design allowed the Japanese firms to get to

the market first. High yields also lowered the overall cost

per chip and gave them a greater production output per

unit of capital investment and per labor hour than U.S.

firms. By the end of 1981, the Japanese held 70 percent

of the world 64K DRAM market. U.S. firms cut the

Japanese share to 55 percent by rnid-1983 after entering

the market in volume, but most U.S. firms subsequently

abandoned the market due to Japanese dumping in the

mid-1980s and/or due to problems they encountered in

manufacturing subsequent generations of DRAMs competitively.

Issues of manufacturing process arose again as firms

made the transition from the 256K to the IM (1,000,000

bits) DRAM. Table C-2 compares the production yields

and costs for a lower-yield U.S. manufacturer-a major

U.S. firm that subsequently dropped out of the DIWM

business-with that of Toshiba, the world leader in IM

DRAM production.

The U.S. firm’s design and manufacturing process had

several serious shortcomings that allowed no rnarg. for

error. For example, in etching the silicon wafer to create

the circuit elements, the U.S. firm’s process formed sharp

vertical walls. In previous generations of DRAMs this

would not have been a problem. But with the dimensions

of the IM DRAM circuitry shrinking to just 1/100 the

diameter of a human hair, sharp vertical walls prevented

ltiesforthis section i.nclu&: PeterD. N- *mi@cLFrson~m~ .cations, May 11, June 22, Aug. 4, andoct. 10, 1989; Brian Sante, “lK-Bit DRAM, 1970, ”

IEEE Spectrum, vol. 25, No. 11, 1988; Wfiam F. F% Jeffrey Frey, “Study of the Management of MieroEkctmnics-Related Research and Development in J~”

cuntractorqortpre pared forthe OfficeofTechnology AssessnnmL November 1988; CompetitiveEdge: TheSemiconductorInAstry in the US. andJapan, Dauiel I. Oldmoto,

Takuo Sugano, and Franklin B. Weinstein (eds.) (Stanford, CA: Stanford University Press, 1984); William F. Finan and Annette M. LsMon& “Sustain@ U.S.

Competitiveness in Microelectronics: The Challenge to U.S. Policy,“ in U.S. Competitiveness in the World Economy, Bruce R. Scott and George C. Lodge (eds.) (BOX

MA: Harvard Business Press, 1985).

-95–
96 ● The Big picture: HDTVand High-Resolution Systems

Table C-2—U.S.-Japan 1 M DRAM Manufacturing

Cost Comparison

Lower yield

U.S. manufadurer

Operation 3Q 1986

Toshiba

3Q 1986

Start wafer costa 

. . . . . . . . . . .

Prooessed wafer cost . . . . . . .

Chip size (square mm) . . . . . .

Total chips possible (assuming

a 125 mm wafer) . . . . . . . . .

Wafer probe yield . . . . . . . . . .

Number of good chips . . . . . .

Packaging cost . . . . . . . . . . . .

Assembly yield . . . . . . . . . . . .

final test cost . . . . . . . . . . . . .

Final test yield . . . . . . . . . . . . .

Total manufaoturina oost . .

(Bulk) $25.00

$300.00

54

151

25Y0

$::5

92Y0

$0.20

85’XO

$11.83

205

68Y0

139

$0.25

92Y0

$0.20

85?40

$3.31

NOTE: These are representative values to indicate relative manufacturing

costs for these two firms at a particular time. These firms are at

different points on the learning curve for IM DRAMs in 1986, but

process design flaws probably would have prevented much higher

yields for the U.S. firm.

~he starting wafers, Epi and Bulk, refer to different types of wafers.

SOURCE: Peter D. Nunan, Sematech, personal communications, May 11,

June 23, Aug. 4, and Oct. 10, 1989.

subsequently deposited material from being effectively

etched out of the comers, causing the circuitry to short-out

(figure C-l).

The Toshiba engineers recognized this pitfall and

developed a new technique which formed sloped rather

than sharp vertical walls (figure C-l). The resulting

process was highly robust. When transferred to Siemens

in Germany and to Motorola in the United States, yields

were high even with the very first wafers processed and

even with relatively less experienced line workers.

Technical management and quality philosophy proved

to be key problems for the U.S. firm. Its design engineers

developed their DRAM process and prototypes in the

laboratory, and then ‘threw the design over the fence’ to

the manufacturing engineers. The design engineers recognized the difficulties of producing IM DRAMs with their

design: they attempted to compensate by specifying a

high-quality starting wafer, by keeping the chip size

relatively large, and by including a very large number of

redundant memory cells on the chip as backup (table C-2).

They were relying on inspection and correction after

production to provide usable DRAMs rather than designing quality in.

The manufacturing engineers were unable to get (wafer

probe) yields up to competitive levels under factory

conditions. They protested that the process had no margin

for error and was not readily manufacturable, but didn’t

have the resources or knowledge to do proper analysis and

implement improvements. The designers insisted that

they had developed a robust and manufacturable process

and stayed away from correcting the problem. In contrast,

the engineers and scientists who developed the Toshiba

Figure C-l-Cross-section of IM DRAM Storage Cell

Metal or oxide insulator

/on vertical Si(fe ~a,,

//////////////////////~

Residual polysilicon

-J/ — — — — — — .

 — — — — -. — — — - ——

Transistor

Lower-yield U S. manufacturer design

Metal or oxide insulator

/“’ ”

on sloped sidewall.

~———-—

Toshiba design

A. Cross-section of lower yield U.S. manufacturer’s design

showing the sharp mrners from which it was dificult to etch

residual polysilicon.

B. Cross-section of Toshiba design shovhg the sloped sidewall.

SOURCE: Peter D. Nunan, Sematech, personal communication, Oct. 10.

1989.

process were also responsible for improving the yield on

the factory floor. Even if the Japanese had not been

dumping DRAMs in the United States in the mid-1980s,

the IM DRAM design and manufacturing process of this

low-yield U.S. manufacturer might never have been

competitive.

The loss of the DRAM market may be particularly

darnaging to the U.S. chip industry. DRAMs are known

as a technology driver because they push the limits in

certain kinds of process technologies. Loss of DRAM

production will likely cause U.S. fiis to lag the Japanese

in developing certain kinds of manufacturing processes

important in the production of many types of chips.

U.S. firms face formidable obstacles should they

choose to reenter the DRAM market. From $5 to $10

million in the mid- to late-1970s, the cost of a single

minimum-efficient scale, state-of-the-art DRAM production facility has risen to roughly $200 million today, and

is expected to approach $400 million for the nextgeneration 16M DRAMs. The human skills to design and

produce leading-edge DRAMs also take many years to

develop.

