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MEMORANDUM Powered By Docstoc
					                                      BORSARI & PAXSON
                          ATTORNEYS & COUNSELLORS AT LAW
      GEORGE R. BORSARI, JR.  4000 ALBEMARLE STREET, N.W., SUITE 100                                   WEBSITE
      ANNE THOMAS PAXSON            WASHINGTON, D.C. 20016                                                E-MAIL
                                  TEL (202) 296-4800
                                  FAX (202) 296-4460

To: All Clients

From: George R. Borsari, Jr. and Anne Thomas Paxson

Date: May 2003

                                              NOW WE KNOW
                                    HDTV Will Destroy Over-the-Air Television

                             AT&T Should Own Cable – Management Sunk the Deal

                       Cable, Not DSL, Will Win the Broadband Competition Hands Down
                              (But No Mass Demand for High-Speed Internet, Yet)

Let us explain.

                                                     * * * * *

                                     HDTV Will Destroy Over-the-Air Television

George finally took the plunge and bought a high definition Mitsubishi projection television set. He also bought a
Samsung over-the-air broadcast digital receiver, and the process of buying and installing the necessary equipment,
and comparing it to the alternative, has led him to the conclusion that the public will want high definition television,
but they will not put up with the inconvenience necessary to receive it over the air.

First, the purchase of the high definition television set: George went to the local high definition television store (in
this case, Best Buy) and asked if there were any available digital television sets that would receive over-the-air
signals. The response was “Why would you want something like that? Just hook it up to the cable.” Right off the bat,
there was the suspicion that there was trouble in River City. If the salespeople at Best Buy are typical, then the retail
stores are a major concern, and the great television industry, which is nothing if not a marketing machine, has failed
to convince the stores to sell real television sets. On further inquiry, the response of the salespeople at the store was
understandable. They have found from experience that it is so difficult to receive over-the-air television signals, and
so easy to hook to the cable, that if they promote over-the-air television they will end up with quite a few returns. For
instance, the Samsung over-the-air receiver was purchased at a $100 discount because that particular unit had been
returned to the store three times.

Nevertheless, in the interest of scientific research, the purchase proceeded. The first issue was where to put it. Most
people find that their high definition television set will not fit in the space formerly occupied by their large screen
analog set. In some cases, bookcases need to be altered, cabinets discarded, and furniture rearranged simply to make
room for it. Of course, if you put it in a different location, then the internal wiring of the cable, the speakers, the
power, and so forth all need to be changed in the house. That added many additional hours to the setup.

Once installed, and with only the analog cable available, the picture on the Mitsubishi television set was excellent.
Then came the time for the over-the-air digital Samsung box to do its thing, and it would not. The box was properly
plugged in, the audio hooked to the surround-sound system, and the newly purchased rabbit ears perched on top of
the box but the over-the-air digital box could only pull in a digital signal from the local public television station
(although George’s house is about three miles from the antenna farm area in Washington).

Not to worry, though. George is also an amateur radio operator and has some modicum of understanding of antennas,
so it was a simple matter to tune the antenna for maximum gain. Of course, to tune the antenna for maximum gain
you must know the channel. But there is no way for the average homeowner to know the matching digital channel. As
people with high definition sets know, in an effort to make the process easy, if you tune to your favorite television
station on its analog frequency, your set-top box will automatically be linked to the digital channel, but without
knowing what the digital channel is, you cannot then tune the set-top box to the digital channel and use the internal
signal strength meter. In other words, Channel 4 in Washington is the NBC affiliate, so to find Channel 4 digital you
simply tune the box to Channel 4, and it will take you to the digital channel which, we think, is either Channel 35, 36,
or 37. If, however, you do not initially receive a sufficient signal to receive Channel 37 in the first place, you do not
know to turn to Channel 37 to tune the antenna. It is a matter of serious frustration.

The antenna problem was finally solved by digging up the old outside antenna, laying it on the floor in the attic, and
running new wiring down through two floors into the basement, under the basement ceiling to the living room,
drilling a hole in the floor, and bringing the cable up to the set. Well, as everybody has been saying, the pictures
actually are spectacular. You do not realize how poor the quality of the analog signal is until you see the high
definition picture, and all the neighbors are highly impressed and want one. That, of course, is the good news. The
bad news is that none of them will even remotely put up with the aggravation. As one engineer put it, we are a “plug-
and-play” society, and nobody is going to put up with the aggravation and the uncertainty of receiving the over-the-
air signal.

