FCC Upholds July 1 Tuner Mandate, Seeks to Accelerate Other Deadlines

Contrary to speculation in the days leading up to the FCC action, there apparently won’t be a formal enforcement mechanism put in place to ensure compliance with the July 1 or later deadlines. Dell had proposed requiring submissions of import or production records a year after the fact to show 50% compliance had been met by July 1, 2005. The FCC’s Office of Engineering & Technology (OET) wouldn’t pinpoint what fines or penalties could be imposed on those who don’t comply, and just as with the Commission’s original tuner mandate order of Aug. 2002, no mention of enforcement is made in the latest order. The FCC said it will monitor the transition as it progresses and remains optimistic for a smooth transition. “We are waiting to see how things play out,” said Bruce Romano, OET assoc. chief/legal counsel. Informal observations indicate there won’t be serious problems, Romano said.

The FCC also proposed to move up the date by which all TV receivers 13” and larger and other devices such as DVD recorders must have DTV tuners to Dec. 31, 2006 “or sooner,” from the current deadline of July 1, 2007. TV interface devices should be required to meet this timetable, the FCC said. The Commission for the first time also asked whether a DTV tuner requirement should be extended to sets smaller than 13”.

CEA accentuated whatever few positives it could glean from the decision. Pres. Gary Shapiro hailed the FCC for having “accepted our proposal” to move the 100% compliance date ahead by 4 months to March 1, 2006, even though CEA had offered the earlier date as a goodwill quid pro quo for scrapping the 50% deadline. Nevertheless, CEA did say it was disappointed the FCC didn’t scrap the earlier deadline, citing statements by Comrs. Abernathy and Adelstein as conceding the 50% rule was problematic.

CEA also expressed concerns that the Commission’s proposed new Dec. 31, 2006, deadline on all remaining TV sets “would sharply raise prices on smaller sets, harming low-income consumers.” Accelerating the schedule from the existing July 1, 2007, deadline will be “extremely difficult for manufacturers to meet and would cause severe disruption in the consumer marketplace,” CEA said. “If implemented, such a requirement would likely cause a jump in prices, thereby reducing the retail market for these sets. Manufacturers relied on the original FCC mandate in their product planning, and need a minimum of 18 to 24 months to plan, develop and deploy new equipment. An accelerated tuner mandate could force some manufacturers who determine that it’s not feasible to meet the new regulations (and fear inability to comply with the FCC’s regulations) to move to tuner-less sets or to stop manufacturing altogether the TV models which cannot be fitted with digital tuners-which many manufacturers are reluctant to do. This also would defeat the purpose of the tuner mandate itself.”

The Commission staff understood the “difficulties” cited in the CEA-Consumer Electronics Retailers Coalition (CERC) petition with respect to the 50% rule, said Alan Stillwell, OET’s assoc. chief. Nevertheless, it was ultimately decided that maintaining the 50% rule “would most effectively ensure” that DTV tuner-equipped TVs would be available to consumers in time for this year’s holiday selling season and for the Jan. Super Bowl when set sales are at their highest point of the year. “In this regard,” Stillwell said, the staff believes scrapping the 50% rule “would be inconsistent with the Commission’s effort to advance the DTV transition as rapidly as possible.”

Abernathy said the DTV transition “has been a bit more rocky” and has taken longer than many would have expected. “We've got to get there, and we cannot take any steps backward,” which is why the CEA-CERC petition needed to be rejected, she said. “We need to push the transition to its conclusion as expeditiously as possible.” Abernathy said she’s “sympathetic” to the problems raised in the petition, “but we can’t go back now and fix them and cause further delays.”

Adelstein said advancing the 100% date on 25-36” sets by 4 months “is a good step toward completing the transition. But we know it’s only one step. We have so many more things to do, and this may be one of the easier decisions we have to make.” Given the choice, Adelstein said, consumers “unfortunately” have been opting for analog over digital TV sets. Moreover, between 1998 and 2003, over 90% of DTV products sold had no over-the-air digital tuners built in, Adelstein said: “We want to move this forward, Congress has asked us to do that, and this Commission has acted in numerous ways to make that happen, because we really believe there’s a significant public benefit in attempting to further maximize efficient use of the spectrum.” He encouraged set-makers and retailers to provide better point-of-sale labeling to raise public education around DTV.

