CASOPIS REPUBLICKE AGENCIJE ZA TELEKOMUNIKACIJE

ABSTRACT

The transition from analog to digital television will bring substantial benefits to the American public, making spectrum available for valuable non-broadcast uses and improving the quality (and quantity) of free, over-the-air television in the United States. This brief overview will describe the current status of the transition, briefly discuss the mechanics and challenges of the transition, and review the benefits.[2]

1. CURRENT STATUS OF THE TRANSITION

US full power television stations will complete the transition from analog to digital on June 12, 2009.[3] This date represents a brief postponement from the previous transition date of February 17, 2009. The US Congress set the February date in a 2006 law and adjusted it to June 12 in a law passed in February 2009. This “DTV Delay Act” permitted stations to complete their transition by the original deadline, February 17, 2009. Some stations, after receiving authorization from the Federal Communications Commission (FCC) had transitioned prior to February 17. Some others, after an FCC review, transitioned on February 17. As described below, some of these stations were subject to conditions imposed by the FCC.

As of February 17, approximately 36 percent of US television stations had transitioned to digital service. Most of these stations are in the smaller television markets (i.e., markets with relatively small populations). The FCC required the remaining stations to specify the date on which they planned to transition, with the permissible dates generally being from April 16 to June 12, 2009. Roughly 55 percent of stations chose to transition on June 12, with the remaining nine percent picking dates between April 16 and June 12.

In order to understand the current status of the transition, and to provide background for the discussion that follows, it is worth reviewing the origins and service rules for digital television (DTV). The FCC adopted a flexible DTV standard called ATSC (which incorporates MPEG2 digital compression) in 1996. Each full power analog television licensee received a second 6 MHz channel on which it would transmit in digital during a “simulcast” period.[4] The FCC required licensees to construct their digital facilities pursuant to a series of build-out deadlines, with the earliest one being for stations located in the largest markets and owned by or affiliated with the four major commercial television networks (ABC, CBS, Fox, and NBC).

US DTV service rules include a minimum requirement to provide one free-to-air video program stream of quality at least as good as the analog. Licensees may provide HDTV, but there is no legal requirement to do so, and they may also “multicast” (offer multiple video program streams within a single 6 MHz digital television channel allotment).[5] They may even provide “fee-based” services, i.e., services for which they charge either end-users or content providers for receiving or transmitting content, provided that the licensee pays the US government five percent of the gross revenues from those services. As part of a phased process, beginning with a 2002 FCC Order, from March 1, 2007, all new television sets, regardless of size, have been required to include a DTV tuner.

In 1997, the US Congress set a target deadline of December 31, 2006 for switching off analog television. However, the legislation permitted television stations to retain their analog authorization beyond that date in markets where household penetration of DTV reception equipment is less than 85 percent. Households would be counted as meeting this criterion if they had acquired new digital television receivers (and so could access DTV off-the-air) or if they subscribed to a pay television service such as cable or Direct Broadcast Satellite (DBS) that provided them with retransmitted digital television signals. By 2005, questions had arisen about how to implement this provision and which markets might not reach the 85 percent threshold by the end of 2006. This led the US Congress to replace the target date with a “hard date” of February 17, 2009. As described below, at the same time Congress provided for a digital-to-analog converter box subsidy.

2. MECHANICS AND CHALLENGES OF THE TRANSITION

Many US television households will not need to take any action in order to maintain their current level of television service once the transition is completed. Those who wish to take advantage of new services such as HDTV will need to acquire additional equipment. Some households will need to acquire additional equipment in order to maintain their current level of service. Of the households that rely on off-the-air television reception, some will lose access to one or more channels as a result of the transition, even after acquiring new equipment.

Television receivers connected to a pay service, such as cable or DBS, will generally maintain current levels of service without having to take any action. Certain households may have some television sets that are connected to a pay service and some that are not. These households will generally retain access to broadcast signals after the transition, but only through the sets that are connected to the pay service. The other sets must be considered separately.

In addition, while all sets connected to cable will maintain current levels of service post-transition, in certain cases this is not true for sets connected to DBS. This is due to differences in the signal carriage (“must-carry”) rules that apply to cable and to DBS. FCC rules require cable television systems to retransmit all local television broadcast stations, with very limited exceptions. Cable operators are not required to transmit a station’s analog and digital signals during the transition. However, in 2007 the FCC required that, after the transition, cable operators must carry each station’s digital primary video programming stream and also carry the digital signal in analog format for an additional three years. Alternatively, cable operators may carry the signal in digital format only, provided that all subscribers have the equipment necessary to view the digital content.

