Before the

Before the

Department of Commerce

National Telecommunications and Information Administration

1401 Constitution Avenue, NW

Washington, D.C. 20230

United States Spectrum Management Policy for the 21^st Century

)

Docket No. 040127027-4027-01

To: Norbert Schroeder, Strategic Spectrum Planning and Reform Division, NTIA

COMMENTS OF THE ASSOCIATION OF PUBLIC TELEVISION STATIONS

The Association of Public Television Stations (“APTS”) hereby submits comments in the above-captioned proceeding.[1] APTS is a nonprofit organization whose members comprise the licensees of nearly all of the nation’s 357 CPB-qualified noncommercial educational television stations. APTS represents public television stations in legislative and policy matters before the Commission, Congress, and the Executive Branch and engages in planning and research activities on behalf of its members.

APTS believes that as the Administration develops and implements a modernized United States spectrum policy in accordance with President Bush’s Executive Memorandum on Spectrum Policy,[2] it should be aware of a number of issues where federal policy can lead to a more efficient use of scarce electromagnetic spectrum. In particular, the Administration should support the transition of broadcast television from analog to digital, a transition of which public television has been an enthusiastic proponent.

In this regard, public television has been exploring the conditions under which an early return of analog spectrum may be possible while furthering public television’s unique mission to deliver an over-the-air broadcast service to all Americans. An early return of analog spectrum has distinct advantages for public television stations, which must shoulder the substantial costs of operating both digital and analog stations for a period of time likely extending much beyond the end of 2006. An early analog return also has advantages for the wireless industry, as well as the public safety community, which would like to see portions of the television band above channel 51 cleared as soon as possible. In addition, the American public would benefit from an early return as the availability of this prime spectrum could generate economic activity substantially greater than the mere value of the spectrum auction proceeds deposited within the U.S. Treasury.[3]

However, without mandatory cable and satellite carriage of digital signals, it will be impossible to reach the more than 85 percent of households that access local programming over these pay platforms, which in turn would make an early return of analog spectrum a very difficult proposition indeed. APTS urges the Administration to support mandatory carriage on all such platforms to encourage the transition to digital and the early return of spectrum. Additionally, APTS urges the Administration to assist in developing a means of ensuring that the remaining over-the-air analog viewers can receive digital signals through set-top converters or by other means.

In addition, to preserve universal service, APTS urges the Administration to support the promulgation of rules to ensure the reception of public television signals via low power and spectrum efficient digital translators and repeaters. Millions of Americans living in rural communities rely on translators for over-the-air reception and for cable reception of television service. When considering its spectrum policy for the 21^st Century, the Administration should pay particular attention to ensuring that Rural America is not left behind in the digital transformation of this nation’s telecommunications infrastructure.

Lastly, APTS urges the Administration to continue to provide full funding of the Public Telecommunications Facilities Program within the Department of Commerce. This critical program provides much needed funding for digital capital construction, improvement and repair and will continue to assist the smooth roll-out of the digital transition for public broadcasting.

A. Digital Television Will Use Less Spectrum and Result in Expanded Noncommercial Educational Broadcast Service

It has been amply documented that digital over-the-air broadcasting is a technically more spectrum-efficient means of delivering such services, as channels can be allocated with fewer unused buffer channels in each market, resulting in a significant reduction of the amount of spectrum the TV broadcast service will occupy.

Since the inception of the digital proceedings, APTS has been an enthusiastic proponent of digital television. With its higher quality images and sound, and its inherent flexibility to broadcast either a high-definition or multiple standard definition streams, along with additional streams of data, digital television gives public television stations new and exciting tools to expand their educational mission in ways that were not possible in the analog world.

For instance, public television stations are regularly producing new and exciting high-definition digital programming for national, regional and local distribution. In addition, multicasting will bring new services to the public that could not be made available under the constraints of a single analog program stream, including an expanded distribution of formal educational services, workforce development services, children’s programming, locally-oriented public affairs programming, and programming addressed to traditionally unserved or underserved communities. Lastly, a number of public television stations have plans to provide various educational or public safety services over their digital allotment through “datacasting,” with data embedded in the digital programming stream.

B. Public Television Is Exploring a Possible Early Return of Analog Spectrum

As the American media landscape is undergoing this fundamental transformation to a wholly digital infrastructure, public television stations have therefore embraced digital technology as a means to revitalize and expand the distribution of noncommercial educational broadcast services. Yet despite this great promise, and the best efforts of the FCC, Congress and the broadcasting industry, it is likely that few communities will have successfully crossed the bridge to digital-only broadcasting by the projected date of December 31, 2006. A more protracted digital broadcast transition is highly probable.

An early return of analog spectrum also has advantages for the wireless industry and the public safety community, which both benefit from having portions of the television band above channel 51 cleared as soon as possible. In addition, as indicated above, the American public would benefit from an early return as the availability of this prime spectrum could generate substantive economic activity.

