Please, sir, I want some more

Looks like America's OTA viewers may soon be repeating Oliver Twist's line from the Charles Dickens classic, begging for more than TV table scraps.

The National Telecommunications and Information Agency (NTIA) released its proposed rules in late July, for handling the distribution of over-the-air set-top box (STB) coupons. The $40 coupons are part of the government's plan to retake the analog spectrum from broadcasters. Consumers without digital TV sets or those who don't subscribe to cable or satellite (i.e., multichannel video programming distributors, or MVPDs) will literally be in the dark if they don't trade these coupons for an STB.

There are currently between 16 million and 21 million households that rely exclusively on OTA broadcasting. All of these households will either need to buy new DTV sets, subscribe to an MVPD or get an STB. It is this third option NTIA is charged with addressing.

Despite what may be the government's best intentions, when stations pull the plug on that big, ol' analog transmitter on Feb. 17, 2009, millions of viewers will think their stations went off-the-air. Millions of television sets will go permanently dark because of this mandate, and viewers may blame the broadcasters.

Let's look at NTIA's proposed solution. Viewers can apply for the free STB coupons beginning Jan. 1, 2008, until March 31, 2009. They can apply for the coupons via mail, Internet or telephone, and the coupons will expire three months after issuance.

A few key points: First, only two coupons per household are allowed. Viewers with more than two TV sets will have to pay for additional STBs for other TVs.

Second, anyone with either satellite or cable service won't qualify for the STB coupons. The NTIA proposal states, “… households that receive cable or satellite television service [will] not be eligible even if they have one or more analog-only television receivers not connected to such service.” In other words, folks with a spare TV in the guest bedroom or basement connected to an outside antenna are out of luck. They'll have to foot the STB bill on their own.

The third issue is one that many, if not most, viewers will find confusing. The STBs will be little more than an OTA digital receiver with composite, RF and stereo audio outputs. While the converters will support closed captioning, EAS and parental control, and will come with a remote control, they will not receive cable or satellite signals. And the converters will not provide an HD output.

Unfortunately, despite NTIA's $5 million advertising budget, many viewers will wait until their TV sets go dark to do anything. And they will probably not understand that the STBs don't provide HD.

Now consider the vendor's place in this food chain. If the boxes are “worth” $40, the gross markup in selling them must be less than 20 percent, which would be around $8 per STB. After deducting marketing, stocking, customer service, returns and what appear to be monumental dealer documentation requirements, will major stores even participate in the giveaway?

The consumers with TVs left in the dark will be saying, “Please, sir, I want some more.” But with such a slim profit margin on STB sales, the consumer electronics industry will be thinking, “Screw the convertor boxes; we want to sell DTVs.”

What do you think?

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