TV Went Digital, Did You?

Cited: Business Week

The nationwide switch to digital TV has confused so many people that many have missed out on the second deadline that was June 12 to get digital converter boxes. Many of those confused people just went out and bought a new TV. What about those who did not have the money to buy a new TV? What about those who did not get a digital converter box?

As Pedro Ortez and his wife, Wanda, watched Law and Order on Thursday night, they knew that soon after the program finished their screen would fade to static. The TV, which for years had served as the low-income couple’s primary source of news and entertainment, turned into an inert box in the center of their apartment on June 12, when broadcasters stopped sending analog television signals and switched completely to digital. “Television is one of those few small pleasures in life,” said Ortez, an unemployed 40-year-old custodian from the Bronx, N.Y. “It keeps us connected to the outside world.”

The Ortezes are hardly alone. Despite converter-box subsidies from the federal government, community outreach by local activists, and a blitz of ad campaigns by media companies from Comcast (CMCSA) and Cablevision (CVC) to CBS (CBS) and NBC (GE), millions of people across the country are expected to be left without working TVs this weekend. Those affected are people who get programming over the air and lack digital TVs or antennas that can pick up digital signals when analog signals are discontinued. (No one who pays for television service from cable or satellite operators is affected.) As of June 7, Nielsen estimated that 2.8 million households, 2.5% of the national TV market, were unprepared for the final switch.

That is a substantially smaller group than would have been affected if the digital transition had taken place in February, as originally planned. Congress and the Obama Administration delayed the switch to give broadcasters and the public more time to prepare. Nielsen estimated that twice as many people would have been without television had the transition proceeded at that time.

Confusion over the Digital TV Switch

Some activists have argued that the digital transition should have been pushed back even further. But the case of the Ortezes illustrates how likely it was that some stragglers would have seen their screens turn to static no matter when the deadline came.

While the Ortezes had heard about the transition to digital television, they didn’t think they could do much about it. They thought they needed to pay for cable to get digital service. “We are on public assistance and we really can’t afford to get cable,” says Ortez. “I didn’t know, until I saw last week in the newspaper, that I could get one of those boxes.”

The couple was also confused by the delay in the transition. They thought the government decision to postpone meant they didn’t need to take action. “We had heard that the whole thing got canceled back in January,” says Ortez. “We didn’t realize they were still going to do it until last week.”

Activists and community leaders say the elderly, the disabled, and low-income families such as the Ortezes are most at risk of being left out. “People who fit the guidelines for Medicaid and food stamps—those making less than $11,000 a year—many of them don’t really understand the analog-digital [distinction],” says Gwen Lawson, founder of KeepYourSignal, a Bronx-based organization that has tried to educate local residents about the switchover.

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Among these groups, Nielsen says, the elderly population is the most ready, while younger viewers, African Americans, and Hispanics are disproportionately unprepared.

Unnecessary Cable Packages for Seniors

The U.S. government has dedicated more than $2 billion to the transition, including subsidized coupons so that people can buy converter boxes to get digital signals. But just getting a converter box doesn’t always address the issue. Craig Moffett, senior analyst at Sanford C. Bernstein, says digital antennas may not be as effective at picking up television signals as analog gear. “I think there’s this widespread perception that if you’ve gotten your coupon and you’ve redeemed it for a converter box, everything is going to be hunky-dory,” Moffett says. “But the converter box is only half of it—you also have to be able to receive the digital signal.” Some 80% of the 14 million households that receive transmission “over the air” rely on rabbit ears instead of rooftop antennas, he says, which “probably will not cut the mustard.” Those living in multi-unit buildings in highly congested areas are the most likely to face reception issues, he predicts.

Elderly-care workers in the Bronx say many fixed-income seniors subscribed to large cable packages, mistakenly thinking that subscriptions were necessary to keep their TV. “We started giving workshops on this [digital transition] over a year ago,” said Carmen Matos, a director of the HOGAR senior-care assistance program. “A lot of them still think that they need to get expensive premium packages, which they really can’t afford.”

Media research and analysis firm SNL Kagan reported 826,000 new cable and direct-broadcast satellite customers in the first quarter of 2009—more than double the previous quarter.

TV sales have continued to grow in the run-up to the transition, despite the economic downturn. The number of digital TVs sold in the U.S. has risen steadily since the technology’s inception in 1998 and is expected to hit 34.6 million this year, up from 32.7 million in 2008.

FLO TV: Live Service on Mobile Phones

One of the strongest segments of the business is flat-panel TVs. The number of flat-panels sold was up 25% for the first four months of 2009, according to market researcher NPD Group. Ross Rubin, a consumer electronics industry analyst for NPD Group, says continued growth in TV sales is at least partly due to people switching to bigger and better sets as the digital switchover neared. “Flat televisions have been one of the bright spots in consumer electronics this year. It’s in part due to lower pricing, but some of it is the digital transitions—both the real one and the false alarm,” said Rubin.

While the digital switchover will leave people like the Ortezes without Law and Order and their other favorite shows, it will make new kinds of service available to others. The radio spectrum that was used for analog television signals will now allow Qualcomm’s (QCOM) mobile television service, FLO TV, to be sent nationwide to the customers of AT&T (T) and Verizon Wireless. Those companies are marketing the service so that people who sign up for special entertainment packages will be able to watch live TV on their mobile phones, perhaps as they commute through the Bronx or elsewhere.

Ortez says he hopes not to be without TV for long. He’s trying to get his hands on a converter box so that he and his wife can start watching shows again soon. “Being that we are unemployed and at home so much it keeps us entertained and up with current events,” said Ortez. “TV is such a big part of our lives. It’s always been there for us. Now we can’t even watch TV, it’s really crazy.”

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My Take: I remember when I was a kid that TV was free. It should remain free! I can understand paying extra for premium stations without commercials, but commercials are what make TV free. I believe it is going to be a long time before I fully understand what the switch from analog to digital is all about.

It definitely has to be more than freeing up airwaves so that companies can send television signals to mobile phones. That is just another way for the companies to make more money out of the pockets of consumers. Cable companies are already taking off for their services.

I think the government should force cable TV companies to give free basic, local service to everybody. The type of service that they would get with rabbit ears or a digital box should be provided free by cable companies. In most areas that would give people 3-5 stations to watch and give them an option of getting premium stations, which they would not normally have.

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