[opendtv] Fortune's take on the switch to digital TV

  • From: Cliff Benham <cbenham@xxxxxxxxxxx>
  • To: opendtv@xxxxxxxxxxxxx
  • Date: Thu, 05 Jan 2006 22:19:27 -0500

Digital TV: Leaving viewers in limbo

Flipping the switch on digital television will be a flop for plenty of 

By Marc Gunther, FORTUNE Senior Writer
January 4, 2006: 12:16 PM EST
NEW YORK (FORTUNE) - Your old TV set may well go dark in 2009, and 
believe it or not, that's a good thing.

That's because, at the end of last year Congress approved legislation 
that set a date for the switch from analog to digital television -- 
February 17, 2009.

But managing this transition -- which will render about 70 million TV 
sets obsolete -- will be not be easy. Nothing is, when the federal 
government gets involved. Indeed, Congress will soon have to revisit 
this issue, to clean up this mess it has created.

This fixed switch date allows consumers, electronics manufacturers, 
broadcasters, cable and satellite operators to plan for the transition. 
All have a lot at stake.

Viewers adrift
But for consumers with one of those 70 million sets -- many of whom are 
likely to be poor, elderly or uneducated, being forcibly switched from 
one technology to another will be a nightmare.

To be sure, the transition will facilitate a lot of progress for both 
the tech industry and the public sector.

Once TV stations switch to digital transmission, they will return to the 
government a big chunk of the radio spectrum they currently use to 
transmit their analog channels.

Some of that spectrum will go to first responders -- police, fire and 
public safety officials -- so they can better communicate with one 
another. Breakdowns in emergency communication slowed the response to 
the September 11 terrorist attacks and Hurricane Katrina. New spectrum 
should help.

The rest of the spectrum will be auctioned off to the highest bidders -- 
probably tech companies. The sale of this valuable, scarce real estate 
is expected to bring in about $10 billion, maybe more. That will help 
reduce the federal budget deficit.

Fostering innovation
Better yet, when the spectrum is sold off, the companies that buy it 
will use it to develop new technology and services. Cheap, ubiquitous 
wireless broadband access is one possibility. Mobile TV or music 
services are others.

Scheduled for 2008, the auction will be the biggest spectrum sale since 
a 1994-95 spectrum auction. That sale helped boost the mobile phone 
industry, boosting the number of cell phone subscribers in the U.S. from 
24 million to 200 million. It also helped drive down the cost of 
wireless minutes from an average of 47 cents a minute to 9 cents a 
minute, according to analysis from financial services firm Stifel Nicolaus.

"With the new auction, we will finally become a broadband nation," says 
Blair Levin, a Washington analyst with Stifel Nicolaus. "Google, Yahoo!, 
Microsoft, Intel, Dell -- these companies will all benefit. The more 
broadband pipes you have, the more applications will come along, the 
more often you will upgrade your device."

Indeed, Microsoft (Research), Intel (Research), Dell (Research) and 
Cisco (Research) all joined a Washington lobbying effort called the High 
Tech DTV Coalition to push for digital television. Congress has been 
debating the issue for a decade, ever since the 1996 telecom bill gave 
digital spectrum to broadcasters, with the expectation that they would 
eventually give their analog spectrum back.

Government handouts
The difficulty, of course, is that the analog broadcast system will then 
be shut down -- which will leave most of today's TV sets unable to 
receive a signal over the air.

Roughly 20 million of those soon-to-be-obsolete sets are in homes where 
people don't subscribe to cable or satellite. The other 50 million or so 
are in pay TV homes, and used as second, third or fourth sets. Sets 
hooked up to cable or satellite services should work fine no matter what.

To avoid a consumer revolt, Congress has set aside about $1.5 billion to 
smooth the transition. Owners of outmoded TV sets will be eligible for 
two vouchers, worth $40 each, to help buy converter boxes that will 
enable today's analog TV sets to receive digital signals.

Yes, the very same federal government that is cutting back on college 
loans and food stamps will soon be issuing TV vouchers.

Consumer groups say this is only fair because the government is 
essentially reducing the value of people's property.

"If you are forcing consumers to adopt new technology -- whether or not 
they are ready -- you ought to provide full compensation for everyone," 
says Jeannine Kenney of Consumers Union.

Consumers Union says the transition, as currently planned, is "totally 
unworkable and unfair to consumers." It sure sounds that way.

Free TV signals scrambled
People are supposed to apply for the vouchers during a three-month 
window in 2008, and use them within three months. But there probably 
won't be enough vouchers to go around, and no one really knows how much 
converter boxes will cost. Disadvantaged people are most likely to be 
left behind in the scramble.

The nightmare scenario is that people who depend on free, over-the-air 
TV for news and entertainment will lose their access, or have to pay 
more for it, so that the rest of us can get faster service on our 
Blackberries and ESPN on our cell phones.

Congress will return to DTV soon to deal with these issues and others, 
notably some major wrangles between broadcasters and cable operators. 
This is a big deal. Let's hope Washington can get it right.

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