DTV Sales: New Math

You might not have noticed that TV sets work and set-top boxes don't. "Mario, what do you mean by that?" This: Withdraw your life's savings and take a year off. Go to your friendly, neighborhood electronics shop or supermarket or drugstore and buy one of those $20 little TVs. Buy a ticket to Punta Arenas, Chile, on the Strait of Magellan – an airport from which planes fly to Antarctica. Take the TV with you. After you land, turn on the TV. It works.
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You might not have noticed that TV sets work and set-top boxes don't. "Mario, what do you mean by that?"

This: Withdraw your life's savings and take a year off. Go to your friendly, neighborhood electronics shop or supermarket or drugstore and buy one of those $20 little TVs. Buy a ticket to Punta Arenas, Chile, on the Strait of Magellan – an airport from which planes fly to Antarctica. Take the TV with you. After you land, turn on the TV. It works.

Buy a car. Start heading north on the Pan-American highway. Every time you hit a new city, turn on the TV. Whether you're in Santiago, Chile; La Paz, Bolivia; Lima, Peru; Quito, Ecuador; Cali, Columbia; Colon, Panama; San Jose, Costa Rica; Managua, Nicaragua; Tegucigalpa, Honduras; San Salvador, El Salvador; Guatemala City; Mexico City; Los Angeles; Vancouver (the Canadian one); or whatever passes for a city in the frozen tundra of that new Canadian province called None-of-it (or something like that) – the TV will work.

Even if you're in lousy-reception conditions – between skyscrapers, out in the boondocks, whatever – the TV will work. If there's the barest hint of a signal, you'll hear sound. And even a snowy, ghosty picture will give you a hint as to which way to point the antenna.

Now try taking your cable box to the next town over. Good luck! Maybe your cable op uses harmonically related carriers and the next one over uses normal carriers. Maybe one of them is so old it's even using inverted carriers for single-conversion tuners. The program guides are probably different. The scrambling is probably different.

Try using a Dish Network receiver to get DirecTV programming (like HDNet). Try having your TiVo disk recorder figure out how to record something based on your pal's connection to ReplayTV. As they tell me they say in New York, "Fuggedaboudit!"

BODY-SNATCHING PODS

Our Beloved Commish said some cable boxes would have to be sold in stores. So, to get around the security issues, the cable folks came up with a renewable security module called a POD. That stands for "point of deployment." I am not making this up. It sounds like the place where the helicopter dropped the commandos.

What POD has to do with the price of a movie channel carrying "Invasion of the Body Snatchers" is beyond my meager capacities of comprehension.

So the POD spec has been out for a long time. Seen any cable boxes in Ye Olde Electronics Shoppe? (Canadians, silence, please; silence, Canadiens, s'il vous plait).

I didn't think so.

The POD covers conditional-access security, but it doesn't deal with (drum roll, maestro, if you please) copy protection. So, besides the POD, there's PHILA, which is neither the city with the Liberty Bell nor the spreadable dairy product.

PHILA is the POD-Host Interface Licensing Agreement, which ain't an agreement but a copy-protection scheme – sort of. Does this make any sense to you? If so, could you please try to explain it to me (in short sentences, with words of only one syllable each)?

Anyhow, that's not what I woke Nellie-the-Neuron up to rant about. But first, a word from this month's sponsor, last month.

I love January. January is home to the Consumer Electronics Show (CES). January is when Our Beloved Commish releases its annual report to Congress on competition in the multichannel video programming distribution (pronounced "cable and satellite") field, based on data from the previous June (hey – these things take time). January is when, even if you can't think of anything to write about, someone is bound to shove a pedal extremity into an oral cavity.

For instance, a pal-o'-mine showed me a paragraph from the expensive and authoritative weekly industry newsletter Television Digest. It's so authoritative that they can't even be bothered with boring parts of speech like articles. Here are a couple of sentences from their front-page story on CES in the Jan. 14 issue:

‘Numbers are misleading,' Shapiro said after session: ‘1.4 million sold units includes all ‘DTV-ready' along with DTV-capable sets. Actual number of ATSC-capable products sold last year that met ATSC DTV specifications numbered about 297,000,' he said."

If you're like me, you're probably puzzling over the difference between "DTV-ready" and "DTV-capable," and trying to figure out what an "ATSC-capable" product that didn't meet ATSC specifications might be. But it seems pretty obvious that somebody named Shapiro found fault with something someone else said, eh?

BZZZZZZT! Wrong! The person who presented the numbers Shapiro called misleading was the same Shapiro – Gary Shapiro, president of the Consumer Electronics Association (CEA).

NEW MATH

Here's some more detail. According to CEA, 97,157 TV sets of any type (HDTV, 480p or plain 480i) that could decode an ATSC DTV signal were sold by factories to American retailers in 2001. "But, Mario, what's 297,000?" Oh, that's including 196,564 ATSC-decoder-equipped set-top boxes sold by factories to retailers in 2001.

