The Real Cost of Delaying Digital TVby
The transition team for President-elect Barack Obama wants Congress to push back a planned changeover to digital television. The delay, Obama's team argues, would give consumers more time to get ready for the switch, now scheduled for Feb. 17.
But analysts say a prolonged delay could also be bad news for the wireless service providers who plan to use the airwaves that will be freed up as a result of the change. It may also put a damper on plans by broadcasters to air popular programming once TV signals have gone digital and viewers have done away with outmoded TVs that only pick up analog signals.
Concern over a delay gathered steam on Jan. 8 when John Podesta, co-chair of the Obama transition team, sent a letter to Congress saying the government's funding of the switch from analog to digital TV broadcasts was "woefully inadequate," and urging Congress to delay the transition to ensure consumers can receive new digital broadcasts.
Waiting List for Converter-Box Coupons
Mobile-phone service providers have a lot riding on the transition. Industry leaders including AT&T (T) and Verizon Wireless, owned by Verizon Communications (VZ) and Vodafone Group (VOD) have spent billions of dollars on the airwaves that will be freed up when the transition happens and intend to use that spectrum to provide advanced services, including Web surfing and mobile video. While the services aren't scheduled to go live immediately after the transition, an extended delay could prove problematic. "Every day they can't roll out the system affects when they can bring [new products] to market," says Tim Bajarin, president of industry researcher Creative Strategies
As the nation prepares to switch entirely to digital TV broadcasts, consumers with older, analog TV sets will need to buy special converter boxes that can turn the new digital signals into analog ones their sets can pick up. The boxes cost $40 to $80, and Congress had allocated $1.34 billion in government funding to supply consumers who don't have cable or satellite television service, or newer digital TVs, with $40 coupons to buy the converter boxes in stores.
That money has run out, though, and more than 1 million consumers are on a waiting list for the coupons, Podesta wrote in his letter to congressional Commerce Committee leaders. By February, the number could reach 5 million. "During the transition, we have discovered major difficulties in the preparation" for the switchover, Podesta said. "These weaknesses mean major problems for consumers."
Nielsen: 6.8% of TV Households Aren't Ready
The Obama Administration argues that many Americans, particularly in low-income and rural households, won't be ready for the conversion until Congress allocates more money for new coupons. Consumers Union, publisher of the nonprofit Consumer Reports, has also asked the government to push back the deadline. As of December, 6.8% of U.S. households with TVs weren't ready for the transition, according to market researcher Nielsen.
TV broadcasters could also suffer as a result of the delay, analysts say. Networks have pushed back the broadcasts and promotions of certain shows, such as new episodes of popular series, to March, to take advantage of the excitement around the digital switch, says Nielsen Senior Vice-President Patricia McDonough. "That cycle has already been changed, and can't be changed back," she says.
Bruce Leichtman, president and principal analyst at Leichtman Research Group, which advises companies on digital television markets, estimates that the demise of analog TV could be postponed by two to four months as a result of Podesta's letter. That, he says, wouldn't be devastating for many companies.
However long the delay, if it comes, Congress will have to pick a new changeover date that will cause the least disruption for viewers—for example, after the NCAA basketball tournament, which airs in March. The government also needs to do a better job educating consumers about the converter-box coupons and the changeover in general, analysts say. Many consumers are unaware of the boxes, and believe they need to buy a new TV. "There's still a lot of confusion," says Creative Strategies' Bajarin. "The real solution for this is for the government to be much more aggressive in getting the message out."