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Culture

No more delays on digital TV

Economist Thomas Lenard warns that the transition to digital programming has foundered on the shoals of a government policy at odds with market reality.

FCC Chairman Michael Powell and his media bureau staff are floating some promising options to accelerate the transition to digital TV. Let's hope that their ideas gain some traction.

The ideas so far present an opportunity to free up valuable spectrum now occupied by TV broadcasters. Such spectrum is much needed for the new and innovative wireless technologies on the horizon. Spectrum auctions also will benefit taxpayers to the tune of many billions.

Powell and staff suggest changing the way households capable of receiving a digital signal are measured. This is a critical metric, because, according to current law, 85 percent of households in any market must be able to receive digital broadcasts before the extra TV channels broadcasters were given to get them through the transition can be freed up.

Congress established a 2006 target for the end of the digital TV transition and the release of this "analog spectrum." But the process is stalled because, as calculated, it is not likely that the 85 percent trigger will ever be achieved.

Digital TV offers a number of advantages, including the ability to provide better-quality pictures, a greater array of programming and new services, such as interactive TV. But the transition has foundered on the shoals of a government policy at odds with market reality. That policy is premised on a transition to free over-the-air broadcast TV when, in fact, only 10 percent of viewers receive television this way, and that percentage is declining.

This issue is politically difficult, because it pits powerful interest groups (the broadcasters and the cable and satellite providers) against each other.
As Powell has noted: "It seems clear to me that at some point on the horizon, all Americans--perhaps in 10 years--will have pay TV." By then, a significant portion of Americans may be getting their TV over the Internet. As Powell also noted, "If 100 percent of Americans don't get free, over-the-air TV, what are we protecting?"

The proposal floated by the FCC staff recognizes that most consumers get their TV from cable or satellite and counts those services toward the 85 percent trigger, if subscribers are able to convert digital signals for their analog sets. Currently, cable and satellite viewers are for all practical purposes not counted. This means, in effect, that 85 percent of the viewers in any market must be capable of receiving over-the-air digital broadcasts.

This, in turn, means that consumers would have to buy expensive over-the-air receivers for the 85 percent trigger to be satisfied. These receivers would have virtually no utility for cable subscribers and would be useful for satellite subscribers only in selected areas, where satellite may not carry local signals.

Hopefully, these new FCC options signal a broader discussion of ways to accelerate the digital TV transition. The United States is not the first nation to confront this challenge. In Berlin, analog TV transmission was turned off at a fixed date. Low-income households were given a digital-to-analog converter box; other households were expected to convert to a subscription service or buy their own converter.

There is no alternative to government taking the lead and doing it sooner rather than later.
One immediate opportunity to take a step in the right direction involves the Satellite Home Viewer Improvement Act (SHVIA), currently up for renewal in the Congress. Satellite is the principal subscription TV alternative to cable and has been growing rapidly, especially since passage of SHVIA in 1999, which for the first time gave satellite companies the ability to provide local broadcast TV signals.

The law also permits rebroadcast of distant signals, if the programming is not available locally. But the current distant-signal provision of SHVIA applies only to analog signals. When the act is renewed this year, this provision should be extended to apply to distant digital signals.

This would help the transition in two ways. By making digital broadcast satellite more desirable, it would move viewers to subscription TV. And, by increasing the digital programming available, it would increase demand for digital TVs.

Moving the nation the rest of the way from its current approximately 90 percent subscription viewership raises the prospect of reclaiming the entire amount of spectrum currently reserved for broadcast TV (402 MHz) and auctioning it off for other, higher-valued uses. Estimates, based on recent auctions for 3G spectrum in both the United States and Europe, put the market value of the TV spectrum as high as $367 billion. If just analog spectrum were returned, the amount of spectrum relinquished would be smaller but still very valuable.

This issue is politically difficult, because it pits powerful interest groups (the broadcasters and the cable and satellite providers) against each other. But there is no alternative to government taking the lead and doing it sooner rather than later. When demand for the airwaves for innovative new wireless communications technologies is exploding, the costs of delay are huge.