DTV Subsidy Covers All Analog-Only Sets

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Senate Commerce Committee Chairman Ted Stevens (R-Alaska) said Wednesday that the DTV transition bill being marked up Thursday would set aside $3 billion for a digital-to-analog set-top subsidy to cover all analog-only TV sets that need one after the DTV transition.

The idea is to have a $10 co-pay per set for boxes costing roughly $50 dollars. The converters will be necessary for analog-only sets when broadcasters pull the plug on analog, a move scheduled for April 7, 2009.

There had been debate over whether to have a means test or to cover all sets.
Other money earmarked in the bill includes $200 million for translator conversion, $250 million for a national emergency alert system, 250 million for e/911, and $1 billion for interoperability grants for state and local first responders.

A second bill is in the works that will deal with labeling of digital sets, a digital-tuner mandate, unlicensed spectrum, likely multicast must-carry, and a host of DTV issues that could not be included on the Thursday bill, which has to be confined to money for the treasury.

Stevens said he agrees with a move to set aside channels 2, 3, and 4 after the transition for unlicensed spectrum, which broadcasters have been fighting.
Below is a full transcript of Stevens' remarks to the Free Enterprise Fund Telecommunications Reform Symposium in Washington and a brief follow-up Q&A.Thank you very much. And, John (Ensign), I’m glad you went first, that’s a good idea. I do think we have a Committee that has a group of younger Senators that have great ideas in this area and we’re trying to encourage all of them to express themselves with bills as John said. And, I do believe we’re going to get to the point where we can meld those together and have very meaningful legislation in a bipartisan way.

Now, I’m sorry to sort of rush in and rush out, John. We are trying to get ready for our mark-up tomorrow and I thought I’d just take some time to outline to you what the situation is now.

We have, as you know, got April 7, 2009, as our hard date, the date for absolute transition. That’s after the NCAA finals, after the football games, after the holidays. Everybody says you just can’t make this happen at a time when there’s some really important part of the communications media being exercised, in effect. So, we want to make sure that we hold this auction at a time when we can get the maximum return to the system so that we can use that money to improve communications to the maximum extent possible. We have that scoring from the CBO and it’s been confirmed that it would be approximately $10 billion. We are under some rather strict rules now from the parliamentarian as to what legislation we can put in the reconciliation bill.

You remember now, this is a bill that goes to the Budget Committee and will be included in the reconciliation bill.

That bill has partisan disputes. It will pass, if it passes, with majority support only probably and yet it will have some provisions in it, which are of great interest to everyone.

It remains to be seen what is going to happen tomorrow because we’ve had some interesting discussions and shouting matches in the last couple of days about this bill and about the decisions of the parliamentarian that some of the items we thought we’d put in the bill must come out.

But, let me tell you what would be in the bill. The parliamentarian said we can make allocations of the money that will come in from spectrum and earmark it, in effect, for specific portions of the legislation, which will be a separate bill, which I will also discuss with you.

We intend to set aside $3 billion for set-top boxes. We have agreed to have a $10 co-pay from everyone per set and we anticipate that the set-top boxes by that time will cost roughly $50. We have set aside $200 million for translator conversion; $250 million for the national alert bill, which we also will mark-up tomorrow, I hope; $250 million for implementation of the E-911 grant bill, the bill itself will not be in this Reconciliation Act; we have $1 billion for interoperability grants for state and local first responders. And, that is the basis of our allocation. If you add it up there still is some money there that is going to be decided by the Committee tomorrow, what to do with it.

The Byrd Rule has been really, as I said, very strictly interpreted by the parliamentarian. It will prohibit policy issues that are not directly related to funding from being included in this bill.

The parliamentarian ruled that even establishing a program to distribute set-top boxes violates the Byrd Rule. We can put up the money, but we cannot say how that money will be spent. As a result, we’ve stripped all such provisions from the draft. It’s a short bill. It’s only five pages long. It was distributed to Committee Members yesterday. The deadline for filing amendments to that bill was 11:00 this morning and we are in the process of compiling that list. I want to point out Lisa Sutherland, our Chief of Staff, my former Alaska Chief of Staff, and former Deputy Chief of Staff of the Appropriations Committee, who is charge of this process.