The white paper attached at Appendix A, which was commissioned by the APTS Board of Trustees, explores the possibilities and conditions under which public television could support either a date-certain or early return of analog spectrum. It explores two potential models to achieve this end and discusses the successful digital transition underway in Europe for purposes of comparison. In addition, this paper examines in turn six critical policy questions that were identified by the APTS Board of Trustees.

· What is public television’s “universal service” responsibility for serving the remaining over-the-air analog audience, and what do we know about the population of viewers who get all or a combination of their programming through over-the-air analog transmissions?

· How reliable is the ATSC Standard for over-the-air digital reception?

· What are the costs for consumers to purchase digital equipment and receive digital signals?

· What partnerships does Public Television need in order to successfully return analog spectrum early?

· What regulatory and legislative strategies are necessary to achieve early return of analog spectrum?

· Is the European experience applicable to the United States?

Lastly, this paper presents a compressed outline of a possible action plan to implement digital-only broadcasting.

· This plan suggests the continuation of FCC policy to encourage band-clearing, coupled with amendments to the Communications Act to establish a series of rolling “hard” transition dates (based on DMA, over-the-air reliance, or some other objective measure) and to mandate a gradual decrease in analog power to effectuate a “fade to black.”

· The plan also suggests that some limited subsidy be created to ensure that the economically disadvantaged have access to digital signals when analog service ceases. This would most likely come in the form of a one-time subsidy or tax credit for the purchase of inexpensive over-the-air set-top boxes.

· To supplement over-the-air reception, the plan also calls for changes to the Communications Act to either mandate full cable and satellite carriage of digital signals after the transition or, alternatively, to mandate the seamless inclusion of ATSC tuners in all digital cable and satellite set-top boxes, without which an early return of analog spectrum would be impossible.

· In addition, the plan suggests that there be a comprehensive and complete publicity campaign regarding the timing of analog cessation and the means of continuing to receive broadcast TV signals, modeled on the success of the Berlin approach.

· The plan also suggests that a successful transition to digital-only broadcasting can only occur through the strategic partnership of public broadcasters, commercial broadcasters, equipment manufacturers, consumer and affinity groups and others.

· Lastly, the plan notes that a transition to digital-only broadcasting could be facilitated (but is not dependent on) the creation of the U.S. equivalent to Britain’s Freeview service in order to encourage consumer adoption of digital over-the-air services through robust market forces.

As the Administration considers its plans for a modernized spectrum policy, APTS urges it to consider the spectrum efficient proposals made in the attached white paper and the associated need for policy changes to support the final outcome of a successful digital transition.

C. Creating Rules to Allow for the Operation of Digital Translators Will Ensure A Means of Preserving Universal Service to Rural America That is Both Technologically Feasible and Spectrum Efficient

Since May 29, 2002, public television has been advocating that the FCC issue rules to allow for the operation of digital translators[4] and on-channel repeaters.[5] On August 29, 2003, the FCC released a comprehensive Notice of Proposed Rulemaking concerning the upgrade of translators, repeaters and other low power television station to digital operation.[6] In addition Congress has repeatedly voiced its interest in a federal policy that supports rural access to free, broadcast service by appropriating nearly $30 million dollars in federal funds to the Rural Utilities Service in the U.S. Department of Agriculture for the construction of a digital infrastructure in rural areas, including the funding of digital translators.[7]

APTS supports the rulemaking and hopes that the rules issued at the conclusion of this proceeding will preserve universal service and bring enhanced digital services to rural America through a means that is both technologically feasible and spectrum efficient. Appendix B to this comment reproduces the most recent of public television’s FCC filings in this proceeding.

Through its system of full-power transmitters and over 700 translators, public television provides services to 99 percent of television households to support its statutory mandate to provide universal service to all Americans.[8] Without rules to facilitate the conversion of translators to digital operation, millions of rural Americans will likely not receive critical educational and public safety services over digital broadcast technology.[9] Indeed, the importance of translators to the delivery of local service is dramatically illustrated when one examines typical cases in the western states. A review of the FCC database reveals, for example, that of the over 700 public television translators in service nationwide, over 70 are located in rural Utah, repeating the signals of KUED, KULC and KBYU to communities that are otherwise unable to receive these signals. Similarly, Idaho Public Television operates five transmitters and 34 translators covering 80 percent of the state’s population,[10] while the public television stations in New Mexico operate over 50 translators to deliver noncommercial educational services to residents throughout that state. Moreover, although national figures are unavailable, numerous small cable systems in rural areas rely on the reception of television translator signals at their headends to provide service to their customers.[11] Providing for the licensing of digital translators and on-channel repeaters would therefore ensure distribution of digital signals both to rural citizens who rely on over-the-air reception and to rural cable subscribers as well.

