A fuzzier picture: the politics of digital TV in the US

Hernan Galperin
6 August 2002

The British broadcasting industry and its political masters will not easily forget the spring of 2002. The bankruptcy of ITV Digital has forced the government to rethink the strategy for completing the switch-off of analogue TV, while the ITC frantically scrambles for a new candidate to take over the digital terrestrial television (DTT) licences.

As David Elstein argues, the fate of ITV Digital was probably sealed from the start. It was a lame-duck proposition based more on political wishful thinking than serious technological or commercial considerations. But for those whose national pride (‘the most advanced digital TV market in the world’ had become a staple of ministerial speechwriters) has been dented by this recent road bump on the digital superhighway (this obviously does not include Mr Elstein), a look at the events on the other side of the Atlantic should provide a sigh of relief. This time, the grass is hardly greener in your neighbour’s yard.

As in the UK, the plan for the introduction of DTT in the US emerged out of political determination. It was in essence a compromise between legislators and the incumbent broadcasters, as follows. Every television station in the US (some 1,600) was allocated an additional frequency channel (the equivalent of an entire multiplex in British lingo) to start digital broadcasting, with few strings attached.

The government set the digital switch-on schedule, which varied with the size of the market in which the station operated. By 1 May 2002, all commercial stations were supposed to be transmitting in digital, with an increasing requirement to simulcast their analogue programming up to 31 December 2006. After that, according to the plan, analogue channels would be switched off for good and one of the frequency channels returned to the government to be auctioned off (Congress even set the dates for the beginning of these auctions, with the proceeds already included in future budget projections).

It was a plan that benefited all – except the public at large, of course. Existing broadcasters kept the terrestrial market closed, and could possibly find new revenue sources by essentially sub-leasing the spectrum gifted by Congress (valued by some at $70 billion). Incumbent legislators, in return, could count on favourable treatment on the local news and good terms when buying political ads, both of which are still necessary to keep a seat in Congress (if not, ask former US Senator Larry Pressler, who opposed the spectrum gift to broadcasters and instead proposed to auction the DTT licences – he was the only incumbent to lose his seat in the 1996 elections).

Is America on track for the switch-off of analogue TV in 2006? Hardly. Some 68% of the 1,240 commercial television stations in the US have failed to meet the 1 May 2002 switch-on deadline. Of course, most of these stations are in small markets, in places such as Rapid City, South Dakota, and thus the actual percentage of Americans that receive at least a couple of DTT channels, if not all four major networks – ABC, NBC, CBS and Rupert Murdoch’s Fox – is much higher.

But this is of little comfort since the plan was later amended so that broadcasters are only forced to give up their analogue channels after 85% of the households in the relevant market are equipped with digital receivers. How many Americans have bought digital sets or decoders that allow them to receive digital TV? Not surprisingly, at the current prices (going digital was never a freebie as in the UK), very few. According to the most recent figures by the consumer electronics industry, only 300,000 digital tuners (either as stand-alone decoders or integrated in digital sets) have been sold since DTT started in November 1998.

Of course, cable and satellite, to which over 85% of Americans subscribe, offer digital TV. The problem is that few operators have so far agreed to carry the digital channels offered by the incumbent broadcasters and so, according to the written statute, these households do not count towards the 85% penetration target.

Broadcasters say Congress should make cable and satellite carry their digital channels. Cable and satellite operators say no thanks, and raise the First Amendment red flag. Both say equipment makers have not done enough to reduce prices. The response: make attractive programming available in digital format and people will buy the sets (so far there has been little in the way of compelling programming in high-definition or digital-only format).

The British way is better

Now, if this trouble is not enough to lift British pride, it just gets better. There are at least two major outstanding rows over technical standards that complicate the picture. One is about how to make the set-top box interoperable so that viewers can buy it retail and use it with any cable operator, a provision that Congress inserted in the plan at the request of the consumer electronics lobby.

As the DVB (Digital Video Broadcasting Project) has painfully learned in the multimedia home platform (MHP) saga, it is very difficult to make parties agree on standards when major commercial interests are at stake and the market has hardly developed. Even when prodded by regulators to ‘agree, or else’, cable operators and the electronics industry have yet to come up with a way to allow viewers to buy integrated televisions or decoders that will work with cable systems across the nation.

But the really ugly fight is about how to protect digital content from being ‘Napsterised’ (that is, copied and redistributed ad infinitum). The major studios and their parent companies have made it clear that premium content will not be offered in digital until a secure copyright protection system is in place. The problem is that, as we have learned from the Napster story, this is easier said than done.

The studios want Congress to mandate it, technology companies say this would be an unwarranted intrusion in their business that would raise prices and slow down innovation, while electronic libertarians and privacy advocates complain that this is yet another move by Hollywood to conquer the digital world. In the meantime, other than some sporting events and some notable efforts by HBO, viewers have yet to see anything worth seeing on their digital channels. No wonder they bought 21 million analogue television sets in 2001.

To conclude, in the face of troubles with digital TV in America and elsewhere, Britain is not doing so badly after all. To be sure, the switch-off of analogue channels might lie further ahead than originally planned. But the problem with DTT is not so much, as Mr Elstein argues, that it is a political project – after all, many of our major accomplishments in terms of communications infrastructure, from the transportation system to the Internet, have been, to say the least, politically driven. What should be asked is what are the goals behind this project, and whether the economic and social costs incurred justify them?

British citizens might decide that preserving a tradition of mixed public and commercial broadcasting while improving the utilisation of the public airwaves are important goals that justify the costs (and pitfalls) of the introduction of DTT. Across the Atlantic, nevertheless, a plan devised to keep the market closed to the existing players in return for electoral support for incumbent legislators would seem much harder to justify.

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