I have announced that as Chairman I will oppose all amendments that would raise Byrd Rule violations in the Committee and I believe a majority of our Members will join in that opposition.

It’s still a pious belief, but I think it will take place. I know that Byrdable amendments will be offered on the floor and I may support some of those, such as multicasting or down conversion of analog signal to digital for cable operators, and there are other issues that may come up. But, those amendments would have to be protected by a waiver of the Byrd Rule, which requires 60 votes. It’s going to be a very interesting time on the floor when that reconciliation act does come to the floor.

As you know, Senator McCain has announced that he plans to offer an amendment to move the hard date to 2007. Yesterday he told us he would like to have any information that anyone had to justify why we picked a 2009 date. And, we have told him that we will provide that.

There’s no question that he is right about one thing, the first responders do need this spectrum as rapidly as possibly, but we’ve been told, particularly by the electronics industry, that it’s not possible to produce 80 million set-top boxes that would be at reasonable prices between now and 2007. In other words, if we take the 2007 date, there’s not going to be enough money coming in from spectrum even to pay the cost of the set-top boxes if they must be produced by 2007. And, by definition we all believe they should be because it’s obvious the analog would go off at that date. In addition, CBO advised my staff just this morning that the McCain amendment will significantly reduce the amount that the auction will raise for the Treasury. That’s implicit also because not only will the costs go up because boxes will cost too much, but also because people will not be able to gather the plans for bidding for this spectrum and the spectrum will reflect the time within which it’s possible for organizations to join together and plan to totally have the ability to use the spectrum that will be available.

Now, let me tell you, of the items that we’ve deleted from this bill, we intend to have a second draft bill, which we’ll, hopefully, have a hearing on or at least have a meeting on before we take it up.

I had offered an amendment to terminate the analog broadcast licenses. I think that’s necessary. We want a deadline for the FCC to complete rules that will have to follow enactment of the DTV bill. We want to set aside up to 12 megahertz, two channels of spectrum, for small providers. We want to require those who bid at the auction to roam with small carriers upon request at commercial rates. As you know, many of the systems do not accept roaming and I think that’s a defect in our cellular system. We want consumer education programs to go into effect immediately, including labels on analog sets. Almost all TV sets sold in the United States are imported. We do not think they should be allowed to bring in and label sets as being digital when they’re not digital-ready at all. And, I would personally like to set a date upon which it would be illegal to sell in this country any TV set that’s called digital that is not digital-ready. We wanted to have a digital tuner mandate by 2007. We wanted to have the down conversion of the digital signal to analog by cable, spell that out, under what circumstances it will take place. We want a converter box program including shipping costs for that. We wanted the translator converter program spelled out. That was particularly Senator Snowe’s wish. We wish to have expedited judicial review of the Act we pass. I wanted to have a severability clause in the Act so we didn’t lose the whole thing if one portion was deemed to be unconstitutional. We want a preemption so states cannot impose additional requirements on converter boxes, such as energy requirements that California has already proposed which will increase the cost of the box in California. And, if they want to increase the cost, I think they should pay in the increased cost. It shouldn’t come out of the national funds.

We do have to have multicasting decided by legislation. And, there are several other amendments we are still working on on a consensus basis that deal with basic problems, such as family issues and some of the issues concerning the time within which there must be special rates or at least special treatment during the period before an election for candidates. We think that’s one issue we should try to settle in this bill when it comes up.

The Budget Committee has told us it definitely will markup this bill next week. The bill then goes to the floor and there is a time limit built into the statute. It is our hope that we will complete the conference on this bill before Thanksgiving.

There are other issues before us that we are going to face before the end of the year. We have invited the FCC Commissioners to appear as a group before us as a group to give us their ideas about the bill and other things that I’ve talked about. And, that’s sort of been an annual tradition anyway before our Committee. We have IP Video bills, both Senator Ensign and Senator Smith have bills on that. And, we have wireless issues; interoperability; decency, were still working with Senators Brownback and Wyden and others on that. We have the problem of internet neutrality. And, we expect a full day of hearings on the Universal Service Fund reform, including contribution methodology and the distribution of mechanisms. If you’ve read the morning papers about that, you’ll see the House is already going into those issues.

