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House Edging Toward Analog Cutoff

By Ted Hearn multichannel.com 2/18/2005 12:25 PM ET

The House could vote before summer on legislation designed to halt broadcasters’ digital transition by the end of next year -- a proposal endorsed by the cable industry, opposed by TV broadcasters and feared by plenty of lawmakers who envision brigades of angry consumers charging up Capitol Hill. House Energy and Commerce Committee chairman Joe Barton (R-Texas) said Thursday that he would soon introduce a digital-TV-transition bill, but neither he nor his staff provided details.

House Telecommunications and the Internet Subcommittee chairman Fred Upton (R-Mich.) said the bill would include a so-called hard date for the termination of analog broadcasting, coupled with a program that would subsidize set-top boxes for homes that rely solely on free, over-the-air broadcasting.

“I think that is the right policy direction, but we’ll need to consider the appropriate scope of such a program and make sure that it's crafted in a way to prevent fraud, abuse and mismanagement,†Upton said at Thursday’s hearing on digital-TV-transition issues.

House lawmakers from both parties voiced concern about huge transition costs and potentially massive consumer inconvenience. They said they were not ready to endorse the Barton-Upton approach.

“If we drop this hammer on consumers, the sledgehammer is going to come back on us, as it should,†Rep. Greg Walden (R-Ore.) said.

The Government Accountability Office estimated in a report Thursday that converter-box subsidies alone would cost $460 million-$10.6 billion, depending on box prices, on whether Congress limits the subsidy to low-income households and on whether Congress allowed cable and satellite homes to participate. The GAO cost estimates assumed one box per eligible home and did not include administrative costs to run a subsidy program.

The United States has about 21 million homes that rely exclusively on free, over-the-air broadcasting. Those homes have 45 million analog-TV sets. Cable and satellite homes have 28 million sets that are not connected to those pay services, the GAO said. The GAO also found that 48% of homes that are broadcast-only have annual incomes below $30,000, while 29% of cable and satellite homes had incomes below that level. And the GAO found that minorities rely solely on broadcast more that whites do.

Some lawmakers expressed concern that consumers might have to acquire boxes for second and third sets at full cost and might not be able to do so, leaving them with useless analog-TV sets after the transition.

Rep. Rich Boucher (D-Va.) wants the federal government to ensure that all 73 million analog-TV sets not connected to pay TV services are functional after the transition. He said he was not convinced that revenue from the auction of analog-TV spectrum -- anticipated by him to be $4 billion -- would cover set-top costs.

“The math that underlies this suggestion is questionable, at best,†Boucher said. “So I urge the members not to rush to judgment and impose a hard date for analog-spectrum surrender.â€

Rep. Edward Markey (D-Mass.) supported a hard date, but only one that was as consumer-friendly as possible in order to avoid harsh political consequences. “I can’t even imagine an issue that can match it in its intensity if this committee mishandles this issue," Markey said.

Current law allows the digital-TV transition to continue until 85% of TV households in a market have digital-TV-reception equipment -- a test that Barton and Upton believe drags out the process far too long and lends support for a hard date. At the hearing, Insight Communications Co. Inc. CEO Michael Willner said a hard date was the only way to close the transition.

“I do want you to know that we are ready, willing and able to comply with whatever date you choose,†Willner testified. “You set the date, we will be there.â€

In contrast, James Yager, CEO of Barrington Broadcasting Co., said talk of ending the transition was premature because consumers weren’t ready to foot the bill for equipment and because cable's pass-through of digital-TV signals was not guaranteed. Yager said cable systems planned to downconvert digital-TV signals at the headend so that even people who owned digital-TV sets would receive analog signals. “The question must be asked: If the end result is turning digital signals back into analog, why did we undertake this transition to begin with?†he added.

Yager said cable downconversion would be akin to a 1960s consumer who bought a color-TV set but could receive only black-and-white pictures. “That, today, is what cable is proposing with conversion at the headend," Yager said.

Willner disagreed, saying that cable would ensure that subscribers with analog sets received local-TV signals in analog either through downconversion or a set-top, and that those with digital-TV sets would receive digital-TV stations in digital. “Those with digital TVs will still enjoy, as they do today, the benefits of digital-television signals,†he added.

In the past, Barton has supported a Dec. 31, 2006, hard date. He and others in Congress want to reclaim analog-TV spectrum quickly for public-safety groups and for wireless-broadband companies through an auction. Upton said the bill would likely finance the set-top subsidy “by using a portion of the proceeds from auction of the returned analog spectrum.â€

Jong Kim, vice president of LG Electronics USA Inc., testified that box costs would become affordable if Congress adopts a hard date, which would help to build a market for converters. Kim said he expects a digital-to-analog converter to cost under $100 by the end of 2006 and $50-$70 by the end of 2008. But he added that those figures assume “sales volumes in the tens of millions of units.â€
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