Digital translators and on-channel repeaters are both a technically feasible and a spectrum efficient means of accomplishing the goal of universal access to digital broadcast service. A number of field trials, for instance, have demonstrated that it is feasible to use low power television translators to deliver DTV signals to rural and other remote areas. For instance, using a two-year experimental license from the FCC, Kent Parsons, an engineer with the University of Utah’s public television stations, has been able to confirm that digital translators can deliver studio-quality television signals to rural viewers with high reliability and reasonable cost.[12] On March 22, 2004, the FCC will host an in-depth tutorial on these real-world experiments with digital television translators. Similar experimental tests have demonstrated the feasibility and reliability of on-channel DTV repeater technology as well.[13]

Moreover, DTV translator and digital on-channel repeater technologies are especially spectrum-efficient and supplement the DTV Table of Allotments in ways that make the most of this limited national resource. First, because translator and repeater channels are a secondary service, they are not allocated frequencies in an established table of allotments; rather they are specifically engineered to fit between established allocations to serve rural and geographically isolated areas. As such, they inherently take advantage of unused spectrum due to terrain shielding and other factors that make reception of allocated frequencies otherwise difficult. Second, both DTV translator and digital repeater technologies use digital modulation, which is more spectrum-efficient and less prone to cause interference with adjacent channels and other services than analog technology. Third, while DTV translators are spectrum-efficient, digital repeater technology is even more spectrum-efficient, as it uses the same channel for both input and output, reducing by half the number of frequencies needed to transmit a local television broadcast service.

Moreover, as indicated above, Congress has made its commitment to the digital upgrade of rural translators clear through its most recent appropriations. Pursuant to Congressional directive, the Department of Agriculture’s Rural Utilities Service announced on February 20, 2004 the award of approximately $15 million in grants to fund the digital conversion of 26 translators. Because the needs of rural America were greater than the available funding in fiscal year 2003, Congress has appropriated an additional $14 million for the same program for fiscal year 2004. However, this funding cannot be used to bring digital services to Rural America until the FCC issues final rules.

APTS therefore urges the Administration to support the issuance of digital translator rules as soon as possible to preserve and enhance the broadcast service for Rural America.

D. The Public Telecommunications Facilities Program Should be Fully Funded

Lastly, APTS urges the Administration to continue to support full funding of the Public Telecommunications Facilities Program (PTFP) within the Department of Commerce. This critical program provides much needed funding for digital capital construction, improvement and repair and will continue to assist the smooth roll-out of the digital transition for public broadcasting. However, the President’s Fiscal Year 2004 Budget proposes eliminating any new appropriations for PTFP, except for a minimum amount designed to ensure the monitoring of existing grants and miscellaneous administrative costs.[14]

PTFP is a competitive, matching-grant program created for the purpose of building and repairing public broadcasting’s facilities and equipment. Established in the 1960s, PTFP is the primary provider of federal funding for public television equipment and infrastructure. As such, PTFP has played an important role in the federally mandated transition from analog to digital technology. Of the approximately $300 million that the federal government has provided to date for the digital conversion, just over $130 million, or slightly over 40 percent, has been funded through PTFP.

Although not a large program by federal standards, PTFP plays an indispensable role in providing seed money for infrastructure – attracting many more non-federal dollars, which in turn deliver innovative new programs and services. In a sense, PTFP is to public broadcasters what venture capital markets are to private technology firms: investing in physical capital to increase innovation, productivity and overall quality in the services provided.

For example, in 2003, NTIA awarded 56 grants totaling $25 million to licensees in 31 states covering 103 stations. Those 2003 PTFP grants once again represented a solid investment for the federal government, as they helped to attract many times more non-federal dollars to public television in the form of matching funds to fulfill the terms of the grant, and funding to provide the new digital services made possible by the station’s upgrade as a result of the PTFP award.

Public television stations are seeking $55 million to be appropriated to PTFP for fiscal year 2005. Without adequate funding through PTFP, public television stations will be hard-pressed to continue the purchase of much-needed equipment and to continue with necessary analog and digital repairs during the digital transition. We request that the Administration support our FY 2005 funding request and include continued funding for PTFP in the President budget for fiscal year 2006.

Conclusion

For the above stated reasons, public television is interested in exploring the possibility of an early return of analog television spectrum and urges the Administration to support the necessary changes in federal policy in furtherance of this goal. This includes mandatory carriage of digital signals on cable and satellite platforms, and a means of assuring that the remaining over-the-air analog viewers, particularly those that are disadvantaged, have access to set-top converters that would allow them to receive digital signals. In addition, public television urges the Administration to support FCC rules to authorize the operation of digital translators and on-channel repeaters to ensure continuity of service and to bring the digital revolution to rural America. Lastly, public television urges the Administration to continue to provide full funding of the Public Telecommunications Facilities Program (PTFP) within the Department of Commerce.