The signal carriage rules for DBS operate on a market-by-market basis, rather than applying nationally. In effect, if a DBS operator wishes to retransmit, on a “local-into-local” basis, one station in a television market, then it must retransmit all of the stations in that market. A few dozen of the 210 local US television markets do not have local-into-local retransmission of television signals. The markets without this service tend to be small, so most US television households live in markets with local-into-local service. However, in the markets without this service, DBS households may need to take action to maintain their broadcast television service, depending on what sort of equipment they currently have for that purpose. It is also worth noting that, by law, all cable subscribers must receive the tier of service that includes local broadcast signals, but for DBS subscribers, the local stations are optional and available for a separate fee.

The most recent estimates suggest that roughly 11 percent of US television households rely solely on off-the-air reception (i.e., they utilize a television receiver connected to a terrestrial antenna for television service). These so-called “OTA” households face the biggest transition adjustment. Some have already purchased digital equipment. This could be a new DTV receiver, capable of displaying digital content, or it could be a digital-to-analog converter box that can be connected to an older analog television set.[6] Those without digital equipment will need to take action in order to maintain service.

In order to smooth the transition, the US Congress created a program to subsidize the purchase of basic digital-to-analog converter boxes. The National Telecommunications and Information Administration (NTIA), an agency of the US Department of Commerce, is implementing the plan. Under the plan, each US household is eligible to receive two coupons, each valued at $40. The coupons may be applied to the purchase price of converter boxes with specified features. The coupons may not be applied toward the purchase of a full television receiver, nor may they be combined. There is no means test for eligibility.

Congress initially authorized up to $1.34 billion for coupons, with an additional amount for administrative costs. The funds were to be provided in two phases, as needed. By early January of 2009, the entire amount had been committed and NTIA was forced to place new coupon applications on a waiting list. Under the law, coupons expire 90 days after they are issued, so NTIA was able to redirect funds associated with expired coupons to new applications. Nevertheless, along with extending the transition date to June 12, 2009, the US Congress also provided an additional $650 million for the coupon program, permitting those whose coupons had expired to re-apply, and made some other adjustments in the program.

As of March 18, 2009, NTIA statistics show 25.6 million coupons redeemed, 8.5 million “active,” and 17 million expired. Approximately $350 million in coupon funding remains available. [See https://www.dtv2009.gov/Stats.aspx] The delay in the transition date, and the availability of additional coupon funding have made it possible for the NTIA to eliminate its waiting list and to ensure additional time for those who need it to prepare for the transition, including acquiring coupons through this program.

Some households that do not rely solely on over-the-air television service may have television receivers not connected to a pay service and hence may want or need coupons. There are no precise current figures available on the number of OTA households that have not yet acquired DTV equipment or on the breakdown in coupon applications between OTA households and others. Nielsen, the major television audience measurement company, publishes a report on the DTV readiness of US households, based on a sample survey. Their figures indicate that, as of March 15, 2009, 3.6 percent of US television households are “completely unready” for the transition (i.e., no television sets are capable of receiving digital signals) and an additional 9.7 percent are “partially unready” (i.e., at least one set in the household is capable of receiving digital signals and at least one set is not).

In advance of the DTV transition, the FCC has engaged in substantial consumer outreach efforts and has also placed educational requirements on various industry parties. Hundreds of FCC staff have visited local television markets to provide information about the transition and to enlist the aid of a wide range of local government and private organizations to help publicize the transition and provide assistance to viewers, and in particular to at-risk segments of the population (e.g., seniors, those in poverty, those whose first language is not English). The FCC has also signed contracts worth millions of dollars with commercial and non-profit entities to provide support, including telephone call centers and walk-in centers for people in need of assistance with applying for and installing converter boxes. It is likely that additional contracts will be signed for assistance during the last months of the transition period. This will include call centers, walk-in centers, and some in-home assistance for those in need.

Among the industry parties required to undertake educational activities are television broadcasters, cable and DBS providers, and equipment manufacturers.

Television broadcasters have provided information via public service announcements, longer form programming with DTV transition information, and, on a voluntary basis, “soft tests”, intervals generally of one to five minutes during which the station would suspend its regular analog programming and transmit a notice that anyone receiving this special message would lose service on the television receiver being used unless the consumer took action to connect it to a converter box.

Two entire markets, Wilmington, North Carolina, in September 2008 and Hawaii in January 2009, made an early transition to digital. Based on experience in those markets, on consumer inquiries prompted by the soft tests, and on the experience of markets in which some or all stations switched off analog service on February 17, the FCC and other interested parties learned much about the difficulties encountered during the transition.

