By Lisa Johnston
New products on display at the American International Toy Fair, held in N
President-elect Barack Obama's transition team wasted little time shaking up the consumer electronics industry by sending a letter to congressional leaders on the first day of International CES asking that they consider delaying the Feb. 17 analog TV shutoff out of concern that millions of consumers, particularly among the poor and elderly, are not adequately prepared.
The call for the delay came in a letter from the co-chairman of Obama's transition team, John Podesta, to key members of the commerce committees of the House and Senate. It did not suggest how long the delay should last.
According to Nielsen data for December, approximately 7.8 million households, or 6.8 percent of total U.S. television homes, are completely unprepared for the analog cutoff.
In Washington, support of the proposal seemed to be split between party lines, with a number of Republicans generally opposing the plan, and Democrats either applauding the move or keeping mum.
As this went to press, Senate Commerce Committee chairman Jay Rockefeller (D-W. Va.) was preparing legislation to delay the transition by 90 days, and was seeking to rapidly garner approvals.
Many in the consumer electronics industry, however, went on record in opposition to any further delays, and asked that other options, including taking steps to make more converter-box coupons available, be considered.
Gary Shapiro, Consumer Electronics Association (CEA) president and CEO, argued in a letter to the president-elect's team that the plan would "engender skepticism, confusion and distrust the next time government asks the public to take specific actions around a specific event."
It would also do little "to promote a successful transition to digital television … with awareness now close to 100 percent," he continued. "A delay will require significant unbudgeted expenditures from the public and private sectors. Resources would have to be found for a new national public education campaign centered on the new date. NTIA [the National Telecommunications and Information Administration] would incur ongoing administrative costs to oversee the coupon program. Broadcasters would be forced to extend leases on their analog towers (to the extent extensions are even possible) and power their analog transmitters at a cost of up to tens of thousands of dollars per month, per station," he said.
Shapiro cautioned that the delay would do little to help "any perceived problems with [converter] box availability" and "could indeed suppress the present demand for boxes, leaving retailers with surplus inventory and removing any incentive to order and warehouse boxes for another date, which could also be viewed as changeable."
Shapiro also reminded the president-elect that "the public interest is served by the return of analog spectrum to be used by carriers that have already invested nearly $20 billion in spectrum auctions and have promised deployment of innovative new next-generation wireless broadband services," and that "first responders need and deserved the spectrum that has been set aside for improving emergency communications."
Instead of imposing a delay, Shapiro offered the president and Congress a set of the following alternative solutions:
"(1) [Get] a fix of accounting issues such as the anti-deficiency rules that are preventing NTIA from sending out coupons despite available funding. Only 19 million of the 33.5 million available coupons have been redeemed.
"(2) Examine total funding for the coupon program and explore any need for additional funding, for example, to send coupons out via first class mail to eliminate three week delivery delays.
"(3) [Eliminate] the 90-day expiration date on coupons, which would put more coupons into use.
"(4) Explore additional funding for government call centers and funding to local grassroots groups to answer questions about the transition.
"(5) Should the government determine that the supply of converter boxes will not meet demand, examine permitting use of converter-box coupons to purchase access to digital television either through pay service (cable, satellite or fiber) or credit toward the purchase of a limited-feature or low-cost digital television."
Consumer electronics manufacturers and analysts canvassed by TWICE generally opposed the delay for the additional confusion it would create, but expressed little concern over the impact it might have on CE business this year.
"Several manufacturers commented at the show that a postponement might not be bad for the continued sale of new TVs," stated Tamaryn Pratt, principal of Quixel Research, which tracks the consumer display market. "Maybe someone will win."
Paul Gagnon, North America TV market research director for The NPD Group's DisplaySearch, said, "I don't think the delay would significantly impact the TV market much. Any positive influence on TV sales has probably already been felt with the population most directly impacted probably choosing a converter box … However, a delay would certainly give consumers more time to wait for a coupon to purchase a converter box whereas a Feb. 17 analog broadcast cutoff where coupons were scarce and converter boxes may be in short supply could convince additional consumers to choose a digital TV instead."
Riddhi Patel, iSuppli TV systems principal analyst, said: "I think the impact will be limited because there is already a slowdown in adoption because of the existing financial crisis that the U.S. is in. The U.S. has already delayed the transition by three years. All the involved participants, from TV manufacturers to broadcasters to consumers — who have redeemed millions of converter-box coupons already — are ready for this transition, so I don't think delaying it is a good idea."
John Taylor, public affairs and communications VP for LG Electronics, which holds key patents on digital television broadcasting technology and is among the leading manufacturers of converter boxes, said, "Ensuring sufficient funding for the coupons is the main issue for Congress right now. The date is up to policy makers, and we believe certainty is important to consumers, retailers and manufacturers alike. In the end, the focus needs to be on consumers, especially under-served communities that depend on over-the-air TV."
A spokesman for Sony Electronics said, "Sony supports the digital transition moving forward as planned."
However, Peter Weedfald, General Displays and Technologies North American operations president, said he "applauds" the president's proposal.
"For safety reasons alone, if we have people who cannot get access to news, weather and emergency messages, and today have that access, then I think [delaying the cutoff] is the right thing to do," Weedfald said.
Among the companies that would feel the impact of a delay the most are wireless service providers AT&T and Verizon, which will directly benefit from freed-up spectrum after the analog-to-digital TV transition is completed.
AT&T issued a letter saying it would endorse a three-month delay as a special, one-time event designed to aid consumers who could lose over-the-air TV service, provided they were compensated for the time they were prevented from using the spectrum they had paid for.
"From AT&T's perspective, a smooth transition from analog broadcast transmission to digital is in the public interest and will ultimately inure to the benefit of all Americans," James Cicconi, AT&T senior executive VP, said in letter to congressional leaders.
But Verizon CEO Ivan Seidenberg expressed concern that any delay would do more harm than good.
"Not only is it unclear that a delay will ensure a smoother transition, but it is likely a delay would undermine the DTV transition by causing significant disruption and consumer confusion," Seidenberg said in letter to lawmakers.
This TWICE webinar, hosted by senior editor Alan Wolf, will take a look at what may be the hottest CE products at retail that will be sold during the all-important fourth quarter. Top technologies, market strategies and industry trends will be discussed with industry analysts and executives.