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issue: April 2005 APPLIANCE Magazine

I Want My DTV

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By Lisa Bonnema, Editor

After 2 decades of exhausting work, the DTV transition is almost here, but don’t get too excited. Thanks to the cold feet of broadcasters and cable companies, the picture is still fuzzy as to when TV will finally go all digital.

Lisa Bonnema, Editor, APPLIANCE Magazine

Consumer electronics manufacturers, for one, are ready for the transition and have more than done their part. No one can argue that OEMs have ramped up digital television (DTV) technology and made it affordable to consumers. Check out the stats: since late 1998, when the first DTV products hit the market, 16.1 million units have been shipped, according to the Consumer Electronics Association (CEA). In 2004 alone, factory-to-dealer sales of DTVs reached 7.2 million units, an increase of 75 percent compared to 2003.

OEMs have also fully cooperated with mandates put in place by the U.S. Federal Communications Commission (FCC). They have been and are continuing to integrate DTV tuners into television sets measuring 13 in and larger to meet FCC deadlines. CEA says industry is meeting those deadlines, and there are currently more than 80 equipped models on the market already.

Manufacturers are also complying with the FCC’s Digital Cable Ready TV agreement for a national plug-and-play digital cable standard, which require OEMs to design digital cable-ready TVs that accept CableCARDs distributed by cable operators. The cards allow users to simply plug in their set and get DTV programming without a set-top box. Jeffrey Joseph, CEA’s vice president of Communications and Strategic Relationships, says OEMs are even ready to move on to the next phase of plug-and-play, which allows for interactive services such as video on demand and pay per view.

So OEMs are ready. The FCC is ready. Even consumers seem ready. What’s the holdup you ask? I’ll just touch on a few reasons. First of all, broadcasters have a very valuable asset they’re not willing to give up—analog spectrum. Let me try to explain. The deadline for the official switch from analog to digital was supposed to be Jan. 1, 2006 or when 85 percent of American TV viewers receive a digital signal. Many have speculated that the 85 percent figure is unachievable and that without a hard deadline, the transition may never happen, which may be the case if broadcasters have anything to say about it.

In 1997, the U.S. government allowed broadcasters to hold onto an analog station for free to help ease the transition to DTV. Broadcasters, however, don’t want to give this up until they see some profit from DTV. So far, they’ve really seen more money going out (to pay for the equipment and infrastructure necessary to broadcast digital channels) than coming in. While I recognize the need to make money, the problem is broadcasters have been riding that wave for almost 10 years now and that spectrum is quite valuable. It’s taking up space that could easily be sold off to other industries, such as telecommunications.

While Congress may have sympathized with broadcasters historically, some politicians are losing their patience. President Bush, for instance, is trying to revive a plan that would require broadcasters to pay a $500 million fee for use of their analog TV channels as of 2007. The point? To force them off the spectrum and help boost the economy. A February 7 Reuters report says that government revenue from auctioning off analog channels could reach $100 billion. That’s quite a boost. Broadcasters, however, are playing the consumer card, saying that the transition should be based on consumer acceptance, not budget-driven timelines. Um, did I mention how many DTVs were sold last year?

Another hold up has been that broadcasters want to force cable companies to carry all of their digital broadcasting. The FCC nipped that in the bud in late February, ruling that the U.S. government won’t interfere with business transactions between cable companies and local broadcasters in order to maintain a competitive market. Broadcasters, of course, aren’t happy with the FCC decision because frankly, it isn’t helping offset the costs of the transition. Some have speculated that there may be a trade opportunity here: Broadcasters agree to a hard analog cut-off date if Congress requires cable operators to carry all of their DTV signals. We’ll see what happens.

The hope is that cable companies are smart enough to transition on their own; they just don’t want to be forced. Cable operators are already carrying 500 digital channels, although that’s a long way from the 1,400 channels currently available. Mr. Joseph says CEA’s main concern is that consumers are clearly informed as to what cable companies are offering so they can choose the provider that best suits their needs.

Unfortunately, cable companies aren’t exactly being as consumer-friendly as they could be. Part of the FCC’s plug-and-play agreement was for cable companies to offer CableCARDs to consumers at a reasonable price, preferably less than a set-top box would cost. Mr. Joseph, however, says this hasn’t been the case. “We have heard from subscribers that the cards are either as expensive or more expensive than the boxes, so that clearly isn’t the competitive market that was meant to be established,” he tells APPLIANCE. “The agreement is being implemented, but it doesn’t mean a thing if consumers don’t have reasonable access to those cards.”

Cable companies are also trying to delay the FCC mandate that gives consumers a choice in cable boxes. They even managed to get Microsoft to support the delay, spreading outrage throughout the CE industry. “Once again, cable has come forth with a creative and media-savvy way to delay their responsibility to the FCC, the CE industry, and consumers,” Gary Shapiro, CEA president, told the FCC in a statement. “We urge the Commission to review the record, stay the course, and not be duped by cable’s attempts to stall the use of CableCARDs and the creation of a pro-consumer competitive environment.”
Simply put, the technology and the consumer desire for DTV is here. That smells like success to me. And while everyone knew that the switch was going to take time, this is getting ridiculous. A well-thought-out transition is one thing, but allowing industry parties to delay the process so that they can find new and creative ways to benefit is just bad policy.

Broadcasters need to stop trying to pass the buck and jump on board with the rest of the industry, and cable companies need to start thinking about their customers first. Heck, if the CE industry held back every time it might see profit margins shrink, we wouldn’t have half of the technology we have today.

With piracy and consumer cost issues still being addressed, most agree the January 2006 deadline isn’t really possible. But at this point, the FCC needs to set a hard cut-off date for analog if the transition is ever going to happen.

As a journalist, I say the industry’s ready for DTV. As a consumer, I say I’m ready. I don’t want to wait another 20 years; I want it now.


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