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Hearing of the House Committee on Energy and Commerce Subcommittee on Telecommunications and the Internet - Status of the DTV Transition Part II

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Location: Washington, DC


Hearing of the House Committee on Energy and Commerce Subcommittee on Telecommunications and the Internet - Status of the DTV Transition Part II

REP. MARKEY: Good morning. Welcome to the Subcommittee on Telecommunications and the Internet.

This is the subcommittee's second in a series of oversight hearings on the status of the digital television transition.

Unfortunately, prior oversight hearings have left the subcommittee with a DTV picture that is fuzzy at best. Our goal going forward will be to get better reception from the federal government, industry and community groups about how they might work better in concert to ensure that millions of Americans do not lose free, over- the-air television after the transition from analog to digital broadcasting on February 17th, 2009.

I'm encouraged by some recent government efforts to help consumers navigate the transition successfully. After our last hearing, the commission required retailers to inform consumers when television equipment only has an analog tuner by displaying a government-mandated consumer alert near the device. Not only does such a notice assist consumers in making fully informed decisions before bringing home an analog-only TV, it also serves to educate consumers about the DTV transition itself.

The commission has rigorously enforced this rule. Seven retailers are facing almost $3 million in fines. In addition, the commission also has assessed penalties against manufacturers for importing TVs lacking digital tuners.

I commend FCC Chairman Martin for sending a strong message that the government will not tolerate the TV equivalent of war profiteering.

I encourage the commission to vigorously monitor and assess the transition as it proceeds. For instance, the FCC could send employees into participating stores to make sure that retailers are sufficiently stocking and selling the converter boxes subsidized by the coupon program, and not just hawking the $500 digital TV sets.

The commission should also spot-check digital devices, including converter boxes, to make sure they include mandatory, pro-consumer technologies. Like the V-chip and closed captioning and those other features, we have to ensure that they actually function properly for consumers.

I also want to applaud Assistant Secretary John Kneuer for NTIA's decision to hire IBM to manage the analog-to-digital converter box coupon program. IBM and its subcontractors appear to have the expertise and pro-consumer orientation necessary to implement a successful coupon program if other entities and elements in the transition work in concert and do their part.

The most critical component of a successful DTV transition is consumer education. Ultimately, the federal government is responsible for making sure that more than 300 million Americans are adequately informed, not the industry or consumer groups. It is, after all, government mandates that will render obsolete millions of analog TVs.

Both the FCC and NTIA have been preparing consumer advisories, creating websites, holding forums and meeting with public and private sector groups. The current plan relies heavily on the good graces of industry and the voluntary efforts of committed consumer and community groups to get the job done.

However, because the amount of money available to the commission and to the NTIA for consumer education for their respective aspects of the transition is highly limited, more must be done. Affected industries appear to be stepping up to fill some of the void. Thus, recent commitments by the cable industry, broadcasters and public television to air millions of dollars worth of messages about the transition on TV will be critical to the success of this effort. But all of those efforts are purely voluntary.

As Chairman Dingell and I suggested to Chairman Martin earlier this year, there is value in mandating a minimum level of compulsory consumer education on the part of industry, particularly given that these requirements can be monitored and enforced. I am pleased that Chairman Martin took our suggestion to initiate a rule-making, and I hope he adopts those rules expeditiously as the deadline draws near.

This leads me to the aspect of the DTV transition that needs greater clarity and coordination.

According to the report being prepared at my request by the Government Accountability Office, no single organization has assumed responsibility for the overall transition. It's as if we have a team of people running backs and receivers running around the field searching for the end zone but no quarterback running the plays. Indeed, according to the GAO, there is no comprehensive DTV transition plan, no monitoring and no contingency plan.

I want to commend the GAO for their excellent work in preparing for today's testimony, which provides us with an emergency broadcast system alert about challenges ahead with sufficient time to take corrective action. It is my belief that while NTIA has responsibility for the consumer coupon program, the FCC has primary responsibility for the overall digital transition.

Chairman Martin, I think that makes you Tom Brady for our DTV purposes --

REP. FRED UPTON (R-MI): A good Wolverine, I want you to know.

