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Chris Llana, Editor


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Digital Converter Box Subsidy Program Comments Are In

October 1, 2006

As part of the legislation setting a hard cutoff date for the transition to the new digital TV standard, Congress created a subsidy program for people still using analog TVs at the end of the transition. The program will give those people $40 coupons they can use toward the purchase of digital-to-analog converter boxes.

Congess charged the National Telecommunications and Information Administration (NTIA - a part of the Commerce Department) with the administration of that subsidy program. After six months or so, NTIA published a proposed rule asking for comments on what that program should look like.

For most of the two months that the comment period was open, mostly ordinary consumers filed comments. As is their practice with FCC filings, the industry heavy hitters waited until the last day of the comment period (Sept 25) to submit their comments. And it was a flood.

If you want to pass on my discussion of what the comments said, and skip down to my reading of what the program will ultimately look like, click here.

So what did everyone say, and how is the program likely to be run? First for the consumer comments . . .

For many of them, news of the converter box program seemed to be the first they had heard of the transition to the ATSC digital TV standard. And it was shock! Some thought that they were going to have to subscribe to a cable TV service in order to continue to receive TV programming.

A few seemed to think they would not be able to get a converter box for their analog TVs unless they were eligible for a coupon.

One commenter was a cable subscriber and owned a high-definition TV, but still wanted coupons for his analog sets (which he said would otherwise become paperweights). He said people would not want to upgrade to digital cable, and suggested that coupons should be available to all and all converter boxes (including digital tuners inputting HD programming into HD-ready digital TVs) should be eligible for the subsidy.

The Congressional legislation limits coupons to basic converter boxes: standard definition into analog TVs only.

He wasn't the only one who wanted the coupons to be available to everyone (not just for people who only watched over-the-air programming on analog sets). Many people wanted the coupons to be given to rich and poor alike, and cable and satellite subscribers as well (those services will convert digital signals for their analog sets).

One consumer filed comments twice, referring to himself alternatively as an "American taxpayer" and as an "American voter." Even though he said he had plenty of money, he threatened to stop watching TV if he couldn't get a free digital-to-analog converter box! That's telling them!

There were others who raged against anybody getting a subsidy.

A couple simply asked the NTIA to send them a coupon. (The coupon handouts actually start in 2008.) One man wanted to use the coupon "to pay for recycling" his TV, rather than to buy a converter box. Presumably he was talking about using the subsidy toward a digital TV. Interestingly, that option was discussed during Congressional hearings on the subsidy program, but rejected.

The more significant comments came from the big companies with a financial stake in the program (or from their association lobbyists/legal counsel). I say "significant" as describing the impact on what the NTIA finally decides.

I'll put these commenters into five categories: 1) companies that will build the converter boxes; 2) other organizations that are concerned with technical performance specifications for the boxes; 3) retailers that will sell the boxes; 4) companies that would like to administer the program; and 5) hangers-on wanting to get their mits in the government money-pot.

The issues raised will define the coupon program, and the weight and persuasiveness of the most professional of these comments would seem to point to the path of least resistance.

The Coupon Program -- Analysis

Eligibility

The NTIA proposed that only households that relied exclusively on analog TVs and over-the-air TV reception would be eligible for coupons (no cable or satellite service, no digital TV owners). NTIA also asked if they should impose a financial means test.

Virtually all commenters said the coupon program should be open to everyone, even rich people with cable service for their high-definition TVs.

Manufacturers want to sell as many converter boxes as possible, and having a $40 discount on a box priced at $50 or $60 ensures a big demand. They suggested that a government program that did not offer a subsidy for everyone "would confiscate consumer investment in analog receivers without due reimbursement." Of course, these are the same people who continue to make and sell analog-only TVs to unsuspecting consumers, and who have argued that analog-only TVs "should continue to work as before with cable and satellite TV services, gaming consoles, VCRs, DVD players, and similar products."

Retailers don't want to be the ones to tell non-eligible customers they have to pay five times more than the next person for the same box.

Potential program administrators don't want to be responsible for policing who has and who doesn't have digital TVs or cable service in their houses.

A consumer group that for years told consumers to go ahead and keep buying analog TVs well into the transition doesn't now want those same consumers to have to pay a premium to keep those almost-new sets working.

The well-financed lobbyists pointed out that (notwithstanding Congressional comments during hearings that the program was aimed at those who depended on over-the-air broadcasts and analog TVs) the explicit authorization for the coupon program did not limit eligibility.

I predict that NTIA will open eligibility for the $40 coupons to everyone, while emphasizing in publicity the needs of those with analog TVs and antennas.

Converter Box Features

Congress mandated that a subsidy-eligible converter box is "a stand-alone device that does not contain features or functions except those necessary to enable a consumer to convert any channel broadcast in the digital television service into a format that the consumer can display on television receivers designed to receive and display signals only in the analog television service, but may also include a remote control device."

Congress anticipated that there would be a demand for more boxes with more elaborate features, but decided the subsidy program would apply only for basic TV service to ensure low-income people would not be left with no TV at all.