We also intend to mark-up the WARN Act, the national alert bill, to work with wireless carriers to create a voluntary system to give them $250 million from the DTV proceeds and liability protection if that alert bill does not go through. Now, that’s a whole range of issues. In other words, we don’t have much to do, right? But, I’m like John, if you have any questions for me, I’d be glad to try to answer them. I do have to go back to another meeting.

Questions from audience:

Question: Senator, as far as the $3 billion subsidy for set-top boxes that’s to be in tomorrow’s bill, at $50 a box, that would come to about 60 million recipients. Is there any means or income test for those recipients? Or how will those 60 million recipients roughly be decided?

Chairman Stevens: We plan to provide a set-top box at the expense of this spectrum auction to everyone who has a TV that needs a box. The House has set some limit. We haven’t set a limit yet. But, it may be we’ll have to set a limit depending upon the date. Currently, $3 billion would finance, we have a $10 co-pay remember, that’s to give us a record of who got the federal assistance and make certain you don’t get one for the same set twice. You’re going to get one box for $10 plus your name and the box will be bought from the proceeds of the spectrum.

Question: Is that 60 million figure correct as far as the number of intended recipients?

Chairman Stevens: Well, I’ve seen a range of up to 100 million, but our feeling right now is that 60 million will be enough. Mind you now, in the period between now and 2009, we take care of a lot of them because as people buy these boxes, once we get this other bill passed, they’re going to be buying digital-ready televisions. And, that will reduce the number of set-top boxes that will be needed. The further out that date is, the fewer set-top boxes will be required.

Question: Could you just clarify the second bill you’re talking about with the policy provisions in it? Is that going to move simultaneously with the budget bill or next year?

Chairman Stevens: It will move later, if possible. I’ve got to tell you, if you were in the discussion I was in yesterday, you would wonder if it’s ever going to be possible. But, as a practical matter it has to done to spell out how that money can be spent, who is eligible to receive that money. And, it also has to be passed to ensure that you’re going to have down conversion for cable or multicasting for over-the-air.

So, it’s something I think, by the time we get the other bill passed into law, there will be a general agreement it ought to be passed this year. What the content is going to be is going to be very difficult because, again, we don’t have the discipline of the Budget Act then. We don’t have a point of order of 60 votes, but we do have a 60-vote margin in terms of filibuster. So, I think there will be a general agreement. And, I’ve talked to people on both sides of the aisle. They all agree the bill has to be passed. There’s a little bit of political conniving in it. Some people are afraid somebody might get credit for something in it. But, I’m one who goes back and remembers the day when I was in the Minority and Senator Magnuson, as Chairman of Commerce, allowed me to write and then he put his name on the 200-mile-limit bill. He allowed me to write the Olympic Act, which became law. I think we should encourage people on both sides of the aisle to be innovative and if they’ve got something to enact, we’re going to enact it without regard to politics. And, again, I remind you that Senator Inouye and I have worked together now for over 30 years in terms of the Defense bill. We’re working on the same basis on the Commerce Committee bill. We have equal allowance for staff. We don’t do anything without consulting one another and there are no surprises on this bill.

Question: Senator, several consumer organizations wrote a letter to the Committee, I think yesterday, asking for the Committee to set aside a certain portion of the spectrum for unlicensed wireless. And, their argument is that that is a good way of promoting broadband, cheap low-cost broadband, to consumers. Is that something that you’re considering, setting aside some spectrum for?

Chairman Stevens: We had such an amendment, we had such a provision in the original draft. It was knocked out by the parliamentarian’s conclusion that it would offend the Byrd Rule. It is one of the items that will have to be considered and we did get that letter. We do believe they’re right.

And, we’re looking at two through four to be set aside for that basis. That affects about 17 stations, including two in my State. They would have to move. But, if we’re going to do that, we have to provide them the money. So, we have that set aside in the list I read, but we have to have the legislation to accomplish it. But, we agree with that and I think there’s bipartisan agreement on that, but the differences on a partisan basis are over the two, three, four. We want those that are less usable in the commercial sense. They are more viable for what people think they should be used for and that’s local free-type operations. Thank you all very much. I appreciate the opportunity to be with you.

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