Siemens has committed $1.6 billion to develop or

acquire IM and 4M DRAM technology and production

facilities. Even armed with IBM’s DRAM designs,

however, U.S. Memories failed to raise $1 billion to enter
Appendix C—The Decline of the U.S. DRAM Industry: Manufacturing ● 97

DRAM production. Similar investments needed for

producing state-of-the-art semiconductors generally are

all but impossible for small- and medium-sized firms. As

a result, many American companies are forced to rely on

Japanese and other foreign firms to produce their chip

designs.

Some observers see the relatively low level of funding

for Sematech—roughly $200 million per year-and the

corresponding decision to not pursue large-volume production of DRAMs as critical constraints. They argue that

a high-volume operation is essential for testing yield and

reliability, and that issues of technical management and

quality techniques-such as for the lower yield U.S.

manufacturer described above-can otherwise be swept

under the rug. As one Sematech engineer, frustrated by

what he feels is an inadequate response to the Japanese

challenge, put it,

It’s as if the Soviets, having already taken the lead in the

space race, had announced in 1961 that they were going to

send a man to the moon, and the U.S. response was to focus

on selected aspects of rocket science.
Appendix D

The Decline of the U.S. DRAM Industry: Tradel

The Japanese Government protected the Japanese

semiconductor industry when it was weak and, as it

strengthened, supported its move into international markets. Conversely, American trade policy largely failed to

prevent serious darnage to U.S. industry caused by trade

violations.

Scientists and engineers in the United States invented

essentially all of modem solid-state electronics. By one

accounting, of some 103 major product and process

innovations in the semiconductor industry between 1950

and 1978, 90 were by American fiis. Despite the

technological lead of U.S. firms, they were never able to

convert it into market share in Japan as they did in Europe.

U.S. firms found it all but impossible to establish

subsidiaries in Japan or joint ventures with a significant

share of the equity-unless the Japanese partner was

given access to new technology or other appreciable

benefits. Thus, whereas U.S. firms had established 46

subsidiaries in Europe by 1974, including 18 manufacturing operations, only Texas Instruments (’H) had a

manufacturing operation in Japan.

TI succeeded where other U.S. firms failed because of

its strong U.S. patent on the integrated circuit (IC). The

Japanese Government refused to give TI permission to

establish a wholly owned subsidiary in the early 1960s; in

turn, TI refused to license its IC patent in the United States

to Japanese firms. This generally stopped exports of

Japanese ICS to the United States, but it did not stop

Japanese firms tiom producing ICS for their domestic

market as TI’s application for a Japanese patent was

refused. (’II applied for a Japanese patent on its invention

of the IC in February 1960 but did not receive the patent

until November 1989. The patent is estimated to be worth

$500 million annually in royalties to T’I.)

Japanesefirmsmpidly gainedexpertise inlCfihicationrnaking TI’s entry into their market evermore difficult the

longer it waited to settle. In 1968, TI settled for a 50:50

joint venture with Sony; licensed NEC, Hitachi, Mitsubishi, Toshiba, and Sony; and agreed to limit its share of the

Japanese IC market to less than 10 percent. Firms with

weaker patent positions did not succeed in establishing

manufacturing subsidiaries in Japan until much later.

Tariff and non-tariff barriers limited imports into Japan

as well. Tariffs were roughly double those of the United

States until the early 1980s. Imports of ICs with more than

200 elements were bamed until 1976, limiting the import

market to the most simple types.

Unable to penetrate the Japanese market, most U.S.

firms licensed their technology to Japanese firms as a

means of realizing some earnings. The Japanese Government required that foreign firms license all Japanese firms

so requesting at a single royalty rate. This prevented the

competitive bidding up of the license fees; and the broad

licensing prevented any one firm from capturing monopoly revenues. Competition among firms was thus effectively shifted fkom innovation downstream into manuhcturing.

The battle for control of the DRAM market began in the

late 1970s with the strong Japanese push in 16K DRAMs.

The 1979 boom in semiconductor demand created a

capacity shortage among both Japanese and @encan

producers. Japanese firms responded by increasing their

export of chips to capture and hold market share abroad

while importing the same chips to ffl their domestic needs

until they could expand their production capacity. U.S.

firms rushed to fill Japanese orders in the hope that this

was a market opening, resulting in the highest levels of

semiconductor imports into Japan at anytime between the

early- 1970s and 1989 (figure D-l). As additional capacity

came on line, however, the vertically integrated Japanese

producers cut back imports of U.S.-made DRAMs while

hanging onto their market share gains abroad.

Japanese firms pushed DRAM prices down sharply in

the early 1980s (figure D-2). Repeated allegations of

dumping were made, but no formal action was taken

because it was difllcult to distinguish the effect on price

of dumping, if any, from that of the high value of the

dollar. Over half of the U.S. DRAM producers dropped

out of the market during this period.

The remaining American firms followed the Japanese

lead in heavily investing in capital equipment in 1983-84.

When recession hit the semiconductor industry in 1985-

86, the large overcapacity and other factors drove down

DRAM prices. Japanese firms lost an estimated $3 to $5

billion during 1985-86, while American fms lost an

estimated $2 billion.

Severe price competition also occurred with other

commodity chips such as EPROMS. In 1985, Hitachi told

distributors to quote 10 percent lower prices—

irrespective of costs-than competing American firms

l-es fi~s s=tim iIKJU& hose cited~ ~. C ~d: Johu E. Til~ “Iu@tiod l)ifhi~ of Tecbology,” Brootigs btihti~ 1971; Es J. ~“%

“Cress-Investment: A Second Front of Economic Rivalry,” CalifomiaManagement Review, vol. ~ No. 2, Wider 1987; The Departmmt of Co

the Us. Semimndlllx

nnnerce, “A Report on

or Indmtry, ” 1979; “The united states Government Trade Policy Response To Japanese Competition in Sanbnductors: 19821987,” O’Ill

Background Rem September 1987; Clayton K Yeutter, “lhe Japanese Left Us With Little Choice,” New York Times, Apr. 5, 1987; Andrew Pollac~ “Chip Pact Falls

Short of Ooals,’’iVew YorkTimcs, Aug. 2, 1988; WilliamF.F- Chris B. Amundscw “Modeling U. S.-Japau Competition in Semiconduc tors,” Journal qfPolicy Mcxieling

8(3): 305-326 (1986); John Burgess, “Japan Oives U.S. Firm Circuit Patent,” Washington Post, Nov. 22, 1989;