Respectfully submitted,

/s/ John M. Lawson__________________

John M. Lawson

President & CEO

Lonna M. Thompson

Vice President & General Counsel

Andrew D. Cotlar

Assistant General Counsel

Association of Public Television Stations

666 Eleventh Street, NW, Suite 1100

Washington, D.C. 20001

www.apts.org

Telephone: 202-654-4200

Fax: 202-654-4236

March 18, 2004

APPENDIX A: Digital-Only Broadcasting

Executive Summary

The American media landscape is undergoing a fundamental transformation as the television broadcast service transitions to a wholly digital infrastructure. Public television stations have embraced this transition as a means to revitalize and expand the distribution of noncommercial educational broadcast services. Yet despite this great promise, and the best efforts of the FCC, Congress and the broadcasting industry, it is likely that few communities will have successfully crossed the bridge to digital-only broadcasting by the projected date of 2006. A more protracted digital broadcast transition is highly probable.

However, it has quickly become apparent that the costs of a protracted transition could be severely detrimental to the financial health of public television stations. There are therefore major advantages for public television stations to end analog transmission and embrace a date certain for converting to digital transmission only. First, it is projected that analog cessation would save public television $36 million dollars a year in analog electricity costs. Second, early return of analog spectrum would allow public television stations to focus all of their energy and resources on the future, rather than on an aging analog distribution system. Third, it could help public television in securing post-transition digital carriage on cable and satellite systems – either through direct negotiations, FCC regulation or legislation. Finally, it could give public television stations crucial leverage in any efforts to retain the proceeds from the subsequent government auction of analog TV spectrum.

The following white paper explores the possibilities and conditions under which public television could support either a date-certain or early return of analog spectrum. It explores two potential models to achieve this end and discusses the successful digital transition underway in Europe for purposes of comparison. In addition, this paper examines in turn the following six critical policy questions.

· How reliable is the ATSC Standard for over-the-air digital reception?

· What are the costs for consumers to purchase digital equipment and receive digital signals?

· What partnerships does Public Television need in order to successfully return analog spectrum early?

· What regulatory and legislative strategies are necessary to achieve early return of analog spectrum?

· Is the European experience applicable to the United States?

Lastly, this paper presents a compressed outline of a possible action plan to implement digital-only broadcasting. This plan suggests the continuation of FCC policy to encourage band-clearing, coupled with amendments to the Communications Act to establish a series of rolling “hard” transition dates (based on DMA, over-the-air reliance, or some other objective measure) and to mandate a gradual decrease in analog power to ensure a “fade to black.” The plan also suggests that some limited subsidy be created to ensure that the economically disadvantaged have access to digital signals when analog service ceases. This would most likely come in the form of a one-time subsidy or tax credit for the purchase of inexpensive over-the-air set-top boxes. To supplement over-the-air reception, the plan also calls for changes to the Communications Act to either mandate full cable and satellite carriage of digital signal after the transition or, alternatively, to mandate the seamless inclusion of ATSC tuners in all digital cable and satellite set-top boxes. In addition, the plan suggests that there be a comprehensive and complete publicity campaign regarding the timing of analog cessation and the means of continuing to receive broadcast TV signals, modeled on the success of the Berlin approach. The plan also suggests that a successful transition to digital-only broadcasting can only occur through the strategic partnership of public broadcasters, commercial broadcasters, equipment manufacturers, consumer and affinity groups and others. Lastly, the plan notes that a transition to digital-only broadcasting could be facilitated (but is not dependent on) the creation of the U.S. equivalent to Britain’s Freeview service in order to encourage consumer adoption of digital over-the-air services through robust market forces.

TABLE OF CONTENTS

Executive Summary…………………………………………………………………. i

Table of Contents…………………………………………………………………… iii

I. The Media Landscape………………………………………………………. 1

A. The DTV Transition………………………………………………… 1

B. The Public Television Digital Build-Out…………………………… 3

C. Advantages of Early Analog Return………………………………... 5

D. Early Analog Return: Two Models…………………………………. 6

1. Voluntary Early Return Under Current FCC Rules………… 6

2. Mandatory Early Return Pursuant to Legislative

Changes to the Communications Act……………………….. 7

E. The European Experience…………………………………………… 7

1. Berlin-Brandenburg: The First Digital-Only Region……….. 8

2. United Kingdom: From Pay DTV to Freeview……………… 9

F. Issues of Concern……………………………………………………. 10

II. Preserving Universal Service………………………………………………… 11

A. Universal Service: The Challenge…………………………………... 11

1. Background…………………………………………………... 11

2. Exclusive Reliance on Over-the-Air Reception……………… 12

3. Reliance on Over-the-Air Reception for Additional

Television Sets……………………………………………….. 14

4. Analog Cable Subscribers……………………………………. 14

5. Satellite Subscribers………………………………………….. 15

B Universal Service: Potential Solutions………………………………. 15

1. Subsidies or Tax Credits to Encourage Digital Cable or

Satellite Subscription…………………………………………. 16

2. Subsidies or Tax Credits for the Purchase of Over-the-

Air Set-Top Boxes……………………………………………. 18

3. Analog “Fade to Black”………………………………………. 20

4. Public Outreach……………………………………………….. 21

5. United States Freeview………………………………………... 21

III. How Reliable is the ATSC Standard for Over-the-Air Digital Reception?........ 22

IV. What are the Costs for Consumers to Purchase Digital Equipment and

Receiver Digital Signals?..................................................................................... 25

