DTV TRANSITION: THE SKY IS NOT FALLING

Over the years, relations between the broadcasting and consumer electronics industries have sometimes been strained, even though they are heavily dependent on one another.

Right now, they seem to be getting along just fine, working together in making sure the country makes a smooth final transition from analog to digital broadcasting. Both are members of the inter-industry DTV Transition Coalition dedicated to that goal.

That doesn’t mean their perspectives of the transition are perfectly aligned.

Broadcasters see the final days to the analog broadcasting cut-off on Feb. 17, 2009, as a major challenge that could end with millions complaining to their congressmen about why their trusty old TVs don’t work anymore.

But, in this interview with TVNEWSDAY Editor Harry A. Jessell, Gary Shapiro, who represents some 2,000 makers and sellers of TVs and other electronic gadgets as president of the Consumer Electronics Association, seems far less concerned. He sees the transition as a manageable chore.

As a result of the industries’ awareness campaigns and government’s converter box program, he says, most people who rely solely on over-the-air broadcasting will equip themselves with new TVs or converter boxes by Feb. 17, 2009, and go right on watching their favorite shows without interruption.

The “tiny number” who somehow failed to get the message and take action before the deadline will quickly figure out what to do after their pictures disappear, he says.

An edited transcript of the interview follows:

How would you characterize the state of the DTV transition today?

The success of HDTV has exceeded even our most optimistic expectations. By the end of the year, 36% of American homes will have HDTV, which is actually incredibly similar to what we projected 10 years ago. No one ever gets it right in the long term. I mean one short-term mistake and it throws everything off.

The big surprise is that the DVD has been a driver of HDTV, even though DVD is not HDTV, at least the current generation.

We thought broadcasters would be a little more aggressive in going to HDTV. We saw it as an opportunity for broadcasters to capture back market share, especially in the over-the-air world. We have been promoting over-the-air broadcasting with www.antennaweb.org rather aggressively. [NAB President David Rehr] has expressed interest in joining us on that and we’re pleased that broadcasters now see the value.

How could he not?

I used to go to the NAB convention every year and encourage them to promote over-the-air broadcasting. It’s something that they should have been doing 10 years ago.

Do you think if they did so now, they could recapture market share lost to the cable and satellite guys?

Well, it’s clearly a different world than when we embarked on this HDTV journey 20 years ago. Then, satellite was the new competition to cable and broadcasters. Now, the competition is also wireless and fiber and video games and DVD. There’s a tremendous amount of competition for eyeballs.

Broadcasters would have done better if they had focused on promoting over the air, but they’ve been sidetracked with other issues like must carry and violence in television and all sorts of other thing. But I have enough challenges leading the consumer electronics industry. I’m not going to start second-guessing the broadcasting industry.

When I asked you to characterize the state of the DTV transition, I didn’t mean HDTV. I meant the transition of broadcasters from analog to digital leading up to analog cut-off on Feb. 17, 2009. Is that on track?

Yes. It is on track. It’s the nature of the beast that there is some concern and there are those who have not been close to the situation who are even more concerned.

The goal is to make sure that everyone understands that this transition is coming and to make wise decisions before February 2009, and we’re working hand and hand with the various broadcaster organizations and cable organizations and satellite companies. Everyone is in agreement that that is a worthy goal.

Now, as a practical matter, what is going to happen in February of 2009 is that people who keep cable or satellite will not know the difference. So, 90% of the population has nothing to do with this and may not even pay attention to what’s going on.

So the issue is, what about the 8% or 9% that just gets TV exclusively over the air. Will they know, and, if they do not know, what will occur? Well, we think overwhelmingly they will know. But, of course, you can’t reach everybody. A tiny number of people will somehow miss our multiple messages and retailer and manufacturer advertising and broadcasting PSAs and bus posters and AARP warnings and everything else.

But those people will turn on the radio or open the newspaper or make a phone call and they’ll find out that day. So I understand that there is some concern by policy makers. They’re worried about an outrage, but, frankly, it will be the tiniest group of people who will not know on that day.

