March 18, 1996

Digital TV, Dollars and Dissent: Battle Grows Over Broadcast Technology


WASHINGTON -- There are a lot of disturbing programs on television these days. But lately some of the most ominous emanations from broadcast stations have taken the form of a lobbying campaign.

"Imagine your favorite shows . . . gone," warned a big newspaper ad taken out last Wednesday by KRON-TV, NBC's affiliate in San Francisco. "Local news, weather and sports . . . gone. The Olympics for free . . . gone. That's what some in Congress have in mind."

That was just one sample from a nationwide media blitz by television broadcasters, a barrage that includes a toll-free telephone hot line to sign up grass-roots political support from viewers. The number (1-888 NO-TV-TAX) generated about 3,500 calls a day last week, according to the National Association of Broadcasters.

At issue is something called digital television, but the fight is not about technology as much as it is about money. Television broadcasters see themselves as locked in the political battle of their lives, a battle that may intensify in the next two weeks as the House and Senate commerce committees conduct extensive hearings on the question of how to bring this technology to viewers.

Digital television is a technology that grew from plans in the 1980s to develop high-definition pictures with movie-like sharpness. But it has evolved to allow many other possibilities, which include the transmission of four to six shows at once; high-speed data services, and even wireless links to the Internet.

Broadcasters argue that the new technology will be stillborn and that the survival of free television will be jeopardized unless the federal government provides every television station a second, transitional channel.

Without these transitional channels, broadcasters say, they cannot switch to digital services unless they shut down their existing analog services -- a move that would leave people with conventional television sets in the dark.

The industry contends that it would take many years for the nation's viewers to buy new digital-television sets or devices to convert their analog sets into digital receivers.

But the industry's critics, including Sen. Bob Dole of Kansas, contend that broadcasters are asking taxpayers for a multibillion-dollar giveaway. Government economists estimate that the licenses earmarked for digital television -- essentially unused channels in the UHF band -- would be worth at least $10 billion if the government auctioned them to the highest bidders.

In fact, in December and January, Dole held up passage of the Telecommunications Act over the issue of the digital airwaves, agreeing to let the legislation proceed only after getting a commitment from his congressional colleagues to take up the matter separately -- and soon.

Money is not the only issue. Some consumer groups and federal officials argue that broadcasters should get new licenses only if they reserve some new capacity for expanded public service: more educational programming for children, free broadcast time for political candidates or new types of community services.

"If they get more spectrum, they should give more public service," said Andrew Jay Schwartzman, director of the Media Access Project, a nonprofit group in Washington. The debate is like a Rubik's cube puzzle that no one has solved. No matter how the pieces are assembled and reassembled, they never line up quite right.

The battle centers on four options:

  • "Lending" every TV station a second channel at no cost during the transition from analog to digital television -- but with no new obligation and no specific deadline to return the original broadcast license for new users. This is the broadcast industry's preference.

  • Auctioning the licenses to any and all bidders and letting the winners do whatever they want with the frequencies they acquire. This approach is championed by Sen. John McCain, Republican of Arizona, who argues that current broadcasters have no special claim on the licenses.

  • Granting current broadcasters each a digital license and forcing them to surrender their analog licenses in a decade. This is the Clinton administration's position, intended to advance digital television but prevent a giveaway.

  • Giving broadcasters a new license while imposing tough requirements for services like public-interest broadcasting or other types of nonprofit wireless communications services. This is the approach proposed by Schwartzman and leaders of other nonprofit groups.

    THE BROADCASTERS: New Forms Of Competition

    Television broadcasters say the survival of free, or advertiser-supported, television depends on getting new channels for digital service.

    "If you look out 5 to 10 years, cable is going to have huge video capacity and you're going to have the same thing from telephone companies and satellites," said Richard Cotton, the general counsel of NBC.

    "I don't think it's too strong to say that over the long haul there is zero possibility that a single-channel analog video provider can survive against that kind of competition."

    Broadcasters say they would surrender their existing licenses as soon as most viewers switched to digital service. But no one knows how long that would take, and the industry has adamantly opposed any firm deadlines for returning the old licenses back to the government.

    NBC president Robert C. Wright argued earlier this year that a spectrum auction would amount to a tax on broadcasters, forcing them to pay the government to stay in business. He also argued that more than half of the spectrum would go to "people with another use that has nothing to do with broadcasting" -- cellular-phone companies, for instance.

    But many broadcasters acknowledge that they are uncertain about the demand for digital services and are unclear about their own intentions.