REP. MARKEY: That's where Mr. Upton and I feel really good; we're a Michigan and Boston bond on this Tom Brady issue, and giving you this mantle, Mr. Chairman, is the highest accolade that can be bestowed by -- on a bipartisan basis -- in this committee. (Laughter.)

REP. UPTON: Hail to the victors, right?

REP. MARKEY: You are the nation's DTV quarterback. And we will be counting on you and the commission for the leadership to coordinate the various aspects of the transition which is so important for public safety, economic growth, innovation, consumer welfare and the future of television itself.

I look forward to hearing from today's witnesses.

Let me turn to recognize the ranking member of the subcommittee, the gentleman from Michigan, Mr. Upton.

BREAK IN TRANSCRIPT

REP. MARKEY: Thank you. Great. Thank you, Mr. Goldstein, very much.

And we don't want to make anyone a czar either. The Russians killed the czar. We want to make them Tom Brady. That's our goal and our effort.

Let me ask you this, Mr. Kneuer: As I understand it, the NTIA will not reissue a coupon if a consumer's coupon expires after 90 days. So tell us what would happen in the following situation: A consumer has a coupon for a converter box; on the 90th day, the consumer goes to Best Buy to use the coupon but Best Buy doesn't have any boxes in stock. As a consumer, although I've procrastinated until the last day, I've done what I'm supposed to do. What happens at that point? Am I out of luck?

MR. KNEUER: One of the things we're talking with retailers about if, in the circumstance -- precisely the circumstance you describe, that a consumer comes in, whether it's the 90th day or it's the 15th day, and there are not boxes in the stores, whether or not they can conclude that transaction with the consumer in the store -- either treat it as an online transaction for the consumer to come by the -- deliver it to their home or have the consumer come back and pick it up at that time. So we do want to make sure that consumers aren't disenfranchised in that circumstance.

One of the other, you know, the more systematic approach is to encourage the broadest possible participation by retailers and the broadest possible --

REP. MARKEY: Okay, should that be a requirement, though? Should it be a requirement that retailers have to honor that coupon if they've walked into the store before the 90th day?

MR. KNEUER: That's something that we can look into, making it an affirmative requirement as a business case in the program.

It's not currently included in the program.

REP. MARKEY: What I'm saying to you, I recommend to you that you make it a requirement, that is, if the retailer is participating in the program and someone shows up and they're representing themselves to have these boxes.

And what about the issue of then should the retailer then have to ship it free of charge to the consumer if they did not have it in the store?

MR. KNEUER: I don't think we have authority to require additional subsidies if it's part of their normal mail order process -- they do things free of charge or they charge for the mailing of it. I don't think that in our program we would have the authority to require that.

REP. MARKEY: Do you have authority to require them to have boxes in stock?

MR. KNEUER: Nope. We don't have -- we do not have authority to require supply chains. We don't.

REP. MARKEY: So what do you get for participating? What's the -- they can represent that they have them, people show up, we don't have them but we have this wonderful digital TV set here. Why don't you buy the digital TV set. We don't know when we're going to have those converter boxes that we advertised in the newspaper saying that we have.

So how do we handle that situation? It's a classic --

MR. KNEUER: We have -- we have --

REP. MARKEY: -- it's rife with potential for a bait and switch.

MR. KNEUER: Sure. Sure, and that sort of obvious consumer fraud -- you know, a classic bait-and-switch campaign where they advertise "we're your DTV coupon-eligible box headquarters" and they don't have boxes; they just have $500 TV sets, and they're doing hard sells on consumers -- our vendor who has responsibility for the retailer relationship -- for certifying retailers -- is going to be doing spot checks in stores to make sure that they are educating their consumers, that they do have --

REP. MARKEY: But what conditions can you put on retailers --

MR. KNEUER: The conditions we have on retailers --

REP. MARKEY: -- in order to make sure that if they're going to represent they have these boxes that they have them, and if the consumer shows up that the retailer will provide them to the consumer and there's no extra charge if they're out of those boxes at that time.

MR. KNEUER: If we found evidence of a retailer that was consistently out of stock -- you know, there may in fact be times that a retailer does run out of boxes. But if we had reports or evidence that there was a consistent pattern, we have the ability to decertify those retailers.

