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A Digital Divide Cracks Wide Open

Broadcasters and consumer-electronics makers clash as the transition to DTV accelerates 6/17/2005 08:00:00 PM Eastern

As government officials and regulators turn up the heat on the nationwide transition to digital TV, the relationship between broadcasters and the consumer-electronics industry is feeling the strain. The two groups’ battles to influence decision-makers are usually fought in Washington hallways and offices, away from the public eye, but lately open warfare has erupted.

On Wednesday, the National Association of Broadcasters and another industry trade group, the Association for Maximum Service Television (MSTV), announced that they would begin soliciting proposals from consumer-electronics makers to produce a digital converter set-top box. The group’s aim: to have a set-top box available to consumers who watch over-the-air TV by the end of this year, priced at about $75.

The Consumer Electronics Association (CEA) immediately dismissed the announcement as a “publicity stunt.” Michael Petricone, the CEA’s VP, technology policy, government and legal affairs, says, “If they really wanted to help jump-start the DTV market, maybe they could use their analog channels to promote HDTV and the wonders of digital television. This is simply an attempt to confuse legislators.”

The spat comes on the heels of another contretemps over the NAB’s recent ads in Capitol Hill publications Roll Call and The Hill criticizing the consumer-electronics industry for continuing to make and sell analog TV sets. The ads, which depict TV viewers staring at snowy screens, say that “foreign electronics manufacturers continue to sell soon-to-be obsolete analog televisions to American consumers. Those Americans will lose their picture or be forced to buy a new set on whatever date Congress chooses to flip the switch to digital-only signals.”

The CEA’s Petricone objects to the ads, particularly their use of the word “foreign.” Says Petricone, “The ads say the debate over hard deadlines and the transition comes down to foreign manufacturers’ wanting to turn off consumers’ televisions. They’re relying on name-calling and xenophobia, and I think it’s shameful.”

NAB spokesman Dennis Wharton says it’s worth pointing out that sets being made overseas could cost some Americans their programming. “Those ads are meant to warn Congress of the consequences of legislation that could disenfranchise millions of viewers.”

The NAB’s message is likely to resonate with at least one lawmaker. Senate Commerce Committee Chairman Ted Stevens (R-Alaska), told reporters last month, “I don’t know why these foreign manufacturers shouldn’t shift over to digital, and if they don’t, they should give us a box.”

The recent war of words comes at a time when Washington is focusing on three important DTV-related priorities, all intended to speed up the switch to digital transmission.

First is setting a hard date for shutting off analog transmissions and, in turn, giving spectrum back to the government so it can reallocate a portion of it to emergency- service needs and then auction off the rest to wireless-service providers. Second is deciding whether or not the government should subsidize the cost of DTV receivers so consumers who own analog sets and rely on over-the-air service will still be able to watch digital broadcasts (Democrats support a subsidies-for-all policy, while Republicans are seeking means-testing). And third is speeding up the deadline that will require consumer-electronics makers to build digital tuners into new TV sets.

“Retailers Have No Incentive”

Moving up the tuner deadline is the most complex issue. For example, the Federal Communications Commission decreed two weeks ago that 50% of TV sets between 25 and 36 inches manufactured after July 1 must have built-in DTV tuners. The CEA expressed disappointment with that ruling but then, in the same breath, thanked the FCC for granting its request to move up the date when 100% of the sets need the tuners. (The deadline is now next March instead of next July).

At first glance, that reaction seems contradictory. But, for the CEA, the problem isn’t the cost of adding the tuners to 50% of the TV units shipped after this month. It’s that retailers, which aren’t mandated by the government to help sell TV sets with integrated DTV tuners, sell more sets without digital tuners than sets with them because the former are cheaper for consumers (sometimes $200-$300 less expensive). Another hurdle: Most American homes don’t need the tuners because they don’t receive over-the-air TV signals.

“Retailers have no incentive to order 50% of the sets with digital tuners because 87% of their customers use cable or satellite to receive their TV signals,” says Petricone. “So instead, retailers will stockpile the cheaper sets without the tuners. And that isn’t good for us, the DTV transition or even broadcasters.”

The NAB’s Wharton says the CEA’s information is inaccurate. “The Government Accountability Office has testified in front of Congress saying that 19% of all households rely on over-the-air television signals,” he points out. “Whose numbers are more believable? The highly respected GAO or the trade organization for TV-set manufacturers? We think the answer is obvious.” (The difference, it should be noted, is between 87% and 81%.)

The FCC also proposed a rule to move the date by which all sets larger than 13 inches must have DTV tuners, from July 1, 2007, to Dec. 31, 2006. That alarms the consumer-electronics industry because, with many of those TVs costing $100-$200, adding digital tuners at the current expense of $100-$150 would make the sets essentially unsalable. Manufacturers likely would simply stop making TV sets of that size until the tuner cost dropped.

“Manufacturers obviously want to make sure the sets they sell are in compliance with the law,” says Petricone. “If you push the deadline up too soon, manufacturers may have no choice but to stop manufacturing sets in that product category.”

And it’s the nature of new electronics gear to drop in price over time. John Taylor, LG Electronics VP, public affairs, expects the cost of the DTV tuner to be about $40 by 2007. If the manufacture of smaller sets is stopped, it likely would only be until the cost of the DTV tuner becomes as inexpensive as the analog tuner.

“Potential Consumer Revolt”

Those cheaper tuners will also play an important part in making DTV converters for analog TV sets affordable. Once the analog signals are turned off, every analog TV set that receives over-the-air signals will need the DTV converter.

“Congress needs to be aware the potential consumer revolt is enormous if millions of Americans wake up on Jan. 1, 2009, and their sets don’t work,” says Wharton.

LG Electronics’ Taylor says that developments in DTV-receiver-chip technologies will help drive the costs down and, once chip volume exceeds 15 million per year, the cost will fall even more. “Who would have thought two years ago that you’d be able to buy a progressive DVD player for $50 today?” he says.

Stranger things can happen—such as the almost certain outcome of the current feud between the NAB and CEA. Converter boxes will accomplish more than changing analog signals into digital: The converters likely will turn enemies into allies. After all, broadcasters will play an important role in letting over-the-air viewers know how and where to buy the new consumer-electronic devices.

 

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