A. Integrated Digital Television Sets with ATSC Receivers……………… 25

B. Over-the-Air Conversion Set-Top Boxes……………………………... 27

C. Computer PC Cards……………………………………………………. 27

D. Antenna Equipment……………………………………………………. 27

V. What Partnerships Does Public Television Need In Order to

Successfully Return Analog Spectrum Early?................................................. 28

VI. What Regulatory and Legislative Strategies Are Necessary to Achieve

Early Return of Analog Spectrum?................................................................... 29

A. Changes to the Communications Act: Deletion of the Market-by-

Market Extension Provision………………………………………….. 29

B. Partial Subsidies for the Economically Disadvantaged to Access

Digital Signals………………………………………………………… 29

C. Digital Cable Carriage………………………………………………… 29

D. Digital Satellite Carriage……………………………………………… 30

E. ATSC Tuners in Digital Cable and Satellite Set-Top Boxes………….. 31

VII. Is the European Experience Applicable to the United States?............................ 32

VIII. Digital-Only Broadcasting: A Possible Action Plan………………………….. 35

Appendix A: 47 U.S.C. § 309(j)(14)…………………………………………………. 36

Appendix B: Digital Cable Subscription Rates and Analog DBS Subscription Rates.. 37

Appendix C: Over-the-Air Reception Statistics from Highest Percentage of

Over-the-Air Reliance to Lowest………………………………………. 39

I. The Media Landscape

A. The DTV Transition

Federal law requires that after December 31, 2006, all television licensees must broadcast solely in digital unless the Federal Communications Commission (“FCC”) extends the deadline in a particular local television market because, among other factors, direct DTV reception, or indirect reception of DTV signals via cable or satellite, is not widely available to at least 85 percent of households in that market. In this regard, extensions of the deadline occur under any one of the three following circumstances:

(A) one or more of the stations in that market licensed to or affiliated with one of the four largest national television networks is not broadcasting a digital signal;

(B) digital-to-analog converter technology is not generally available in that market; or

(C) fifteen percent or more of the television households in the market do not subscribe to a “multichannel video programming distributor” that carries the DTV signal of each of the television stations broadcasting in DTV in the market, and do not have either:

(1) at least one DTV television receiver or

(2) at least one analog television receiver equipped with digital-to-analog converter technology.[15]

At the end of the DTV transition, the spectrum not needed for digital operation must be returned to the federal government for reallocation through auctions.[16]

To initiate this conversion, the FCC allocated to nearly all full-power broadcast television stations an additional 6 MHz channel with which to begin digital broadcasts,[17] required these stations to construct DTV facilities according to a graduated schedule,[18] and set forth operational rules governing the nature of digital broadcast operations, including requirements concerning replication of the analog coverage area,[19] maximization beyond the analog coverage area,[20] analog-digital simulcasts,[21] minimum hours of operation,[22] and penalties for unexcused failure to construct digital facilities on time.[23] A key feature of the FCC’s plan to migrate television broadcast operations solely to digital operation was a transition period during which television licensees would be required for a period of time to operate both their analog and their digital stations. In this regard, it was determined that a transitional period was necessary to ensure continuity of service until digital reception capability becomes so widespread that the cessation of analog service would create a minimal adverse impact on the public.[24]

While a successful transition to a fully digital broadcast service may seem to simply be a matter of time and consumer acceptance, there are a number of factors affecting the pace of the digital transition. Such factors include the widespread distribution of digital programming content, an effective means by which digital programming content is protected against illegal copying and distribution, the inclusion of over-the-air receivers in all DTV sets or related devices, standards for the connection of “cable ready” sets to cable systems, and carriage of local broadcast DTV signals by multichannel video programming distributors, such as cable or satellite. Recently, the FCC has made great strides to address all of these issues, save the remaining issue of cable carriage. It has encouraged the production of quality digital content.[25] It has recently adopted rules mandating that by July 1, 2005 all digital equipment capable of receiving broadcast digital signals should recognize a “broadcast flag” designed to protect digital broadcast content from illegal piracy.[26] It has mandated the phased-in inclusion of over-the-air digital tuners in all television sets over a certain size.[27] And it has conditionally approved an industry agreement to facilitate the connection of consumer electronics reception equipment and digital cable systems.[28] While the FCC has yet to effectively deal with the issue of transitional and multicast cable carriage of digital broadcast television signals, having last issued a tentative decision in January of 2001 that was not favorable to broadcasters, the FCC has been reconsidering that decision and is slated to resolve the matter in the first quarter of 2004.