–98–
Appendix>The Decline of the U.S. DR.AMIndustry: Trade ● 99

Figure D-l —U.S. Share of the Japanese Semiconductor Market, 1973-66

Percent Losing the Chips: The Semiconductor Industry

100% I \

90% t I

80% t I

70%

60Y0

50%

40%

30%

20%

10%

Substantial Substantial Substantial

yen appreciation yen appreciation yen appreciation

# – \

9%

/

o% I I I I I I I I I I I I I 1

73 74

El First

‘‘liberalization

of imports

75 76 77 78 79 80 81 82 83

\ P!!!ns I / /nReduction of

Japanese

tariff to

4.2%

\

Third Im

84 85 86

/t

U .S, -Japan

semiconductor

accord

Elimination of

Japanese duties

SOURCE: Clyde V. Prestowitz, Jr., Trading P/aces: How We A//owedJapan To Take the Lead(New York, NY: Basic Books, 1988). Used with permission.

until the sale was won, while guaranteeing a 25 percent

distribution profit. From January 1985, when the Japanese

entered the 256K EPROM market, to August 1985 prices

fell from $17 per chip to less than $4, while the estimated

Japanese production cost alone was $6.34.

In response, U.S. semiconductor firms filed antidumping cases against Japan in 1985 for below-cost sales

of 64K DRAMs, and the Department of Commerce itself

filed an antidumping case against Japan for below-cost

sales of 256 DRAMs and EPROMs. The U.S. International Trade Commission (ITC) found that dumping had

occurred. For example, constructed prices indicated that

DRAMs were being sold at half their estimated production cost. A trade agreement was subsequently reached in

September 1986. When this failed to stop below cost

sales, the Reagan Administration imposed sanctions.

These remain in place in early 1990 on the issue of the

lack of access to the Japanese market. Despite this

relatively quick action, the only American firms in the

merchant DRAM market today are TI, Micron, and

Motorola.

Following the trade agreement, prices on the spot

market rose sharply to as much as four to five times

long-term contract prices. Further, prices charged to U.S.

purchasers have typically been 30 percent higher than

those for Japanese users. In sharp contrast, EPROM

prices-where U.S. producers still have 40 percent of the

world market and 70 percent of the U.S. market-have

been much more disciplined.

Some analysts believe that Japanese producers, who

now control the world DRAM market, have subsequently

acted like a carte12: driving prices up to capture excess

%hades Fergu~ “DRAMs, Component Supplies, and the World Electronics Iadustry: Aa international Stmtegic Analysis,” VLSI Memo 89-554, Ausust 1989,

Massachusetts Institute of Technology, Cambridge, M& Kenneth Fl~ “Policy and Politics in the International Semiconductor Industry,” paper presented at SEMI ISS

seminar, Newport Beac4 CA, Jan. 16, 1989.
100 . The Big Picture: HDTV and High-Resolution Systems

Figure D-2—Average Cost

Millicent8 per bits

120 1 1

Per Bit for DRAMs, 1976-89

Millicente per bit

40

3 0 -

2 0 -

10-

0 1 I I 1 1 1 1 $ 1 ! 1 1 r

76 77 76 79 80 81 82 83 84 85 86 87 88 89 90 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90

Calendar year Calendar year

- Expected pric e ~ Actual price + Expected pric e + Actual price

Showing the large price erosion that took place in 1981 and 1985.

SOURCE: Based on data in: “Mid-Term 1988,” Integrated Circuit Engineering Corp., S@tedale, AZ, 1988.

profits in 1988 and 1989, and driving prices down, as in ary 1990, in part due to this sharp decline in DRAM

fall 1989 to perhaps wam any would-be entrants into the prices; the same day, many of Japan’s largest chip

DRAM market with the specter of enormous financial producers announced DRAM production cutbacks to turn

losses. The effort to launch U.S. Memories-a DRAM the price declines around.3 production consortium-was finally abandoned in Janu3David E. Sanger, “Contrasts on chips,“ New York Times, Jan. 18, 1990.
Appendix E

The Development of the Japanese Computer Industryl

Japanese researchers at the University of Tokyo, the

Electrotechnical Laboratory (run by MITI after 1952),

NEC, Fujitsu, N’IT and elsewhere resumed pre-war work

on computing machines in the late 1940s and early 1950s.

The computers they developed were generally small,

low-cost, and technically well-behind the better financed

efforts in the west. In 1955, a MITI-sponsored committee

recommended that the computer sector be given more

financial support, be protected by limiting imports, and be

assisted in the acquisition of foreign technology. The first

test came the following year.

In 1956, IBM requested MITI’s permission to create a

wholly owned manufacturing subsidiary (it already had a

sales subsidiary) in Japan with the right to return royalty

payments and profits to its parent company. Permission

was denied. A settlement was not reached until 1960,

when IBM was allowed to establish its desired subsidiary

and to repatriate 10 percent royalties back to its parent in

return for licensing its patents to all interested Japanese

companies for a 5-year period at a single reduced rate--5

percent on computer systems, and 1 percent on parts,

among other concessions. MITI negotiated these licensing rights on behalf of the individual companies to

prevent competitive bidding-up of the royalties and to

prevent the establishment of a domestic monopoly.

Even with the 1960 settlement, IBM-Japan operations

were closely controlled by the government on the grounds

that it might hurt domestic industry. IBM-Japan was not

allowed to begin production until 1%3; its 1964 request

to produce the 360 series was delayed for a full

year-until after Fujitsu and NEC had introduced their

own “family series”; its importation of critical parts

which could not be produced locally was slowed; and the

entry of capital that it needed to build facilities was

restricted.

Beginning during this same period, the Japanese

Government began an extraordinary series of initiatives to

enable Japanese firms to become world class competitors

in computer technologies and markets.

First, the Japanese Government provided domestic

firms direct financial support. Subsidies and tax breaks

totaled about $130 million and loans totaled more than

$400 million during the 1960s. Together, this was nearly

twice what domestic firms themselves invested in R&D,

plant, and equipment for commercial computer development.

That funding was often not used at the firms’ discretion. Much of it went to spectilc investments that

government, business, and university researchers agreed

would contribute most to technical progress and production efficiency. Support was also targetted towards

specific firms to develop certain classes of computers

(Fujitsu, NEC, and Hitachi) and particular pieces of

peripheral equipment (Oki, Mitsubishi, and Toshiba).

