Senate committee to debate $463 million set-top-box subsidy, new DTV transition date

Washington (DC) - Late last Friday, Sen. Ted Stevens (R - Alaska) rushed five pages of new draft legislation that would extend the "hard date" for the final terrestrial VHF TV broadcasts to 7 April 2009. Beating deadlines by just minutes, the draft document didn’t even have time to attain a formal name or a Senate docket number before being added to the agenda for Stevens’ Commerce Committee.

"The DTV Bill," as it’s being called temporarily, will be discussed during an afternoon markup session on Thursday. The final delay to the hard date, which Sen. John McCain (R - Arizona) had hoped would be 1 January 2009, was an olive branch to broadcasters in exchange for announcing their support of the draft legislation. Reporters were told the delay would enable broadcasters to finish their coverage of the NCAA Division I Men’s Basketball Championships, before finally turning over the spectrum that supported North American broadcast television for over six decades, to be auctioned off for emergency response purposes.

Some industry groups’ statements of support appear to have been completed sooner than the draft itself. In one statement, Consumer Electronics Association president and CEO Gary Shapiro wrote, "A hard date provides certainty to manufacturers, retailers, consumers and all others with a stake in the transition. A hard date will foster innovation, strengthen America’s security and begin the process to auction off analog spectrum to provide funds to the U.S. Treasury, while completing the DTV transition in a timely and understandable manner for consumers."

It is this auction to which Shapiro referred which may inevitably generate controversy as debate over "The DTV Bill" extends from the markup session to the full Senate. The rules of the Senate state that bills under consideration during certain times of the year must contain line-item budget provisions - they must either spend money or raise money. To comply, Sen. Stevens concentrated on a provision from the bill on which the current DTV Bill is based, which will spend as much as $463 million to procure set-top boxes - digital-to-analog converter units - for distribution to "eligible persons" who apply to receive these set-top boxes from the Federal Communications Commission. If Stevens had delayed action on this provision, the Committee would have been prohibited, under the so-called "Byrd rule" (named for Sen. Robert Byrd (D - West Virginia), the former majority leader), from debating the entire bill, including the hard date, for the remainder of this session of Congress.

As the July version of the legislation reads, "There are authorized to be appropriated $468,000,000 from the proceeds of the auction of licenses for recovered analog spectrum under section 309(j)(14) of the Communications Act of 1934." The licenses would be auctioned for use by emergency services and first responders. Five million of that appropriation would be spent for administrative purposes. Newer draft language, with possible revisions to this figure, has not yet been made available to reporters.

During hearings last July, the Commerce Committee heard from Charles Townsend, the president and CEO of Aloha Partners, who said his firm is likely to place a bid for a large chunk of this analog spectrum, and that the premium it may pay is justified. The firm would then resell small portions of the spectrum to local and regional services. Aloha had already spent, said Townsend, up to $30 billion over a two-year period for frequencies in the PCS spectrum for cellular phones, for similar resale. But cellular frequencies, as cell phone users know, don’t extend well under tunnels and through concrete and steel buildings like television frequencies ; and as Senate supporters reminded the committee, the "Twin Towers" were concrete and steel buildings.

But Townsend warned the Committee that further delays to the hard date could reduce the value that firms such as Aloha would be willing to pay, saying that spectrum doesn’t appreciate like an investment. "I don’t think pushing it out too far is a good idea," he said.

So Sen. Stevens has repeated several times over the past few months that the DTV bill will pay for itself. Prior to last week, the working title for the bill had been "Spectrum Availability for Emergency-Response and Law-Enforcement to Improve Vital Emergency Services Act," which shortens with a minimum of contortion to the "SAVE-LIVES Act." The name of a bill alone can be its own best defense against opponents, who could conceivably become characterized, as mid-term elections approach, as "opposed to saving lives."

But the largest disaster recovery operation in US history is under way, and even more potential weather-related disasters are looming in Massachusetts and Florida. Nestled in the midst of those headlines, plus the rising price of oil and the downturn in the economy, are the wars in Iraq and Afghanistan, and the downturn in public confidence in the Bush administration. With all that as a backdrop, some members of Congress from both political parties are likely to argue whether it’s prudent for the federal government to be spending half a billion dollars to ensure that lower-income citizens - some of whom along the Gulf Coast remain without homes - retain their right to watch TV.

Last July, although the full amount of the expenditure had yet to be determined, some Committee members spoke out against the appropriation of funds for what are essentially consumer electronics devices. Sen. John Ensign (R - Nevada) reminded the committee that current analog TVs won’t "go black" after the hard date, especially if they’re connected to cable systems, or to set-top converter boxes available through retail channels. Ensign referred to the PC industry - which recovered in the US after the rapid growth of the Internet - as proof that even lower-income consumers will pay premiums for services whose value could be substantiated. "We don’t need a subsidy," he concluded.

Also appearing before the Commerce Committee last July, the CEA’s Gary Shapiro predicted that up to 97 million digital TV tuners may be in operation in the US by 2009, for what he characterized as 86 percent market penetration. Using Shapiro’s figures, that would leave about 15.8 million viewers without digital television by the time of transition - about as many people as watch "ER" on any given Thursday night.

Using ballpark figures provided to the Committee by a representative of Motorola, a set-top analog-to-digital converter box manufacturer, estimating the price per unit at $50, the FCC would be able to purchase 9.26 million converters. While Sen. Ensign may continue his opposition to the DTV Bill as an unnecessary subsidy, others may end up opposing it for not being enough of one.

The DTV debate, which shifts into a new gear on Thursday, is likely to touch on a multitude of topics, including whether Americans have a "right" to television service, whether TV truly is a public service any more as private interests abound, and by no means coincidentally, the priorities for spending money in a time of national crisis. But Senate rules - in the interest of transparency of the budget process - may prohibit Sen. Stevens’ committee from raising money through the auction of VHF spectrum, for unspecified purposes, such as pending national emergencies. So despite public and private support for the April hard date, which should now make even the NCAA happy, a plethora of contingencies competing for the attention of the public sector could very well prolong the DTV transition process even further.