FCC Sets Fees for New Digital Services

Back in 1996, when Congress set the timetable for digital television, one of the provisions left open for later discussion was fees the Federal Communications Commission (FCC) would levy on broadcasters who charged for new pay-TV programming. The deadline for converting to DTV was set to be the year 2006, but how much should the government be compensated for special content such as HDTV movies, stock quotes, or other fee-based services that a broadcaster might charge for?

Last week, the answer was settled: 5% of gross profits from these new services will go to the government. The FCC feels that the 5% fee will help reimburse the government for the amount that would have been received had the broadcast spectrum been sold at auction. This sounds like a good deal for broadcasters, who have essentially gotten the DTV bandwidth for free in past years, but not all are happy.

"We're disappointed," says Dennis Wharton, a spokesperson for the National Association of Broadcasters. "A lower fee would have provided greater incentives for broadcasters to offer the type of programming and data delivery that cable and others offer." The NAB had hoped for a 2% fee, phased in over time. The FCC counters that the fee is fair and easy to calculate, thus making it easy to work out the financial picture for new services.

On the other hand, some groups feel that the government plan doesn't go far enough. According to a Reuters report, Gigi Sohn of the Media Access Project says the FCC's plan won't represent fair compensation to the public for giving broadcasters valuable digital channels. Sohn believes that the definition of "ancillary" services that would be subject to fees is too narrow to make much difference. "The bank is going to be empty," she predicts, referring to how much the public will gain back from the assessments. Programs such as home shopping and infomercials are exempt from the fees. Also exempt are fees that broadcasters would pay on revenues from cable companies that rebroadcast digital services.