Notwithstanding that, many heavy-hitting commenters want more (or less). Specifically, they want boxes that are capable of displaying electronic program guides, and they want boxes that contain an interface for "smart antennas" (the box could control the direction and sensitivity of an electronically steered antenna to best suit the chosen station, so that the consumer will not have to reach over and manually adjust their rabbit ears or turn the control to rotate their roof antenna).

Only the oldest analog TVs do not have composite input jacks (the yellow one for the video, and the red and white ones for audio). Instead, they have only the antenna input. The antenna input is an RF (radio frequency) jack, and requires that the converter box have a slightly costly RF modulator. Some commenters wanted the flexibility to make some boxes without the RF modulator and some with, so that the majority of people having analog TVs with composite inputs would not have to pay for the RF modulator (cheaper box).

Most commenters (manufacturers and retailers) wanted NTIA to adopt a national energy efficiency standard for the boxes, preempting separate and more stringent state standards. The EPA's Energy Star standard for converter boxes won't be out until later this year, but there is some suspicion that it will not be very stringent. A couple of other commenters in favor of greater energy efficiency noted that while the more efficient box might cost $5 more, it would save consumers many times more than that in lower electric bills over the predicted five-year life of the box.

Some commenters asked that there be a way to pass-through analog broadcast signals without unplugging the box. Before the end of the transition, both analog and digital broadcasts will be available, and even after February 17, 2009, Class A and low-power TV stations may continue to broadcast analog signals.

Some commenters asked that boxes be capable of receiving over-the-air software upgrades, suggesting that they may be buggy when sold and not work without in-place fixes (without their owners having to do anything). Methinks this might add a wee bit of complexity and expense.

And the most important technical performance requirement would be for the actual receiver. Comments mostly made reference to the ATSC A/74 Guidelines for DTV receiver performance. Some said adopt A/74. Others said adopt with modifications reflecting the performance of 5th generation receiver designs (which use multi-path interference to actually strengthen the primary signal). The most sophisticated comments (from non-aligned engineers) suggested desirable changes to performance standards that would correct the deficiences of the A/74 Guidelines (which are a couple of years old).

I am hopeful that the NTIA will seek out technical support outside of that agency and adopt the most forward-looking technical performance standards so that consumers will have a good experience with their boxes.

Physical Form of Coupon

Both retailers and companies that run rebate programs said that electronic coupon cards should be used (versus paper). These cards are like debit cards or gift cards; they would be swiped through the retailer's card reader. They would also be programmed with the amount (either $40 or $80, depending on whether the consumer requested one or two boxes), a serial number, the expiration date, and the converter box models that it could be used for.

The retailer's software would ensure that the purchase was valid and would then transmit the purchase data (serial number, date, model/serial number of box purchased, retailer, etc.) to the program administrator's computer so that the retailer gets reimbursed and the government knows exactly in real time the status of the program. The opportunity for fraud would be minimized.

Paper coupons, on the other hand, would require a monstrous labor-intensive effort to track coupon use. Very inefficient. Not likely to happen.

The Coupon Program -- My Crystal Ball

By Congressional dicta, households may request either one or two coupons worth $40 each toward the purchase of digital-to-analog converter boxes. These boxes will enable their analog TVs to receive and display digital TV broadcasts. (These converter boxes could be used today to good efffect, except that there are no converter boxes on the market yet.)

These coupons may be requested between January 1, 2008, and March 31, 2009, and must be redeemed within three months. Two coupons may not be combined to purchase one box.

You should be able to apply for a coupon over the internet, by telephone, or by regular mail. I'm predicting that everyone will be eligible (except no more than two coupons per household).

You will receive an electronic coupon card with an expiration date printed on it and encoded on its magnetic strip. The coupon card should come with information on participating retailers where you can use the $40 value toward the purchase of a qualified converter box (which should cost $50 to $65). A list of qualified/eligible boxes will also be included with your coupon card.

You will be able to buy either over the internet or from brick and mortar stores. There may be a PIN supplied with the coupon for internet purchase validation.

The converter box will come with a remote control, and will comply with EPA Energy Star efficiency standards (which will probably not be as stringent as other state standards that will have been preempted). The all-important digital 8-VSB TV receiver in the box will be at least as good as 5th generation digital receivers (and that's very good).

The converter box will also be capable of displaying electronic program guides, and will have an input for "smart" antennas. It will have an automatic or a manual A/B switch to permit pass-through of analog signals to your TV (in other words, the box in combination with your analog TV set will receive and display both analog and digital TV channels).

Virtually all converter boxes on the market will be eligible for subsidy. Manufacturers will decide (or have already decided) not to sell non-coupon-qualified converter boxes. If someone comes in the store wanting a converter box with more advanced features, the salesperson will persuade that customer to buy a digital/HD TV instead.

The program will exhaust the $1.5 billion for the program before the demand for converter boxes has been met (it's first-come, first-served). Congress will appropriate more money for more boxes. That's how the industry is setting this up to work; Congress will not be politically able to refuse at that late date. The public would scream.

The consumer electronics industry will leverage the converter box subsidy program to get consumers in the store, where many will be persuaded to buy new digital TVs in lieu of converter boxes.

This is a complex program and time is short. Let's hope the NTIA doesn't waste any more of it.