Calls to the FCC’s national call center in the days surrounding February 17, 2009 fell into several categories. A relatively small share of callers were either unaware of the transition or were aware but had failed to take action. Some callers had experienced difficulties with the NTIA converter box coupon program. The two largest categories of question related to converter box problems and reception/technical problems. Many callers had difficulties with setting up the converter box and/or understanding the instructions and some did not realize the necessity for periodically “rescanning” the converter box (i.e., performing a search for newly-available transmission frequencies; see below for a more detailed discussion). Under the heading of reception or technical problems, callers reported problems receiving digital signals (sometimes the problem was receiving no signals, sometimes the problem was failure to receive a particular signal, and sometimes the issue was a weak or spotty signal), and problems due to antenna function or connection to the receiver or lack of an antenna. This experience influenced the FCC’s revised consumer education requirements.

The extension of the transition deadline to June 12, 2009 prompted the FCC to review and revise some of the consumer education requirements imposed on television stations. Delaying the cutoff date certainly has the effect of giving those not yet prepared additional time to make preparations for the transition. In particular, the delay (and the accompanying increase in funding for the coupon program) allowed NTIA to provide coupons to all consumers who were on the coupon waiting list prior to analog switch-off. However, the change in date and the fact that now some markets would experience partial transitions over a period of months brought the possibility of confusion. Indeed, even in markets where all stations transitioned on or before February 17, because this was no longer a hard national transition date, there was the potential for additional confusion.

Even before the extension, the FCC had made provision, pursuant to a law enacted by Congress at the end of 2008, for so-called “analog night-light” service. The law required the FCC to encourage and permit some continued analog television service for 30 days after the transition date (which at the time of enactment was February 17, 2009). Analog night-light service consists of emergency and DTV transition consumer information, and would be of interest to viewers who, for whatever reason, do not have the necessary equipment to receive digital broadcasts at the time of the transition deadline. The rules do not require any station to continue analog transmissions and, indeed, some stations would not be permitted to provide analog night-light service due to the potential for interference among analog and digital signals.

After Congress extended the date to June 12, the FCC imposed some additional requirements, including “enhanced night-light.” The first step in this process was to review “termination notices” filed by the 491 stations planning to end analog service on February 17, 2009. The FCC concluded that, for 123 of these stations, termination of analog service on February 17, 2009 posed a significant risk of substantial public harm. These stations are all affiliated with the four major commercial television networks and they serve markets (or, in some cases cities within larger television markets) in which planned terminations would result in an end to analog television service from these networks in the market. These stations were permitted to terminate their analog service on February 17, provided that several conditions were met. These included ensuring that at least one station that had been providing service to an area within the market that would no longer receive analog service after February 17, 2009 would provide analog “enhanced night-light” service for at least 60 days after February 17. Enhanced night-light service consists of DTV transition information, emergency information, and local news and public affairs programming. Some of the other obligations could also be met by stations acting jointly (e.g., staffing a consumer “walk-in” center to provide assistance with coupon application, obtaining converter boxes, installing converter boxes, and other matters). Some had to be met individually by each station (e.g., broadcasting for specified times during the seven day period from February 10 to February 17 a “crawl” on their analog channel regarding termination of analog service).

The FCC established a separate set of requirements for stations terminating analog service in the April 16-June 12, 2009 time period inclusive. All of these stations were required to submit a binding declaration of the date on which they intend to terminate analog service and all are subject to additional requirements regarding consumer education, including a requirement to air viewer notifications for at least 30 days before terminating analog service. Affiliates of the four major commercial networks wishing to transition before June 12, 2009 were also required to certify that at least 90% of the viewers in their analog service area would continue to receive analog service from at least one other major commercial network through June 12. Any that could not were required to certify compliance with certain public interest conditions similar to those imposed on some of the stations that transitioned on February 17, including “enhanced night-light.” Any stations needing to comply may do so either by taking action themselves or by relying on or supporting actions of another station or provider in the market. The first requirement is to ensure that at least 90 percent of their analog viewers will continue to receive some form of analog service from another major network affiliate through June 12, either via enhanced night-light service or by some combination of enhanced night-light and full analog service. These stations must also provide or support a consumer referral telephone number for local viewers and provide or support a “Walk-In Help Center” for local viewers.

