Assorted Musings On The FCC Mandate…

By Steve Smith

The newest battle over the conversion to digital TV was fought earlier this month when the FCC made its decision, forcing TV manufacturers to build digital TV tuners in every set they produce by July 1, 2007. Estimates on how much it will increase the cost of new HDTVs range from $15 or so to $250, depending upon whom you talk to.

My initial reaction was that I railed against the FCC and broadcasters to anyone who'd listen. Here we have the FCC again providing a windfall favor to broadcasters by beating up TV manufacturers again, who will have to re-engineer their sets. TV retailers share part of the burden. Depending upon whom you talk to they may have to take less margin for the sets they sell and/or spend more time and money on sales training to sell the new sets. And consumers will have to buy higher priced sets with a feature that they really don't need, since about 90 percent of all U.S. households either subscribe to cable or satellite services.

It really has to make your blood boil when broadcasters get away with saying they are doing their share. They say that 85 percent or so of the country is getting HDTV broadcasts. What they don't tell you is that the broadcasts are usually sporadic and mostly low power.

Meanwhile cable and satellite interests continue to stall in talks about passing through the HDTV signals and interactive services that over-the-air broadcasters will eventually provide and want to severely limit the consumers' right to home video recording in the digital era!

I then got off my soap box, caught my breath and calmed down …

I figured out that if Gary Shapiro, president/CEO of CEA, wasn't blowing a gasket, neither should I. He calmly told TWICE that CEA may challenge this decision in court. (See p. 1). In fact he saw some positives that will come from this, even if CEA can't overturn the decision in court. The industry put itself on the side of the consumer in this tuner fight, gaining the support of more than a dozen major consumer groups for its position, he said. And now the FCC will have to deal with cable/satellite industry issues and home video recording rights in the digital era.

In thinking about the cost of these tuners you've got to acknowledge that not every analog TV in the United States will be replaced by a digital set by 2007. "Relatively inexpensive" (read under $100) set top boxes to downconvert HDTV programming onto your analog set will become available.

And finally for you retailers out there I have question: When was the last time there was a price increase in consumer electronics? I've been around 20 years and I'm pretty sure the answer is "never." I know I will receive irate calls from a few of my friends in the TV manufacturing business, because you have been left trying to make the FCC's decision economically viable.

But your engineering and manufacturing staffs will probably do what they normally do in this business, create a near miracle. They will come up with ways to put tuners in all TV sets by 2007 for little or no real increase to consumers. Manufacturer and retailer profit margins may suffer some, but what else is new?

Remember that even CEA says digital TV prices continue to drop an average of 2 percent a month. Okay, so maybe the price decreases slow down or stop as the tuner deadlines approach over the next five years. With all the new features 2007 sets will sport, I doubt consumers will be hit with major price increases, even on the high end. As for the entry-level sets, there will probably be so many new features if the price does go up slightly, most consumers won't mind paying the difference.