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New Year, New Gadgets, And Maybe New Rules

By Frank Ahrens
Washington Post Staff Writer
Saturday, January 1, 2005

In 2005, there's a good chance you or someone you know will buy a digital television set and a satellite radio and purchase a movie at home using a remote control or laptop. In the newspapers (strike that -- on the Internet), you'll read more about radio and television indecency and may very well see the Supreme Court take the first step toward tossing out the federal regulations that have kept NBC from looking more like HBO.

Where 2004 saw Comcast Corp.'s attempted takeover of the Walt Disney Co., the Big Music merger between Sony Music Entertainment Inc. and BMG Entertainment, Edgar Bronfman Jr.'s purchase of Warner Music Group and NBC's purchase of Vivendi Universal's movie and television properties, no big media mergers are on the horizon for the coming year, other than the eventual purchase of troubled cable company Adelphia Communications Corp., possibly by Time Warner Inc.

This year's action will take place in the living room and courtroom, said a group of more than two dozen media, entertainment and technology executives, policymakers, commentators, public interest advocates and consultants informally surveyed by The Washington Post. Among the top technology and policy issues for 2005:

• Digital television: By the end of 2004, there were almost 10 million digital television sets in use in U.S. households, most of them high-definition televisions (HDTV). Seven million more will be shipped by the end of 2005, predicts the Consumer Electronics Association (CEA), the trade group of electronics makers.

Digital televisions enable local television stations to add channels and improve the picture and sound quality of broadcasts.

"The tipping point has already occurred for HDTV," said Gary Shapiro, CEA president. "Every major network is broadcasting in HDTV, and everybody who has ever experienced HDTV wants it."

Congress or the Federal Communications Commission is expected to set a date for the end of the transition from analog to digital broadcasts -- a date by which all over-the-air analog signals must cease, policymakers said.

Cable companies such as Comcast also like the digital conversion because they hope 2005 is the year that video on demand (VOD) catches on. VOD lets cable subscribers buy movies and programs when they want and adds another revenue stream to the cable industry, which has stopped adding customers as more viewers are switching to satellite services.

"Most consumers lack the awareness of VOD's existence," said Shari Anne Brill, a media buyer with Carat USA. "VOD will get a bigger push from cable systems."

More consumers will listen to digital radio in 2005, as well.

Pay satellite radio services offered by XM Satellite Radio Inc. and Sirius Satellite Radio Inc. passed the 3 million and 1 million subscription marks at the end of 2004, respectively, and both will angle for more talent along the lines of Howard Stern and Bob Edwards in 2005.

Regular broadcast radio will try to fight back by, like television, converting its signals from analog to digital, improving the sound quality of radio shows, adding channels and adding text to programming for consumers who buy new digital radios. The technology will enable stations to offer niche programming -- similar to WTOP's new Federal News Radio -- and charge for premium content.

"Satellite radio will either see strong upward movement, or the bubble will start to burst," said Jeffrey H. Smulyan, president of Emmis Communications Corp., which owns 27 radio stations. "I pick the latter," he added, perhaps hopefully.

• Your TV is your phone; your phone is your TV: Consumers will get more choices as cable companies offer phone service and Internet phone calls become a reality. At the same time, regional phone companies will offer video service competing with cable companies, said David L. Cohen, Comcast executive vice president.

"Next year will bring more breakthrough technology to consumers, including more voice choices through new platforms like cable and WiFi and more video choices through phone lines, broadband and cell phones," said Michael K. Powell, chairman of the FCC. "The consumer sits at the center of the information universe as more powerful tech tools come into the home."

• Toy story: XM already has a portable radio that will record five hours of programming; expect to see more TiVos for radio. Also, hard drives will be put to greater use: Game boxes will be used to store movies and MP3 players will hold photographs.

Sales of TiVo and other digital video recorders will continue to grow slowly but will speed when television manufacturers begin building them into new digital sets, predicted Alex Wallau, president of ABC network operations and administration.

You can expect to see full-motion video come to cell phones this year, as wireless networks get faster, Powell said. Possible content: short news clips and local weather.

