[opendtv] Re: Democrats Air Concerns About Analog Switchover

  • From: Frank Eory <frank.eory@xxxxxxxxxxxxx>
  • To: opendtv@xxxxxxxxxxxxx
  • Date: Mon, 20 Nov 2006 10:14:57 -0700

Comments interlaced.

-- Frank Eory

Bert & Mark wrote:

Subject: [opendtv] Re: Democrats Air Concerns About Analog Switchover
Date: Sun, 19 Nov 2006 20:00:47 -0500
From: "Manfredi, Albert E" <albert.e.manfredi@xxxxxxxxxx>

Mark Schubin wrote:

>> Until we find out precisely what it is that keeps innovative
>> solutions away from the DTT market in the US, any speculation
>> about DVB-T in the US is idle talk.
> That seems like an easy one to answer: cost.

That *would* appear to be a decent guess. But I don't think that's it.
Because, in fact, the cost of these newer solutions is lower than the
cost of the 3rd gen products we've been offered for so many years. Even
the FCC pointed this out. The "latest and greatest," they reported, do
not cost more. Cost is not associated with performance. The newer
designs cost less, because they are much more highly integrated.
It is not a simple matter of "Cost". A proper business proposal for a new product development must analyze not only all the costs -- NRE costs of developing the product, the BOM cost per unit, the distribution cost, etc. -- but also the Total Available Market (TAM), the likely % of that TAM that could be captured over a period of time from product introduction, through ramp-up, ramp-down and End of Life, and of course the ASP. When all those numbers are crunched, an ROI is determined. This must be compared to the ROI of other new product proposals that compete for the company's limited resources. No company deliberately chooses to invest in developing new products that are guaranteed to make less profit than other new products the company is capable of producing.

Whether or not "cost is not associated with performance," which I think is far from clear, the reality is more likely that the economics of designing, manufacturing and delivering DTT STBs for the U.S. market just don't add up.

> The FCC's latest video-competition report (with data as of
> June 2005) showed 86% of U.S. TV households connected to cable,
> satellite, or some other non-broadcast provider of TV
> programming, with the number increasing all the time.
> So why should a TV-set manufacturer spend money on a shrinking
> market that has not shown any desire to pay for
> advanced-reception technology?

Because they have the mandate regardless, and the newer chips cost less.
So what's so hard about using the same solutions in STBs? And by the
way, I've never seen any evidence that the market is shrinking, in the 6
years I've heard this repeated.
The "mandate" is an unnatural distortion of market forces, so it is not surprising that both producers and consumers will react to it in unusual ways. Most consumers react to it with either ignorance or indifference.

Instead, my guess is different. My guess is that CE vendors see no great
and growing market for STBs, simply because they see no attempt from
broadcasters to promote their product.
There are many more forces at work here than simply the broadcasters' lack of promotion of thier DTT product.

Besides which, CE manufacturers
would also much rather sell an entire new TV than an STB.
Of course they would. And perhaps most consumers would much rather buy an entire new TV than a STB. Does a new STB get me HD resolution on my existing TV? Does it make my TV screen flatter, or transform it from a CRT to an LCD? My old NTSC TV sets are all garage-sale throwaways, so at best, my assessment of the value of a DTT STB is something less than what my old TVs would fetch at a garage sale. Since I'm one of the 86% who has satellite or cable, my personal assessment of the DTT STB value is actually a lot less -- it is in fact ZERO, because it doesn't give my old TV any new capabilities that it doesn't already have from my pay-TV provider.

And again, please anyone show me where DVB-T would change anything here.
I think my guesses are more accurate than any others, but they are still
just guesses. Until we know, any purported answer to this dilemma is not
very credible.
Switching to DVB-T would, by itself, change nothing. If, on the other hand, a reliable transmission system were coupled with a compelling service offering that could compete with cable & satellite, that is quite a different matter. "Freeview" saved DTT in the U.K., not DVB-T. But the success of one depends on the other.

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