Prisoners of Digital Television

A misadventure in high-tech regulatory policy -- and a Harry Potter Fix

Mike Godwin from the April 2003 issue

(Page 2 of 4)

The Linux problem is particularly acute, as Linux-based operating systems are among the few serious competitors to Microsoft remaining in the operating system market. Linux programs are distributed with their "source code" or simply distributed as source code, which means that they're inherently open and tamperable. A regulatory requirement that Linux-based media players be untamperable would in effect outlaw Linux versions of such products.

Fine, you say: Then the law should recognize the competitive value of open source software and carve out an exception from the untamperability requirement. But that wouldn't just be a big hole in the content-protecting regulatory scheme. It would actually put proprietary software companies at a disadvantage in competing with Linux in the media player market, since Linux-based players could be modified by any programmer to add functionality or remove content protections. In effect, the "untamperability" requirement creates a dilemma -- either permanently hobble open source software (and perhaps lock in Microsoft's current market dominance), or permanently disadvantage proprietary software, including Microsoft's (and thus promote Linux as a matter of industrial policy).

For Internet companies, any regulatory obligation to monitor for copyrighted content signifies a substantial redesign of the Net as it has existed and grown since its beginnings more than three decades ago. Peer-to-peer file trading did not begin with Napster. It is, in a deep sense, a part of the Internet's fundamental design. The Net was created so computers could share data and other resources on a distributed, decentralized network. Digital music files are just another kind of data.

Furthermore, making copies is a fundamental part of what each computer does. It copies information from one part of memory to another, from memory to hard drive and back again, from memory to video, and so on. The Internet, too, works by copying -- transmitted data are typically divided into "packets," which are then copied and recopied from computer to computer until reproductions of all the packets reach the destination computer and are reunited into a perfect copy of the transmitted information.

Problems for Congress. For a number of policy reasons -- the perceived benefit to the public, a purportedly more efficient use of the spectrum, higher-quality broadcasts -- Congress has required television broadcasters to move from analog to digital transmissions. It established the year 2006 as a nominal deadline for the shift, assuming that the general public would see the value of DTV and buy new television sets, with digital tuners, to take advantage of these features. In effect, Congress "loaned" broadcasters extra spectrum to develop DTV (and the DTV audience), but the loan has not produced the expected consumer buy-in.

Making things still more problematic, Congress based its tax and budgeting decisions for the next few years on the assumption that the original "analog spectrum" would be returned. It could then be used for public service purposes (public safety, a larger unlicensed band) or auctioned off, with the latter plan generating perhaps tens of billions of dollars for the government.

As we approach the deadline, the increasingly evident lack of significant consumer purchases of (relatively expensive) DTV receivers means Congress faces the prospect of telling voters that their analog TVs -- including the big new ones they buy just this year, or next year, or in 2005 -- will either be wholly obsolete or require a converter box to keep working. There is no serious doubt that voters will be unhappy about having to buy new, more expensive TVs, or somewhat less expensive adapter boxes, just because Congress has said they must. (An unfortunate side effect of the converter interim solution is that, by adapting legacy devices to receive digital broadcasts, the government may in effect be equipping home-entertainment equipment to facilitate the very "analog hole" infringement that troubles content companies.)

Congress could, of course, push back the spectrum give-back deadline. Broadcasters may also be able to use a loophole in the original deal to push it back themselves. But this would throw off budget and tax calculations and force a revenue shortfall, which in turn would force Congress to make other hard decisions that also may irritate or disappoint voters.

Problems for consumer electronics companies. Quite rationally, the consumer electronics sector likes selling high-margin, high-quality, high-resolution TV display devices. It also knows that just about all of its current customer base for such devices gets its content from cable, satellite, or DVD, and scarcely ever from over-the-air digital broad-casting.

Tuner mandates, such as the FCC's recent requirement that all high-definition televisions (HDTVs) carry both analog and digital TV-signal receivers, mean an added expense per unit at a time when the industry is hoping economies of scale will reduce their costs and get more buyers into stores for crisper, even "cinema-quality," TV displays. Consumer electronics companies now have an incentive to move entirely into the computer-monitor business and abandon selling "TV sets" (monitors plus tuners) altogether. This would allow them to escape the tuner mandates and continue to sell high-quality visual displays that would function equally well on computers or as part of home entertainment systems -- attached, for example, to cable set-top boxes.

Meanwhile, one looming problem has not even begun to be addressed: In-the-field tests of television sets equipped with digital tuners suggest that DTV reception -- at least under the technical standard digital broadcasters are currently required to use, dubbed 8VSB -- is not as reliable as analog broadcast reception. In other words, the FCC is requiring manufacturers to add digital tuners that, while spiffy on the rare occasions that they do work, are nowhere near as reliable as plain old analog TV receivers. This is not the kind of policy that inspires people to buy consumer electronics.

Problems for broadcasters. Broadcasters aren't pleased that digital transmissions are less reliably received than analog broadcasts. Nor are they happy that the bill for "loaned" spectrum will soon come due, especially given most Americans' unwillingness to buy DTV products. If the transition is imposed on the scheduled date, there will be an abrupt decline in the advertising audience base for their broadcasts -- especially when compared to those of cable and satellite.

Furthermore, the generally high costs of refitting broadcasting plants to enable DTV transmissions are, for many stations, an unfunded mandate -- expenses that they are required by law to make as licensees (and may already have begun to make) but that do not translate (or haven't yet translated) into additional revenue.

Historically, one argument for the transition to DTV has been to enable broadcasters to compete against the heretofore more reliable signal quality of cable- and satellite-delivered TV content. It would be ironic if a policy designed to preserve free broadcast TV were in fact to hasten its end.

Problems for consumers. By voting with their wallets, most consumers have demonstrated that they do not yet value DTV's benefits enough to invest seriously in new equipment for it. Consumers who rely primarily on over-the-air broadcast signals may find that their new digital TV sets receive broadcast content less reliably than their old analog sets did. This federally compelled downgrade in reception reliability will likely make a significant number of broadcast-reliant voters unhappy.