What the set makers have to say: An interview with Gary Shapiro The laws of physics tell us that nothing is constant: All things must and will change.

What the set makers have to say: An interview with Gary Shapiro The laws of physics tell us that nothing is constant: All things must and will change. At this time of year, it is traditional to dust off the crystal ball in an attempt to cast a wary eye into the future.

Questions relative to the transition to digital continue to keep many a chief engineer and director of engineering burning the midnight oil. Congress looks to the ultimate auction of our precious spectrum like a greedy heir at an estate sale.

When attempting to learn from history, it doesn't hurt to look back at the RCA/NBC relationship, which brought us radio and television with enhancements such as color, FM and stereo. RCA/NBC was a complete chain, starting with the acquisition of program material and going through to presentation in the homes of listeners and viewers alike. Sarnoff was no dummy. He realized that the real money was in the sale of millions of TVs. To make them appealing, he provided the entertainment that helped sell them, while making a handsome profit from both ends of the chain. He even made the equipment that did the acquisition and distribution and challenged anyone who tried to compete.

In contrast to yesterday's glass-to-glass model, in today's television landscape, the perspective of the broadcaster is difficult to gauge because broadcasters are no longer a unified whole. Gary Shapiro, president and CEO of the Consumer Electronics Association (CEA), the trade organization that represents most of today's set manufacturers, sat down with me for a discussion of current issues that fleshes out the CEA's perspective and sheds some light on what the now disparate other end of the broadcast chain thinks may be the fate of digital television.

At the outset, we discussed FCC Chairman William Kennard's comments and apparent "get-tough" posturing during several recent speeches he gave in reference to the sluggish transition to digital television.

"I think the Chairman hit the nail on the head," Shapiro began. "The facts speak for themselves. If you go back for the past ten years on this issue, a lot of promises [regarding digital content] were made and we naively relied on them. We thought broadcasters would produce content and I think some of the networks and local stations have done a good job, but the fact is that most haven't. What has especially caused us some challenges is the issue of tuners. They have the standards issue and it doesn't make business sense to incorporate them into a product with a 12- to 18-month manufacturing cycle when several broadcasters, like NBC and Sinclair, are challenging the standard. Get on the broadcasters."

"At the same time the extraordinarily good news is that there are a lot of the DTV's selling phenomenally well, mostly because of DVDs and also because of satellite. Our new third-quarter numbers are off the charts. It's incredible!"

With such exuberance expressed for the industry, it was telling that Shapiro himself does not have an HDTV receiver. "I have an old order to buy; let me put it that way. I've begun shopping several times. I've measured and the set I want will be on the market shortly. What I'm looking at is more of a satellite orientation. I was recently on a plane and going over my "to do list," and it said in the next few weeks, buy a DTV set. I have the permission of the wife, I have the cash set aside and I think I have a place I'm debating over where to put it. I guess as of this moment, you could say that Gary Shapiro does not have one, but that will probably be inaccurate by the time you get to press." Continuing, Shapiro said: "If I don't, I'm awfully stupid because I have everything as a go at this point. The question that I face, honestly, is whether I get one with a tuner or not, that's the issue."

But why the delay? Shapiro responded, "The local ABC affiliate here [Washington D.C.] doesn't even carry HDTV, it upconverts analog. I couldn't have gotten Monday Night Football last year. It was a great disappointment to those of us in Washington D.C."

Shapiro was asked what size he would get if he got a digital TV by the first of the year for his home. Not even trying to dodge the question, Shapiro said: "It's a function of my fixed cabinetry and whether I go with the fixed cabinetry in my prime viewing area or I put it in another room. I believe it will be a 36-inch or a much bigger stand-alone. It's a debate going on between my wife and my kids."

When asked what his choice of programming source would be, Shapiro replied, "My big dilemma, quite frankly, is whether I get EchoStar or DirecTV, because EchoStar's doing some phenomenal things with HDTV. I was just talking to Jim Goodman this week, from WRAL-TV [president & CEO of WRAL-TV] and he was waxing eloquently about how wonderful his EchoStar is, says it's phenomenal."

When WRAL's commitment to doing full HDTV was mentioned to Shapiro, along with them offering 5.1 channels of audio, Shapiro responded: "That's right and Goodman says they are doing the Dolby digital, as well." He continued, "If you look at consumer satisfaction surveys, HDTV is the only product with 100 percent consumer satisfaction in terms of the quality. The only disappointment is the local programming. It is frustration with broadcasters. The issues we are increasingly facing, and what manufacturers are asking, is are broadcasters even relevant to HDTV anymore?"

Shapiro pointed out that broadcasters are inconsistent at best in their support of the HDTV transition. "With all respect to NBC," he stated, "it makes no sense to have the Tonight Show in HDTV, of any show you could choose, because that's the one show you're most likely to watch in your bedroom and you don't put your big TV sets, for the most part, in your bedroom. It's totally inconsistent with how HDTV is sold. NBC is probably the last network to get to HDTV. In terms of how we rank them internally, they're at the bottom."

