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Digital TV transition could hurt consumers, warns CU

Tuesday, July 12, 2005

Digital TV transition could hurt consumers, warns Consumers Union

(Washington, DC) – Consumers must receive all the potential benefits from the transition to digital television – and not be stuck with out-of-pocket costs for the switch – two prominent consumer groups told a congressional panel today.
Consumers Union and the Consumer Federation of America outlined four specific areas of concern that must be addressed by Congress prior to the digital transition in prepared remarks before the Senate Commerce, Science and Transportation Committee. A complete copy of the remarks delivered by Gene Kimmelman, senior director of public policy for Consumers Union, is available at www.HearUsNow.org.
The digital transition, as envisioned by the 1996 Telecommunications Act, has failed, requiring additional congressional action, the consumer groups said. Legislation enacted by Congress to facilitate the transition will determine whether it will ultimately benefit American consumers with more programming and telecommunications choices, or whether it will impose billions in direct costs on consumers and exacerbate concentration in telecommunications markets.
To ensure the outcome is the former not the latter, any legislation that this Committee takes up on the digital transition must:

  • Ensure that consumers do not bear the direct costs of the transition by providing consumers with full compensation for the costs of converter boxes for all of their over-the-air-only sets.
    Research conducted by Consumers Union and the Consumer Federation of America shows that about four in 10 American households, or about 42 million households, continue to rely on about 80 million over-the-air televisions for some or all of their television viewing. Without full compensation, the transition will impose costs on consumers for the purchase of converter boxes of $3.5 billion or more.
    Even using the conservative estimate of spectrum auction revenue of $10 billion that the digital transition facilitates, the Committee would be able to both meet its budget reconciliation obligations and fully compensate all households with over-the-air reliant sets for the costs of converter boxes.

  • Promote market competition, rather than consolidation, by setting aside a portion of the 108MHz of reclaimed spectrum for new entrants and smaller existing market players, particularly in the area of broadband wireless.
    The broadband market, dominated by cable and telephone companies, is already highly concentrated, limiting choices and increasing costs on consumers. Congress can foster greater competition in broadband by ensuring that dominant market players are not able to swallow new spectrum that becomes available.

  • Provide for unlicensed, or open-market, use of either the reclaimed or digital spectrum by both commercial and non-commercial entities to foster universal, affordable access to wireless broadband Internet.
    Without competitive alternatives, broadband Internet access will remain a service available only to consumers in those markets deemed desirable by dominant providers — and then only at the high prices these monopoly providers demand. Rural and low income communities are left behind. Unlicensed spectrum policies adopted as part of the digital transition can remedy the problem or exacerbate it.

  • Prevent further concentration of local media markets in a post-transition digital environment by prohibiting broadcasters from holding two television licenses or owning a newspaper in the same market.

Contact: Matt Hartwig, CU 202-462-6262