This divided the market and improved the scale economies for the firms in each segment. Firms chosen by the

government to lead the effort in specfilc segments varied

over time on the basis of competitive proposals and past

performance. For example, Hitachi was chosen to lead the

1966 Super High-Performance Computer Project—

intended to develop a domestic counter to IBM’s 360

Series-on the basis of its design proposal.

The government-backed Japan Electronic Computer

Co. (JECC) was another important source of direct

support. Most of its directors were former MITI or Japan

Development Bank offlcia.ls; and it was financed with

low-interest loans either directly through the Japan

Development Bardq or through a MITI-organized private

financing cooperative with the loans guaranteed by the

JDB. As of 1978, the JECC was the 20th largest firm in

Japan in terms of capital; yet had no sales division, did not

advertise, had just 120 employees, and averaged annual

profits of less than 0.1 percent of rental assets.

The JECC (est. 1961) purchased computers at relatively high fixed values to prevent price competition and

provide producers reasonable profits; and then rented

them to users at values designed to undercut IBM. This

gave computer makers their cash up front, and shifted

much of the financial burden from the computer firms to

the JECC. While 15 companies had licensed IBM’s basic

patents, only the top seven firms were allowed to enter

JECC in order to prevent excessive competition such as

“redundant investment and cut-throat pricing. ” The top

three-Fujitsu, Hitachi, and NEC-were given preferential treatment. Following the establishment of the

JECC, Japanese companies share of the domestic market

jumped from 18 percent in 1961, to 33 percent in 1962,

l~ci~ SO-S include: Marie Anchordoguy, ‘The State and the Market: Industrial Policy Towards Japan’s Computer Industry, ” draft, 1986 and Computers, Inc.

(Cambridge, IvIA: Harvard University F%Ess, 1989); Jonah D. bxy and Richard J. Samuels, “Institutions and Innovation: Research Collaboration As Technology Stmtegy

in Japan,” MITJSTP 89-02, Massachusetts Institute of Technology, 1989; Kenneth Fl~ Targeting the Computer: Government Support andhternational Competition,

Creating the Computer: Government, Industry, and High Technology (Wbsbingto% DC: Brookings Institution, 1988); Robert Sobel, IBM vs. Japan: The Struggle for the

Future (BriarcliffManor, NY: Stein & Day Publishers, 1986); Charles H. Fergusou “Technological Development, Strategic Behavior, and Government Policy inroformatl“on

Technology Industries,” PhD. Thesis, Massachusetts Institute of Technology; ha C. Mag aziner and Thomas M. Hout, “Japanese Industrial Policy,” Report #585 (J-xmdmu

England: Policy Studies Institute, 1980); “A Worldwide Strategy for the Computer Market,” Business Week, Dec. 14, 1981; John Mzukoff, “Fujitsu Will Pay $833.3 Million

to IBM To Settle Software Fight, “ New York Times, Nov. 30, 1988.

–lol–
102 ● The Big Picture: HDTV and High-Resolution Systems

to 52 percent in 1965 despite the technical inferiority of

their computers.

The JECC only bought the specific machines that users

ordered for rent and, further, required computer makers to

buy back at book value any computers that users wished

to trade in after the minimum 15 months. This forced the

producers to compete for customers through continuously

developing better computers. At the same time, domestic

content requirements were only slowly increased. When

these buybacks became excessive for computer companies, however, the government accelerated depreciation,

further lowered the interest rate charged JECC, and

allowed these companies to put money for trade-ins into

tax-free reserves. By 1972, for example, some 60 percent

of the cost of a computer could be depreciated in the first

year.

Firms began developing their own rental systems in the

early 1970s to circumvent (undercut) JECC’S price cartel

and thus gain market share. Hitachi, for example, put

some $180 million into its rental system in 1973 alone,

using profits from its consumer electronics division.

Second, the government organized cooperative R&D

beginning in 1962. Cooperative R&D reduced the financial burden on individual firms, promoted the diffusion of

critical technologies, and increased competition by preventing any one firm from gaining control of critical

technologies. Many projects, including the first-the

FONTAC project—fell far short of their goals. With each

project, however, more was learned about managing such

cooperative ventures, the R&D was done at a lower cost

than if firms had each done it individually, and, with

experience, better computers were developed. Projects

which maintained a strong competitive environment

between firms were generally more successful than those

which placed all bets on a single horse.

The Japan Software Co., for example, was established

in 1966 as a joint venture between Hitachi, NEC, Fujitsu

and the Industrial Bank of Japan. It was intended to

develop the software needed for the MITI-organi.zed

effort involving all of the Japanese computer firms to

match the IBM 360 computer. It failed. The company

presumed it had an assured market and made little effort

to build up outside customers. Software technology is

complex and abstract and realistic goals were difficult to

formulate. The company was left with little direction. In

addition, software technology changed rapidly and became increasingly important in overall system cost,

increasing the desire of firms to keep software development within their own company rather than contracting

for it outside. The presence of the Japan Software Co. also

discouraged other firms from entering the software

market. When the project ended in 1972, its orders

dropped precipitously leading to bankruptcy and dissolution in December 1972.

Third, the government allowed firms to establish

agreements with foreign partners for technological cooperation, while at the same time denying foreign firms

(with the exception of IBM) direct entry into their market.

Other firms had less market power and fewer patents to

trade upon and were thus generally unable to get terms

even as favorable as IBM’s-IBM was the only computer

firm to get a wholly owned subsidiary during the 1960s.

Sperry Rand, for example, was able to enter the Japanese

market only by accepting a minority interest in a joint

venture with Oki Electric. Between 1961 and 1964,

Hitachi, Mitsubishi, NEC, Oki, and Toshiba formed

agreements with RCA, TRW, Honeywell, Sperry Rand,

and GE respectively. This dependence on U.S. firms

caused considerable turmoil in the 1970s when firms such

as RCA and GE abandoned their computer businesses.

Fourth, the government increased protection for the

domestic computer industry. Tariffs on imported computers were raised from 15 percent to 25 percent in June 1960

and tariffs on computer peripherals were raised to 25

percent when the government decided to enter that market

in the late 1960s. The tariffs on computers were lowered

in 1964 when Japan entered GA~ and the OECD.

Quotas also limited imports, and were not ended until the

early 1970s. As already noted, IBM’s production in Japan

was similarly limited. Foreign firms, IBM in particular,

were also excluded from certain data-processing markets

which developed in the late 1960s by changing various

laws that had restricted NTI”s entry. This allowed NT’I’

to begin a cooperative research project in 1968 to develop

a large, high performance computer for on-line data

processing and to subsequently provide these services and

dominate this market. NTI’ has also been a major source

of R&D funding as well as a major market for computer

fimls.