Chmn. Martin said the many public interest benefits that would accrue from a rapid DTV transition was why “you've got Congress and the Commission united in making sure we do all that we can in moving forward.” Like Abernathy, Martin said he was sympathetic to the “burden” expressed by CE makers with the 50% rule, but said the petition needs to be rejected so “we can continue to move forward as quickly as we can.”

Sources within the CE industry whose companies didn’t necessarily support the petition to change the tuner mandate phase-in schedule predicted CEA would be in for a lot of second-guessing, as they speculated an earlier final deadline on 13” and larger likely would not have otherwise come up as a proposal. “This teaches you to be careful what you wish for,” said one such CE critic, requesting anonymity. But another CE watcher offered that “it’s the will of Congress” to accelerate the tuner mandate schedule, and the issue would have cropped up with or without the CEA-CERC petition.

Like Shapiro at CEA, attorney Robert Schwartz, representing CERC, sought to stress whatever positives accrued from the Thurs. decision and refused to characterize the development as a slam dunk against CE interests. Echoing an ex parte he wrote and filed at the Commission last week, Schwartz said CERC believes scrapping the 50% compliance rule and moving up the 100% date by 4 months were proposals that had “independent value.” Disappointed as CERC was that the FCC didn’t eliminate the 50% deadline, having the 100% date accelerated to March was “preferable to having to endure the uncertainty of a 50% rule for another 12 months” to July 2006, Schwartz told us.

TTE, which makes RCA-brand TV products, “will continue to provide consumers with the highest-quality digital television products at affordable prices,” Greg Bosler, exec. vp of the company’s N. America Profit Center, said, reacting to the ruling. He cited the company’s 27” RCA-brand SDTV receiver introduced at Jan. CES for sale later this year for $300. TTE is eager to complete the DTV transition “as quickly as possible consistent with its commitment to the twin principles of quality and affordability,” Bosler said. “TTE looks forward to continuing to work constructively with the Congress and the FCC to ensure that regulatory requirements imposed on manufacturers are possible to meet, feasible to measure, and do not result in sticker shock for consumers.”

NAB said FCC’s actions “validates that the tuner mandate is a powerful pro-consumer mechanism for moving the digital television transition forward.” “Allowing set manufacturers to continue selling analog-only TV sets only elongates the transition to digital,” NAB Pres. Edward Fritts said in a statement.

Draft legislation in the House would establish a hard analog cutoff on Dec. 31, 2008, and contains language advancing the final DTV tuner mandate by a year to July 2006. The Senate version is likely to set a similar hard date for the analog cutoff (see separate report, this issue), but it’s not yet known whether the Senate bill would also seek to accelerate the DTV tuner mandate schedule, as the House draft would.

Not all in the FCC’s decision went against CE interests. The Commission rejected the suggestions of Motorola and Pappas Telecasting to accelerate the 100% compliance deadline on 25-36” sets to Nov. or Dec. of this year. The FCC’s order said “we do not believe it would be feasible or practicable to advance the 100 percent requirement to a date earlier than that suggested by CEA- CERC.” It accepted set-makers’ arguments that the lead time to develop new products, and particularly the time needed to establish specifications, change manufacturing lines, and order parts, wouldn’t allow the industry generally to meet a 100% compliance requirement before March 1, 2006. “It makes little sense to require products to be on the market before the general population of manufacturers can deliver them,” the order said.

In seeking comments on the Dec. 31, 2006, or sooner date when 100% of sets 13” or larger must have DTV tuners, the Commission for the first time also said it will delve into the issue whether TVs smaller than 13” should be made to abide by the same requirement. “We note that if such devices are to provide off-the-air reception of TV signals after the transition, they too must be able to receive DTV signals and that it is less likely that such products, and particularly handheld and similar portable devices, would be used with a separate device for receiving DTV signals,” the order said.

So that the Commission may complete action quickly on the proposed new accelerated date and “afford manufacturers the maximum time to prepare to comply with new rules,” it will limit the length of the comment and reply periods on the proposal, the order said. Comments will be due 21 days after the order is published in the Federal Register, with replies due 14 days later.