Shapiro continued: "NBC is a disappointment not only because they are clearly last, but also because of their historical position. In fact, they were first, the great relationship they had with RCA being part of it. They went to stereo first, and their relationship with Disney to promote color, long before Disney got involved with ABC."

Shapiro was then asked about Fox, to which he replied: "Fox is doing stuff. It may be 480p, but they're doing stuff.

As for CBS, Shapiro said: "Certainly CBS has taken the lead and they are promoting it for each show. They have that HDTV thing."

The next decade Despite his criticism of broadcasters, Shapiro remains upbeat about HDTV's future in the U.S. "I think that broadcasters will go to HDTV for the same reasons they said they wanted to go ten years ago," he stated, "because they thought they'd lose market share to other media. What heartens me is the fact that consumers are buying up these HDTV sets even though the price is high; they're buying them up still, in extraordinary numbers.

"The issue is the question of tuners. Everything would have been fine except for the standards today, quite frankly. If it wasn't for this uncertainty, manufacturers would have made them and put them in sets in a much higher percentage than they've been selling. It's very risky for a manufacturer to do it, and it's obviously risky for retailers to sell them when they might be obsolete. That's an issue that people are facing."

"Broadcasters, including, I think, some people in the associations, will tell you how they are personally devastated at this debate, because they think that 8VSB will ultimately win but the COFDM people have caused a lot of uncertainty for manufacturers."

But what of the move to COFDM as a "world" standard? "As far as world standards are concerned," Shapiro began, "I recently returned from Europe and I don't think that's really such an issue. Europe is pretty protectionist in a lot of ways. I have no problem with the U.S. doing what's best for the U.S., which has been our position for fifteen years.

"The U.S. standards reflect the unique needs of U.S. broadcasters and the environment here. That's what we set out to do in 1990 when we laid that out as our basic premise in the electronics industry: The U.S. standard could be unique. Broadcasters told us that they had unique needs here. The whole standard was built around the unique needs of broadcasters. We were always very agnostic on it, but said once you've set it, keep it."

What makes our needs here any different? "For example," Shapiro said, choosing his words carefully, "in Japan, they have a very highly concentrated population, and satellite delivery of broadcast is perfectly acceptable. Here you have a commitment to free, over-the-air broadcasting, using, basically, a local antenna system with a grade B contour: that's what we built on.

"What separates broadcasters from other media, we understand, is `free over the air' and that is unique. Now maybe that's worth looking at; I don't know. The reality is we keep comparing this to color and things like that, but color was a different world. There were only three or four broadcasters then and now there's so much alternative media."

Based on Shapiro's comments about broadcasters not showing any special interest in HDTV, he was asked what he thought would become of HDTV. "HDTV's going to come over the Internet in a few years," Shapiro replied confidently. "You obviously have cable, satellite, pre-recorded media of all types, video games, fiber optic to the home soon. So, you know, the question is: HDTV will be there but will it be there in the broadcast transmission format by the year 2006 with eighty percent? You'd have to be crazy to think that now. When that 2006 date was set, look at what we said: in 30 percent [penetration] of American homes. That's what we said then and we've maintained that position. Now if broadcasters go more slowly, it will be less and if they get more aggressive, it will be more."

When asked how manufacturers know what to make, Shapiro said: "Manufacturers always look to broadcasters first on this, but there's been a general shift in the last several months amongst manufacturers, thinking broadcasters just aren't going to play this game." Shapiro finished this thought in a tone of grave disappointment: "You know what? Maybe we'll do fine without them!"

Giving some feedback from the set-makers, Shapiro said: "What we're also hearing from manufacturers is that maybe broadcasters should be asked to give the spectrum back because there's a lot of other products we could build and use with that spectrum. When it comes to products like G-3 and G-4 technology, you know, portable communications devices, we're hearing a lot of our same members saying that broadcasters should give the spectrum back."

Shapiro says that the future of over-the-air television "is up to the broadcasters. If people are like Jim Goodmon, then I see a very bright future. People like CBS have a bright future. They will be competing for the upper parts of the viewing audiences, at least in the beginning, along with other viewers. If they [broadcasters] want to become the AM of video media, and be the low class media, that's their choice. It's obviously not a question of money, right now, because they have plenty of it. You could say that the stock market evaluations are low, but there's a lot of cash coming into broadcasting. Whether they choose to invest that for the long term is up to them."

When quizzed about the moving forces in the television/broadcast industry - are they the programmers, accountants or engineers - Shapiro said: "I think there's truly an absence of leadership. I think that engineers should be a little more assertive in talking about the quality of their signals, because that's something consumers respond to. HDTV consumers are not going to be happy watching broadcast television and every day there are more HDTV consumers. Not only are there HDTV consumers, but big set consumers, as well."