Fifth, government control over computer imports gave

it strong leverage over firms applying for import licenses

to instead buy a Japanese made-computer. These efforts

were effective. Purchases of foreign computers (including

those made in Japan) were reduced horn 93 percent in

1958 to 43 percent in 1%9 despite the technological

inferiority of Japanese-made machines.

This “Buy Japan” policy did cause inefficiency and

hardship, particularly in the 1960s when production was

just getting underway and the technological gap was the

largest. Firms objected to this pressure from MITI to buy

domestic computers, usually unsuccessfully. The government allowed, however, the import of some foreign

computers to prevent excessive damage to critical sectors

and to push firms to do better by showing them the level

of technology needed to compete in world markets.

Sixth, government procurement played an important

role in Japan just as it had in the United States. In the
Appendix&The Development of the Japanese Computer Industry ● 103

1%0s, the Japanese Government purchased or rented 25

percent of all domestic computers.

These efforts helped. The U.S. hardware advantage was

reduced fkom some 10 years in the mid-1960s to perhaps

4 years by the early 1970s. The Japanese share of their

domestic market increased to some 60 percent by 1970.

The introduction of the IBM 370 in the early 1970s,

reduced the Japanese share of their domestic market to 48

percent in 1974. RCA, GE, and others left the market at

this time due to the heavy investment that would have

been required to remain even somewhat competitive with

IBM.

Japanese producers might have left the market as well

had it not been for government protection and support.

Indeed, IBM had enormous advantages in the scale of its

operations. In the late 1960s, the top three Japanese

computer firms each manufactured about 2 percent of the

number of computers made by IBM for any given type. At

the same time, their currency was revalued, they were

under increasing pressure from the United States to open

their markets, and oil prices were crippling their heavy

industries.

In response to IBM’s 370 Series, the government

organized the firms into three groups: Fujitsu and Hitachi

focused on large computers; NEC and Toshiba on small

and midIevel machines; and Mitsubishi and Oki on

specialized scientific and industrial machines. From

1970-75, more than $600 million in subsidies, including

tax breaks, and over $1 billion in low-interest loans

helped these firms make the investments needed to

compete with IBM. Indeed, these subsidies and loans

totaled nearly 1.7 times what the firms themselves

invested in R&D plant and equipment.

Similarly, the computer firms would have had to

massively increase their debt in order to finance their

computer sales directly rather than through the JECC.

Fujitsu, for example, would have had to more than double

its long-term loans during the 1960s, and then nearly

triple them again in the 1970s-pushing its debt-equity

ratio to 21—in order to provide this financing itself.

A major opportunity also arose when a former top

designer for IBM spun off a startup firm in 1970 to

produce IBM compatible rnainhames. Unable to secure

sufficient funding, he turned to Fujitsu for help in 1972

and received $54 million between 1972-76 in exchange

for technical information. In 1974, Fujitsu announced it

would produce computers in Japan for this company,

Amdahl, to market in the United States. Amdahl is now

49 percent owned by Fujitsu and sells over $1 billion of

IBM-370 compatible mainframes annually.

The intensive internal effort and external technology

acquisitions helped Japanese manufacturers produce computers competitive with the 370 series within 3 to 4 years

of IBM’s offering. When these machines became available beginning in the mid-1970s, Japanese users quickly

began trading in their IBM systems for those of domestic

producers. The number of IBM systems rented out

actually declined for some models while the comparable

Japanese offerings showed increasing usage.

The role of the Japanese Government continued to be

important even after the market was officially opened in

1975. Direct subsidies totaled some $1 billion between

1976-81+ual to a quarter of private-sector investment

in R&D, plant, and equipment. If low-interest loans are

included, government support nearly equaled private

sector investment during this period.

The Japanese computer firms have grown enormously

in strength. They offer IBM compatible equipment that is

often as good, sometimes even better, than IBM itself, and

they are willing to drastically cut prices to capture market

share. Hitachi, for example, has offered central banks,

government agencies, and others discounts of 50 to 60

percent below IBM prices in order to win customers.

These tactics have worked. Between 1975-85, Japanese

computer exports increased 35 times, while imports only

doubled.

World reliance on IBM-compatible hardware and

software continues to be a serious weakness for Japanese

firms+ne which they have sometimes gone to great

lengths to circumvent. In 1982, for example, an FBI sting

operation caught Hitachi and Mitsubishi stealing IBM

technology. Recently, Fujitsu was required to pay IBM

nearly $1 billion for its ongoing unauthorized use of IBM

software. These and other incidents have led to Japan’s

current Fifth Generation, Supercomputer, and other

projects which include the goal of ending their dependence on IBM-compatible software.
Appendix F

Research and Development Consortial

The scale of investment required to catch up with

Japanese and European HDTV projects naturally leads to

the consideration of R&D consortia. U.S. industry (and

govemrnent) have traditionally viewed consortia as unnecessary (given a technological lead), inefficient, and

possibly illegal (for antitrust reasons). But times change,

and there are clear signs that the climate of opinion in the

United States is changing. Many consortia have sprung

up: industry-university consortia for basic research, like

the Semiconductor Research Corp.; private sector consortia aimed at long-term basic research, like the Microelectronics & Computer Technology Corp. (MCC); and

consortia aimed at developing manufacturing technology,

notably Sematech and the National Center for Manufacturing Sciences (NCMS).

Aside from simple catchup, there are good reasons for

this flowering of consortia in the United States. As

manufacturing processes become more complex and

technology more sophisticated, the cost of R&D is rising

rapidly. Consortia offer a way of sharing these costs and

risks, which are becoming increasingly difficult to bear.

For example, Yasuro Matsukara, general manager of

~C’SWIdiVisiOn,2 said that it would have cost his

firm five times as much to develop their electron-beam

lithography system independently. In contrast, six U.S.

semiconductor equipment manufacturers attempted to

develop e-beam systems independently in the early

1980s. Only Perkin-EImer succeeded, with the others

eventually writing off losses of more than $100 million

and quitting the market.

There are other reasons why consortia may be useful

and attractive. They can help to correct the well-known

U.S. tendency toward short-term thinking and strategy.3

They may generate externalities not captured by an

individual firm but available either to the economy or the

industry-such as a source of competition for foreign

monopoly suppliers of high-technology inputs.4 They can

train people in methods and practices not prevalent in

their home corporations. They may help to diffuse new

technologies, especially where consortia are designed to

help companies catch up in areas of technological

weakness. Finally, they can help participants create

formal and informal ties and alliances which may be

critical for international competitiveness and technology

development.