When a consumer gets a coupon --

REP. MARKEY: All right, so the -- again, the coupon has expired. There's no box. It's not the consumer's fault. It's the retailer's fault. What are we going to do for the consumer?

MR. KNEUER: On the 90th day we are going -- and irrespective whether it's the 90th day or the 15th day -- in our outreach and our conversations with retailers we are raising this issue with them: Can you execute the point-of-sale transaction --

REP. MARKEY: But what do they do if they don't comply? What if they don't? What are you going to do?

MR. KNEUER: If they don't agree to have those sorts of processes in place?

REP. MARKEY: Yeah. What are you going to do to them?

MR. KNEUER: Those are the sorts of things that we're working through in a business case with the retailers. The point --

REP. MARKEY: Yeah, I think the retailers have to know up front what you're going to do to them, and then they will comply. If they think you're going to be counseling them, you know, at the 90th day -- just talking to them -- then unfortunately there are going to be too many consumers out there who will be walking around, you know, a store without any converter box being in it now being counseled by this salesman to, you know, "These new digital TVs only cost $350; you should get one of these anyway, you know? Why wait?"

So why don't we try to figure out some way of having a real, you know, set of sanctions that can be imposed upon them and that they know about it, and that they're being told very clearly what will happen to them if they don't honor that coupon as it's being presented.

MR. KNEUER: Throughout our relationship with retailers and in designing this program, we want to balance those sorts of requirements on retailers with also having it be a program so we have a very broad cross-section of retailers.

There may be rural stores or smaller retailers that aren't part of big chains that don't necessarily have the capability to do shipping and transactions of that kind, so we want to make sure that we're doing everything we can to make sure the retailers are educating consumers, that retailers that participate in this program are not engaging in those sorts of fraudulent activities, but we also want to make sure that we're not raising burdens that exclude classes of retailers that may serve people in other communities other than the large sorts of --

REP. MARKEY: Okay. Again, what I'm saying is for my district -- where we have all big stores -- I just want them to know that there's going to be a penalty.

Now, if you want to make -- it sounds like you want to make a rural America exception, that rural Americans can be treated differently, those consumers, then; if you've got a separate set of protections for rural Americans that aren't as stringent for urban and suburban, you know, I'd like to hear that. But I think where there are big stores there should be.

MR. KNEUER: No, and we absolutely will have sanctions. If there are retailers that are actively misleading customers and are consistently out of supply, and we have evidence of the fact that they are using this simply --

REP. MARKEY: But I'm saying even beyond consistently -- I'm talking about that consumer that's standing there and they don't know anything and, you know, they have to have some protection. The store manager has to be under instructions to say "But we're going to honor it; don't worry; we'll get it for you in a week."

MR. KNEUER: And that's why we're in discussions to retailers, to find out what they're capability to do that is. We are certain it's something that we want them to be able to do to make it as easy for consumers and to not disenfranchise consumers when they show up at the end of the expiration date.

REP. MARKEY: Okay. Well, I think there have to be very firm requirements that are placed upon these stores.

My time has expired. The chair recognizes the gentleman from Michigan, Mr. Upton.

BREAK IN TRANSCRIPT

REP. MARKEY: Without objection, so ordered. The gentleman's time has expired. Mr. Martin and Mr. Kneuer, have you met on this issue in person in the last month?

MR. KNEUER: We've spoken on the phone about it.

REP. MARKEY: You have.

MR. KNEUER: I don't that we've gotten together, maybe in the park with our kids, but mostly on the phone.

REP. MARKEY: You talk about DTV in the park?
(Laughter.)

MR. KNEUER: On occasion, that's the kind of life that we do, in fact, live.

REP. MARKEY: But I would recommend that the two of you meet.

MR. KNEUER: But also, I would be remiss not to point out that on September 25th we had a public forum that Chairman Martin was gracious enough to address our group. Ours was coordinated with theirs, which was the next day, and our staff were there. I was unable to be there from other commitments, but so we've been coordinating. We were together on September 25th, and we've spoken several times on the phone.

REP. MARKEY: And I think the committee would feel good if we knew you were meeting over the next three months in person. The chair now recognizes the gentleman from Michigan, Mr. Stupak.