The key to making sure that TVs don’t go dark in over-the-air homes is the government’s converter box program. As you know, the program involves giving $40 coupon to folks who want to retrofit their TVs with low-cost digital-to-analog set top boxes.

It’s really a very generous program.

Are the manufacturers going to step up and make the boxes so that people who want them can find them in the stores when they need them?

At least three will. They’ve announced that they will and they’re being pretty aggressive about it, but, right now, the market demand for these items is nonexistent. I mean you have to understand that I’ve never heard of anyone going to the store and asking to buy one because, for a few dollars more, you can get the whole shebang. Certainly they will make those available and it will be something that is used and bought.

I know that LG, Thomson and Samsung have said they will build the coupon-eligible set-top boxes. But I talked to Marc Pearl [executive director of the Consumer Electronics Retailers Association] and he said the retailers he represents have a lot of concerns about their participation in the program.

I don’t want to speak for Marc Pearl and I will not. I can speak for a whole bunch of retailers though. We are announcing just this week that we’re having a retailer as vice chairman of our board. I just spoke with the president of Circuit City. I’m in regular contact with the president of Best Buy and other major retailers.

Will Wal-Mart and Target and Circuit City and Best Buy be responsive on this? Absolutely. I can say without any doubt that they are focused on this transition. If you’re hearing hesitancy, my guess is it’s because IBM has just been awarded the contract for the coupon distribution program and they want to see the details play out.

They want to understand how it will work and how they’ll get the coupons. It’s still extraordinarily early. There are no consumers demanding the coupons or the boxes. What there is is a very high take up rate for digital television and that’s something which is pretty significant. You know the sales for digital televisions are really pretty high. Fifty-three percent of homes already have digital TVs of some kind.

Let’s talk about those digital sets. As of March 1 of this year, all sets have to be digital, right? They have to have the ATSC tuner in them. So when will it be safe to walk into a store and know that any set that I buy is going to be able to receive digital signals off air.

First of all, the March 1 date wasn’t every set sold. It was every set made or imported. So there’s a pipeline process and obviously it depends upon how many TVs stores have in inventory and how quickly they move.

But we’re almost at the point where everything has tuners in them. I’ve been in a number of stores lately and have not seen anything that’s analog, but didn’t have a digital tuner in it. So some stores are already there.

So certainly by the holiday buying season, consumers aren’t going to have to worry whether their new sets are digital ready.

Right. I’d be very surprised if you could find [an analog-only set] anywhere other than eBay.

Now, just from looking at your Web site and a letter that you sent to Congress, I know you are doing a lot to educate the public about DTV. You’re operating some Web sites, you’re a member of the DTV Transition Coalition, you’re sending info packets to Congress. I don’t want to imply that what you’re doing is not a lot, but is that it? Do you have any other initiatives up your sleeve?

What we’re doing now is a fairly comprehensive set of actions that we think is appropriate for this time in the transition.

What you will see as it gets closer to the date is more and more activity by every group because that’s when it matters. Now those of you in the media understand that timing is everything and right now what we’re doing is we’re working very closely with broadcasters, cable and other affiliated groups. We’re establishing relationships, we’re getting the word out, we’re helping people buy antennas. We have a Web site in English. We have one in Spanish. We’re doing all sorts of different things. We’re talking about it every chance we have. I’m not sure what else we could possibly do at this point. Do you have any suggestions?

Well, the NAB says they’re going to do some paid media at some point. Do you have any money budgeted to actually buy time somewhere?

I could absolutely promise you that the amount of money spent on this by TV manufacturers and retailers as individual companies will be much higher than the combined budgets of NAB and CEA.

We’re trade associations and as such we don’t play in the big leagues in terms of marketing campaigns. Now, the reality is that every major retailer is going to have a huge interest in promoting their stores and so will the TV set makers.

But they’re not going to be spending money to warn people that their TV sets may go dark. I mean that’s a sort of a public interest campaign.

