Fee Would Make Digital Shift Less Taxing


Thirty-seven months from now, every household in this country that would like to watch TV will need a digital television set.

That’s when old-style, radio-wave broadcasting becomes a thing of the past. All that will come over the air will be digits, by law, as Congress moves to declare Feb. 17, 2009, the “hard date” for converting how we all receive our television signals.

Americans then will have these choices: one, own a digital TV set; two, purchase converter boxes enabling their old sets to receive digital signals; or three, subscribe to cable or satellite TV service. In that last case, the set-top box will act as their converter.

That should be a boon for cable or satellite operators. About 13% of the 110 million U.S. households currently do not subscribe to either cable or satellite, according to a survey by the Consumer Electronics Association. The National Association of Broadcasters figures there are 36 million non-digital TV sets in those non-cable, non-satellite homes.

That’s a lot of potential hookups. If DirecTV Inc. somehow managed to sign up all these over-the-air households, it would essentially double its customer base.

Of course, broadcast TV is free TV. These holdouts either don’t want spend $50 or $60 a month to watch movies, sports, dramas and sitcoms, or they can’t afford to.

That’s why Congress is considering spending as much as $3 billion to help these households get digital signals. And that might be quite a bit shy. Consumers Union figures the tab for getting every household onto digital TV could actually reach $5 billion.

Instead, the House and Senate conference plan calls for only $1.5 billion to be spent to subsidize conversion to digital TV sets. This, even though the federal government could pull in $10 billion by auctioning off the spectrum that had been devoted to analog broadcasting.

There’s more stinginess to the plan approved by the conference committee. Any given household can get one coupon to buy a converter box. The coupon is good for $40. The price of the box right now is projected to cost $60 when 2009 rolls around.

If those purchasing the spectrum aren’t even indirectly going to underwrite the full cost of the conversion, who should?

ABC, NBC, CBS, and Fox? It’s their viewers that would go dark. But don’t count on it. At least until the government money gives out.

What then?

Try the manufacturers. They’re getting a real bonanza: A federally mandated conversion to digital equipment, with a hard deadline.

So, here’s a private-industry solution, borrowing conceptually from the way governments bring in revenue. Tax digital-TV sets to pay for converter boxes for the dispossessed.

CEA president Gary Shapiro figures 77 million digital TV “products” with tuners in them will be sold over the next three years. On average, each digital set sold will cost $1,125, according to figures from eBrain Market Research. Get manufacturers to charge new customers 3.5% more for their digital TVs, and you get to $3 billion, fast. And buyers will hardly notice the bite: It comes in at $40 per set — in effect, another coupon per box.

“The idea has a lot of merit,’’ said policy analyst Kenneth DeGraff of Consumers Union. “That solves the problem going down the road. That’s it.’’

But it’s not easy to get an industry to tax its customers. In fact, Shapiro has studiously avoided any comment about how to fund any shortfall, even though CEA represents manufacturers. When the conference committee set Feb. 17, 2009, as the switchover date, he said the CEA was looking forward “to working together with the broadcasters, cable system operators, government officials and others to make the final steps in this transition a seamless reality.’’ Notably unmentioned: Electronics makers.

“We don’t have any control over product pricing by individual manufacturers,’’ said CEA vice president Jeffrey A. Joseph. “Our role will be to continue to educate consumers.’’

Manufacturers? He’s confident they will provide conversion “solutions” at prices “commensurate with the final “subsidy” provided by the U.S. government.’’

Now, the ability to watch TV is not an inalienable right. But if the federal government — with the support of private industry — is taking away the ability to view the screens they already own, the equation changes.

So, then, does the need for a response. Either the government or industry — or both — will have to find a way to pay for essentially universal TV viewing.

NEXT WEEK: Rethinking the universal service fund.