BREAK IN TRANSCRIPT

REP. MARKEY: Okay great, thank you, and we thank the gentlelady for participating. We're going to complete this panel. Chairman Martin, if you could let the committee when you're going to finalize the technical rules for the transition, that would be very helpful to us. You can do it in writing or you can just give us the --

MR. MARTIN: Sure. No, I mean, most of the technical rules have actually been completed. We released the final DTV Table of Allotments in August. There are several recompetitions. Some people didn't like the channel assignment they got and have come back in and asked. And we've also had several waivers for people that missed the original deadline that then went to the bottom of the list.

But we released the final DTV Table of Allotments. We've got some recompetitions that we will be dealing with in the next few months, but 99 percent of the channels have already dealt with. We've also got one final order on the maximization of replication issues that is due out by the end of this year.

REP. MARKEY: Okay. And please try to resolve the issues for those remaining --

MR. MARTIN: I'm sorry.

What's that?

REP. MARKEY: If there is anything remaining to be finalized, please do so.

MR. MARTIN: Sure.

REP. MARKEY: And we would also request that you also work with Secretary Kneuer on this issue of retailers taking advantage of people who might not fully understand that they're being moved over to a digital TV set when they actually qualify for a converter box that would work very well with their old TV set. So if you could, have a partnership --

MR. MARTIN: Sure, be happy to.

REP MARKEY: -- with Secretary Kneuer to accomplish that goal. Thank you. This has been a very productive hearing. But what I'd like, at the indulgence of the members, just to ask each one of you to give us the one minute you want us to remember from your testimony as we're finishing right now. Just give us your one minute summary. Here we are, nearing the end of October, Mr. Goldstein.

MR. GOLDSTEIN: I think, Mr. Chairman, that the transition is moving along. We've seen a lot of progress, and I think the other witnesses have told you what a lot of that progress is. However, we are concerned still that there are a lot of things that are left to be done, a lot of which is voluntary. It's not required by private industry that they participate. A lot of private industry will participate, and it's already evidenced that it is doing so.

But this is a very big transition, and to leave it all or mainly to voluntary participation and to some planning but not extensive planning that really analyzes all of the potential problems and loopholes and the like. I think we feel it is probably not in the best interest in the government at this time, and so we do think there is additional work that the government, and principally FCC in conjunction with NTIA, still needs to do.

REP. MARKEY: Okay. Thank you, Mr. Goldstein, and I think the GAO for their good work. Chairman Martin.

MR. MARTIN: I think that we've made significant progress on the technical policy issues. Additional work needs to be end up doing on the educational front, but I think the single most important thing that we can end up doing is changing our message from a negative one that if you don't go buy a converter box we're going to take away your TV signal, to a positive one which says that if you go buy a converter box you'll get something additional out of it.

And I think that the most important thing we could end up doing there is facilitating multicasting so that over the air homes can have access to multiple broadcast signals without having to go and take advantage of the digital transition, without having to go buy an expensive HTV set.

The over the air homes are disproportionately lower income. Telling them that the only way they'll get an advantage out of this is to go buy an expensive HDTV set is, I think, a negative message for them. And I think if we're going to expect them to go out and purchase an over the air set -- converter boxes, even with the coupons that have been provided, they should be getting something for it. And I think to do that, we've got to facilitate multicasting.

REP. MARKEY: Thank you. Secretary Kneuer.

MR. KNEUER: It may look like we're down to three-one, but the series hasn't started. The voluntary --

REP. MARKEY: I like that analogy.

(Laughter.)

MR. KNEUER: The efforts that some view as voluntary are actually being driven by enormously powerful market self-interests, and I expect them to continue. And we've got a program that has been put in place and is going to be run effectively and efficiently for the American people.

REP. MARKEY: Great, thank you. And we thank this panel. It has been very helpful to this committee. Thank you. And now, we'll just take a brief moment here while we allow the first group of panelists to move on, and we'll have the second group of witnesses come up and sit in front of their name.

So, we welcome our second panel. We apologize to you for the length of the first panel, but obviously these issues are very important to the American public. And this panel is equally as distinguished as the first and critical in our ability to understand the issues.

So we will begin with Claude Stout. He is the executive director for Telecommunications for the Deaf and Hard of Hearing, Incorporated. He is testifying on behalf of the Coalition of Organizations for Accessible Technology, which promotes the development of acceptable communications devices for people with disabilities. We welcome you, Mr. Stout. Whenever you're ready, please begin.

