A No-Cost Transition?

Washington — Millions of American households would receive free cable-television service while local TV stations would be guaranteed distribution of all their analog- and digital-TV channels over cable, according to a new, seven-year scheme proposed by Ohio-based Massillon Cable TV for dealing with the transition of all broadcast-television signals into digits.

“This proposal is designed to benefit consumers — the public interest,” Massillon president Bob Gessner said. “Broadcasters and [pay TV providers] both have benefits and costs, but consumers are the primary beneficiary.”

The Massillon plan, unveiled last week in private talks with Federal Communications Commission officials, is largely designed to mitigate the impact of the federally mandated shutdown of analog-TV broadcasts in early 2009. That shutdown will force an estimated 20 million households that rely exclusively on free, over-the-air TV signals to acquire new TV sets or conversion equipment in order to view digital-TV signals.

Key to the Massillon plan's success is agreement from local TV stations that in exchange for cable's commitments, broadcasters would refrain from seeking compensation for cable carriage of their signals for the first seven years after analog-TV signals go dark on Feb. 17, 2009.

National Association of Broadcasters spokesman Dennis Wharton said his group “was not aware of the proposal, but we will be interested in studying it.”

Under the government's plan to handle the transition, any household could apply for two $40 coupons that would let them buy boxes that would convert the digital signals back to analog signals, so they could keep using their existing TVs.

Under the Massillon plan, a broadcast-only home that obtained such a coupon under the federal subsidy program would receive free analog-basic cable for seven years on every television set in the home, with free installation.

The customer would surrender the coupon to the cable company, which would then return it to the federal government for possible recirculation.

“Cable operators, while they will accept the vouchers, will return them to the government and receive nothing in return,” Gessner said.

“One of the primary reasons why we came up with this is … there aren't enough [converter coupon] vouchers,” Massillon outside counsel Mark Palchick said. “We know for a fact that the program was designed not to have enough vouchers.”

Massillion's plan would also address cable customers who also have some sets that are broadcast-only.

Although Massillon has discussed its “Save Our Sets” plan at the FCC, it hasn't placed documentation into the public record.

Rep. Fred Upton (R-Mich.), who helped design the coupon program, has disputed claims that the program was underfunded. He predicted that demand wouldn't exceed 21.8 million coupons, while the first round of federal funding — $890 million — would underwrite 22.25 million converter boxes.

TV stations within the markets of participating cable companies would have to forfeit their right to receive cash and other forms of compensation for cable carriage, under Massilon's proposal. In exchange, cable systems would agree to distribute each TV station's primary video signal in both analog and digital form. Each station's multicast digital services, if offered to the public free of charge, would have automatic cable carriage.

“At this point, it's hard to say if this will get traction, but even if it doesn't, it might get people thinking more about some kind of package deal involving carriage and DTV coupons,” said Paul Gallant, a media analyst with Stanford Washington Research Group.

With 45,000 subscribers, Massillon is a small cable company taking the lead on an issue that has pitted the interests of some the largest media companies in the United States against each other.

The NAB, for example, has at time times called for government-mandated cable carriage of TV signals in both analog and digital. With TV stations capable of offering multiple programming streams over their digital bandwidth, the NAB has called for mandatory cable of all those signals as well. Cable operators have resisted both plans, saying a TV station that elects must-carry is entitled to distribution of one programming service, either in analog or digital.

While generous to TV stations in terms of carriage promises, Massillon's plan would exact a price on broadcasters who want a second revenue stream from cable operator-paid fees. CBS, for example, has highlighted retransmission-consent payments as an important source of revenue going forward.

House Energy and Commerce Committee chairman John Dingell (D-Mich.) has stated that a poorly executed transition could have serious political repercussions, despite the $1.5 billion in federal money set aside for consumer subsidies.