WASHINGTON
While much attention on the digital transition lately has focused on the federal government’s coupon campaign for converter boxes, one looming issue that may not be fully realized until Feb. 18, 2009—the first full broadcast day of the transition—could be the effectiveness of those analog-era antennas that are coupled with those boxes. Although broadcasters continue to reassure viewers that their old antennas will do just fine, others are predicting heartache ahead.
That trouble may also extend to converter box distribution. While several million consumers have applied for $40 government coupons, barely more than 40 percent of those coupons had been redeemed by mid-summer. At the same time, there have been numerous reports of periodic box shortages at several major retailers around the nation, an inventory dilemma further complicated by 90-day coupon expiration dates.
“By my count, about 70 million [analog] sets will be impacted in some way,” said analyst Bruce Leichtman of Leichtman Research Group in Durham, N.H. “Do you need a box or antenna or both? Or do you not need one? A lot of people still don’t seem to know.”
One retailer—well known and well regarded for providing help to A/V-challenged consumers—acknowledges the problems with converter box availability.
“We are aware some consumers have expressed frustration by not being able to find converter boxes,” said Charles Hodges, a spokesman for RadioShack Corp. Hodges said the periodic shortages also affect those consumers who want analog pass-through so they can watch low-power stations and via translators that are not making the switch to digital in 2009. (The pass-through boxes are supposed to become more widely available by mid-August.)
CONSUMER CHALLENGES
While no retailer would release information on return rates on converter boxes (they don’t release such data on any products), neither RadioShack nor Best Buy said they knew of any anecdotal information where consumers were returning boxes in high numbers.
“In our experience, consumer issues with converter boxes have been no greater than other consumer electronics,” Hodges said. “Challenges faced by consumers tend to be related [more] to such things as digital signal strength from stations [or] the discovery that they may need a new indoor or outdoor antenna to get reception.”
Best Buy spokesman Brian Lucas said his chain has been diligent at making sure boxes are in stock, but conceded some bumps along the way this summer when the big-box CE retailer transitioned from its own Insignia-brand unit to two new boxes (from Insignia and Apex).
“That transition [of] selling out the old boxes and bringing in the new ones left some stores with inventory issues,” Lucas said. Best Buy set up a toll-free hotline for sales, but this approach also was having some supply problems because retailers are not certain how much inventory to carry for this unique, one-time only product distribution.
“A lot of people got two coupons, which was as easy to get as one, and then for a variety of reasons decided they only need one of them, if that,” said Robert Schwartz, general counsel for the Consumer Electronics Retailers Coalition, a non-profit association that counts Circuit City, Target, Wal-Mart, Amazon among its members. “Retailers are just very nervous over [predicting] proper inventory levels for the boxes. This is all unprecedented, so we may not know about how all this goes down until the transition deadline itself.”
By mid-July more than 20.5 million converter box coupons had been requested according to the National Telecommunications and Information Administration, the government office overseeing the coupon program.
NTIA sees this as signifying success—but as for the low redemption rate, “Maybe they decided to get cable, or went out and bought a DTV set, or they let the coupon expire [after 90 days],” said Todd Sedmak, communications director for the agency. “But 41 percent redemption doesn’t say that’s a problem. People who say that do not understand the program we’re out to implement.”
Lucas said what relatively few complaints at Best Buy have been made “seem to be less about the box and more about reception issues. We’re trying to educate people about antennas, like where to place them, and what kind to use… but if customers tell us their converter box isn’t working, it usually means they are not getting a good signal from their antenna.”
That would be good news for the nation’s largest cabler, which is apparently counting on a few million antennas and/or converter boxes performing poorly. Comcast Chief Operating Officer Steve Burke told a trade meeting this summer the February transition will prove to be a growth opportunity for all pay-TV providers. And one analyst, Craig Moffett of Sanford Bernstein, recently concluded, “The digital TV transition could represent a once-in-a-generation catalyst for cable stocks.”
DBS firms, on the other hand, are selling converter boxes for their subscribers’ off-line OTA sets. Dish Network said its DTVPal box is the only basic converter (priced at about $60 before coupons) that it was selling, while EchoStar was planning to sell another model (TR-40) by late this summer. (At press time, Sears announced that it was selling DTVPal at 511 of its 935 full-line stores.)
MAXIMIZATION
While some engineers may have held back in pushing out their maximum DTV power early in the transition because it saved money, among other things, NAB said FCC rules now provide stations with protection from interference only within the service area of their actual transmitting power—not their allotted power—if, for example, a new broadcaster went on the air or another wanted to increase its power.
NAB chief spokesman Dennis Wharton said “there aren’t too many new broadcasters out there [not operating at full power], but there are over 500 applications for ‘maximization’ that have been recently filed at the FCC, which could affect those broadcasters who didn’t build out to their full allocated power.” So it would appear to be in the best interest of broadcasters to maximize their allotted power, which would also be welcome news for converter box/antenna users. (The FCC would not comment.)
“It’s great to get the converter box, but you’re going to have to pay attention to your [type] of antenna, especially if you have not been using one before,” said Shermaze Ingram, NAB senior director for the digital transition. “Rabbit ears without UHF capabilities, for example, will not pick up those stations that have been repositioned. Most stations, remember, will go from VHF to UHF.”
CERC’s Schwartz said for many retailers, antennas weren’t even in the game until recently. “In fact, our own consumer guide didn’t say anything about antennas because the assumption was that people already have them and they would work fine. After the Centris study came out, we added a paragraph to our CERC guide that mentions that their antenna would probably be fine, but that some concerns had been raised,” Schwartz said.
Schwartz is referring to a study released in early 2008 that caused an uproar when it concluded, in part, that many homes in outlying areas may not be able to adequately pull in DTV signals using their analog antennas. The study was done by Centris, a Los Angeles-based market research and information company specializing in gathering and analyzing consumer electronics data. Broadcast advocates denounced the report.
“It is not a scientific study,” said David Donovan president of the Association for Maximum Service Television (MSTV). “Our spectrum studies, which were based on actual reception testing, demonstrated that DTV provides a superior picture at greater distances than analog transmissions…This is a PR and marketing campaign, not science.”
Dr. Barry Goodstadt of Centris disagrees, especially with the charge that his report relied too heavily on indoor antennas. “It does not—that was a misreading on their part,” he said. “All our analysis of the areas we say have poor reception is based on the assumption of having an outdoor antenna that is a small or medium omnidirectional unit…[but] 75 percent of antenna households use indoor antennas. I can assume reasonably well that when [others] do measurements with the truck, they do it at 30 feet. Many outdoor antennas are not 30 feet high—and about a third of homes are only single-story.”