BREAK IN TRANSCRIPT

REP. MARKEY: Thank you, Mr. Romeo. So that completes the opening statements from the witnesses. The chairman will now recognize himself for a round of questions.

Ms. Fazlullah, you are bringing very troubling findings to our committee that -- people in your organization went out to stores and they found out that people were not being given the accurate information by those that worked in these stores. Target has already been fined for not properly labeling their analog TV sets. Are you concerned that in January Target will be how that store views the consumer walking into the store as someone that might be moved up to an HDTV set that costs $500 or $1,000 when all they need is a converter box for their analog TV set in order to be able to receive a digital signal?

MS. FAZLULLAH: Yes, definitely. I think any of the top five retailers still have personnel in their stores that aren't aware of the appropriate pieces of the transition, and as a result, upselling is a serious problem. We don't make any conclusions in our report whether or not -- (audio skip) -- or anything like that. I think there's a lot of confusion out there in terms of what the details are. What we find troubling is that you go to a store representative and you expect them to have some expertise on the question, or at the very least be able to guide you to the appropriate resources.

REP. MARKEY: So you're not sure they're taking advantage right now?

MS. FAZLULLAH: I'd say that what they're doing in the stores right now definitely takes advantage of consumers, but I can't say if it's on purpose or for -- just a lack of training.

REP. MARKEY: Ms. Zirkin, do you think that there's a real risk here, that these retail stores will take advantage of consumers?

MS. ZIRKIN: I absolutely do, and for our communities, Mr. Chairman, the problem is that a TV is a total luxury. Forty-eight percent I believe -- and I can check on that -- of all over-the-air households have income of under $30,000 a year. So for them it is a real stretch even to be able to afford what they would have to put up in terms of the coupons, and that's why we are so concerned.

REP. MARKEY: Thank you. Mr. Stout, I share your concern that the closed captioning is not adequately supported by new digital television equipment, even though the manufacturers have a legal obligation to ensure that that function is included. The FCC just circulated a consumer advisory on closed captioning. Does that alleviate your concern?

MR. STOUT: I haven't read that consumer advisory that was just released yesterday, but I will give you our feedback to be added to the record at a later date.

REP. MARKEY: Okay. Please do so. I've been working with Karen and everyone associated with you going back to the late 1980s in terms of closed captioning being built into the law, and I would like to ensure that we do everything to maximize the accessibility for your community.

I also want to make sure that everyone knows that Karen's son Jeremy was not covering me when (laughter) I ruptured by Achilles tendon. Just so that's clear for the record.

Mr. Romeo, I'm concerned that retailers are not opting into the converter box program. Many of the retailers argue that the system upgrades they must make to process coupons are too onerous to implement before the Christmas rush. How difficult are those system upgrades? Can they be accomplished before this holiday season so retailers can stock boxes in January of 2008 when the coupons become available?

MR. ROMEO: Sir, we're just starting to engage now in conversations with those retailers, but they've happened very quickly. We've talked to 23 of the largest retailers.

REP. MARKEY: Is it a big deal? How hard is it?

MR. ROMEO: We've given them six options to participate -- (inaudible) --

REP. MARKEY: Is it a big deal? Is it hard to do?

MR. ROMEO: It is not a big deal. It's not hard to participate. And with the simplest option -- they can send paper too.

REP. MARKEY: So if they don't have it done on January 1st, they'll have no excuses.

MR. ROMEO: If they choose an option which is more automated for them, they would have to make the modification to their system, and during the Christmas season they may choose to defer that into later next year, but I expect that we will have very broad participation by the retailers.

REP. MARKEY: Yeah, I mean, my feeling is that since this program is not very difficult for retailers to participate in that my expectation would be -- the committee's expectation would be that they would be ready on January 1st to deal with this rush of consumers that would be coming to their stores. And we're going to make that very clear to the retail community.

And I'll turn and recognize the ranking member of the committee, the gentleman from Michigan, Mr. Upton.