LESS tangible benefits of consortia may also be

important. Some consortia may offer a forum for industry

to discuss common problems and a framework for

industry to quickly establish technical standards and

common equipment interfaces.

Initiating cooperation among otherwise strongly competitive firms can be difficult. Strong firms may hesitate

to join, fearing loss of their proprietary technologies with

little to gain fkom weaker firms. In Japan, government

support then plays an important role both symbolically

and substantively in enabling such collaboration—

reassuring strong firms that they will get back at least as

much as they give.

Companies similarly fear the loss of their best personnel to a consortium and may consequently send their

second-best. Admiral Bobby Inman initially rejected 95

percent of the researchers sent by member companies to

the Microelectronics & Computer Technology Corp.

(MCC—a private U.S. consortium formed in 1982).

Firms are likewise reluctant to share their in-house ideas

or technologies. IBM’s and AT&T’s donations of important leading-edge technologies to Sematech suggest how

vital they view its mission.

All these elements may be achievable during the

enthusiasm of starting up a new consortium, but maintaining them-especially once the high-level champions in

the member firms have moved onto other problems—is

a different and more difficult matter still. It is often hard

for firms to agree on an R&D agenda or to maintain a

long-term perspective. For example, managers are often

forced to concentrate on the near-term bottom line within

their firm, and therefore may in turn demand quick

supporting results from a consortium-though its purpose

is longer term R&D, When R&D is successful, it can still

be difficult to transfer technologies from the consortium

to the member firms, particularly when the firm has not

maintained good in-house technical expertise. Finally,

even if the member firms are confident that these barriers

ls-e~for~s ~timfiIuA: Mark~oq “~andtie Entrepreneurial State,” unpublished monograph, MCC, Aust@ ‘IX; Joti D. ~VY ~d Ric~J. S~lS.

‘Tnstitudcms and Innovation: Reseamh Collaboration As Technology Strategy in Japan,” and Richard J. S amuels, “Reseamh Collaboration in Jaw” MlT-Japan Science

and Technology Pmgrarrx George R. Heaton, Jr., “The Truth About Japan’s Cooperative R&D,” NAS Issues in Science and Technology, fall 1988; “G-Operathg to

Compete,” The Economist, Apr. 5, 1980, pp. 74-75; Charles H. Ferguson, “Technological Development, Strategic Behavior, and Government Policy in Information

Technology Industries,” Ph.D. Thesis, Massachusetts Institute of Technology, 1988; Lee Smith, “Can Consortiums Defeat Japan?” Fortune, hne5, 1989; Sheridan Tatsuno,

The Technopolis Straregy (New York NY: 1%.mtice-Hall, 1986); and interviews with personnel at the Semiconductor Reseach Corp., Reseamh Triangle Pink, NC; the

Micmelectmnics & Computer Technology Corporation (MCC), Austiq TX; and SemakdL Austin, TX2Japm~5 ~~condmtor Cortsorhq 19

76-790

3For a di5m55im of ~ ~=a ~~d ~s ~~cy, so= of tie most impo~t of wtich are found in the U.S. fiancid ~ vimnment, See, U.S. Congress, Office of

Technology Assessmmt, Making Things Better: Competing in Manufacturing, OTA-ITE-44 3 (W%shingtom DC: U.S. Govemmen t Ptiting Office, February 1990).

4~s Wm& aimof the U.S. Memories projec~ which failed in part because it aimed at generating externalities that might have goneuncaptumdby the firms themselves.

–lo4-
Appendi.x F4esearch and Development Consortia ● 105

can be overcome and that the consortium will be

successful, in some cases they may have antitrust

concerns to deal with.

Consortia pose potential risks as well-of being

ineffective and wasting money; of reducing competition;

or of hampering creativity. Cooperative long-term R&D

also does not address the areas where U.S. firms have had

the greatest difficultieein manufacturing process and

incremental product improvement.

Japanese consortia have provided many of these same

benefits to member firms, and have suffered many of the

same problems of initiating and sustaining cooperation.

For example, judging itself to lead in the technology,

Hitachi refused to collaborate in a $60 million 8-year

MITI sponsored R&D project to develop high-power

C02 lasers for flexible manufacturing. MITInevertheless

helped fund Toshiba and Mitsubishi. Today, all three

firms have comparable C02 laser technology and the

level of interfirrn competition has no-doubt accordingly

increased. Some Japanese consortia have been abject

failures as well. The Japan Software Co. (app. E) is an

example.

Japan is famous for its consortia, and justifiably so.

One-third of Japanese industrial R&D is collaborative.

But these consortia take a form different from those

usually used to describe consortia in the United States.

Fully 90 percent of collaborations are between two firms

only, usually in the same keiretsu (industrial grouping).

Only 6 percent of Japanese industry R&D is done

collaboratively between firms in the same business (i.e.,

direct competitors). Much of the research done within

these consortia is also done on a partitioned rather than a

collaborative basis, with the results being shared but the

research being done by individual firms in their own labs.

Fewerthan 1 in200f Engineering Research Association~

horizontal R&D consortia-have had joint laboratories.

Such partitioned efforts have nevertheless been important

in reducing duplication and the needed investment by any

individual firm: Chapter 2 notes several examples of this

for HDTV.

The critical element in the Japanese equation has been

the role of MITI, not necessarily for providing the funding

for collaborative R&D, but as a facilitator, supporter, and

long-range voice. During the Japanese catch-up phase,

MITI often negotiated for patent rights on behalf of all

Japanese firms, andin many cases demanded patent rights

as a condition for a foreign firm to have even a limited

presence in the Japanese market. This kept patent

licensing fees uniformly low for Japanese firms and

provided all interested firms access to the teehnology—

preventing any one from gaining monopoly control. In

joint R&D efforts, partitioning research between firms

allows the government to assign more difficult portions to

stronger fins-effectively holding them back while

implicitly aiding weaker firms. With all the participating

firms having access to the same basic technologies by

such mechanisms, competition is heightened and by

necessity also moves downstream into manufacturing

process-the area where U.S. firms have most lagged

their competitions.

Simple emulation of the Japanese model is not possible

or desirable in the U.S. environment. But as the European

initiatives for science and technology show, there are

many ways in which the positive attributes of the Japanese

model can be captured in a different setting. It is likely,

therefore, that the right consortia operating under the

appropriate conditions can help U.S. industry in some

critical sectors-perhaps including HDTV. The trick is to

make sure that the circumstances and conditions are

Iight.s

5A mm &~ed ~view of some of these issues can be found in OTA’s report, Maktig Things Better, op. ~~, footoo~ 3.
Appendix G

Acronyms and Glossary

Acronyms

—heIiCan Electrom“CS ksociatiq table z-s.

fk&cD —Active Matrix Liquid Crystal Display

—ArnericanNational Standards Institute, table

2-3.