B. The Public Television Digital Build-Out

Since the inception of the digital proceedings, Public Television has played a leadership role in, and has been an active participant in, and enthusiastic proponent of, digital television.[29] With its higher quality images and sound, and its inherent flexibility to broadcast either a high-definition or multiple standard definition streams, along with additional streams of data, digital television gives public television stations new and exciting tools to expand their educational mission in ways that were not possible in the analog world.

However, despite the promise that digital broadcasting holds to enhance and expand the educational mission of public television, public television stations are facing a number of obstacles to completing the digital build-out. Although the digital construction deadline for public television stations was May 1, 2003, 197 public stations had applied to the Commission for six month extension of time to construct their digital facilities due to a number of factors that were beyond their control, including a critical lack of funding, technical problems, equipment delays, weather problems and legal issues that have made conversion difficult.[30] All of the initial noncommercial applications for extensions of time have been either approved by the FCC or been rendered moot by the station having later gone on-air with a digital signal. By December 24, 2003, the FCC reported that 130 public television stations had applied for a second six month extension of time.[31] Presently, 237 public television stations out of 357 CPB-qualified stations (or 66%) are on-air with a digital signal. Those stations serve markets that include 85% of U.S. television households, although actual reception by households may be lower because many stations are on-air with low power facilities pursuant to FCC-approved special temporary authority.[32]

Regarding the financial cost of the digital conversion, it has been estimated that it will cost public television stations a total of $1.63 billion to fully convert.[33] While public television stations have raised a substantial amount of digital conversion funds, totaling $733 million, from state, local and private sources,[34] to date, the Federal government has

allocated only $313.84 million.[35] In addition, a number of public television stations are facing severe financial challenges due to current economic conditions and state budget crises. Meanwhile stations throughout the nation are simultaneously facing the increased operations cost associated with operating two stations – one analog and one digital—until the DTV transition has run its course.[36] In fact the analog electricity costs alone for public television stations during the transition are estimated to be approximately $36 million each year. This figure represents almost 10% of the amount of money Congress appropriated to the Corporation for Public Broadcasting (CPB) for FY 2003 – and almost 20% of the total amount of money CPB distributed to public television stations last year as CSGs.

C. Advantages of Early Analog Return

It may, therefore, be in the best interests of public television stations to consider the advantages of an early cessation of analog service.

· First, it is projected that analog cessation would save public television $36 million dollars a year in analog electricity costs.

· Second, it has been argued that early return of analog spectrum would allow public television stations to focus all of their energy and resources on the future, rather than on an aging analog distribution system.

· Third, it could help public television in securing post-transition digital carriage on cable and satellite systems – either through direct negotiations, FCC regulation or legislation.

· Finally, supporting a hard date for cessation of analog service could give public television stations crucial leverage in any efforts to retain the proceeds from the return and government auction of the analog spectrum.

In view of the above, in an APTS survey in the summer of 2003, 88 percent of APTS member stations who participated in APTS’ online consultation indicated they would support a hard date for cessation of analog service in return for certain policy concessions.

D. Early Analog Return: Two Models

To effectuate an early return of analog spectrum, public television stations may enter either of two courses of action. On one hand, they may voluntarily return their analog allotments early under the current regulatory structure. On the other hand, they may support legislative changes to the Communications Act to ensure a mandatory hard date for return of analog spectrum.

1. Voluntary Early Return Under Current FCC Rules

Under the first course of action, public television stations may voluntarily return their analog allotments to the FCC early within the confines of current regulatory policy. Current FCC policy states that if a television licensee with dual analog-digital channels wishes to return one of its channels to the FCC prior to the end of the DTV transition, it must demonstrate that cessation of analog service is in the public interest. The public interest considerations vary slightly depending on the channel allotment that is being returned.

If a station returns its analog channel in order to facilitate the clearing of channels 59 through 69, early return of the spectrum is presumed to be in the public interest if the applicant demonstrates compliance with a number of public interest factors, including a demonstration that there would not be a loss of a community’s sole service on a channel reserved for noncommercial educational broadcast service.[37] This last requirement may be particularly problematic for those public television stations which are the sole station in their community but less problematic for stations operating in markets with multiple public television stations (so-called “overlap” markets).

With regard to the early return of channels 52 through 58, an applicant must demonstrate compliance with substantially similar public interest factors – including the same requirement that there not be a loss of a community’s sole service on a channel reserved for noncommercial educational broadcast service. [38] Because the FCC has not required mandatory band-clearing for channels 52 through 58, it will not presume that cessation of analog service for those channels would be in the public interest. Following this model, Commonwealth Broadcasting, licensee of WNVT in Goldvein, VA successfully petitioned the FCC to return its analog channel allotment at reserved channel 53 and to operate solely in digital on reserved channel 30.[39] WNVT was required to demonstrate that early return of analog spectrum was in the public interest and to assure the FCC that analog service would be replicated either through down-converted analog cable subscription or the purchase of DTV receivers for certain local schools. Importantly, WNVT was not a sole noncommercial educational service in any community it served, so its applicability as a model for other public television stations, which may in fact be the sole NCE service in their community, may be limited.

