Analysts rap FCC ruling on digital tv

By CHRISTIAN BOURGE, UPI Think tank correspondent   |   Aug. 16, 2002 at 1:53 PM
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WASHINGTON, Aug. 16 (UPI) -- The recent Federal Communications Commission decision to require television manufacturers to include digital tuners in all TV sets sold in the United States is bad telecommunications policy and will probably not facilitate the transition to high definition television, think tank analysts in Washington say.

"The risks seem to completely dominate any possible benefits," Thomas Hazlett, a senior fellow in the Center for a Digital Economy at the conservative Manhattan Institute, told United Press International.

"The benefits of this are only that people who don't have cable or satellite service can receive on-air digital television," he said. "But people with cable and satellite (reception) are more than 90 percent of viewers."

The FCC's Aug. 8 decision requires manufacturers to include in TV sets digital turners capable of receiving signals for higher quality high-definition television, or HDTV, beginning in 2004 for some sets, and completely phase them in for all sets by 2007.

The move is intended to speed along the federally mandated conversion from analog signals to digital television that has so far been slow in gaining momentum. Interests in the broadcasting and television manufacturing lobbies are at odds over the likely effects of the action upon costs to consumers.

Critics of the plan also believe the decision could have a negative effect upon the use of the wireless signal spectrum that is currently used for the transmission of analog TV signals. This spectrum is coveted by cellular telephone carriers and others who hope to take advantage of the potential it holds for wireless technologies.

The Consumer Electronics Association has indicated it plans to file a lawsuit to reverse the FCC decision. The group argues that the move will add from $50 to $100 to the cost of a television by 2007, and hundreds of dollars more to the cost of a new TV set in the near term. Critics have estimated the mandate will add $5 billion to the total price of televisions sold over the next five years.

But the FCC and the National Association of Broadcasters agree that though the decision would raise television costs somewhat in the short term, the mandate would ultimately add only around $16 to the cost of a new set by 2007. They also believe the new sets will drive demand for HDTV programming.

Edward O. Fritts, president and chief executive officer of the NAB called the decisions a "pro-consumer step to jump-start the transition" from analog to digital television.

In 1997, Congress mandated that over-the-air television broadcasters convert from the current analog signal to full digital signal by Dec. 31, 2006.

The consumer response to the expensive sets, however, has been moderate at best with both sides of the debate -- television manufacturers and broadcasters -- blaming each other for sluggish sales. Manufacturers cite the dearth of available content while broadcasters say as long as the sets are not a viable choice to consumers, they will not spend the money to produce high definition programming that reaches only a few early adopters of the technology.

Given that digital signals are more efficient than their analog counterparts, the FCC also intends for the switch to digital TV to free up analog spectrum for other uses, such as the next generation of cellular technologies, and wireless broadband Internet access.

In the interim, the government provided extra spectrum to all licensed television broadcasters, to allow them to continue broadcasting their analog signal along with the new digital signal, until their station operations became fully digital.

Once 85 percent of households in a region have digital television capability, the FCC is supposed to reclaim the spectrum allocated for the analog television signals in that region, and resell it for other applications, for an estimated profit of $5 billion to $10 billion.

The overall handling of digital television policy, however, has long been criticized by those who feel the spectrum could be put to more effective use immediately -- both economically and technologically -- by other wireless applications.

"It would be a good thing if it works out that the FCC could get the broadcasters out of that spectrum," said Randolph J. May, a senior fellow and director of communications policy at the free-market-oriented Progress & Freedom Foundation. "Because there is a real need for additional wireless spectrum, and if the wireless folks had this spectrum it would be of great benefit for the economy."

However, he believes the recent FCC move is unlikely to accelerate the movement of broadcasters to exclusively broadcast of digital signals, and that it will be costly to consumers. He said from a cost-benefit perspective, the decision is representative of the "mess" that characterizes the FCC's digital television policy.

Robert Crandall, a senior fellow in economic studies at the centrist Brookings Institution, said if the FCC is trying to recover the analog television spectrum for other technological uses, this decision is a very expensive way to do it.

"I think the whole digital television thing is a fiasco," said Crandall, "We should never have designated spectrum for that purpose. With so few people getting television over the air today, clearly digital video is not the way to go."

Critics of the approach cite the fact that many broadcasters -- especially in smaller and rural markets -- have already shown an unwillingness to make the transfer to digital broadcasting by failing to meet the FCC's May 1 deadline to begin transmitting at least some digital programming.

These broadcasters have cited as the reason the prohibitive costs of making the change, which are estimated to be nearly $1 million per station. They believe it cannot be justified given the limited financial return and the small number of people with televisions that can receive the HDTV signal.

They believe that this, coupled with the fact that only about 10 percent to 15 percent of homes still get their primary television signal via broadcast rather than a satellite or cable feed, demonstrates that the strategy is misguided. Indeed, the CEA has argued that the FCC should focus on getting HDTV content to televisions through cable and satellite feeds, because so few viewers still get their TV signals through antennas.

Adam Thierer, director of telecommunications studies at the libertarian Cato Institute, categorized the FCC decision as a move to shift the blame for the failure of HDTV over to the television manufacturers.

"I think that the HDTV fiasco continues to get worse in the passage of every new government regulation attempting to facilitate this misguided government venture," said Thierer.

He says that television makers have done a "wonderful" job of providing digital technology at fair prices, and at meeting consumer demand as it has developed. The demand, however, is simply not there for integrated tuners, otherwise they would be produced in greater numbers, he said.

He and others critics believe the FCC decision ultimately represents the agency's attempts to push digital television onto a mostly uninterested public, at a significant cost to the consumer.

"The FCC is trying to shove industrial policy down our throats no matter what we want and not matter how much it costs," said Thierer.

Hazlett noted that even FCC Chairman Michael Powell acknowledged the mandate was not a market-oriented policy. He thinks Powell's admission that the agency is turning to regulation as a fix to a traditionally unregulated industry "ought to set off some sirens" that the FCC is "locked in their own political world" as well as into "their own extremely bad policy" decision.

Ultimately, he said the debate over HDTV comes down to content, more of which is available through cable and satellite pay stations than over the air.

He believes the transition to HDTV should be allowed to happen at its own pace and, that the digital television revolution is already coming, just more slowly than some had hoped, and lead by subscription-based TV services instead of the broadcast networks.

"We can poke fun at those who say they don't care (about digital television) but this is not for the public policy community to decide and to force upon people," said Thierer. "There is nothing policy makers can do. Only time will change it."

According to Hazlett, the market may very well have more chances to respond -- at least in the foreseeable future --given the strong opposition to the FCC's decision and the lawsuits that television manufacturers have indicate they will file.

"My anticipation is that there will be a lot of calamitous outcry, and (the FCC decision) will be reconsidered, creating more delays, which will at least shelve the policy for some time," he said.

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