CEA Howls over DTV Tuner Mandate

How much does it cost to include a digital tuner in a new TV? If you ask members of the Consumer Electronics Association (CEA), they'll tell you as much as $250 at retail. The National Association of Broadcasters (NAB), on the other hand, estimates that the cost is closer to $15. The truth is probably somewhere in between.

The CEA has launched a flurry of strongly worded protests in the wake of an early-August vote by the Federal Communications Commission (FCC) requiring television makers to install digital tuners in all sets offered for sale by July 2007. The commission is also considering proposals—including the incorporation of a copy-prevention "broadcast flag" in movies and television shows—that might protect digital television signals from being ripped off and re-transmitted by pirates. The agency will entertain comments on digital television copy-control proposals until October 30.

But it's the tuner requirement that really burns up the CEA. The FCC vote stipulates that manufacturers add digital tuners to all TV sets with screens of 36" and larger by July 2004, with the requirement for smaller sets to be phased in over the following three years. CEA officials have denounced the requirement as "a multi-billion-dollar television tax on all American consumers," claiming that it will add hundreds of dollars to the cost of new TVs, without providing any demonstrable benefit. The CEA correctly points out that only about 10% of American viewers depend on over-the-air broadcasting. The remaining 90% get their signals from cable companies or satellite systems, which typically provide their own set-top converter boxes that eliminate the need for built-in tuners.

CEA officials have also denounced the FCC's multi-billion-dollar spectrum giveaway to broadcasters as the ultimate form of corporate welfare. To begin the transition to digital broadcasting, each of the nation's 1600 local broadcasters was given a free 6MHz-wide section of the RF spectrum to use as a digital channel, with the agreement that analog broadcasting licenses would be returned once the transition was completed. Many broadcasters balked at the cost of installing new studio equipment for the development of programming that few consumers could receive, and more than 70% failed to meet the FCC's first deadline this past spring for broadcasting a minimum amount of digital programming. Without tuners to receive their signals, the production and broadcast of digital programming doesn't make financial sense, the NAB successfully argued.

The FCC agreed, and the CEA will have to comply. Many manufacturers and analysts have questioned the entire spectrum giveaway as a subsidy to what increasingly appears to be a dinosaur industry. Apart from local news, sports, and weather reporting, very little programming originates from local broadcasters, almost all of which depend on network feeds, syndicated shows, and re-runs for their programming. Despite the prevalence of cable and satellite, the FCC and NAB still cling to the old model of local broadcasting that originated when radio was in its infancy. In fact, in justifying its ruling, the FCC quoted the 1962 All Channel Receiver Act (ACRA), which gives the agency the "authority to require" that TV sets "be capable of adequately receiving all frequencies" allocated for "television broadcasting." Some pundits have speculated that the entire DTV transition might have gone more smoothly if local broadcasters had been left out of the formula, and only manufacturers, cable providers, and satellite services had been involved.

"We don't need a digital broadcast tuner embedded in every new television in order to accelerate the DTV transition; we need digital cable equipment compatibility—the option for consumers to buy a high-definition set, take it home, plug it into the cable jack in their wall, and turn it on just like they do today in the analog world. A mandatory digital broadcast tuner would be a costly vestigial organ in the sets used by millions of American cable and satellite viewers," said CEA president and CEO Gary Shapiro.

"We certainly respect the Commission's interest in shifting broadcasters rapidly to DTV," Shapiro continued. "TV manufacturers have helped advance these goals by making and selling DTV products that consumers want. Set makers have also offered to help the transition by putting an over-the-air tuner in cable-ready DTV sets of all sizes. We further share the FCC's urgency in achieving an 85% DTV penetration rate as quickly as possible. We believe minimizing the cost to consumers of new DTV products and making them cable compatible will best accelerate the process." The value of the broadcast spectrum given away by the FCC is estimated by the CEA at $70 billion.