BREAK IN TRANSCRIPT

REP. MARKEY: (laughs) We're going to have a hearing. We will have a hearing, by the way, in another couple of weeks with industries that are responsible for making this work. And by the way, this thing is coming this Thanksgiving. I mean, it's coming in five more weeks, six more weeks. People are going to be in department stores all over America for four of five weeks, and this is going to be a (laughs) big moment where these stores better be ready to give people the honest information they need, the broadcasters, the cable industry. They better have already explained to people that they may be walking into a trap. They may be walking into situations that are going to be very dangerous so long as they purchase their new TV set.

So let's do this. Let's have each one of you give us your best one minute for what it is that you want the committee to remember about your testimony. So we'll begin with you, Mr. Romeo.

MR. ROMEO: Thank you. I'd just like to say that IBM is in a position with our partners to execute the program in a successful manner, and we will be ready and operational on January 1st, and we've designed the program to ensure that both the consumer and the retailer have a satisfactory transaction process.

REP. MARKEY: Great. Ms. Zirkin.

MS. ZIRKIN: At the risk of repeating myself again, I urge that the Congress provide intense oversight with the General Accounting Office and be ready to actually step in so that nobody's TV goes dark, because remember who folks are going to coming to on February 7th, 2009. Thank you.

REP. MARKEY: Who is that? I don't know who you're talking about.

MS. ZIRKIN: I think it's every member of Congress.

REP. MARKEY: Oh, oh, okay, yeah.

MS. ZIRKIN: It might be every member of Congress.

REP. MARKEY: Oh, we'll put that -- (inaudible) --

MS. ZIRKIN: It's certainly not going to be anybody at this table. Thank you, Mr. Markey.

REP. MARKEY: Thank you. We appreciate it. Mr. Benjamin.

MR. BENJAMIN: I think FCCLA with its 225,000 students, 7,000 chapters will be prepared to engage the larger communities with our Keep Your TV On campaign.

REP. MARKEY: We thank you for work, Mr. Benjamin. I think there's a lot of -- you guys give out merit badges. Is there something you can win for doing this -- (inaudible)?

MR. BENJAMIN: Well, they do give competitions, and in this case they'll get 500 other chapters depending on how they stack up with other chapters, will get $500 coupons to purchase electronic equipment from Best Buy.

REP. MARKEY: Great. That's excellent. (But turning ?) in Best Buy -- they'll be able to get a --

MR. BENJAMIN: (laughs)

REP. MARKEY: -- certificate to go into Best Buy. That's great. Ms. Fazlullah.

MS. FAZLULLAH: I think one of the most important statements that is in our testimony is that we need to have a coordinated effort from government on this. And I think the GAO noted this earlier, that there isn't really a leader, and we need to have coordination among the different pieces of government that are acting on this so that there can be a guiding hand for the retailers, for the public interest folks, and for the consumers at large.

REP. MARKEY: Thank you. And finally you, Mr. Stout.

MR. STOUT: Okay, I just want to clarify one part with you. Earlier you had asked me about the consumer advisory that was sent out yesterday, and I had just talked with some of my staff, and they said that the advisory doesn't address any of the issues that you had.

In closing, I just wanted to emphasize -- just in 1996 Congress finally mandated the FCC and the industry to provide us with closed captions. And, you know, one thing that you would get access to is also another thing to see another -- the access continued. You know, we've experienced the change from analog over to digital programming. We want to be able to experience complete accessibility there. We're like all other Americans. We deserve full TV access. Thank you.

REP. MARKEY: Thank you, Mr. Stout, and this committee agrees with you, and that's why we have consistently passed legislation to accomplish that goal, and we will take whatever action it takes in order to ensure that that happens in this area as well.

So today's hearing has given us an emergency broadcast system alert that the transition to digital TV is fast approaching, and several challenges loom. We have established that the FCC is the quarterback of the transition, but we need to see better coordination, better planning, and contingency work being done, as the GAO recommended in their testimony here today. We obviously have consumer groups and hard to reach citizens for whom a comprehensive consumer outreach and education program is the top priority.

In two weeks we will have another hearing to obtain testimony from key industries. We will have an opportunity to assess industry announcements regarding outreach and education at that time. And we then will about three weeks before Thanksgiving and the Christmas sales season that opens have a real idea of where we are. This has been an excellent panel. We thank you for your testimony. The hearing is adjourned with the thanks of the subcommittee.


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