Cable Takes a Loss in DTV Bill

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Washington— Cable operators lost the right to deliver some digital-TV signals in analog, a policy defeat that might force millions of subscribers to lease set-top boxes to maintain their ability to watch local broadcast stations via cable.

Just before Christmas, the House and Senate agreed to sweeping legislation that called for ending local broadcasters’ transition to digital transmission on Feb. 17, 2009.

The House bill had included language designed to avoid the mass deployment of set-top boxes, providing relief to large and small MSOs in different ways.

NAB OBJECTED

But House Energy and Commerce Committee chairman Joe Barton (R-Texas) agreed to remove it after Senate Budget Committee chairman Judd Gregg (R-N.H.), with the encouragement of the National Association of Broadcasters, raised procedural objections.

Under the House bill, high-capacity cable systems would have been required to carry “must-carry” TV stations in analog and digital for five years after the transition, with cable having the right to degrade an HDTV signal to standard definition.

Small cable operators, again for the first five years, gained permission to transmit must-carry DTV signals in analog, a concession to small operators’ technical constraints in transmitting local TV signals in both analog and digital.

A must-carry TV station is one that demands cable carriage without compensation in lieu of marketplace negotiations.

NAB spokesman Dennis Wharton hailed the outcome on Capitol Hill, which is expected to be finalized by one last House vote in late January or February.

“Our No. 1 priority going into [the House-Senate] conference was thwarting the cable industry’s attempt at degrading HD picture quality for consumers,” Wharton said. “We’re pleased this language was stripped in conference.”

After the transition in 2009, millions of cable homes will still have analog TV sets. Must-carry DTV stations will lose access to those cable homes until those homes have DTV sets or set-top boxes.

Wharton would not address whether must-carry stations were prepared to lose so much of their audience.

NCTA president Kyle McSlarrow told Congress cable wanted the right to downconvert DTV must-carry stations at the headend to avoid the cost and inconvenience of deploying millions of set-top boxes.

But NAB’s position throughout had been that degradation of DTV signals should be done by the consumer, not the cable company.

By the end of 2006, Comcast Corp. and Time Warner Cable plan to offer all customers a digital simulcast of their analog channels, allowing analog consumers to transition to DTV sets and set-tops at their own pace.

Under the DTV legislation, in 2009 Comcast and Time Warner could not offer DTV must-carry stations in analog.

The two major direct-broadcast satellite carriers — DirecTV Inc. and EchoStar Communications Corp.’s Dish Network — also had DTV signal-carriage flexibility removed from the bill.

Paul Gallant, a media analyst with Stanford Washington Research Group, said cable has a few years to persuade Congress that downconversion at the headend was more convenient and cost effective than set-tops.

“As a practical matter, it seems pretty unlikely that cable companies will let any customers be cut off from broadcast signals,” Gallant said. “It seems pretty likely that Congress will plug that gap.”

An NCTA spokesman declined to comment, referring a reporter to McSlarrow’s statement that applauded establishment of the Feb. 17, 2009, transition date.

SET-TOP SUBSIDY

In another provision, Congress agreed to create a $1.5 billion federal program to subsidize digital-to-analog converter boxes in an effort to extend the life of millions of analog TVs in homes that do not subscribe to cable and satellite.

The U.S. has about 20 million homes that rely exclusively on free, over-the-air broadcasting. Collectively, those homes own an estimated 45 million analog TV sets.

The subsidy program allows each U.S. household to receive two $40 coupons to acquire two converter boxes. Congress, however, is anticipating that cable and satellite homes are unlikely to apply for coupons and that broadcast-only homes are likely to represent the bulk of the demand.

If Congress had to provide for the 45 million sets in the 20 million broadcast-only homes, the price tag would be $1.8 billion, excluding administrative costs. But some in Congress think that many of the broadcast-only homes will fund the transition on their own, either by buying a DTV set or hooking up to cable or satellite. The more that do, the less Congress has to spend on converter boxes.

In a statement, Consumers Union complained that Congress underfunded the converter subsidy and said the federal government needed to make whole all consumers who have to pay to keep their analog TV working. Congress, CU said, should have allocated $3.5 billion to the converter program.

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