The "Beltway" meets "The Strip" again this year as top government officials come to the Consumer Electronics Show in Las Vegas. In recent years CES has become a destination for many members of Congress and regulatory officials who want to experience in person the scope and vitality of the CE industry and to get an up-close and personal view of the newest electronics products and technologies.
This first-hand view is important because throughout the remainder of the year these legislators and regulators — in Washington and state capitals nationwide — consider legislation and regulations that impact the consumer electronics (CE) industry every day. CEA's Government and Legal Affairs department works with these officials daily, advising, lobbying and reporting on federal, state and international CE policy on behalf of its members, the industry, and consumers.
In recent years, the bulk of the work for government affairs has revolved around five crucial areas: broadband, home recording rights, energy efficiency, sales tax holidays and the digital television transition. This past year was no different, with digital television making headlines, especially since the Federal Communications Commission (FCC) has mandated that digital tuners be built into all TVs by 2007, and consumers are purchasing digital TVs at a rapid pace.
In the fall the FCC addressed recording rights and the DTV transition when it adopted rules for the so-called "broadcast flag," designed to prevent the mass redistribution of digital broadcast television programming over the Internet. While there was much discussion of the concept and the timing of the mandate within the membership and the industry as a whole, and while there are still reservations in some quarters about the technology's implementation, most viewed it as a positive step. Gary Shapiro, president of CEA, said, "We applaud the Commission for establishing a date of July 1, 2005 for products to comply with the broadcast flag requirements as we had urged. Through this act the FCC has recognized the real-world product development and manufacturing cycles of digital television product manufacturers."
Shapiro also urged the commission and broadcasters to implement the flag "in a manner that respects and protects consumers' fair-use rights." And he also urged the FCC and broadcasters "to ensure that implementation of the flag does not invalidate the billions of dollars consumers have invested to date in DTV, DVD, VCR and related products."
Michael Petricone, CEA government and legal affairs VP, noted, "The key (to the broadcast flag) is how it's implemented. If at the end of the day, consumers rights are preserved and broadcasters are more comfortable airing their digital content, it will work."
One of the biggest accomplishments of 2003 was the publication by the FCC of the cable plug-and-play agreement for digital televisions. "You cannot overstate the importance of plug-and-play," noted Petricone. "It gives a huge boost to the DTV transition, and it is a great example of how the process can work, with the encouragement of the Congress and regulatory agencies."
"One of the great things of the last years is that the Congress didn't have to produce much legislation in this area because the industries involved were working together to make it happen." This is a very active Congress with many members especially interested in issues that are critical to the CE industry, especially Chairman Tauzin and Rep. Dingell of the Commerce Committee. They let us know their interest very clearly, but gave the marketplace the room to let the various parties work together without legislative intervention."
In digital television, an area of growing interest to many members of Congress, there's a heightened sensitivity to the rights of consumers. "There was a time when the content industry could get pretty much anything they wanted in Congress," Petricone noted, "but we're now seeing a more balanced debate." There's an increased understanding that these are very complex issues with strong consumer interest and members of Congress are hearing about it from their constituents. "There's also a growing consensus," Petricone said, "that the DCMA (Digital Millenium Copyright Act) leads to some absurd results and needs to be revised."
But the content industry has opened another front in the seemingly never-ending efforts to roll back consumer's recording rights. The content industry has increasingly gone to the states under the guise of "cable theft" to lobby for laws that would limit consumers rights to use their electronic products as they please. "There's been some strong pushback by consumer groups," Petricone said, with such bills vetoed in Colorado and stopped in Texas.
One critical industry issue that often flies below the radar screen is the recent proliferation of class-action suits that can engender an anti-business climate and raise the cost of doing business for consumer electronics makers. It was one of the issues highlighted by Arnold Schwarzenegger in his successful insurgent run for governor of California.
Class action suits bedevil the industry every day at the state and federal level and now there is a bill being considered in the Senate that would limit this type of suit's application. CEA is pushing for legislation, Petricone said. "There's a real window of opportunity to make class action suits more reasonable," he noted.
Another positive development for the industry Petricone noted was the FCC's release of additional spectrum for unlicensed devices. "This had terrific support and push from Capitol Hill," he said, "particularly from Representative Darrel Issa (former CEA chairman) and Senator Barbara Boxer."
Another effort at the state level that has shown increasing success is CEA's encouragement of sales tax holidays for high-tech products. Sales tax holidays are not a new idea, but applying the notion to the digital economy is. CEA is urging states to create sales tax holidays for computers and computer-related products as a way to encourage their residents to embrace technology. In addition to promoting sales of computer related technologies, CEA believes this is an innovative way to help bridge the "digital divide."
Most recently Massachusetts created the state's first sales tax holiday as part of a broad economic stimulus package in November. The temporary sales tax exemption will take place this August covering all consumer goods including electronics products with prices under $2,500. This adds to the five states (Pennsylvania, South Carolina, North Carolina, Georgia, West Virginia) that held sales tax holidays in August 2003 that focused on or included computers and related products.
Recent research indicates that sales tax holidays help to bridge the technology gap for lower income consumers. CEA's back to School Computer Report found that 68 percent of respondents earning under $15,000 think a computer is important for schoolchildren and 64 percent of those earning under $25,000 said they would be more likely to buy a computer during a sales tax holiday. "We have seen how sales tax holidays for computers and related products have stimulated consumer demand and generated new sales that would not have taken place otherwise," said Douglas Johnson, senior director of technology policy at CEA.