All stations terminating analog service on or after April 16, 2009 are subject to some additional consumer education requirements, prompted by the experience gained during the February 17 terminations of analog programming. Space does not permit a complete description of these provisions, but the following apply to all stations. Stations must provide service loss notices (required if two percent or more of the population served in a station’s analog service contour will not be served by the station’s digital signal)[7] and information about home reception antennas (to help viewers understand the impact on reception of adjustments to their current antenna as well as to help them assess the value of acquiring a new antenna). Additionally, stations are required to provide information about the need periodically for digital television equipment, including converter boxes to “rescan”, in order to ensure that the equipment has access to all available broadcast frequencies. In the time period surrounding the conclusion of the transition, many stations will be changing their service areas and the broadcast channels on which they transmit their digital signals; this will make new signals available at a variety of locations. Stations must also publicize their consumer referral telephone number and any walk-in help centers in the local market.

3. TRANSITION BENEFITS

The public benefits of the DTV transition fall into two categories: more efficient spectrum management, i.e., reallocation of spectrum from television service to other valuable uses; and improved quality and quantity of terrestrial television service. In the US, the so-called “digital dividend” amounts to 108 MHz of spectrum in the valuable 700 MHz band. This contiguous block represents over one-fourth of the spectrum that had been allocated for analog television service.

The US Congress directed the FCC to allocate 24 MHz of the digital dividend to public safety use and to auction the remaining 84 MHz for commercial use. The auctions to date have brought net proceeds to the US Treasury of $19.6 billion; one nationwide 10 MHz bloc (which had been offered with the condition that the licensee would be required to form a “public safety/private partnership” with the public safety broadband licensee) did not attract a bid greater than its reserve price in the initial auction

The substantial 700 MHz auction revenue suggests that commercial demand for this spectrum is very strong. The two biggest winners were ATT and Verizon, both of which have announced plans to use their spectrum for advanced wireless services, with Verizon highlighting an expected 2010 launch of an LTE (“Long Term Evolution”) network and ATT speaking of using its spectrum for “higher-speed 4G (fourth generation) services”. One of the 700 MHz auction winners, Qualcomm, is using its digital dividend spectrum to provide mobile video under the name “MediaFlo”. Qualcomm acquired one nationwide six-MHz channel, over which it claims to be able to provide 21-23 video channels, with an average per-channel bit rate of 250 kbps for video plus audio. Both of the largest US mobile phone operators, Verizon and ATT, now offer MediaFlo, which is transmitted over MediaFlo’s own spectrum to their customers. Additionally, according to trade press reports, auction winner Frontier Wireless, a subsidiary of a US DBS provider, may use its spectrum for a “nationwide video network”. Another winner, Cox Cable, plans to use its spectrum to become an “integrated provider” of wireless services. [For more information on the auction results, see http://wireless.fcc.gov/auctions/default.htm?job=auction_summary&id=73 and references therein.]

With regard to the quality and quantity of television service, all of the major broadcast networks are carrying HDTV content, with its much higher resolution video and enhanced sound quality. The Public Broadcasting Service is the leader in multicasting, offering four digital multicast program streams to public stations. Commercial station multicast offerings include weather channels, Spanish language programming, and “classic” (i.e., old) television programming. Thus, people who rely solely on off-the-air television service will have a wider range of choices after the transition than before. Also, because off-the-air television service competes with pay services that have been offering digital and HDTV channels for years, the transition to digital also makes television stations more competitive with (digital) pay services than they would be if transmitting solely in analog.

4. CONCLUSION

The US transition from analog to digital television will benefit the American public by freeing up spectrum for new and valuable uses and by increasing the quality and quantity of over-the-air television. Households that subscribe to a pay television service will generally not need to take any action in order to maintain their pre-transition level of television service (except with respect to any receivers in the household that are not connected to the pay service). Household that utilizes an analog receiver and an antenna to access television service will need to acquire a digital-to-analog converter box to retain their pre-transition level of service (or obtain a new digital television receiver). The FCC has undertaken substantial consumer education and outreach efforts in the period leading up to the transition and has placed public interest and consumer education requirements on various industry participants, first and foremost television broadcasters. The US transition is well underway, with 36 percent of stations having terminated analog service as of February 17, 2009. This date had been the national transition date until the US Congress recently delayed the final termination date to June 12, 2009.

Author

Jonathan D. Levy holds a Ph.D. in economics from Yale University. In 1993, Dr. Levy was a Fulbright Senior Scholar in the School of Humanities at the University of Technology Sydney studying US-Australian trade in television programming. He is the Deputy Chief Economist at the Federal Communications Commission in Washington, DC, and a senior economist in the Commission’s Offi ce of Strategic Planning and Policy Analysis, specializing in media policy. Prior to joining the F.C.C. in 1980, Dr. Levy taught economics at the University of Wisconsin-Milwaukee.