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Subsidy Under Fire

Jul 25, 2004  •  Post A Comment

A proposal to require the federal government to pick up the tab for the digital-to-analog converter boxes for the 45 million analog TV sets in the United States that aren’t currently hooked up to satellite TV or cable could cost at least $4.5 billion-a half-billion more than the $4 billion some project that government auctions of the broadcasting industry’s analog channels will raise for the federal treasury.

That was the alarm being sounded by Rep. Rick Boucher, D-Va., during congressional hearings on the DTV transition last week.

“We may not realize enough [from auctions to pay for the converters],” said Rep. Boucher.

The cost of a federal subsidy for converters is at issue because leading lawmakers have expressed interest in using them to expedite the DTV transition.

Lawmakers want to speed the switch to clear the way for auctions of broadcasters’ analog channels, which are supposed to be returned to the government at the end of the DTV transition.

At the hearings last week, Rep. Joe Barton, R-Texas, the chairman of the House Energy and Commerce Committee, said limiting the subsidy to one $100 converter for each of the 10 million or so homes expected to still be relying exclusively on over-the-air broadcasting at the end of 2006 would cost $1 billion.

“One billion dollars is nothing to scoff at, but auctioning the reclaimed [analog] spectrum with a hard date in place should bring in many more times that amount to the Treasury,” Rep. Barton said.

But Rep. Boucher said he couldn’t support transition legislation unless the government agreed to pay for converters for the estimated 45 million analog TV sets in consumer homes that aren’t already hooked up to satellite and cable.

“If the transition results in stranding millions of American homes without the ability to receive their local broadcast signals, we will have failed miserably and the voters will know who to blame,” Rep. John Dingell, D-Mich., said in a statement.

The hearing was supposed to focus on the transition to DTV in Berlin. There the German government paid for converters solely for consumers on the city’s welfare rolls. But Rep. Boucher said he does not believe restricting subsidies to the neediest would work in the United States, where he said more consumers rely on over-the-air broadcasting than in Germany. “The owners of analog sets must be held completely harmless,” Rep. Boucher said.

According to a Government Accountability Office study released at the hearing, TV stations in Berlin stopped transmitting in analog in August 2003. Berlin subsidized the entire cost (up to $158.70 apiece) for 6,000 “needy households,” for a total of $615,100.

As a result of the switch, GAO said the number of over-the-air channels available to Berlin households went from 11 to 27.

The GAO study also noted that there are numerous differences between television in Germany and in the United States. For starters, there are two public broadcasting networks in Germany that receive about $7.4 billion a year raised from mandatory monthly fees of about $20 paid by each household. There are also two dominant private broadcasters.

While 15 percent of U.S. households rely exclusively on over-the-air reception, only about 5 percent to 7 percent of German households do. Other German households either get their TV from cable for about $18 a month (for about 30 channels) or get about 125 channels from satellite, which is free after the household pays around $246 for the satellite dish and related reception equipment.