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Digital Strategy in Play

Nov 22, 2004  •  Post A Comment

Federal Communications Commission Chairman Michael Powell’s plan to force broadcasters to make the switch to digital TV no later than Jan. 1, 2009, could wind up costing consumers more than $7 billion, if they want to be able to continue receiving TV signals over the air. That’s the concern being expressed by watchdog group representatives and broadcasters alike, with the FCC nearing a self-imposed deadline to vote on the chairman’s controversial plan before year-end.

“This is bad news for consumers and public,” said Jeff Chester, executive director of the watchdog Center for Digital Democracy.

Dennis Wharton, a spokesman for the National Association of Broadcasters, said, “We’re concerned this could disenfranchise millions of Americans who could face a government-forced turnoff of access to local television stations.”

Broadcasters are particularly concerned about Mr. Powell’s plan because industry studies suggest that there may be more than 73 million analog-only TV sets currently in consumer homes that aren’t connected to cable or satellite. That figure includes second and third sets in cable homes.

If Mr. Powell’s proposal wins the approval of his agency colleagues by next month, consumers could be required to pay up to $100 or more for digital-to-analog converters for each of those 73 million sets, for an estimated total price tag of $7.3 billion.

In an effort to soften a potential consumer backlash, leading lawmakers-including Sen. John McCain, R-Ariz., and Rep. Joe Barton, R-Texas-have advocated subsidizing digital-to-analog converter acquisitions, at least for consumers in low-income households. How far any such subsidy would go is unclear.

Legislation backed by Sen. McCain last month would have capped the relief at $1 billion. Even so, the proposal was opposed by the Bush White House, which would prefer to spur the transition by taxing broadcasters that don’t make the switch by 2006.

In a position paper in his campaign, former Democratic presidential candidate Sen. John Kerry endorsed the concept of providing federal subsidies for the transition but didn’t indicate how much his administration would have been willing to provide or any details about how they would have worked.

FCC officials are trying to determine how big an impact putting a firm deadline on the transition could have on consumers.

Some FCC officials contend that they’ve already taken a series of steps that could dramatically reduce the number of consumers harmed, by adopting a firm 2009 transition deadline.

Education Initiative

One key FCC ruling, for instance, mandates that most new TV sets sold as of July 2007 will have to include digital and analog tuners.

In addition, last month FCC Chairman Powell announced the launch of a new digital television consumer education initiative at the agency that appears to consist primarily of a promotional Web site at www.dtv.gov.

“Although for the vast majority of American households, digital television may be uncharted territory, we will not let them go it alone,” Mr. Powell said at the time.

Despite the chairman’s words of reassurance, broadcasters fear a forced transition will infuriate millions of consumers unless lawmakers and the White House agree to a plan to slash the financial consequences for them.

In a recent announcement, NAB and other major broadcasters floated a proposal at the FCC under which cable operators would ultimately be responsible for ensuring that their analog-only subscribers have access to digital-to-analog converters in their homes. As expected, the NAB proposal was quickly panned by the National Cable & Telecommunications Association.

In an interview, the Center for Digital Democracy’s Mr. Chester suggested broadcasters shoulder the financial burden for consumers because the transition to digital will ultimately benefit broadcasters.

“Consumers are completely helpless victims here,” Mr. Chester said. “Clearly the broadcasters and advertisers should have to pay to subsidize the digital transition.”

NAB’s Mr. Wharton said broadcasters disagree with Mr. Chester’s proposal. But Mr. Wharton declined to elaborate.

Mr. Chester said, “We will whip the public into a fury once they realize their TV sets are going to go dark.”

Despite the potential for a massive consumer backlash, the FCC’s Mr. Powell and some leading lawmakers see forcing a transition to be in the nation’s best interests because it would free up broadcast analog channels for public safety use and clear the way for auctioning those channels for new spectrum users nationwide. Those auctions are expected to raise billions of dollars for the federal treasury and spur the development of new services for consumers.

“A nationwide, hard date for the end of the DTV transition would benefit everyone,” Mr. Powell said in recent testimony before the Senate Commerce Committee.