Paul Gluckman

Cable and CE industry negotiators “are again moving forward, expeditiously” in an effort to complete “Phase II” specifications on bidirectional plug-&-play devices, CEA said in its 3rd status report to the FCC on cable-DTV interoperability issues. It said work on Phase II specs became bogged down because of outside issues. Like NCTA, CEA said it was reaching out to 3rd parties whose interests might be affected by the negotiations (CD Jan 22 p11). CEA said objectives included: (1) Establishing “known, minimal technical requirements” for bidirectional devices. (2) Creating a “truly level” competitive playing field, including reliance on a common security interface. (3) Avoiding functionality that would put a home or external network at a competitive disadvantage. (4) Maintaining a competitive market for home network services and devices. Commenting for the first time on the NCTA’s reconsideration petition filed Dec. 29 seeking FCC rule changes on certain aspects of the “testing regime” and “the status of independent laboratories generally,” CEA said the talks were addressing the points raised to the extent that they touched on matters relevant to testing at CableLabs. It said CableLabs “Test Guidelines,” posted on the CableLabs Web site as Version 1.0, remained under “active and constructive discussion” between cable and CE negotiators. But it said “there remain novel, difficult and often contentious questions” that hadn’t been resolved on those and some other issues. CEA said so contentious were some of those issues that the FCC ultimately might be asked to resolve them.

XM Satellite Radio expects to be “fully funded” and won’t need to raise additional financing “so long as we meet the revenue, expense and cash flow projections of our business plan,” the company said in a prospectus filed at the SEC for an offering of 18 million shares of its class A common stock (CD Jan 15 p12). It said the $183.6 million in estimated net proceeds would be used to repay debt and for general corporate purposes. XM said it was continuing to pursue payments on insurance claims it filed for the solar anomaly on its 2 existing Boeing satellites, and would use those payments to repay vendor financing it expected to be used for the launch of one or 2 replacement satellite. XM’s insurers have denied the company’s claims, but it said it had continued trying to negotiate a settlement. With the Sept. 2003 completion of a class A common offering and the sale of notes completed last June, XM said it had raised “substantially all of the funds” it would need for the completion and launch of its 3rd satellite, XM-3, and the construction of a 4th, XM-4, should insurance payouts not be received “in a timely manner.” XM has said the solar anomaly significantly curtailed the life expectancy of its 2 orbiting satellites. As a long-term hedge against future failures, XM has made plans to launch XM-3, currently its ground spare satellite, into one of 2 orbital slots by the end of the year and operate its 2 orbiting satellites together in the other slot. Those 2 would be replaced in 2007 with the launch of XM-4, XM has said. In Dec., XM amended its satellite contract with Boeing to revise its payment schedule on XM-3 and XM-4, the prospectus said. Also amended were unspecified “performance incentive payment terms” on the 2 orbiting satellites.

HD Radio developer IBiquity finished the year with 300 stations “licensed and in the process of going on the air” in 100 markets, and was “arguably ahead of expectation” from a year ago, when only 250 stations were foreseen, CEO Robert Struble said in a pre-CES interview. By the end of 2004, he said, 600-650 stations are expected to be on the air with HD Radio, representing 75% coverage of the U.S. radio population. As a result of the midyear change to a new codec after AM audio artifacts were found in its original PAC algorithm, iBiquity’s consumer launch is 3-6 months behind schedule, Struble said. Although he conceded the abrupt change to a new codec was “a headline-making event” in 2003, “all things considered, it came out quite well,” resulting in better audio quality. Struble said he hoped that “the fruits of our labor” would come to bear in a successful consumer launch in 2004, beginning at CES with the formal introduction of aftermarket radios by JVC and Panasonic, in addition to Kenwood, followed later in the year by additional receiver partners “diving in the pool.” He also said CES would be the showcase for the first HD Radio multichannel audio demonstrations and there would be “exciting” demonstrations of the “services” capabilities the technology ultimately would offer, including traffic reporting.

