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

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America's 15-year high-definition television (HDTV) industrialpolicy experiment has been afailure by almost any standard. Although this long and miserable history is too long to recall here, sufficeit to say, the grand vision of the broadcast industry and publicpolicymakers has become an expensive joke. And just when you thinkthings can't get worse, Congress and the Federal CommunicationsCommission (FCC) are now readying new rules to roll the burden ofrolling out a service nobody wants onto the backs of television setmanufacturers and cable network providers.

Under a potentialnew FCC rule, TV set makers will be required to include digitaltuners in all their new sets by 2006. The logic behind thisrequirement is that it will help jumpstart the slow HDTV rollout byensuring all Americans can receive high-def signals when they areavailable. The Consumer ElectronicsAssociation, however, notes that this unfunded mandate willtranslate to a hidden $250 tax on new TV sets. Meanwhile, onCapitol Hill, House Commerce Committee Chairman Billy Tauzin (R-LA)is apparently set to drop a new bill mandating that cable companies carry alllocal digital TV broadcast signals on their systems. Cable firmsare already strapped with analog "must carry" rules that eat upcapacity and offer them no compensation in return. Under the billTauzin is proposing, "dual must carry" rules would be forced uponthe cable industry. So if that home shopping station on channel 50in your hometown offers both an analog and digital feed, your localcable company will have to carry both of them whether they like itor not. That means less cable capacity for other programs orservices that consumers actually demand.

What makes these new mandates on set makers and cable companiesso offensive is that they come on the heels of FCC concessions tobroadcasters regarding their commitment to rolling out HDTV. Eventhough Congress mandated that each and every commercial broadcasterwas to be transmitting high-definition television signals to thepublic by May 1, 2002, hundredsof broadcasters filed petitions with the FCC asking for waiversfrom the rollout requirements earlier this year. The FCC grantedmost of them, citing "economic hardship" or other technicalfactors. Consequently, roughly 70% of America's 1,200 commercial TVstations missed the May 1 deadline to be HDTV-ready. This delay isvery important because it will almost certainly push back the moreimportant transition date of December 31, 2006, which is the datewhen all old analog broadcast channels are suppose to go dark andthat valuable spectrum is to be returned to the FCC and reallocatedto other uses.

Amazingly, however, broadcasters and policymakers want us tobelieve that the real culprits here are the TV set makers and cablecompanies of America who supposedly are refusing to take steps tohelp the transition happen. This logic is utterly preposterous andflatly contradicted by market realities. First of all, to theextent this transition will happen at all, it will depend mostheavily upon high-quality content. Consumers won't care about adigital TV tuner or mandatory cable carriage if there's nothing onfor them to see. And regrettably, there's just not much to see inhigh-def today. Don't get me wrong, when you can get HDTVprogramming-and I do-it is a bona fide feast for the sight andsenses. But only a small number of Americans have made thetransition so far since networks only provide a handful of programsin high-definition, and much of their best programming (sportingevents, movies) is not passed through in HD. So unless "Touched byan Angel" or "Crossing Jordan" gets your juices flowing, you'rebound to be disappointed with what the networks offer. Second, justbecause a television network produces a program in HD, itdoesn't mean their local affiliates will pass it throughto you. Many local broadcasters aren't willing to transmitexpensive and complicated signals to the limited number ofconsumers in their territories with HD-ready sets. Moreover,affiliates in smaller rural markets don't have the financial resources to retool their facilitiesand build the new transmission towers that are necessary to beam adigital signal to their communities.

So, if you can't get much-or any-high-def programming from yourlocal broadcaster, where can you find something to watch? Satelliteis currently the best option. Through my satellite provider, I havea handful of excellent HD channels and many more are on the way.Cable companies are beginning to pass through more programming aswell. Of course, policymakers will argue that with cable andsatellite services consumers have to subscribe to theseservices to receive HD programming. Although the concept ofconsumers paying for what they want may be shocking to somelawmakers, that is exactly the reason why the natural transition todigital video programming has worked so well for satellite andcable companies while it has faltered for broadcasters. The voiceof consumers is heard and respected by private satellite and cableoperators. But it has been largely ignored, or even rejected, inthe broadcast television world. Still, policymakers prop up thisold system in the name of guaranteeing the "continuation of free,over-the-air local broadcasting."

But over-the-air broadcast television ishardly free. There are serious opportunity costs associatedwith allocating massive chunks of the electromagnetic spectrum tobroadcast services, especially when over 80% of the public opt toreceive their video programming through cable or satellite. Allthat broadcast spectrum could be used for a wide variety of otherservices (think wireless broadband or cellular telephony), all ofwhich the public probably would demand more than over-the-air HDTV.Policymakers might want to consider taking back the valuabledigital spectrum they loaned to broadcasters in 1996 and selling itto other companies who could put it to better use. Alternatively,Congress could just let the broadcasters sell it off themselves andthen split the proceeds with the government. These aren't perfectsolutions, but they are certainly better than continuing with thecurrent failed industrial policy.

But even if Congress refuses to go this far, it should at leastnot drag innocent third parties into this mess. Lawmakers also needto ponder a few serious questions like: How will digital tunerstandards be defined; should we expect regulators to change themevery year; will they apply to computer monitors and other devicemanufacturers; and, more profoundly, what right does the governmenthave to impose technology mandates on TV makers in the first place?Likewise, why should public officials be allowed to tell privatecable operators what they must carry on their systems? And just howmuch cable capacity do we want soaked up by broadcast televisionwhen it could be used for more valuable cable channels (like C-Span3) or even broadband Internet access?

Although they'd be hard-pressed to point to any section of theConstitution authorizes all this nonsense, policymakers haveapparently decided that every American has a birthright entitlementto crystal clear broadcast television pictures and no expenseshould be spared to make this goal a reality. But the government's"damn the consequences" HDTV industrial policy has absolutely zeroprobability of working according to schedule and is likely toderail entirely. Ironically, it will probably be the broadcastersthemselves who eventually put an end to it with small ruralaffiliates recognizing they simply cannot afford to keep up thischarade. The real question is, how long do we have to wait beforethis happens and how many more victims will this industrial policyfiasco claim before policymakers finally admit defeat?