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Barton to Broadcasters: Speed Up the Switch

Congressman urges use of converter to hurry digital conversion 8/01/2004 08:00:00 PM Eastern

If Rep. Joe Barton (R-Texas) has his way, broadcasters will have to turn in their old analog channels by the end of 2006—at least three years earlier than planned.

Switching off analog channels so early could leave most of the 12 million U.S. households that don't subscribe to cable or satellite TV without access to television.

Even so, lured by the promise of billions in revenue from auctioning reclaimed channels, the House Commerce Committee chairman and a growing clique in Washington are convinced that the federal government can speed the transition without hurting anyone. The key: Give folks who can't, or won't, buy digital sets a gadget that would keep their old analog sets working in the digital world.

Paying for such converters is a snap, says Barton: Use a small portion of the auction proceeds. The converters wouldn't allow the old sets to display the beautiful high-definition pictures that DTV offers, but nobody will be forced to throw a perfectly good appliance into the landfill.

Barton says a government subsidy will cost no more than $1 billion—not exactly chump change but a tiny portion of the tens of billions of dollars that supporters of the idea say can be raised from the channel auction. Backing Barton are wireless companies hoping to pick up old broadcast channels to expand their services. Also, supporting him: like-minded think tanks, such as the free-market Manhattan Institute and the New American Foundation. The latter argues that broadcasters got a free ride when digital channels were doled out to them at no upfront cost.

The FCC asked Congress to consider a converter subsidy in March. Initially, the idea of "TV welfare" drew little takers, but incessant lobbying by the wireless industry and Washington think tanks has changed minds on Capitol Hill. Still, questions linger, particularly whether Barton's estimate for the subsidy is too low and the auction windfall too high.

Subsidizing converters worked in Berlin last summer. So Congress and the FCC are toying with a plan that would combine a set date for returning analog channels, perhaps the end of 2006, with government-subsidized converters.

"We should complete the DTV transition in the United States as soon as possible," Barton said during a recent hearing on Germany's experience. "Berlin has shown us that a hard deadline can work." He wants the channels back by Dec. 31, 2006, rather than waiting until 2009, the FCC's working deadline.

Broadcasters' fear

Broadcasters fret over all the talk, fearing that they will end up spending $16 billion to go digital while delivering to most viewers a picture little different from the one available for decades. They also fear completing their end of the DTV conversion before winning the right to secure cable and satellite carriage for digital multicast channels or full high-definition programming. Unless the overwhelming majority of viewers can be lured by HDTV and other new digital services, broadcasters worry that they will have gained nothing to reverse free over-the-air TV's long slide in market share.

"I do not think the Berlin experience shows us to be on the wrong track," says Greg Schmidt, vice president of new development for LIN Television. Barton's plan "would be vastly more complicated and expensive."

But broadcasters' needs are taking a back seat to the government's desire to raise revenue and jump-start the wireless industry with new spectrum that can be developed into new services. Estimated costs of the converter subsidy vary widely. Barton thinks the job can be handled for the relatively low cost of $1 billion. Others consider his figure laughably optimistic, pegging the costs at between $3 billion and $7 billion.

Low-cost converter

Barton assumes that converters would cost no more than $100 and only one would have to be provided per household. Motorola, which hopes to create new wireless and DTV markets for itself, pledged to do what it can to move things along. The company is offering to have a converter priced under $70 on the market if the government completes the DTV switch by early 2007. If Motorola makes good on its offer, the government could subsidize converters for less than Barton predicts.

Rep. Rick Boucher, a Virginia Democrat on Barton's committee, worries that those estimates are wildly optimistic. Congress will be forced to subsidize 45 million or more converters, he says, because Americans will demand that the government fund converters for their second, third and fourth sets, too.

"Owners of analog sets must be held completely harmless," he says.

More worrisome, Boucher says, is his colleagues' faith in an auction windfall. There's a real chance that the government won't raise even enough to cover the cost of the subsidy. He notes that a handful of analog channels have already been auctioned, raising a meager $88 million, not even a tenth of the money needed to fund the converter subsidy.

Says Boucher, "Every time we try to predict receipts from auctions of spectrum, we're wrong."

March