Sony supports making the Active Format Descriptor (AFD) feature of the ATSC’s A/53B standard mandatory for DTV broadcasting in the U.S., the company told the FCC Mon. in an ex parte filing. AFD, which is optional under ATSC specifications, enables a DTV receiver to adapt its screen contours automatically to suit the dimensions of an incoming digital video signal. Sony said that without AFD, viewers often were confronted with situations in which DTV broadcast content was “displayed inappropriately” with “pillar bars” on the left and right of the screen and “letterbox” bands across the top and bottom. It said the resulting smaller “postage stamp” image in the middle of the screen had caused viewer confusion and was “a detriment to the DTV service.” Sony said consumers often knew that “something’s wrong” with their DTV picture, but they didn’t know how to fix it. Mandating AFD also would be beneficial to DTV set makers because it would allow manufacturers to “mitigate the effects of uneven screen aging,” Sony said. It said Commission action to make AFD mandatory for broadcasters would “ensure that the framework is put into place to alleviate this problem and remove a potential obstacle to the digital TV transition.” Sony said the FCC should determine an appropriate phase-in period to “minimize the burden” on broadcasters, which typically could incorporate AFD functionality into existing digital broadcast equipment through software upgrades and modifications. CEA and other CE makers also support making AFD functionality mandatory, but the NAB and MSTV don’t think a mandate is necessary. Broadcast groups in past filings at the FCC have praised AFD as “a valuable enhancement to the DTV standard,” but said “market forces” would be adequate to assure that broadcasters used AFD in “appropriate circumstances.”

Based on the know-how gleaned from operating WRAL-DT Raleigh, the transmission of accurate PSIP (Program System Information & Protocol) data is “vital to the consumer’s digital experience,” Capitol Bcstg. told the FCC in an ex parte filing. Filing on cable carriage rules, it urged the Commission to adopt rules “ensuring that our cable viewers get real-time programming and programming information that can be provided to them seamlessly through PSIP.”

Philips isn’t in negotiations with any group “about going to court” to challenge the FCC’s adoption of broadcast flag rules, Thomas Patton, the company’s vp-govt. relations, told us Mon. in an interview. “We certainly reserve all of our rights,” he said, and stand by past statements on potential legal challenges to the broadcast flag rules and the Commission’s jurisdictional authority to impose them. The rules are designed to limit unauthorized Internet distribution of broadcast content.

MARINA DEL REY, Cal. -- The FCC and Congress should replace the 85% “trigger” on DTV household penetration with a “hard” deadline for turning off analog TV service, James Sanduski, vp-mktg., Samsung Visual Display Products Group, told an HDTV Forum opening keynote session here Wed.

XM Satellite Radio is “well on its way” to exceeding its projected 1.2 million subscribers by the end of the year and will surpass the average Wall St. forecast of 2.5 million by the end of 2004, company executives told financial analysts in a conference call Thurs. on 3rd-quarter results. XM said it reduced its 3rd-quarter EBITDA loss to $64.37 million from $66.52 million in the same 2002 quarter as subscription revenue rose significantly to $21.66 million from $4.78 million. XM added 237,395 subscribers in the quarter for a total of 929,648 Sept. 30, breaking the million-subscriber barrier in late Oct. Subscription additions were up 34% from the end of the 2nd quarter, XM said. CEO Hugh Panero told analysts that “just as cable TV destroyed the myth that no one would pay for television, we have destroyed 2 myths -- that no one would pay for radio and that radio had to be local to be successful.” Panero said XM not only accounted for 85% of the total satellite radio market, “but also continues to capture the dominant share of all new growth.” He said the company expected to add 300,000 subscribers, or nearly as many as were added in all of 2002. His projection would raise XM’s year-end total to at least 1,229,648.

There apparently is growing sentiment among some CEA member companies that pursuing the legal fight to overturn the FCC’s DTV tuner mandate would be futile. But Michael Petricone, CEA vp-technology policy, said his group’s official position hadn’t changed since Oct. 28 when the U.S. Appeals Court, D.C., repudiated the CEA and upheld the FCC’s argument that it had the statutory authority to impose the mandate (CD Oct 29 p1). Petricone said CEA was continuing to study its legal options, including the possibility of pressing for an appeal to the U.S. Supreme Court. He also said again that although CEA disagreed with the Appeals Court decision, manufacturers would abide by it. Petricone said CEA would face an unspecified deadline for seeking a Supreme Court hearing on the issue, but the deadline wasn’t imminent. CEA Pres. Gary Shapiro told us the “odds” of the Supreme Court’s “accepting a petition” from CEA were stacked against it. Sources familiar with the CEA Video Div. said its board hadn’t met or voted on the issue whether to press for a further appeal, but they said there was a rising groundswell of opposition to continuing the court fight on the ground that it wasn’t winnable and to press forward with a Supreme Court challenge would be a waste of CEA resources.

Philips, Sony and Thomson joined the growing chorus of consumer electronics (CE) makers urging the FCC to reject the MPAA’s call for a mandatory July 1, 2004, deadline for making CE devices broadcast flag-compliant. Zenith, like other CE makers, said its typical new product design cycle averaged about 18 months from the FCC’s final adoption of any new rules, but Zenith didn’t say it would be precluded from meeting the July 2004 deadline.