CTPAA Conference May 3, 2005 Digital Television Transition

Then and Now - Distribution April 2003 May 2005 TV stations on- air 9211,491 Full-Power deadlines None 7/1/05 for 4 affils/top 100 mkts; others 7/1/06 Cable HDTV 45 mill HHs passed 90 mill HHs passed

Then and Now - Equipment April 2003 May 2005 DTV sales 2.5 million units (2002) 15 million units (2005 proj) DTV Tuners 275,000 integrated sets (2002) 8.9 mill. integrated sets (2005 proj) Digital Cable- Ready Sets None on mkt Over 150 one- way DCR models on mkt

Then and Now - Content April 2003 May 2005 HDTV Content 300 hours daily (cable and broadcast) Multicasting 537 stations (source: DecisionMark) Content Protection None for broadcast DTV; no encoding rules for MVPDs Broadcast flag mandate 7/05; encoding rules adopted for MVPDs

Content Protection-Broadcast Flag Adopted by FCC November 4, 2003 Adopted by FCC November 4, 2003 Provides protection from mass redistribution of content over the Internet Provides protection from mass redistribution of content over the Internet No restrictions on home copying No restrictions on home copying No need for new equipment No need for new equipment New TV sets must be flag-compliant by July 1, 2005 New TV sets must be flag-compliant by July 1, 2005 Interim FCC process for approval of technologies Interim FCC process for approval of technologies First wave of 13 technologies approved in August 2004 First wave of 13 technologies approved in August 2004 Divx application pending Divx application pending FCC Order on appeal in DC Circuit – Oral argument held in Feb 2005 FCC Order on appeal in DC Circuit – Oral argument held in Feb 2005

Remaining Challenges - Distribution Final DTV Table of Allotments Final DTV Table of Allotments Channel election process underway Channel election process underway Current schedule NPRM in August 2006 Current schedule NPRM in August 2006 DTV Must-Carry DTV Must-Carry Feb Order re: “dual” carriage and multicasting; recons filed Feb Order re: “dual” carriage and multicasting; recons filed Remaining issues re: program-related, material degradation, DBS carriage, etc. Remaining issues re: program-related, material degradation, DBS carriage, etc.

Remaining Challenges - Equipment FCC ATSC Tuner Mandate – Adopted Aug FCC ATSC Tuner Mandate – Adopted Aug Mandate upheld by DC Circuit Mandate upheld by DC Circuit Include ATSC tuners in receivers on phased-in basis, beginning with set 36” and above. Include ATSC tuners in receivers on phased-in basis, beginning with set 36” and above. Phase-in schedule: Phase-in schedule: Sets 36” and above – 50% by 7/1/04; 100% by 7/1/05 Sets 36” and above – 50% by 7/1/04; 100% by 7/1/05 Set 25”-35” – 50% by 7/1/05; 100% by 7/1/06 Set 25”-35” – 50% by 7/1/05; 100% by 7/1/06 Sets 13”-25” – 100% by 7/1/07 Sets 13”-25” – 100% by 7/1/07 NPRM pending on revising deadlines for mid-sized sets NPRM pending on revising deadlines for mid-sized sets Two-Way Digital Cable Ready Two-Way Digital Cable Ready Negotiations ongoing; 60-day status reports/mtgs w/FCC req’d starting 8/05 Negotiations ongoing; 60-day status reports/mtgs w/FCC req’d starting 8/05 Cable Separate Security Requirement Cable Separate Security Requirement Deferred to July 1, 2007 Deferred to July 1, 2007 Report due by December 1, 2005 on downloadable security Report due by December 1, 2005 on downloadable security Periodic 90-day reports on CableCard roll-out starting 8/1/05 Periodic 90-day reports on CableCard roll-out starting 8/1/05

Remaining Challenges – Consumer Education Need to educate consumers that there is a transition going on and how to prepare themselves Need to educate consumers that there is a transition going on and how to prepare themselves 84% of consumers are familiar with the term High- Definition TV 84% of consumers are familiar with the term High- Definition TV But how many know that analog broadcasting is ending? (In 2002, GAO found that 40% of consumers had never heard of DTV transition) But how many know that analog broadcasting is ending? (In 2002, GAO found that 40% of consumers had never heard of DTV transition) FCC web site ( tip sheet FCC web site ( tip sheet Warning labels for analog sets? Warning labels for analog sets?

The End of Analog Target date December 31, 2006 But Congress specifies conditions for extensions e.g., the “85% test” When transition is over, government will reclaim 108 MHz for public safety and advanced wireless services (TV channels 52-69) Broadcasting will continue on “core” spectrum channels 2-51 Congress examining setting hard date, possibly as early as end of 2006

Transition Impact on Viewers? Over-the-air viewers: Over-the-air viewers: About 15% of TV HHs rely exclusively on over-the-air TV About 15% of TV HHs rely exclusively on over-the-air TV About 70 million TV sets not connected to cable or satellite About 70 million TV sets not connected to cable or satellite What, if anything, should gov’t do? What, if anything, should gov’t do? Cable subscribers: Cable subscribers: How should DTV signals be carried? How should DTV signals be carried?

Conclusion Transition moving from start-up phase to mass market phenomenon Transition moving from start-up phase to mass market phenomenon Remaining challenges being addressed Remaining challenges being addressed Questions/further information: Questions/further information: