Digital TV switch not going as expected

Posted by Rick C. Hodgin

Washington (DC) - The upcoming mandatory switch from analog to digital TV has been known about for some time. Projections were made, estimates were budgeted, and everything was to proceed smoothly. Except, nobody counted on a recession. As a result, digital TV sales are down, fewer consumers are switching to cable/satellite, and converter box sales are way up causing the government's coupon program to run out of money. It was a plan well executed!


On February 17, 2009, all full-power analog TV stations are required to cease broadcasting analog signals and switch to full digital (lower-power stations can remain analog). Consumers have the choice of buying a digital TV, switching to a paid-TV service like cable or satellite, or getting a converter box which enables their analog TVs to receive digital signals.



The cheapest route for consumers is the converter box, especially with the government coupons. And this downturned economy has shown consumers like cheap. Government coupons are for $40 and are available to help consumers buy a converter box, which begins around $60 making the consumer cost only around $20. Digital TVs, on the other hand, begin in the several-hundred dollar range, and many consumers don't like the idea of paying for TV service (cable/satellite) when they can get it for free directly out of the air.



It's worth noting that most TVs purchased after 2004 will have both an analog and digital converter inside, and won't need anything new to keep working after the switch. Existing cable and satellite TV subscribers have nothing to worry about as their signals are unaffected.



Last month, Neilson Media Research estimated that 7% of US households are not yet prepared for digital TV signals. They've also noticed a trend between August and November - converter box sales have increased 50%. Digital TV sales are not increasing as much as expected, and are projected to be only about 2% higher compared to 10% that was expected. In addition, due to the economy, TV sales are down 18% from last year.



The government coupons have been very successful with over 18 million issued ($720 million). More than 103,000 consumers are currently on a waiting list as the under funded program looks for new funding. Unredeemed coupons will be automatically re-mailed after they expire, which is 90 days from issuance.



President Bush's administration had set aside $1.5 billion for the analog to digital program, which includes not only the converter box coupons but also advertising and public awareness of the switch. It is estimated an additional $330 million will be needed to fully fund the switch, something the Obama administration will have to deal with immediately after assuming office.



The FCC took in $20 billion in 2008 by auctioning off some of the airways opened up by the analog-to-digital switch. The remaining portions are being set aside for a new wireless network for emergency responders in the police and fire departments.