October 14, 2005 | WebMemo on Regulation
Since the days of Ed Sullivan and Milton Berle, television has been broadcast using the same technology and largely over the same frequencies. That is about to change. Later this month, Congress will vote on setting a firm date, likely in 2009, when TV broadcasters will have to end their analog broadcasts and return the frequencies used for them. Afterward, all TV broadcasts will use digital television (DTV) technologies. This transition is critical-not so much for television viewers, few of whom watch television over the air anyway, but for consumers of innovative new wireless services that can put the old TV spectrum to better use.
While the final proposal has not yet been circulated, the Senate Commerce Committee may vote on the DTV transition next week, in order to allow some $10 billion in spectrum auction revenues to be included in budget reconciliation. The House Commerce Committee will likely vote the following week. In addition to setting a transition date, lawmakers will also consider subsidies for over-the-air viewers who don't own DTV sets. Subsidies, however, are unnecessary and should be rejected. Additionally, broadcasters are urging lawmakers to force cable television providers to carry each of the multiple digital channels that the broadcasters may air. This too should be rejected, as it runs contrary to First Amendment principles and may constitute an unjustified taking of private property.
A Snail's Pace
Efforts to improve television signals began in earnest in the 1980s. Initially, the focus was on improving picture definition with high-definition (HD) technology. However, these early efforts were overtaken by the advent of digital technology. Digital broadcasting brings with it many new features. For instance, viewers watching a sports event could call up instant replays or change camera angles at the touch of a button, or they could obtain further information on a program, much like with recent DVDs. Digital compression also allows broadcasters to transmit several channels of programming over spectrum that previously could carry only one.
In 1997, the FCC, as directed by Congress, established a plan for the transition to DTV. Each existing broadcaster received a new six-megahertz block of spectrum to transmit DTV signals. They would have to return their old, "analog" spectrum after the transition-set to occur on December 31, 2006, provided that 85 percent of households had access to DTV by that time. The old frequencies would then be auctioned off, potentially raising billions of dollars, and put to other uses, such as wireless telephony.
The net effect of this plan was to grant existing broadcasters use of two huge blocks of spectrum, free of charge. This giveaway raised quite a few eyebrows because elsewhere the FCC was auctioning the use of valuable spectrum to the highest bidders. Aside from the billions in lost government revenue, the plan left broadcasters with little incentive to return their old spectrum.
Since that time, the digital transition has proceeded at a snail's pace. With less than one-and-a-half years to go before the 2006 deadline, almost no one is watching over-the-air DTV broadcasts. While close to ten percent of households have digital television sets, the content mostly comes through cable, satellite, and DVDs. Only two percent of households own TV sets that can receive digital broadcasts.
It should not be surprising that broadcast DTV is falling flat. Whatever the advantages of digital technology, fewer and fewer Americans are watching broadcast TV. Only some 15 percent of viewers receive terrestrial TV signals. And the viewers most likely to want digital service are the ones least likely to watch over-the-air TV. How may videophiles have rabbit ears on their TVs?
By itself, consumers' lukewarm reception of digital broadcasting should not concern policymakers. Government should have no role in determining technological winners and losers. Whether viewers are unimpressed with DTV or choose to receive it via cable rather than broadcast, policymakers should not try to impose their own preferences.
The transition to DTV nevertheless is critical, but for a different reason: the old TV frequencies are extremely valuable and can be used to provide innovative new wireless services, from expanded smart-phone services to wireless Internet connections. Until the transition is made, however, this valuable electromagnetic real estate will be virtually wasted.
The Budget Bill
The real cost of inaction, then, is not forgone government income, but the lost benefits to consumers and to the economy if this spectrum remains locked up. Procedurally, however, the issue is being driven in Congress by the budget. Both the Senate and House Commerce committees plan to recommend DTV legislation for inclusion in budget reconciliation. Each committee is expected to set a new deadline-likely January 1, 2009-for the end of analog broadcasts. This new date would not be conditioned, as is the current 2006 deadline, on the percentage of viewers with DTV access.
Establishing this "hard" deadline is critical. But there are a number of other important issues that lawmakers also need to addressed. Among them:
After years of delay, Congress may soon vote to complete the transition to digital television. This is a good thing, but not for the reasons usually offered. Washington should be neutral on broadcasting technology, as with any other industry. The real issue here is the valuable spectrum that was given to broadcasters in the 1990s, on the understanding that their old frequencies be returned. Retrieving this spectrum and making it available for other uses should be policymakers' main goal. Congress should set a "hard" date by which old spectrum will be relinquished. This should be done with few or no consumer subsidies and without any new mandates.
James L. Gattuso is Research Fellow in Regulatory Policy in the Thomas A. Roe Institute for Economic Policy Studies at the Heritage Foundation.
 See "Beachfront Property Values Drop: Analog Spectrum Now Pegged at $10B," October 7, 2005, at http://www.tvtechnology.com/dailynews/one.php?id=3303.
 See Adam D. Thierer and John S. Barry, "How the Telecom Bill Gives Away $70 Billion In Family Tax Relief To The Broadcast Industry," The Heritage Foundation F.Y.I. No. 84, January 23, 1996.
 "Speeding the DTV Transition: Facts and Policy Options," New America Foundation Policy Brief, May 2005.
 These issues, however, need not be resolved at the same time. Only the establishment of a firm deadline must be addressed as part of the budget reconciliation process.)
 "CBS Plans Second Digital Channel," Mediaweek, Oct. 5, 2005.
 The Supreme Court in Turner Broadcasting System v. FCC (512 US 622) did uphold then-existing "must-carry" rules. That case, however, involved the carriage of only one channel, not the multiple channels at issue now. Moreover, the changes in the TV marketplace since 1994 could open even the original rules to reexamination.
 For an analysis of the First and Fifth Amendment problems with multicast must-carry rules, see Charles J. Cooper, Michael W. Kirk, and Brian S. Koukoutchos, "A Mandatory Multicast Carriage Requirement Would Violate Both The First and Fifth Amendments," September 6, 2005 (legal memorandum prepared for the National Cable and Telecommunications Association).