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GAO: Preparation Key to Berlin DTV Plan

7/21/2004 8:08 AM Eastern

Berlin became the first major city to switch to all-digital broadcasting last summer because regulators adopted a plan that prepared consumers for the change and subsidized converters for low-income people, a federal government report concluded Wednesday.

The report -- prepared by the Government Accountability Office (formerly the General Accounting Office) at the request of Congress -- reviewed Berlin’s digital-TV transition, which concluded with the shutoff of analog broadcasting last August without any signs of a consumer backlash.

The GAO report said Berlin’s plan had three key ingredients: a consumer-education effort, set-top-box subsidies for low-income people and a date-certain for the analog shutoff that was understood by all in the TV-distribution business.

“Berlin officials and industry participants engaged in extensive planning for the rapid DTV transition in the Berlin test market,” the GAO’s 22-page report said.

The GAO added that Berlin's 18-month plan and the city’s market characteristics were different from America’s digital-TV transition in some key respects.

For example, although 15% percent of U.S. households are broadcast-only, Berlin has very high pay TV penetration -- about 93%. High pay TV penetration lowered set-top subsidies to low-income Berlin viewers.

Unlike the United States, Berlin’s switch was not driven by regulators’ needs to reclaim analog spectrum, the GAO said.

The GAO also noted that Berlin’s digital-television system is not currently geared toward HDTV. Meanwhile, in the United States, TV stations, cable operators and direct-broadcast satellite operators are all moving aggressively to offer HDTV.

Another difference the GAO noted was that Berlin’s transition was designed to bolster broadcasting, which, by going digital, was able to offer viewers more programming services than possible with analog technology.

“In Germany, government officials and industry participants are implementing the DTV transition largely for the purpose of improving the viability of terrestrial television,” the GAO said.

The report’s release was timed to coincide with a House subcommittee hearing on the U.S. digital-TV transition, which is to end Dec. 31, 2006, in those markets where at least 85% of TV households have digital-reception equipment, such as digital-cable boxes or digital-TV sets with off-air tuners.

Because so few people have purchased digital-TV sets and about 50% have cable or satellite digital boxes, many believe the 85% test won't be met for many years to come.

However, the Federal Communications Commission has designed a digital-TV transition plan that would terminate analog TV Dec. 31, 2008. This would be accomplished by allowing cable systems to convert digital-TV signals of broadcasters to analog and to count cable households toward the 85% threshold, which would also take into account satellite subscribers receiving local TV packages.

The National Association of Broadcasters strongly opposes the FCC plan.

Insight Communications Co. Inc. CEO Michael Willner testified in favor of a firm digital-TV-transition date -- a view shared by House Energy and Commerce Committee chairman Joe Barton (R-Texas), who advocated support for Dec. 31, 2006.

Some lawmakers expressed concern that a firm cutoff date would have to include a plan dealing with about 45 million analog-TV sets that would be useless after analog broadcasting ceased. The lawmakers noted that millions of cable and satellite homes have TV sets that are not connected to those pay TV services.

Box subsidies could be financed with analog-spectrum proceeds, but Rep. Rich Boucher (D-Va.) said auction revenue might not be sufficient to cover the cost of the subsidy, especially if Congress were to decide that every analog-TV set should continue to work.

Boucher added that auction revenue might not even cover the cost to subsidize one set-top box per TV household.

 

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