ASK —Application Specific Integrated Circuit

ATSC —Advanced Television Standards committee,

table 2-3.

AmC —Advanced Television Test Center, table 2-3.

Am —Advanced Television

BTA —Broadcast Technology Association

CM’S —Center for Advanced Television Studies,

table 2-3.

cm -Charge-Coupled Device

CCIR —Comite Consultatif International des

Radiocomrnunications

CD -Compact Disk

DARPA —Defense Advanced Research Projects

Agency (DoD)

DAT —Digital Audio Tape

DBS —Direct Broadcast Satellite

DoD —U.S. Department of Defense

DRAM —Dynamic Random Access Memory

DSP —Digital Signal Processor

DVI —Digital Video Interactive

EBU —European Broadcasting Union

EDTV —Extended- or Enhanced-Definition

Television

EIA —Electronic Industries Association, table 2-3.

EIAJ —Electronic Industries Association of Japan.

FCC —Federal Communications Commission

FSS —Fixed Satellite Services

GHz -Gigahertz

HD-MAC —High Definition Multiplexed Analog

HRs

HDTV

IC

IDTV

IEEE

ISDN

ITFs

LCD

LPTV

MSO

Component

—High Resolution Systems

—High Definition Television

—Integrated Circuit.

—Improved Definition Television

—Institute of Electrical and Electronics

Engineers, table 2-3.

—Integrated Services Digital Network

—Instructional Television Fixed Service

—International Telecommunications Union

—Kilohertz

—Liquid Crystal Display

—Imw-Power Television

—Megahertz

—The Japanese Ministry of International Trade

and Industry

—Multiple System Operator

MMDs

MFAA

MUSE

NAB

N(XA

NTIA

NTsc

PAL

SECAM

SMATV

SMPTE

TvRo

VCR

VHs

—Multichannel Multipoint Distribution

Service

—Multi-media Terminals

—Motion Picture Association of America,

table 2-3.

—The Japanese Ministry of Posts and

Telecommunications

—Multiple sub-Nyquist Sample Encoding

—National Association of Broadcasters, table

2-3.

—NationalCableTelevision Association, table

2-3.

—Nippon Hoso Kyokai (Japan)

—National Telecommunications and

Information Administration

—National Television Systems Committee

—Phase Alternation by Line

—Sequential Encoded Color Amplitude

Modulation

—Satellite Master Antenna Television

—Society of Motion Picture and Television

Engineers, table 2-3.

—Television Receive Only

—Ultra High Frequency

—Video Cassette Recorder

—Very High Frequency

—Video Home System

—Video Random Access Memory

Glossary

525/59.94; 625/50: The number of scan lines followed by

the field rate for the existing NTSC (U. S., Japan, etc.),

PAL (Europe except France, China, etc.), SECAM

(France, Soviet Union, etc.) color TV systems.

1050/59.94; 1125/60; 1250/50: The number of scan lines

followed by the field rate for various HDTV system

proposals, corresponding to the United States, Japan,

and Europe, respectively.

Active Matrix Liquid Crystal Display (AM/LCD): An

advanced type of liquid crystal display.

Advanced Television (ATV): Refers generically to all

the improvements in TV over today’s system, including IDTV, EDTV, and HDTV.

Application Specific Integrated Circuit (ASIC): A type

of integrated circuit produced in relatively limited

numbers for a specific application.

Artifact: An audio or video error or defect introduced

during the processing or transmission of a TV signal.

Aspect Ratio: the ratio of a screen’s width to its height.

Today’s TVs have a 4:3 aspect ratio. HDTV systems

typically call for a 5:3 or 16:9 ratio.

–lo6-
Appendix Mcronyms and Glossary ● 107

Bandwidth: The range of frequencies available for or

used to carry an electronic signal.

Beta: The first, but less popular, format for home VCRs.

Bit Rate: The rate at which digital data is carried or

transmitted, measured in units of bits (binary digits)

per second. This is the digital equivalent of an analog

bandwidth.

Broad Band: A signal that requires a large bandwidth to

be transmitted or equipment that must be capable of

receiving and transmitting accurately a signal with a

large bandwidth.

Broadcast Technology Association (BTA): An organization of private Japanese broadcasters and equipment manufacturers.

C-Band: The range of frequencies from 4 to 6 GHz. See

figure 3-1.

Cable TV Labs: A lab setup by the N(2TA to test cable

systems, including those for ATV, table 2-3.

Charge-Coupled Devices (CCD): A type of solid-state

electronic device used as a sensor in some types of

careers.

ClearVision: The Japanese EDTV system.

Comite Consultatif International des Radiocommunications (CCIR): An organization under the ITU

which studies technical questions and issues recommendations for international radio matters.

Compact Disk (CD): An opticaI storage medium used for

music and for computer data, among others.

Compatibility: The ability of one type of TV set to

receive and display the signals designed for another

TV system. See box 4-3.

Digital Audio Tape (DAT): A new technology that

records music on magnetic tape in a digital format.

DAT has many applications to computer data storage.

Digital Signal Processor (DSP): A type of digital chip

that manipulates a video (in the case of HDTV) signal.

For the purposes here, this manipulation is usually to

either compress the signal so that it can be transmitted

or decompress it and turn it back into a viewable

picture.

Digital Video Interactive (DVI): A digital technology in

which the viewer can interact with the image being

shown. For example, a viewer might take a video

‘‘walk’ through a building being designed by an

architect and see the details of the interior or view the

building from any desired angle, at that person’s

discretion.

Direct Broadcast Satellite (DBS): It transmits TV

signals directly to satellite receiver dishes at viewer’s

homes. DBS is a high-power system that requires only

small dishes.

Downlink: The transmission (or receiver system) from a

satellite.

Dynamic Random Access Memory (DRAM): A computer memory chip. The capacity of DRAMs is

measured in bits—lKb (1,000 bits), IMb (1 million

bits), etc. The storage capacity of a computer or other

systems is measured in bytes-1 KB, MB, etc.—and

one byte equals 8 bits.

Eureka 95: The joint project to develop Am systems for

Europe.

European Broadcasting Union (EBU): A union of

European broadcast organizations whose purpose is,

among others, to develop standards for the exchange of

program material among its members.

