TechKnowledge No. 39

The HDTV Fiasco Gets Worse: TV Set and Cable Mandates On the Way

By Adam D. Thierer
August 5, 2002

America’s 15-year high-definition television (HDTV) industrial policy experiment has been a failure by almost any standard. Although this long and miserable history is too long to recall here, suffice it to say, the grand vision of the broadcast industry and public policymakers has become an expensive joke. And just when you think things can’t get worse, Congress and the Federal Communications Commission (FCC) are now readying new rules to roll the burden of rolling out a service nobody wants onto the backs of television set manufacturers and cable network providers.

Under a potential new FCC rule, TV set makers will be required to include digital tuners in all their new sets by 2006. The logic behind this requirement is that it will help jumpstart the slow HDTV rollout by ensuring all Americans can receive high-def signals when they are available. The Consumer Electronics Association, however, notes that this unfunded mandate will translate to a hidden $250 tax on new TV sets. Meanwhile, on Capitol Hill, House Commerce Committee Chairman Billy Tauzin (R-LA) is apparently set to drop a new bill mandating that cable companies carry all local digital TV broadcast signals on their systems. Cable firms are already strapped with analog “must carry” rules that eat up capacity and offer them no compensation in return. Under the bill Tauzin is proposing, “dual must carry” rules would be forced upon the cable industry. So if that home shopping station on channel 50 in your hometown offers both an analog and digital feed, your local cable company will have to carry both of them whether they like it or not. That means less cable capacity for other programs or services that consumers actually demand.

What makes these new mandates on set makers and cable companies so offensive is that they come on the heels of FCC concessions to broadcasters regarding their commitment to rolling out HDTV. Even though Congress mandated that each and every commercial broadcaster was to be transmitting high-definition television signals to the public by May 1, 2002, hundreds of broadcasters filed petitions with the FCC asking for waivers from the rollout requirements earlier this year. The FCC granted most of them, citing “economic hardship” or other technical factors. Consequently, roughly 70% of America’s 1,200 commercial TV stations missed the May 1 deadline to be HDTV-ready. This delay is very important because it will almost certainly push back the more important transition date of December 31, 2006, which is the date when all old analog broadcast channels are suppose to go dark and that valuable spectrum is to be returned to the FCC and reallocated to other uses.

Amazingly, however, broadcasters and policymakers want us to believe that the real culprits here are the TV set makers and cable companies of America who supposedly are refusing to take steps to help the transition happen. This logic is utterly preposterous and flatly contradicted by market realities. First of all, to the extent this transition will happen at all, it will depend most heavily upon high-quality content. Consumers won’t care about a digital TV tuner or mandatory cable carriage if there’s nothing on for them to see. And regrettably, there’s just not much to see in high-def today. Don’t get me wrong, when you can get HDTV programming-and I do-it is a bona fide feast for the sight and senses. But only a small number of Americans have made the transition so far since networks only provide a handful of programs in high-definition, and much of their best programming (sporting events, movies) is not passed through in HD. So unless “Touched by an Angel” or “Crossing Jordan” gets your juices flowing, you’re bound to be disappointed with what the networks offer. Second, just because a television network produces a program in HD, it doesn’t mean their local affiliates will pass it through to you. Many local broadcasters aren’t willing to transmit expensive and complicated signals to the limited number of consumers in their territories with HD-ready sets. Moreover, affiliates in smaller rural markets don’t have the financial resources to retool their facilities and build the new transmission towers that are necessary to beam a digital signal to their communities.

So, if you can’t get much-or any-high-def programming from your local broadcaster, where can you find something to watch? Satellite is currently the best option. Through my satellite provider, I have a handful of excellent HD channels and many more are on the way. Cable companies are beginning to pass through more programming as well. Of course, policymakers will argue that with cable and satellite services consumers have to subscribe to these services to receive HD programming. Although the concept of consumers paying for what they want may be shocking to some lawmakers, that is exactly the reason why the natural transition to digital video programming has worked so well for satellite and cable companies while it has faltered for broadcasters. The voice of consumers is heard and respected by private satellite and cable operators. But it has been largely ignored, or even rejected, in the broadcast television world. Still, policymakers prop up this old system in the name of guaranteeing the “continuation of free, over-the-air local broadcasting.”

But over-the-air broadcast television is hardly free. There are serious opportunity costs associated with allocating massive chunks of the electromagnetic spectrum to broadcast services, especially when over 80% of the public opt to receive their video programming through cable or satellite. All that broadcast spectrum could be used for a wide variety of other services (think wireless broadband or cellular telephony), all of which the public probably would demand more than over-the-air HDTV. Policymakers might want to consider taking back the valuable digital spectrum they loaned to broadcasters in 1996 and selling it to other companies who could put it to better use. Alternatively, Congress could just let the broadcasters sell it off themselves and then split the proceeds with the government. These aren’t perfect solutions, but they are certainly better than continuing with the current failed industrial policy.

But even if Congress refuses to go this far, it should at least not drag innocent third parties into this mess. Lawmakers also need to ponder a few serious questions like: How will digital tuner standards be defined; should we expect regulators to change them every year; will they apply to computer monitors and other device manufacturers; and, more profoundly, what right does the government have to impose technology mandates on TV makers in the first place? Likewise, why should public officials be allowed to tell private cable operators what they must carry on their systems? And just how much cable capacity do we want soaked up by broadcast television when it could be used for more valuable cable channels (like C-Span 3) or even broadband Internet access?

Although they’d be hard-pressed to point to any section of the Constitution authorizes all this nonsense, policymakers have apparently decided that every American has a birthright entitlement to crystal clear broadcast television pictures and no expense should be spared to make this goal a reality. But the government’s “damn the consequences” HDTV industrial policy has absolutely zero probability of working according to schedule and is likely to derail entirely. Ironically, it will probably be the broadcasters themselves who eventually put an end to it with small rural affiliates recognizing they simply cannot afford to keep up this charade. The real question is, how long do we have to wait before this happens and how many more victims will this industrial policy fiasco claim before policymakers finally admit defeat?

Adam Thierer (athierer [at] cato [dot] org) ) is the Director of Telecommunications Studies at the Cato Institute.