Lastly, the FCC has not yet considered what public interest factors will apply where a licensee desires to return channels 2 through 51 prior to the end of the DTV transition.

2. Mandatory Early Return Pursuant to Legislative Changes to the Communications Act

An alternative approach would be to support legislative action to delete the market extension provisions of the Communication Act. This would have the effect of creating a mandatory hard date for cessation of analog service without having to apply to the FCC and satisfy the public interest factors outlined above. Although December 31, 2006 would be the current default date of analog return, it is important to note that a mandatory hard-date may be later than the end of 2006 and need not be the same in all markets. Rather, it may be expedient to create several, phased-in hard dates, with some markets having an earlier deadline and other markets having a later deadline (based, perhaps, on DMA size, geography, over-the-air reliance, or some other objective measure). In addition, it may be expedient to mandate that stations in markets slated for analog shut-off should slowly reduce the power of their analog operations according to an established schedule to effectuate a “fade to black.” These possibilities are considered in more detail at Part II.B.3 of this paper.

E. The European Experience

While the U.S. has yet to implement mandatory early return of analog spectrum, some portions of Europe have already completed portions of this process or will soon

require it.[40] In this regard, the experience of Berlin-Brandenburg and the United Kingdom may be instructive.

1. Berlin-Brandenburg: The First Digital-Only Region

In Berlin-Brandenburg, an area with high cable and satellite penetration,[41] the government successfully shut down analog television service on August 4, 2003 – the first region in the world to go digital-only. Berlin engaged in a massive publicity program through a wide range of media, coupled with a subsidy for the purchase of over-the-air set-top boxes for those on the social welfare rolls, to successfully shut down all TV broadcast analog operations with a minimum of social discomfort.[42]

The analog shut-off occurred in three stages. At stage one, at least one high-power analog channel was switched to digital transmission to demonstrate the quality of digital television broadcasts and to provide some orientation for the households affected regarding the need to purchase new receivers. During stage two, (a) all high-power transmitters were switched to digital transmission; (b) the analog transmissions of all national commercial broadcasters ceased; and (c) “public-sector” services continued analog transmission but only via lower power frequencies. Lastly, at stage three, all analog frequencies were switched off completely.[43]

The publicity program entailed a concerted communication with the public from October of 2002 through August of 2003 and involved (a) broadcast spots, running bar information and local news and current affairs coverage by broadcasters; (b) a letter sent to every home in February of 2003; (c) leaflets, brochures and newsletters distributed in local shops; (d) close communication with the Berlin tenants’ association and local consumer associations; (e) a telephone hotline; and (f) an Internet website.[44] The costs were shared between broadcasters and the Berlin-Brandenburg regulatory authority (mabb) and remained well below the budgeted € 1.2 million.[45]

To ensure a successfully switchover in a socially acceptable manner, the authorities devised two separate subsidy programs. The first subsidy program was private and market-driven, with the receiver industry providing digital-to-analog over-the-air set-top boxes for € 8.50 per month to entice purchase by low income homes. However little use was made of this offer.[46] The second subsidy was targeted to homes entitled to a TV set under German social security rules. Homes dependent on terrestrial reception were entitled to a government-paid subsidy of 25% for boxes that cost approximately € 100 (equivalent to $127) each over an estimated 6,700 sets.[47]

2. United Kingdom: From Pay DTV to Freeview

In the United Kingdom, over-the-air digital television was initially introduced as a subscription service (ITV Digital), which subsequently failed to gain consumer acceptance due to a number of factors.[48] After the government reclaimed spectrum from the failed subscription venture and reassigned it, the BBC, BSkyB and Crown Castle (a transmitter company) engaged in a joint marketing effort, called Freeview, whereby homes with the ITV Digital boxes could receive about 30 over-the-air channels (in addition to other services like music channels) for free. Additional households could purchase over-the-air digital set-top boxes to allow them to view digital signals on their analog sets. Prices for the boxes have dropped to an average of £80-100 (equivalent to $136-170).[49] By December 17, 2003, there were 1.8 million sales, with average sales approaching 100,000 per month (and in the middle of November, 100,000 sales in a week), prompting projections that Freeview would be in 2.5 million homes and that 50% of the 24.9 million homes would have digital television by the end 2003.[50] Of those households that have adopted Freeview, consumer profiles apparently reflect those of the general population, with Freeview attracting consumers who would not ordinarily consider subscribing to a pay television service.[51] Interestingly, households with Freeview still watch more than half of their total viewing via the analog signal, bypassing their Freeview box altogether.[52] The UK plans on ceasing all analog television broadcasts by 2010.[53]

F. Issues of Concern

Despite the apparent advantages of some sort of early analog return (either voluntary or mandatory), and the apparent success of digital broadcasting in two European nations, Public Television in the United States must consider a number of issues of concern as well, including the following, which will be addressed in turn:

· How reliable is the ATSC Standard for over-the-air digital reception?

