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Digital transition slowing bit by bit

Jul 23, 2001  •  Post A Comment

If the Federal Communications Commission wants the digital TV transition to happen, the agency will have to force the issue because market forces aren’t getting the job done.
At least that was one reaction of key industry observers last week in the wake of word that the National Association of Broadcasters is urging the agency to let broadcasters slash their hours of digital TV operation and to ease the way for hundreds of commercial TV stations to get a reprieve from the government’s DTV build-out deadlines.
“When there is no regulatory cop on the beat, these guys are going to take advantage,” said Mark Cooper, director of research for the Consumer Federation of America.
“Most broadcasters are doing everything they can to postpone and extend this transition,” said Gary Arlen, president of Arlen Communications, a Bethesda, Md., research company.
Under FCC rules, broadcasters are supposed to transmit digital TV signals whenever they operate their analog stations.
But the NAB made waves by asking the FCC to ax those rules for allegedly wasting electricity at a time when there are few TV sets capable of DTV reception in homes.
Also under FCC rules, all of the nation’s 1,200 commercial TV stations are supposed to launch DTV operations by May 2002. But the NAB is urging the FCC to come up with a simple way to deal with the hundreds of extension requests that stations are expected to lodge.
Industry observers said NAB’s requests, which would have been met by howls of protest as recently as a year or two ago, are in response to not-so-subtle hints from the Bush administration’s FCC chairman Michael Powell that he believes the transition should be spurred by marketplace forces, not government edict. He has suggested that the Clinton administration’s DTV deadlines were overly ambitious.
Some analysts also said a basic problem for the DTV rollout is that broadcasters don’t have a marketplace incentive to convert any time soon. That’s the case because broadcasters got the channels for the conversion from the government for free and thus don’t have to build out quickly to try to recoup costs.
Indeed, because so few DTV sets are capable of receiving DTV signals, the quicker broadcasters build out, the longer they suffer
financially.
“If you don’t have market forces, you either need massive government intervention or you say the whole thing isn’t worth it,” said Blair Levin, a telecom analyst for Legg Mason Wood Walker who was once a top aide to former FCC Chairman Reed Hundt.
Even Dick Wiley, the former FCC chairman who headed the agency’s DTV advisory commission, said he believed the lack of governmental and industry leadership on the issue has hurt the cause.
“I think it’s one of the great transitions of our time,” Mr. Wiley said. “But nobody seems to care, and I think that’s selling the public short.”
Also making it easier for broadcasters to get their way with digital now, according to sources, is that DTV has dropped off the radar screens of many policymakers. That’s the case in large part because the wireless radio industry, which once had been lobbying strenuously to win the right to bid in government auctions for the broadcasters’ analog channels (and therefore bending the ears of regulators against broadcasters), has refocused its short-term ambition on getting spectrum that is currently allocated to the military.
It’s also noted that while the Consumer Electronics Association says the cost of DTV sets has been coming down recently, receivers are still too expensive for most consumers. In addition, sources said the industry’s criticisms about the difficulties of getting U.S. DTV transmissions over the air, particularly to indoor antennas, have undermined consumer confidence in the technology.
“I wouldn’t go out and buy one of these things myself,” said Jim Hedlund, president of the Association of Local Television Stations.
Added Mark Hyman, Sinclair Broadcast Group vice president, corporate relations, “It’s not like the American public is clamoring for all sorts of activity.”
Also helping broadcasters plead their case for delay is the fact that a calamitous advertising economy has led to a drop in ad revenues of up to 20 percent or more in some markets.
“Short term, the last thing you’re thinking of is new things to be spending money on,” Mr. Hedlund said.
Despite the postponements, David Donovan, president of the Association of Maximum Service Television, said transmission improvements to the nation’s DTV standard are expected to be unveiled “by the beginning of next year.”
“We are doing our part,” Mr. Donovan said.
Gary Shapiro, president of Consumer Electronics Association, said more than 1 million households are equipped with “DTV-ready sets”-that is, including monitors that can’t receive DTV signals over the air because they don’t have digital tuners.
“From the manufacturers’ point of view, DTV is going very well,” Mr. Shapiro said.
In a press release last week, CEA also said manufacturers sold 227,349 DTV sets and monitors to dealers in the second quarter of the year.
“The close of the second quarter and these impressive DTV sales figures represent another success not just for manufacturers but for consumers and the overall transition from analog to digital,” Mr. Shapiro said. “Consumers clearly are sold on digital quality.”
But Sinclair’s Mr. Hyman said there’s nowhere near 1 million homes in the U.S. capable of receiving DTV over the air.
“That statement has taken the term `bogus’ to a whole new level,” Mr. Hyman said.