Wednesday, March 29, 2006

Does this sound fair to you?

The following comes from a recent report, that I found on netscape... give it a read, and let me know if it sounds fair at all to you.

George W. Bush may be grappling with low approval ratings, but at least one constituency must be pleased with the president right now: The consumer electronics business, which just received a government mandate that forces consumers to spend billions to replace or upgrade their television sets within three years.

Tucked away in the "Deficit Reduction Act of 2005" Bush signed this month is a provision requiring television broadcasters to switch their signals from analog to digital by Feb. 19, 2009. The intent is to free up valuable bandwidth that the federal government can sell, presumably to help whittle down the budget deficit. But it will also require much of the
country to spend billions in order to watch television: Forbes estimates that the digital switchover will help the electronics business move $75 billion worth of product in the next three years.

Right now only about 20% of Americans are capable of receiving a digital signal through a digital tuner built into the television set itself, according to the Consumer Electronics Association. And about 40% more will be able to view the digital signal through a digital cable or satellite set-top box on an analog TV they already own. That leaves more than 40% of American TV viewers--or 44 million households--in need of an upgrade.

The upgrade itself gives broadcasters the opportunity to distribute multiple channels at a time: A local network affiliate, for instance, might have one news channel, one sports channel and one 24-hour movie channel. The images won't necessarily look better, unless consumers have an enhanced or high-definition TV set. If they do, the image quality will be much sharper due to increased resolution.

But without a digital TV tuner, or a cable or satellite set-top box that can convert a digital signal, consumers won't get any TV at all by 2009. They have been headed in that direction for several years--in 2006, digital sets will outsell analog sets at a ratio by a two-to-one ratio, the Consumer Electronics Association estimates--but the new law will accelerate that trend. In the next two and a half years alone, estimates NPD subsidiary DisplaySearch, Americans will spend some $73 billion buying 56 million digitally equipped sets.

"It's at a point where it's not just the early adopter, technophiles buying digital sets," says John Revie, Samsung vice president of visual display marketing. But Revie, who says his company expects digital TV sales to double this year and again in 2007, says some of that sales growth will come because of the mandate.

And within a year, even consumers who aren't interested in upgrading from analog to cable won't have a choice if they're buying a new set--the law requires retailers to only carry digital-capable sets by March 1, 2007. And anyone who hasn't replaced their analog set by the digital deadline in 2009 will have to buy a tuner, expected to retail for around $60, made by manufacturers like LG and Thomson

Still, the conversion will take some prodding. Stewart Wolpin, an analyst with market research group Points North, says only 13% of consumers know about the digital switch. Wolpin says he eventually expects to see ads urging consumers to restock their sets from electronics manufacturers and retailers, but that those campaigns will likely not begin until a year from now. The Commerce Department's National Telecommunications and Information Administration has been allocated a modest $5 million to help with the advertising effort.

And if all else fails, there's always direct subsidies: The feds have earmarked $1.5 billion to be distributed among the 21 million families who still have analog sets so they can buy digital tuners. Each family will receive up to two $40 vouchers, to be distributed through the Commerce Department.

But there is still a chance that the impact of digital conversion may be weakened: Some cable operators are arguing that they should be able to keep supplying their customers with analog signals which would allow them to keep watching without an upgrade. The rationale, according to National Cable and Television Association spokesman Brian Dietz, is that neither customers nor cable companies should have to pay for new set top boxes to maintain service.

Nothing doing, says National Association of Broadcaster spokesman Dennis Wharton, who argues that cable operators are trying to avoid carrying the new "multicasted" digital channels from local broadcasters. Such channels might directly compete with cable offerings like sports and movie channels. The Federal Communications Commission is expected to make a ruling on the broadcasters' request this year.

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