· What are the costs for consumers to purchase digital equipment and receive digital signals?

· What partnerships does Public Television need in order to successfully return analog spectrum early?

· What regulatory and legislative strategies are necessary to achieve early return of analog spectrum?

· Is the European experience applicable to the United States?

II. Preserving Universal Service

A. Universal Service: the Challenge

1. Background

Public Television in the United States operates under a federal mission to provide a free, noncommercial educational television service to all Americans.[54] This is not only a statutory mission but also a political expectation that provides the condition for continued federal funding. Without additional safeguards, this mission may be compromised if the free, over-the-air analog service is replaced with a free digital over-the-air service that requires either a substantially prohibitive investment in reception technology or a prohibitively expensive subscription to a digital pay service for some Americans. Thus, if analog over-the-air service were to be shut-down and replaced with its digital counterpart, some mechanism, or combination of mechanisms, must be in place, as a matter of political expediency and fundamental fairness, to ensure continuity of service for the following constituencies:

· Consumers who, for whatever reason, rely exclusively on over-the-air reception;

· Consumers who subscribe to a digital multichannel television service but who possess additional television sets that are not connected;

· Consumers who subscribe to analog cable service only, unless their cable system is willing to down-convert a DTV-only station to analog for their analog customers; and

· Consumers who subscribe to a local-into-local service via satellite, which relies on the uplink of local analog stations pursuant to the Satellite Home Viewer Improvement Act of 1999.

To understand the extent and nature of the problem, and to craft effective solutions, it is necessary to examine how many households rely on over-the-air reception – either directly or indirectly—and to understand the reasons for such reliance.

2. Exclusive Reliance on Over-the-Air Reception

Approximately 15 percent of all U.S. television households rely exclusively on over-the-air reception of television signals (“OTA households”), although the figure may be somewhat higher depending on the methodology used to count such households.[55] This statistic, however, is an average. Over-the-air reliance is not uniform throughout the nation because in some geographic areas, reliance on over-the-air reception may be greater than in other areas.[56] For a detailed information on the percentage of television households that rely on over-the-air reception in each DMA, see Appendix C to this report.

Among those households that rely exclusively on over-the-air reception, we know the following, based on Nielsen data.

· OTA households are much more likely to have lower incomes and much less likely to be in the highest income category:

HH Income	National Average	OTA	Difference
Less then $40K	44%	62%	18%
$40K to $60K	18%	18%	0%
$60K +	38%	20%	18%
$75K +	27%	13%	14%

· African-American households (defined by Nielsen) are more likely to rely on OTA (18% OTA vs 12% general population).

· Households headed by women with children are slightly more likely to rely on OTA.

· Older Americans (55+) are slightly less likely to rely on OTA.

· There was no significant difference in the following categories:

o Head of households with college attainment (4+ years of college)

o Location of the households in a metro, suburban, small town or rural county.

On first blush it would seem that the socially disadvantaged segments of the United States population are more likely to rely exclusively on over-the-air reception, including the poor, the elderly and minorities. However, family income is not necessarily a good predictor of over-the-air reliance. For instance, while 62% of households with less than $40K income per year demonstrate reliance, the converse is even more striking: 48% do not rely exclusively on over-the-air reception. These results are consistent with the findings of a 1998 study that concluded that household income was not a significant influence on the decision to subscribe, although it did influence whether subscribers would purchase additional cable services beyond the basic tier.[57] Based on data from a variety of sources, the 1998 study concluded that “even for households in the lowest income bracket, the decision not to subscribe to cable television is more often the result of a preference than an inability to afford services.”[58] In fact one study from 1989 established that most non-subscribers were former subscribers, suggesting that consumer satisfaction with a cable operator’s service and offerings plays an important role in determining cable subscribership, and that the motivation to subscribe initially comes from a desire to obtain the unique video programming supplied by cable operators.[59]

Nor does the age of a viewer determine with any certainty the likelihood of reliance on over-the-air reception. As the evidence above demonstrates, older Americans aged 55 and above are slightly less likely to demonstrate reliance, a fact confirmed in a recent telephone survey of 1024 individuals conducted by Magid Media Futures. In this survey, of those individuals aged 25 and older without any multichannel television service, only 30% were 55 years or older (the percentage was lower (18%) in an on-line survey that slightly favored younger adults). By way of contrast, 25% fell within the 35-44 age group, and 26% fell within the 25-34 age group.[60]

In addition, while according to the Nielsen data above, African American households are slightly more likely to rely on over-the-air reception, other studies have indicated that African Americans and Hispanics constitute a larger proportion of cable subscribers than non-subscribers.[61]

3. Reliance on Over-the-Air Reception for Additional Television Sets

Numerous television households that do subscribe to a multichannel television service possess additional televisions that

A Roadmap for Early Return of Public Television’s Analog Spectrum