[ EEPI-Discuss ] Re: The Digital TV Fiasco

[Dan Krimm <djkrimbo@earthlink.net>]

>Date: Fri, 10 Jun 2005 08:19:43 -0500 (CDT)
>From: "Craig A. Finseth" <fin@finseth.com>
>Subject: [ EEPI-Discuss ] Re: The Digital TV Fiasco
>To: djkrimbo@earthlink.net
>Cc: eepi-discuss@eepi.org
>
>   Date: Thu, 09 Jun 2005 20:30:49 -0700
>   From: Dan Krimm <djkrimbo@earthlink.net>
>	...
>   And then, there are proposals for means-tested D-A converters to be made
>   available to remaining analog-only TV households, which I also support (if
>   the estimates can be believed, auctioning off the old analog spectrum
>   should provide far more than required for such subsidization).
>	...
>
>I may have this wrong, but it is my understanding that the estimated
>revenues from the analog spectrum have already been incorporated into
>the current federal budget projections.
>
>So, there isn't any money there.
>
>Craig
>
>   [ Craig, you are correct.  Back as far as the 1997 Budget Resolution,
>     Congress assumed many billions of dollars of revenue from spectrum
>     auctions related to the retirement of the analog TV spectrum.  They
>     want to get their hands on that money -- desperately.  And if anyone
>     seriously thinks that there's going to be significant money
>     available for the government to buy people TV conversion boxes, in a
>     time when so many people in this country don't even have basics like
>     reasonable and affordable health care, well, I've got a bridge in
>     Brooklyn up for sale ...
>
>        -- Lauren Weinstein (EEPI-Discuss Moderator) ]


I'm simply reporting what the heads of the House/Senate committees with
jurisdiction are saying.  Here's a small article from last week referring
to Ted Stevens, for example:

http://www.broadcastingcable.com/article/CA606639.html?display=Breaking+News&referral=SUPP

Relevant quote:

"He also said Congress must make sure all Americans can obtain converters
necessary to keep their old analog TV sets working when broadcasters go
all-digital.

Stevens said he has not decided how a converter program should work or how
much money the federal government should kick in to subsidize the cost of
boxes because he wants to make sure the cost of the program--which could
range from $500 million to somewhere in the billions depending how many
viewers receive subsidies doesn't exceed the amount raised from auctioning
reclaimed analog channels. (The funds for subsidizing set top boxes is
expected to come from a portion of the auction's proceeds.)"


Here's the logic as I see it:

 (1) without an auction, there is no money from an auction
 (2) without an actual analog cutoff, there is no auction of analog frequencies
 (3) under current statute, there is no analog cutoff until at least 85% of
households have digital reception (and even then, there is the issue of the
remaining 15%)
 (3a) IMHO doing head-end D-A conversion for cable systems is bogus as
representing "digital reception by households" -- D-A conversion should
happen at the user end, thus providing an incentive to purchase
digital-capable sets (thus, cable and other MVDS like DBS, terrestrial
microwave, satellite master antenna, etc., should present the digital
signal in a form equivalent to that originally broadcast, with full HDTV,
etc. -- and then D-A conversion if needed at the user end, in the household)
 (4) in order to get digital-capable sets (and/or D-A converters for
analog-only sets) in substantial market penetration requires ultimately
setting a hard-cutoff date, otherwise there is no competitive value
proposition in the market for more expensive dual-tuner sets as compared to
analog-only sets
 (5) people "need" their TV, and probably don't understand the health care
issue (personally I agree with you, Lauren, that health care is far more
important than TV but politically this is far more complicated -- it
depends on who doesn't have TV or health care, and what they think about it
-- and it also depends partly on the remaining lobbying power of the NAB
who will fight for every viewer they can save for their advertisers)

It would be political suicide for a politician to leave analog-only
households without TV reception.  Setting a hard date does create an
immediate market for D-A conversion and/or digital-capable sets, and that
helps bring down the cost of such items, which makes a means-tested subsidy
less costly and probably reduces the number of households that would not
otherwise have the means to get D-A or digital reception.

I don't doubt that some budget czars have already budgeted the auction
proceeds, but that doesn't stop others from claiming it for other purposes
-- such is the rhetoric game in Congress.  Ultimately, wherever it comes
from it'll have to compete with other issues from other quarters whether or
not it is "already spent" or not.  This stuff is not etched in stone; it'll
all be subject to political realities.  When push comes to shove, the
expediency of the moment rules.

It's a chicken-egg problem -- the 85% loophole destroys the incentive, and
somebody has to "go first".  Consumers won't buy digital-capable sets until
there is substantial perceived value in the added price of a digital tuner
plus the old analog tuner.  Video service providers and producers won't
provide/produce much until there are enough digital-capable viewers to make
a market (Mark Cuban excepted ... ain't it nice to have a bundle to invest
in the future before the break-even comes around).

Bottom line, not *all* analog sets would be subsidized for free D-A
conversion -- only one per low-income household, probably administered via
the IRS (not perfect, but close enough).  For the non-subsidized remainder,
the market would be big enough to keep D-A converter prices relatively low
(I've seen public quotes as low as $50/unit), and the transition can
proceed with a minimum of pain (not zero by any means, but low enough to
constrain political damage).

I doubt that cold-turkey cutoff in the next few years without *some*
low-end subsidy would be politically wise, so I doubt that will happen.
Nevertheless, a hard-date cutoff is increasingly critical because, as
you've said, they've already "spent" the auction proceeds, so the auction
needs to happen, and without hard cutoff it won't happen for many years yet.

As it turns out we should find out in the next several months -- this seems
targeted for the fall.  It'll be interesting to watch.  There is no win-win
solution here, the political task is to balance the pain.

Dan

 [ Dan, can you *imagine* the reaction from all manner of watchdog
   groups if Congress really starts talking seriously and publicly about
   spending millions or billions of dollars on TV converters, so that
   people will be able to keep using their existing working television
   sets, with so many critical budget priorities already getting such
   short shrift?  Imagine the political cartoons of rich guys sitting
   around watching football on giant screens, juxtaposed with an elderly
   couple eating dog food.

   I'm not saying subsidies can't happen.  I am suggesting that they
   could well set off a political firestorm.

     -- Lauren Weinstein (EEPI-Discuss Moderator) ]

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