This could be a critical year for the movie industry, as it battles online and bootleg piracy. Hilary B. Rosen, former president of the Recording Industry Association of America, wonders if the movie industry will wait until piracy reaches crippling levels -- as it did in the music industry -- before licensing a significant number of movies for sale online and creating the "iTunes for movies," referring to Apple Computer Inc.'s popular online music store. The studios' initial attempts to sell movies on the Web, at sites such as Movielink, have not caught on.

Technology also will continue to spur shifts in programming, others said. As more television viewers rely on 24-7 cable channels for news, the traditional network evening news program may change, said Tucker Carlson, who hosts shows on CNN and PBS.

"My guess is that you'll see NBC shift even more of its news coverage to cable [its CNBC and MSNBC channels] and the other two networks step up the search for cable outlets to do the same," Carlson said. "Five years from now, I bet all three nightly broadcasts will look a lot more like '20/20,' or 'Dateline.' "

• Supremely indecent: The FCC asked for and Congress drafted legislation to increase the maximum fine for indecency to $500,000, but it stalled before recess. The measure has bipartisan support, and lawmakers and broadcasters expect it to pass in 2005, though probably at a lower fine amount.

The bigger story may happen in the courts, however.

A number of policymakers and First Amendment scholars are expecting -- and broadcasters are hoping -- that the Supreme Court will reconsider two rulings that allow the government to police the airwaves.

The FCC can fine broadcasters for indecency and can require public-interest obligations, the court has held, because the radio and television airwaves have a limited amount of spectrum and cannot support an infinite number of stations. Also, because radio and television waves are "uninvited visitors" into homes -- meaning they can be received free -- the government is within its rights to protect children from objectionable programming.

Both rulings, however, came before the explosion of cable and satellite networks, which gave television and radio audience members a wider variety of programming. Over-the-air television channels account for fewer than 10 of the more than 100 channels available on most pay systems. Also, now that fewer than 15 percent of television viewers do not subscribe to pay television -- cable or satellite -- few homes have "uninvited visitors."

The government has no authority over cable or satellite networks and, late last year, Fox Broadcasting Co. argued that this double standard is unfair when asking the FCC to drop a $1.2 million indecency fine against the network. If the FCC upholds the fine, Fox is likely to take the case to the Supreme Court.

"Make no doubt about it -- if the industry gets serious enough about this and mounts a major challenge to the indecency rules [and] fines, it would represent the best chance in years for the courts to reevaluate" the indecency rulings, said Adam D. Thierer, the Cato Institute's director of telecommunications studies. Further, he said, "if the Republicans are so foolish as to adopt direct indecency regulations for cable . . . it would be a killer case to tee up" the indecency rulings.

Broadcasters bemoan what they call the "antiquated system."

"If Congress doesn't fix it, we will continue to have bizarre results," said Andrew W. Levin, chief legal officer for radio giant Clear Channel Communications Inc., which settled all of its outstanding indecency fines with the FCC last year with a $1.75 million payment. "For example, an NFL running back can let the f-word loose live on ESPN and the FCC is apparently powerless. The same word could cost CBS Sports $300,000. It makes no sense and certainly does nothing to protect kids, which is the whole point in the first place."

How will network writers and producers respond to the heightened government pressure on indecency?

"The return to twin beds for married couples of television," a Hollywood studio executive deadpanned.

• Full-court press: Legal battles between the technology and content industries are expected to continue, as film, television and music makers try to protect their copyrighted material and electronics makers and technologies (such as peer-to-peer file-sharing systems) seek to give consumers more ways to get and use content.

In March, the Supreme Court is set to consider whether peer-to-peer services such as Grokster are liable for illegal activity -- such as downloading and sharing copyrighted work -- committed with them. Grokster argues that it is protected by the Supreme Court's 1984 "Betamax" decision, which found Sony was not responsible for bootlegged videotapes made on its machines as long as they could be used for legal activities.

"2005 is the year in which the Supreme Court decides whether consumers control their movies, music and the Internet or whether the cable and phone companies and the Hollywood studios control what you get to see, hear and find on the Internet," said Gene Kimmelman, senior director of public policy and advocacy at Consumers Union, the nonprofit organization that publishes Consumer Reports magazine.

© 2005 The Washington Post Company