It’s difficult to asses blame for the current state of the transition. Certainly the government could have moved much
faster than 25 years to convert to digital, and much has changed over the course of those years in terms of electronics
and society. The Commission is still moving at a glacial pace. If we had to pick one key bad decision, we would look
at the standard that was chosen. Whatever the reason for the choice of the standard, customer convenience was not a
major factor in the decision, and it should have been. Sinclair Broadcasting maintains that the other available
standards would have allowed the receipt of the high definition signal in most homes through the use of rabbit ears.
That would have been convenient and would have saved over-the-air television.

As it now stands, George’s alternative was to pay $14 a month to the cable company and, with no muss and no fuss,
receive high definition programming from ABC, NBC, and CBS, as well as the public stations. In a strange twist,
cable sees its competitive advantage over satellite as HDTV. Watch next month’s NCTA convention. Check and mate
to cable.

                                                       * * * * *

                                AT&T Should Own Cable – Management Sunk the Deal

Michael Armstrong, the CEO of AT&T, was widely criticized for his purchase of TCI (only after the deal went
sour),but Michael Armstrong knew something that most people did not realize. While we arguably have the finest
telephone system in the world, with by the far the cheapest price, the cheapest price for the consumer is not
necessarily good for the telephone companies, and because of competition and resellers, the price of both basic
telephone and long distance has gone up very little. Cable costs, however, are skyrocketing in their unregulated
atmosphere. With cable internet service, basic and expanded cable, and two premium channels, George’s cable bill is
$120 a month. The basic telephone charge is $25, and the long distance bill probably adds another $20. The problem
with Armstrong’s vision was the management. They paid too much going in, and then could not capitalize on the
purchase with the introduction of new services.
                                                     * * * * *

                         Cable, Not DSL, Will Win the Broadband Competition Hands Down
                                (But No Mass Demand for High-Speed Internet, Yet)

For the same reason that cable is going to win out over broadcast for the high definition market, cable will win out
over DSL – convenience. Most homes that are passed by cable, in order to get high-speed internet access, can simply
call the cable company, install a modem, and install a card in the computer. We do not view the installing of the card
in the computer in the same way as the installation of the over-the-air high definition box, because anybody who has
a need for broadband internet access in all probability will be familiar with computers, and the installation of the
network card with more modern Microsoft operating systems is a breeze. Telephone companies have finally realized
that they have to play catch-up, so all of them have recently launched new marketing initiatives. But horror stories are
abounding concerning telephone companies being unable to make DSL work (due to such things as untrained
installers and distance to the central office). Even if you order DSL, and even if the installers show up roughly on
time, and even if they install the additional lines, there’s no real assurance that it’s going to work. The major problem
for broadband providers is the lack of a real need for high speed internet by the home user. High speed is basically
one-way, and if you do not download large files, it’s not needed. Maybe the demand will develop with the increasing
availability of movies and music, and the addition of new uses as yet unforeseen, but not in the next few years.

                                                     * * * * *


The first round of broadcast renewals to be filed since changes were made to the FCC Rules is coming up fast.
Renewal applications for radio stations (AM, FM, and FM translators) located in DC, MD, VA, and WV are due to
be filed June 2, 2003.

The renewal filing process is a work in progress, for several reasons. First, certain filings due simultaneously with the
submission of the renewal applications must be filed electronically [i.e., Forms 396 (EEO) and 323 or 323-e (biennial
ownership report)], although the Form 303-S renewal application itself may currently be submitted either on paper or
electronically. All renewal applications filed after August 1, 2003 must be filed electronically. Second, the FCC staff
is still identifying and working out kinks in the renewal filing and processing system. For example, it has been
determined that the community of license shown on a translator authorization often differs from that of the primary
station. The staff therefore advises that applicants check the FCC database to see what community of license is shown
for a given translator and then transfer the information exactly as shown in the database to the translator renewal
application. Otherwise, the renewal application will not be accepted by the electronic filing system (even though each
translator has its own Facility ID Number).

                                                     * * * * *

                                       RF, Safety, Environmental Enforcement

A few years ago, the Chairman of the Commission made a speech in which he said that he did not see that there was a
need for new regulation of the industry, but that the Commission would begin enforcing the regulations that were on
the books. Recently, the Enforcement Bureau has been taking a much more proactive stance on the enforcement of
the existing regulations. Part of the Enforcement Bureau, of course, is the field staff (the inspectors). Some inspectors
have told us that they are now being directed by Washington to begin the enforcement of the Commission’s RF rules.
Now is the time for everybody to dust off their copies of OET 65, the Commission document that outlines the
calculations necessary to establish compliance with the Rules. These are considered to be safety issues, and like
tower lighting, tower lighting logging, and emergency alert notification, are now items of inspection by the Staff. We
also understand that the Commission’s field inspectors are being issued new equipment so that they can visit a site, or
a station, and make direct readings of the RF environment to determine compliance.
Many stations feel that, since they are part of an established antenna farm, they are somehow exempt from the RF
requirements. All stations operating on multiple-use towers contribute to the RF environment. There are, in OET 65,
limits that can be calculated using the various multiple users, and if the RF limits on a multiple site exceed the overall
RF limits, it does not matter whether the station owns the tower, is renting space, or has signed an agreement
delegating to somebody else (i.e., the site owner) the responsibility for RF compliance. If the inspectors calculate that
your station contributes 5% or more to the overall RF environment in a multi-user tower, then you, along with
anybody else who contributes 5% or more, will be assessed the basic fine of $10,000 for excessive RF radiation.

As the country continues to mature, radio and television stations that were once located in sparsely populated
suburban areas now find that around their towers houses, trailer parks, high-rise office buildings, and high-rise
apartments are all being constructed, and new historic areas are being designated. The fact that your tower was there,
and somebody a quarter of a mile away built a high-rise apartment building, and your television transmission now
beams straight into their windows, does not help you.

A different, but related, problem involves the location of AM stations. Many older AM stations, which are located in
what were formally rural areas, now find that they are surrounded by all sorts of metal objects, other towers, tanks,
houses, barns, and so forth, that all have an impact on the pattern. Directional stations often find that not only are
their patterns not in compliance with the Rules because of these outside forces, but many can never be brought into

For example, the Commission just imposed a $200,000 fine on a tower owner who built in Medina, North Dakota, in
compliance will all Rules, except the owner did not clear his 180º monopole with the state historic preservation
officer and did not get an environmental assessment. As the tower owner, he was subject to a much higher fine than
could be assessed against a broadcaster

All of this has to do with your license renewal. As part of the renewal process there is both the renewal form that is
filed with the Commission and the worksheet that must be filled out by each station in order to certify the answers on
the form itself. In other words, while you only submit a relatively short form, you are certifying to the Commission
that you have completed the worksheet, and that all of the answers on the worksheet support the representations made
on the form. The problem for stations is that if they are not in compliance yet certify compliance on the renewal form,
that is not just deemed a violation of the RF rules, but rather a misrepresentation to the Commission. Although you
will not lose your license for an RF violation, you can lose your license for an intentional misrepresentation.

One final word of caution. Most transgressions of radio and television stations are located not by the inspectors, or by
the FCC staff in Washington reviewing your paperwork. There is almost no station that does not have disgruntled
employees – engineers who have been discharged, people who have lost their jobs as a result of mergers of facilities,
changes in operation or format, or for any other reason. A letter from a disgruntled employee to the FCC will bring an
investigation, and when the Commission does investigate, you will be asked a series of questions. Because of the
changes in the Rules, your verbal answers to the Commission staff will become misrepresentations if they are found
to be inaccurate, and it is fairly simple for the staff to determine if you have given an inaccurate response because
they already know the facts.

The bottom line is that with the renewal process beginning for all radio and television stations around the country,
you need to go back and look at the Regulations, go back and look at your compliance, go back and make sure the
station is operating in accordance with the Commission’s Rules, and you need to do it now, not in the few weeks
before filling out the forms.

                                                      * * * * *