    "The surveys we've seen suggest that in 10 years we might have 10 percent penetration for high-definition sets," said Ralph Gabbard, the president of Gray Communications in Lexington, Ky., which owns eight stations in small and medium-sized markets. He wondered whether such a small slice of the market would be worth significant investment.

    "Can a broadcaster afford to invest $8 million to $10 million in equipment? Where's the advantage? Where's the business?"

    That view was echoed by Ben Tucker, the president of Retlaw Broadcasting in Fresno, Calif., a company controlled by the heirs of Walt Disney. "I've heard all kinds of speculation about what the business opportunities might be, but I've seen no business plan that shows how you enhance the business in your market," Tucker said.

    THE MONEY: $12.5 Billion Or $70 Billion?

    Lawmakers like McCain say that the fairest approach for taxpayers would be to simply auction all the television frequencies and use the money to reduce the federal deficit.

    That idea has drawn considerable interest, as lawmakers have watched the Federal Communications Commission raise billions from auctions of wireless telephone licenses.

    Dole insisted earlier this year that giving broadcasters new licenses would be "corporate welfare."

    But opinions vary about what the licenses earmarked for digital television would be worth. The Congressional Budget Office estimated that they might fetch $12.5 billion in an auction, while economists at the FCC have said the licenses might be worth $70 billion.

    But many experts say that auctions could easily kill digital television because many licenses would fall to companies with plans for services that have nothing to do with television.

    The notion that an auction could help reduce the deficit got a chilly reception at a hearing before the Senate Budget Committee last week. "Spectrum auctions are not the solution to the deficit problem," said Sen. Phil Gramm, R-Texas. "It is a one-shot deal that will net us maybe $10 billion to $15 billion. But all we're doing is making it easier for one year."

    That view was echoed by Sen. James Exon, D-Neb. "Some see the spectrum as a cash cow," he said. "I do not, and I don't think that should be the driving force of our policy."

    THE WHITE HOUSE: Clinton Proposal For Transition

    The Clinton administration has proposed a third approach, aimed at promoting digital television while also generating revenue for the Treasury.

    Under the proposal, the government would meet the broadcasters halfway, by giving each a second, digital channel for every existing analog television channel they operate.

    But the government would impose a strict timetable, auctioning the current analog television licenses in 2002 and forcing today's broadcasters to switch off the analog stations by 2005.

    Administration officials say their proposal provides the best of all worlds: a chance for broadcasters to move smoothly to digital technology and a chance for the government to reap what administration forecasters expect to be about $17 billion in auction revenue.

    "What we are trying to do is create a win-win-win situation," said Larry Irving, assistant secretary of commerce in charge of the National Telecommunications and Information Administration. But broadcasters and many others say the plan would impose huge costs on consumers. The most optimistic forecasts predict that only a third of households will have digital television receivers by 2005. That means millions of other consumers would then have to junk their conventional sets or buy digital converter boxes.

    No one knows what these boxes will cost. The closest comparison now is the digital receiver for Hughes Communications' DirecTV satellite service. That receiver now costs about $500, but the price is expected to fall as computer chips continue to become less expensive.

    Irving, citing statements by television industry officials, said the boxes would cost as little as $25 apiece by the time they were needed. But as recently as December, White House officials estimated that the converter boxes would cost $100.

    CONSUMER GROUPS: Making a Push For Public Service

    The last option is one favored by some consumer advocates and by FCC Chairman Reed Hundt: offering broadcasters the transitional licenses they seek, in exchange for a broad new commitment to public service.

    Under proposals offered by Schwartzman of the Media Access Project, broadcasters could satisfy these obligations in a variety of ways. They could simply set aside part of their frequencies for nonprofit community and education services.

    Or they could pay a revenue tax for any subscription services beyond free television -- money that would be used to build a trust fund for public telecommunications projects.

    Or they could simply commit to carrying a minimum amount of public programming -- educational television for children, free broadcast time for political candidates or programs created by local government or community groups.

    Broadcasters say they want no part of such plans, arguing that they already carry public-service programming.

    But Hundt said the government was well within its rights to demand new public-service broadcasting -- and should do so. "A TV license carries no property rights," Hundt said last week. "It is a license to use the public property, and it can be conditioned in exactly the same way that an apartment lease can be conditioned for 'no pets' and 'no children.' "

    "Think about it," Hundt added. "We could break the back of the political fund-raising monster" by providing free broadcast time for candidates. "Thanks to the digital communications revolution," he said, "all we have to do is ask. The only question is whether Congress and the FCC have the will to make these requests."

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