CONSUMER ELECTRONICS EYES GROWING REGULATION

Environmental issues that include end-of-life and disposal of consumer electronics are factors with few rules but potentially become expensive problems if disposal rules fall onto manufacturers, officials said. Toxicity of lead is tough challenge, Kelly said: “The way God laid out the periodic table, lead is a good conductor of electricity.” It’s impossible to “solder a board without using lead,” he said. In CRTs, lead is present to protect consumers from radiation, he said: “The Germans and others are trying to mandate end-of-life issues. We are trying to figure out the best way to work with governments so companies can take the lead on reclaiming those products.” Most of companies are “green,” Kelly said, but goal of industry is “how do we show we are trying to be pro-environment but pro- business as well.”

Mandates that limit power consumption of devices are potential concern for industry where regulation begins to supplant engineering, CEA Vp-Technology Policy Michael Petricone said: “Mandates that seek to impose a one watt consumption standard on a whole variety of consumer electronic products may be perfectly well-intended from an environmental point of view, but from a practical point of view [there are] cost implications and performance implications for consumers.” Products such as TV in standby mode are processing information including V-chip information or channel information and need to respond to remote control, he said. Consumer electronic devices rarely are truly turned off, Petricone said: “If you impose unrealistically low energy consumption mandates, devices aren’t able to do the kind of things consumers want them to do.”

Govt. is not necessarily enemy of industry, both agree. Example where regulatory bodies is helpful is industry-govt. partnership program Energy Star, Kelly said. Environmental Protection Agency created Energy Star in 1992 as voluntary labeling program to identify energy-efficient products and to reduce carbon dioxide emissions. EPA later partnered with U.S. Dept. of Energy to promote label. Besides consumer electronics, program was expanded to cover new homes, buildings, residential heating and cooling equipment, major appliances, office equipment, lighting. Under program, consumer electronics “companies have done a wonderful job trying to manufacture products that use less wattage,” Kelly said: “The reason Energy Star has been such a success is that it is a voluntary program. When you look at the companies involved, it’s a who’s who of the high-tech industry.”

Priority for industry is making sure govt. “doesn’t implement unnecessary mandates on consumer electronics that will restrict choices and drive up prices,” Petricone said: “For reasonable prices today consumers have a remarkable variety of products to choose from different manufacturers with different performance characteristics and different price points.” Manufacturers have “very direct relationship with the consumer and are extraordinarily responsive to consumer demand because business depends on it.” With govt. mandates, “the law of unintended consequences comes into play and it backfires,” he said: “Broadcasters are urging that a digital TV tuner be put in every analog set.” Consumers currently have variety of DTV products in marketplace with “20 some odd integrated sets, tuners and computer cards you can put in a PC that will receive DTV. There are analog sets -- we still sell over one million black- and-white sets each year -- the TV marketplace is very diverse,” Petricone said.

Many customers made choice to buy DTV monitor first, “the major investment,” Petricone said, and buy tuner later as more programming became available. “They use DTV to watch analog TV and DVDs -- which look wonderful on a DTV set -- and at Blockbuster there are hundreds of DVDs to rent. For the consumer it is a perfectly rational choice,” he said. Proposal to require DTV tuner in every set removes flexibility and simultaneously raises prices for consumers, he said: “Early in the adoption cycle, a price of over $200” will double cost of lower priced analog sets. “Take away the marketplace choice consumers are enjoying brings unintended consequences and, in the end, anticonsumer consequences,” Petricone said.

Where govt. mandates help industry is standards for compatibility between electronic devices, Petricone said. Priority for DTV industry “is assuring compatibility between set- top cable services and digital cable products [to create] a retail market for cable set-top boxes as called for by the Telecommunications Act,” he said: “The big obstacle, there isn’t one standard and multiple regional MSOs are using different standards to send their cable signal.” It’s impossible for manufacturers to build cable-compatible digital TV or cable box “sold at retail that will work in one city and still work when the customer picks up and moves,” he said: “These kind of standards are not only helpful, but indeed are necessary if you want to have a national marketplace for products.”

Both industry groups believe level of innovation in consumer electronics has been made possible by relative lack of regulation. “Governments tend to try to mandate and technologies move so fast that when you try to mandate, you tend to hurt innovation,” Kelly said: “Right now, mandates and regulatory problems on companies is the wrong way to go. Economically our companies are hurting. The last thing we need is the government to step in and slow down production in the sale of machines.” Petricone said: “A lot of these mandates -- whether they are well intended from the social policy point of view like the V- chip or well intended from the broadcasters’ business plan like the DTV tuner mandate -- are really attempts to force consumers into doing things they normally wouldn’t do. This leads to market distortions and unintended consequences.”