Set-Top Subsidy Omission Stalls DTV Bill

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For a while, House Energy and Commerce Committee chairman Joe Barton (R-Texas) wanted to end the digital-TV transition on Dec. 31, 2006. Now, it's not exactly clear whether he can even move a bill out of his committee.

Barton's effort to end the transition abruptly and reclaim billions of dollars in analog spectrum has ground to a halt. He got off to a good start with hearings, which exposed some important differences, but nothing that appeared beyond the reach of experienced dealmakers.

Problems started cropping up in late May. First, Barton did not introduce a bill; instead, he circulated a draft measure that seemed to reflect Republican priorities. Second, Barton moved the DTV transition deadline to Dec. 31, 2008. Why he added 24 months without extracting concessions from House Democrats remains a mystery.

ANALOG OMISSION

The Barton draft contained a glaring omission. It said absolutely nothing about the fate of 73 million analog TV sets that rely exclusively on free, over-the-air broadcasting and that face instant obsolescence if not hooked up to a set-top box, or to a cable or satellite connection once analog TV is turned off.

Republicans and Democrats on Barton's committee agree that millions of analog TVs suddenly going dark would create a serious political problem that they simply can't ignore. But the parties remain so far apart that Barton had to cancel a June 16 vote in the Telecommunications and the Internet Subcommittee, headed by Rep. Fred Upton (R-Mich.)

House Democrats — including Rep. Edward Markey (Mass.) and Rick Boucher (Va.) — support the government providing a free set-top for all 73 million sets, regardless of income. Assuming box prices range between $50 and $100, the cost would range between $3.6 billion and $7.3 billion.

In general, Barton has voiced support for a limited subsidy program that would provide one box to each broadcast-only home considered low income. The U.S. has about 20 million households that are broadcast-only, according to the Government Accountability Office; Barton would subsidize just a subset of those households.

Until Barton and the Democrats can figure out a compromise, DTV legislation appears to be stalled indefinitely. Early last week, word spread of a set-top agreement, but a House Democratic aide shot that down in a hurry.

“My hope is that we don't argue about it so long that we lose sight of the fact that we do need a deadline for the end of the transition so that it will spur new products and new options for consumers,” said David Arland, vice president of communications for TV set maker Thomson Consumer Electronics.

In November, Thomson affiliate TTE Corp. is planning to sell for less than $300 a 27-inch standard-definition digital set with a built-in over-the-air DTV tuner. If those RCA-branded units fly off the shelves, they could replace millions of analog sets that qualified for a free set-top.

The Consumer Electronics Association supports a firm date on ending the transition. But CEA has neither embraced nor opposed set-top subsidies.

“We haven't really taken a position on the subsidy per se. LG Electronics is interested in that angle to the extent it will help move the legislation forward,” said John Taylor, vice president of public affairs of LG, parent of TV set maker Zenith. “We all have a common goal, I think, of getting to a hard date and turning off analog broadcasting.”

J. H. Snyder, an expert on the DTV transition at the New American Foundation, indicated that the Democrats would need to modify their position, because the party of the working man can't be seen as supporting free set-top boxes for millionaires.

“We're going to pay for boxes and cut Medicaid and aid to families with dependent children? How are those two positions going to be squared?” Snyder said.

After the transition, the federal government will reclaim 108 MHz of analog spectrum. Those airwaves are so valuable that 60 MHz sold at auction to wireless broadband companies is expected to net the federal government between $10 billion and $30 billion, according to private estimates. Some of that money is expected to fund the set-top subsidy.

Snyder said there is so much value tied up in analog TV spectrum that lawmakers should do what it takes to end the transition fast, even it means that some people who can afford boxes wind up getting them for free.

“Our position is to be fairly generous, but the question is should we be super-generous for even very high-income individuals,” Snyder said. “Even if you give more set-top boxes than might be ideal, just to get rid of the political headache, it's well worth it.”

McCAIN'S POSITION

Two weeks ago, Sen. John McCain (R-Ariz.) introduced a bill setting a Dec. 31, 2008 transition deadline.

On the set-top issue, McCain would provide $468 for the government to buy 9.3 million boxes and distribute one each to households that meet certain income levels.

For example, a family of four with about $58,000 in annual income would qualify for a free box, according to one interpretation of McCain's bill.

Senate Commerce Committee chairman Ted Stevens (R-Alaska) has identified the set-top box issue as a key component in any transition plan. But he has also expressed concern about taxpayers having to pick up the tab.

In a proposal that is pleasing TV-station owners, Stevens has called on TV set makers to package a digital-to-analog converter with the sale of an analog TV set.

The National Association of Broadcasters is taking the set-top issue so seriously that it has launched a research program to determine whether the consumer electronics industry can produce a low-cost box that is reliable and uncomplicated to use. CEA called the NAB effort a stunt designed to delay the transition and maintain broadcaster control of valuable spectrum.

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