Hefty government fines may prove a strong incentive for broadcasters to return their analog television spectrum to the government in 2006.
Outraged that some TV stations are dragging their feet on transitioning to digital, Senate lawmakers last week raised the specter of financial penalties for stations that hang onto analog spectrum beyond the give-back date.
“Maybe you [should] pay something if you are keeping the digital spectrum along with the analog spectrum in 2006. I think that’s only fair to the taxpayers,” Sen. Peter Fitzgerald, R-Ill., said at a hearing Thursday before the Senate Commerce Committee.
Panel Chairman Sen. John McCain, R-Ariz., was more cautious.
“I think [we] need to explore that one. Again, I doubt seriously if that could get through the Congress of the United States. The broadcasters would oppose it, and we’d have great difficulty,” he told reporters.
His committee members, he said, are starting to recognize that Congress made a “serious mistake” by giving broadcasters $70 billion worth of digital spectrum for free. He plans to hold more hearings on digital TV.
Watchdog and think-tank witnesses recommended that the government auction broadcasters’ digital spectrum to the highest bidders, potentially enabling the spectrum to be used by wireless companies instead.
Meanwhile, broadcast witnesses reluctantly acknowledged what many industry observers have known all along: Most stations will not be ready to give back their analog frequencies on time.
Under federal law, stations must return their analog spectrum by 2006 unless 85 percent of viewers in a market do not have access to digital signals. Most broadcasters don’t expect the 85 percent threshold to be met for many years.
Also at the hearing, the witnesses said some commercial TV stations will not be able to meet a federal requirement that they offer digital signals beginning in May 2002.
Sen. McCain told reporters the 2002 deadline and other mandates will be delayed.
“I guarantee you that they will be. I can assure you. They have sufficient clout to extend those deadlines.”
Sen. Ted Stevens, R-Alaska, was more sympathetic, saying, “I do think there’s some need for extensions of the deadlines in the existing law. We’ve got to listen to the market and see what the market’s going to do.”
The Arizona lawmaker, noting that TV executives a few years ago promised to use their digital frequencies to offer free high-definition signals, said the industry has engaged in a classic “bait and switch.”
He said industry officials are now suggesting they don’t have to offer HDTV because the 1996 Telecommunications Act doesn’t require them to do so.
Ben Tucker, executive vice president, broadcast operations, Fisher Broadcasting, said, “There’s a lot of experimentation going on with spectrum … and that was authorized under the statute as far as I know.”
When Mr. Tucker said stations are generally converting to digital on schedule, Sen. McCain jumped in: “We’re going to reach 85 percent of the homes in America by the year 2006? You’re going to comply with the [federal law]? There’s no one in America who believes that.”
The witness said the industry has encountered problems with construction permits and regulatory hurdles and conceded there will be delays. Stations that can’t meet the 2002 deadline will seek extensions.
Cable and broadcast officials squabbled over whether the government should require cable companies to carry both the analog and digital signals of stations during the transition as well as the multicast signals of DTV broadcasters.
DTV will never catch on until cable, which reaches about 70 percent of homes in America, agrees to carry the signals, Mr. Tucker argued.
“There has to be some sort of must-carry for our digital signal so we can encourage consumers to go out and buy a digital set,” Paxson Communications president and CEO Jeff Sagansky said.
But Michael Willner, vice chairman of the National Cable Television Association and president and CEO of Insight Communications, said must-carry requirements would clog up precious capacity on cable systems.
Cable companies are already required to carry analog TV stations and must carry the DTV feeds of any broadcasters terminating their analog signals. Beyond that, some cable companies have negotiated digital signal carriage agreements with specific station groups, usually major players.
Mr. Tucker proposed that manufacturers include both analog and digital tuners in all new TV sets, but the idea met with opposition from watchdogs and the Consumer Electronics Association. To date, digital TV monitors and tuners are sold separately.
CEA said the plan would result in higher costs and limited consumer choice. “We estimate that such a mandate could add hundreds of dollars to the cost of almost every television set, pricing many lower-income Americans out of the market and severely slowing the DTV transition,” CEA President and CEO Gary Shapiro said.
Sen. McCain sharply criticized plans by Paxson Communications and other broadcasters occupying channels 60 to 69 on the analog television spectrum to vacate the frequencies early in exchange for billions of dollars in payments from wireless companies. Paxson is prepared have its 18 analog TV stations on the band leave the spectrum in 2003 or 2004.
“Doesn’t this presume that broadcasters own this spectrum, while in reality it belongs to the American public, who’s been loaning it to them based on the promise of digital television?” Sen. McCain asked rhetorically.
Paxson’s Mr. Sagansky emphasized the plan is being coordinated with the Federal Communications Commission.
He said compensation would be appropriate because the Paxson stations would lose much of their viewership after leaving the band. The stations will be available on cable but would no longer be broadcast as analog signals. They’d be offered as free over-the-air digital TV signals, but few people have DTV sets.
After the hearing, Sen. McCain too a softer tone, suggesting he’s open to exploring Paxson’s approach and conceding there’s little chance of legislation emerging to stop it.
Lawmakers glossed over questions about the industry’s embrace of the 8VSB transmission standard, which broadcast trade association tests show performs inadequately. The tests also raised questions about the efficacy of the COFDM standard, which is widely used in Europe.
“It’s time for the public to get full value for its very, very valuable properties,” Dr. Mark Cooper, director of research for the Consumer Federation of America, said.
He thinks the DTV spectrum should be auctioned to the highest bidder, with the proceeds going to a trust fund to develop noncommercial, local programming “to fill a very clear need in this country for that kind of responsive programming.”