Pay TV Windfall From the DTV Transition

After more than a decade of denials, we now know how important a good rooftop, rotor-driven antenna will be to millions of people wanting to receive DTV signals.
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After more than a decade of denials, we now know how important a good rooftop, rotor-driven antenna will be to millions of people wanting to receive DTV signals.

It's also a pretty good guess then that many of these viewers will finally learn the true story of over-the-air DTV in the next three months and forego the antenna installation altogether.

After complaining a short time about the loss of "free" television, most will finally hook up to some form of pay television if they want TV at all.

Smart pay television operators will make it actually cheaper for the viewer to hook up their services than it will be for the viewer to hire an installer for the new antenna setup. With the value proposition of 500 channels to three or four, the viewer may never look back.


Comcast, the nation's largest cable operator, estimated a windfall of 2 million new viewers in its service area alone. It was then a no-brainer for the provider to offer free basic cable service for a year to customers who also take at least one other service such as a phone or Internet service. As an alternative, the user can also get a year's worth of basic cable for $10 a month.

"The simple fact is that basic cable is the easiest path through the digital transition... with no new boxes, no new remote, no antennas and no reception issues," said Derek Harrar, general manager of Comcast's video services division.

FCC Commissioner Robert McDowell, who after a DTV tour predicted the transition is going to be "messy," has called on broadcasters to customize their education efforts in markets where reception areas will be toughest. The Republican commissioner noted there are parts of the country where viewers will need new antennas to make their converter boxes work.

The truth has been such a long time coming; it may be too late to fix it now.

If the analog shutdown had occurred in late October, 9.6 million households would have gotten no TV reception at all, the Nielsen Company said. Another 12.6 million households had at least one analog-only TV set not hooked up to a pay television service or converter box. Those sets would have gone dark was well.

In all, Nielsen said, one in five U.S. homes were not ready for the transition with less than four months to go. Those households are headed by less educated, lower income, and blue collar workers, according to the report.

The size of the pay television windfall was debated in October at the ISCe Satellite Investment Symposium in New York City.

Barry Goodstadt, a senior vice president at Centris, the firm that first revealed the serious antenna issue through a series of controversial reports, predicted the transition will result in as many as 9 million people signing up for pay television services. One-third of the new subscribers, he said, will go to satellite and two-thirds to cable.

Viewers who subscribe to satellite service will pay an average of $59 a month, adding $2 billion in revenues to the satellite industry, Goodstadt estimated. Those who sign with cable will pay about $71 a month, adding $4 billion to cable's bottom line.

James Ratcliffe, a Barclays Capital analyst, agreed with Goodstadt's breakdown of two-thirds to cable and one third to satellite, but suggested that a total of 2.5 million households will switch to pay-TV service because of reception problems.

The Dish Network, he predicted, will win new subscribers over DirecTV in the satellite arena. Dish has "been historically a better marketer to over-the-air customers," Ratcliffe said. Plus, Dish offers significant Spanish language programming.


In Congress, blame is being dispensed to the Bush administration for botching the transition. Sen. Bernard Sanders, an independent from Vermont, said the FCC has "failed" to warn over-the-air TV viewers that they may need new antennas to get DTV signals.

"Americans should not be forced to pay for cable, satellite or other telecommunications video services to get their free broadcast channels," Sanders said, "because the government did not properly plan for this transition."

Indeed, they should not. But much has changed in recent years, and free television is now near extinction.

In fact, the transition to DTV will not be free for anyone. It will cost viewers, either for a subscription to pay television or to install a high-quality antenna and converter box. And it will cost over-the-air broadcasters, first with a loss of viewers and later with a loss of advertisers.

Unfortunately, it seems to have been planned that way.

Frank Beacham is a New York City-based independent writer. Visit his Web site is at