[opendtv] Analysis: Money for Nothing
- From: Craig Birkmaier <craig@xxxxxxxxx>
- To: OpenDTV Mail List <opendtv@xxxxxxxxxxxxx>
- Date: Wed, 26 May 2004 08:25:37 -0400
The following interesting article was forwarded to me by another list
member. It puts the all channel receiver act in proper perspective,
not to mention the DTV receiver mandates that are about to kick in...
Money for Nothing
The FCC is forcing you to buy digital TV tuners that may not even work.
By Thomas Hazlett
Posted Monday, October 7, 2002, at 8:07 AM PT
In August, the Federal Communications Commission mandated that television
manufacturers, beginning in 2004, include digital tuners in new TV sets. By
2007, every TV set larger than 13 inches must include the device, which
today costs upward of $500 and is used to receive digital TV signals over
the air. As consumers replace about 250 million sets in U.S. households,
they'll shell out more than $12 billion for the technology even if the cost
falls by 90 percent.
Most consumers are asking, is it worth it? But perhaps the better question
is, do the tuners even work? Last month, a New York Times review of digital
TV technology noted offhandedly that a digital TV receiver placed in a
skyscraper succeeded in pulling in just three of New York's nine digital
stations. The Times' informal results echo more scientific findings. Testing
under a range of conditions in 1999, Sinclair Broadcasting found that TV
sets in just 11 of 31 locations in Philadelphia could successfully tune in
using the over-the-air DTV standard selected by the FCC. Sinclair-joined by
several other broadcasters-has repeatedly asked the commission for the
option to use the European DTV standard. Stations and viewers could choose
which system they liked best.
Instead, the FCC has rejected these pleas and rendered it illegal for
customers to opt out. In just over four years, traditional analog TV
broadcasts are scheduled to go dark with new digital feeds taking their
place. But currently less than 1 percent of U.S. homes have TV sets with
over-the-air DTV receivers. That's not a huge problem for viewers, because
90 percent of them feed their TV desires via cable or satellite, not their
antennas. But it's a huge problem for the FCC's digital transition. By
congressional statute, at least 85 percent of the homes in a market must be
able to receive digital signals over the air, or the old analog stations
will continue broadcasting past 2006.
A preferred solution would be for everyone to simply pretend they can
watch digital TV via their antenna. Using the pretend method, viewers will
have a difficult time receiving digital TV over the air. But the same will
be true using the FCC's digital tuners, and the remedy to poor
reception-cable or satellite TV-has already been adopted by all but a tiny
sliver of TV households. Moreover, digital video can be viewed via cable or
satellite without expensive tuners. For almost all TV viewers, buying an
off-air tuner constitutes a reinstallation of tonsils.
As irrelevant as the tuners will be, their added cost is real. The
electronics industry believes the mandate amounts to a TV tax of about $200
per set. FCC Chairman Michael Powell responds that this estimate is
ridiculously high, citing alternative forecasts of just $16 to $75. But
given the tuners' effectiveness, this is just a quibble over how much to pay
for junk.
Powell goes on to argue that the mandate will save the broadcasting
industry just as the All-Channel Receiver Act of 1962 rescued the failing
video technology of its day, UHF-TV. This legislation, mandating that TV
sets sold after Jan. 1, 1964, be equipped with an 82-channel tuner, "made
UHF broadcasting a viable business," a trade journal dutifully reported
following the FCC's digital tuner mandate. Powell boasts that TV "set prices
actually declined following passage of the legislation."
Alas, both claims are bureaucratic legend. The FCC did long ago report
that TV sets dropped in price following the UHF-tuner mandate. But the
conclusion "was based on a misunderstanding of the way the price index for
television was constructed," economist Douglas Webbink wrote in a persuasive
study. Webbink-who has worked at the FCC since 1987 and is today chief
economist of its International Bureau-found that consumers paid between $85
million and $110 million each year for their UHF tuners. Despite that
subsidy, UHF stations did not become more profitable. Only when federal
regulators relaxed rules permitting cable systems to expand did UHF
stations, which benefit from improved reception over cable, achieve
widespread commercial viability.
Cable saved UHF-TV, while a TV-tuner mandate that cost consumers millions
got the credit. Now the FCC positions to take a bow for forcing billions
more in consumer costs for unused, and possibly unusable, digital tuners."In
the end," Powell says, "we have to make a judgment about what is in the
consumers' best interest."
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