Oh, I see. Are we going to spend money to tell people that their TV sets are going to go dark?

Right as the NAB says it will.

That’s a matter of semantics. Let me put it this way: I don’t think it’s our intent to try to scare the public. Our intent is to try to educate the public and let them know what their options are and that would be our strategy.

We are always surveying to see what people know and who needs to know more, but it’s still so early, frankly, that it’s not that relevant. What really matters is obviously the third and fourth quarters of next year.

I’ve heard some people who are not close to the situation say that the sky is falling, people are going to lose their signal or, as you say, their TV sets are going to go black.

That’s not really the issue because that’s just such a small number of TV sets where that will occur.

The NAB and NTIA tell me the number of homes relying on over the air TV is 20 million, that 16% or 17% of the total TV homes. Your percentage may be low.

The difference is that we do not count every TV set that is not hooked up to cable or satellite as reliant on over-the-air television. We know, by our research, that a lot of these TV sets are either being used for video games, for DVDs, for VCRs, for security or frankly gathering dust in the basement.

So we do not count those TV sets as reliant on over the air and we think that our methodology reflects the true usage of television sets. That’s what we do and that’s what we sell and we’re 100% confident in those numbers. So it’s a much smaller number than some of the articles and others have been led to believe.

But, in any case, it doesn’t matter what the number is. Our mutual goal with the broadcasters is to make sure that everyone knows what their options are before Feb. 17, 2009.

Let’s talk about something completely different—white spaces. This is a hot issue with broadcasters right now. They don’t want to share their broadcast spectrum with unlicensed wireless computer devices. They say they will interfere with digital TV reception. Why are you on the other side of that issue?

No, we’re not on the other side. We’re on no side.

You’re not? I just read your comments and you’re saying you favor unlicensed devices in the white spaces today. Was I reading that wrong?

We sell TV sets. We want consumers to be able to use those TV sets. We don’t want interference. However, we are not as concerned as the broadcasters with white space interference. We recognize that there’s a tremendous opportunity to use unlicensed devices that creates new services, new opportunities. We have a different reaction than just saying this is bad.

Well, if I buy a new HD digital set and the picture freezes up because of interference, I’m taking it right back to the store and asking for my money back.

We have an interest in making sure that the consumers can use their products, no question about it, but we think white space should be opened up if there’s no interference. Broadcasters say there is interference. We say, let’s look at some serious, serious testing.

Now we understand that the FCC did some preliminary testing and there are some questions as to what really happened with those tests. But again, the sky isn’t falling here. Let’s make sure that there’s really interference before we ban a whole useful set of devices. So we do take a middle line approach.

And you do that with the understanding that it would be a disaster for your industry if suddenly these sets stopped working.

You know that there has been this huge change in the broadcasting landscape over the last 20 years. When we say broadcasting now, we don’t mean broadcasting the way we used to mean broadcasting.

We used to mean a free over-the-air signal from a transmission tower all the way through the air into a consumer’s TV set. What’s fundamentally changed is that that has become a relatively insignificant portion of the consumer viewing experience. Broadcasters now rely heavily upon cable, satellite and fiber to get their signals to the consumers. So the actual percentage of over-the-air reception has gone down despite our best efforts at CEA to promote it.

So when broadcasters say the sky is falling because someone might interfere with over-the-air broadcasting, let’s look at how many sets it really affects and let’s look and make sure there is an effect. Those are two very important questions.

But you must also be aware that broadcasters are interested in using their digital spectrum for mobile broadcasting. That’s a whole new service and they don’t want anything interfering with it. That’s another reason this is such a big deal for broadcasters.

Well, maybe that’s their job, but we worked with the FCC for years and frankly we have a pretty good history of credibility on a whole range of issues, whether it has to do with micro radio or it has to do with the testing of digital television itself. Although we’ve been accused of a whole bunch of things, no one has ever come back and said we were wrong from a factual basis. We’ve always given the facts and we’ve been data driven.