Extended- or Enhanced-Definition TV (EDTV): A

form of TV that provides a better picture than today’s

TV or IDTV using today’s broadcasts, but somewhat

less resolution than HDTV. EDTV requires modest

changes in today’s NTSC broadcast signal, but is

compatible with it while remaining within today’s

channel bandwidths. EDTV usually has a greater than

4:3 aspect ratio.

Federal Communications Commission (FCC): The

U.S. Government agency dealing with communications issues and allocation of the radio frequency

spectrum.

FCC Advisory Committee on Advanced Television

Service: The industry committee set up by the FCC to

make recommendations on advanced television system

broadcasting standards.

Fiber: Optical fibers used to carry information, usually in

the form of pulses of light.

Field: The alternate lines that compose half of a complete

television picture or frame. In the United States, fields

are shown at a rate of 59.94 fields per second; in

Europe, fields are shown at a rate of 50 fields per

second.

Fixed Satellite Services (FSS): Satellites that are assigned geostationary orbits and provide information

transmission services.

Frame: A complete television picture, including both

even and odd alternating scans. The frame rate in the

United States is 29.97 ties per second; in Europe, it

is 25 frames per second. If frames are shown at too

slow a rate, there can be an annoying flicker to the

picture.

Gigahertz (GHz): One billion cycles per second.

Headend: A cable TV system’s control center where

incoming signak from satellites and other sources are

put on cables going to subscribers.

Hertz (Hz): Cycles per second. One kHz is 1,000 cycles

per second; one MHz is 1 million cycles per second;

one GHz is 1 billion cycles per second.

High Definition Multiplexed Analog Component (HDMAC): The European HDTV system for DBS delivery.

High Definition TV (HDTV): Usually defined as having

roughly twice the resolution of today’s TV systems, a

wider aspect ratio of 5:3 or more, and compact disk

quality sound.

High Resolution Systems or High Definition Systems
108 . The Big Picture: HDTV and High-Resolution Systems

(HRS): Information systems that provide a high

resolution visual image. See box 1-1 for examples.

HiVision: The Japanese HDTV system based on their

MUSE standard.

Improved Definition TV (IDTV): A television that uses

digital technologies to improve the picture seen even

with today’s conventional broadcasts.

Instructional Television Fixed Service (ITFS): A TV

delivery service by line-of-sight microwave that the

FCC licenses for use by educational institutions.

Integrated Services Digital Network (ISDN): A fully

digital telephone network now being implemented.

This system makes use of the existing copper wire

infrastructure but adds improved electronics which

allow much higher data rates to be carried.

Interlaced Scan: A technique which first shows all the

even lines of the TV picture or frame, and then shows

all the odd lines of the frame. Each set of lines

corresponds to one field. This allows the picture to be

shown without flicker while reducing the total bandwidth necessary to transmit the picture.

International Telecommunications Union (ITU): An

intergovernmental organization with 164 member

countries, whose purpose is to develop regulations and

voluntary recommendations, provide coordination of

telecommunication development, and foster technical

assistance fo developing countries. The CCIR is one of

the organizations under the IT’U.

Kilohertz (kHz): One thousand cycles per second

Ku-Band: The range of frequencies between 11 to 14

GHz. See figure 3-1.

Liquid Crystal Display (LCD): The type of display used

on calculators and watches.

Low-Power TV (LPTV): Stations licensed by the FCC

to use low transmitter power, usually in areas not

locally sewed by full-power stations.

Megahertz (MHz): One million cycles per second.

Multichannel Multipoint Distribution Service (MMDS):

A TV delivery system using line-of-sight microwave

with four or more channels operated by a single

company. MMDS is often called wireless cable’ and

is similar to I’I’FS in operation.

Multi-media Terminals (MMT): Computer terminals

that can combine normal text and graphics with

near-real-time video images or other forms of visual

display.

Multiple System Operator (MSO): A company that

operates more than one cable TV system.

Multiplex: See box 3-1.

Multiple Sub-Nyquist Sampling Encoding (MUSE):

The bandwidth compression technique developed by

Japan’s NHK to allow delivery of an HDTV quality

signal over a DBS system.

National Telecommunications and Information Administration (NTIA): A U.S. Government agency

under the Deparrnent of Commerce.

National Television Systems Committee (NTSC): The

industry group that defiied the current U.S. B&Wand

then color TV standards. The NTSC system is used in

the United States, Cana@ Japan, and elsewhere.

Nippon Hoso Kyokai (NHK): The national radio and

television broadcasting organization for Japan. Has

extensively funded and coordinated HDTV development in Japan.

Optical Disks: Recording media including CDs that store

information in patterns of microscopic pits on the

surface of the disk, which can then be detected by a

solid state laser and detector system and reproduced as

sound, images, or data.

Pay Per View: Program services purchased by subscribers on a per-program rather than per-month basis

Phase Alternation by Line (PAL): The type of TV

system used in most European countries (with the

notable exception of France), The People’s Republic

of China, Australia, and elsewhere.

Progressive Scan: A TV picture that is shown in a single

scan—the way we read a book-rather than by

alternately sending all even and all odd Lines as for an

interlaced scan.

Resolution: A measure of a picture’s detail.

Satellite Master Antenna Television (SMATV): Or

‘‘private cable”; a miniature cable system that receives

programming by satellite and serves a housing complex or hotel.

Sequential Encoded Color Amplitude Modulation

(SECAM): The TV system used today in France, the

Soviet Union, and elsewhere.

Taboo Channel: A TV channel left unused in order to

prevent interference on adjacent active TV channels in

the same geographic area.

Television Receive Only (TVRO): A satellite receiving

antema, also known as a downlink or a bac~ard dish.

Transponder: A satellite component that receives and

retransmits a TV signal or perhaps many narrowerband data channels.

Ultra High Frequency (UHF): The band including TV

channels 14 through 83. See figure 3-1.

Uplink: The transmission or corresponding equipment to

a satellite for relay.

Very High Frequency (VHF): The band including TV

channels 2-13, which are more powerful than UHF

channels. See figure 3-1.

Video Cassette Recorder (VCR): Piece of equipment

used for recording and replaying TV broadcasts or

prerecorded video materhd at home.

Video Home System (VHS): The most common format

for today’s VCRs.

Video Random Access Memory (VRAM): A type of

memory chip similar to a DRAM, that is optimized for

high-speed handling of video images.

Sources include: “Behind the Buzzwords,” Channels/Field Guide,

1989; and “Everyone’s Thlking About HDTV, But What &e The

Facts?” Ampex, Redwood City, CA, 1989.