Yes, hon, I know the numbers don't add up to 297,000 if you use arithmetic; you have to use CEAlculus. And if you add up all the ATSC decoders sold by factories to retailers since the beginning of DTV you get a whopping 361,828 through the end of 2001, almost five years after Our Beloved Commish issued its DTV rules.

Does that sound like a big number? For the seven-day period from Nov. 24 through Nov. 30 of last year, the same CEA reported the same kind of factory sales to retailers of DVD players to be 687,333. That was in one week, not 220 of them.

Around 29 million TV sets were sold by factories to American retailers last year, according to estimates in a document CEA had at CES (if you added up all the TV-set categories). That would make the ATSC-decoder sales just about one percent of TV sales – almost five years after the DTV rules went into effect. My, my.

FAIRCOMPARISON

I ain't sure if that's a fair comparison. After all, according to CEA, 98 percent of U.S. homes already have TV sets (and have had them for decades). Methinks I should pick a less-mature technology, like wireless phones. Not even counting the cordless phones people use in their homes and offices, the CEA document estimates 53,400,000 wireless phones sold by factories to American retailers in 2001. Now that's an impressive figure.

Looks like it's time to switch to Our Beloved Commish's competition report (FCC 01-389, released Jan. 14, 2002). Where was I? Oh, yeah. A whopping 361,828 ATSC decoders had made it into the retail channel by the end of 2001. In the middle of the year, according to Our Beloved Commish, 102,184,810 U.S. homes had TVs. So, if every one of those 361,828 made it into a home, that's 0.35 percent.

Our Beloved Commish also said that 88,310,074 homes had subscribed to a multichannel video-programming distributor (MVPD) like cable or satellite by June (but there could be a wee amount of overlap). That's 86.42 percent.

For those of you who don't keep a copy of the Balanced Budget Act of 1997 handy, anything over 85 percent is enough (in any particular market) to allow NTSC stations to be shut down at the end of 2006. But it's only enough if those MVPDs carry at least one channel of digital programming from each DTV station in a market.

Cable's in just 67.5 percent of TV homes, and there ain't many DTV stations being carried on cable. Most of the rest of the MVPD homes are satellite and there are approximately zero DTV stations (give or take none) carried on DirecTV or DISH – except by accident.

The Balanced Budget Act of 1997 said NTSC stays on if 15 percent or more of households ain't got MVPD delivering DTV programming and also don't have set-top boxes. So let's go back to CES.

Methinks it was last year that about a dozen brands showed new DTV set-tops at CES. This year, it was approximately two.

"Mario, what's going on?"

I ain't all that clear on it myself, but methinks it's got something to do with the proposed merger between DirecTV and EchoStar. If it happens, it ain't likely that the combined company will want to waste satellite spectrum delivering everything twice. So, one or both of the existing satellite set-top schemes is probably going to get junked.

If I had to guess, I'd say somewhere in the neighborhood of 99 percent of ATSC decoders are associated with either DirecTV (most of them) or Dish. Samsung's 150 model is one of the few that ain't; the 160, one of the two new set-top ATSC decoders at the show that is compatible with DirecTV and Dish.

That makes perfectly good sense to me. You want to watch HDTV movies? Tune in HBO or Showtime via satellite or cable. You want to watch HDTV sports? Tune in HDNet on DirecTV. About all an ATSC decoder gets you – even if it's working perfectly and every local station in your market is spitting out DTV – is a soap opera, some primetime sitcoms and dramatic series, an occasional movie, an occasional sporting event, and maybe even an opera or two.

But, with the satellite merger confusing matters, who wants to sell DirecTV-decoding ATSC decoders if it turns out those are the ones the new company will dump? That also makes perfectly good sense to me.

ULTIMATE GIVEAWAY

Ultimate Electronics, a big retail chain that has different names in different parts of the country, has been giving away ATSC set-top decoders (they call them $800 values) with their high-resolution TV sets. As far as I can see (which ain't all that far in my old age), they ain't jacking up the prices of the TVs when they do that.

Well, gosh-darn if I don't find that downright interesting. Are those folks taking an $800 hit on each TV? Do they think they're selling more high-end TVs that way? Are they clearing out inventory of set-top boxes they can't sell? If so, is that because they don't work well enough or because they're from the satellite standard about to be dumped. So many questions! So few DTV households!

So, let's go back now to Our Beloved Commmish's competition report this year. TV households grew 1.37 percent from the last report. But MVPD homes grew 4.6 percent. And DBS homes grew 23.74 percent. If things continue at roughly the current rates (call it 1.4 percent growth of TV homes and 4.5 percent growth of MVPD subscribers), then by 2006 there'll be 110 million TV households and all of them will subscribe to some MVPD service.

If Our Beloved Commish can somehow get those MVPDs to carry DTV, then there won't be any need for any ATSC set-top boxes, because everyone will get DTV via cable or satellite. Maybe that's why the manufacturers didn't show new ones this year.

So it doesn't matter whether ATSC set-top boxes will work or not, because no one will need them. That's a relief! But if no one needs off-air reception, does anyone need off-air transmission? My, my!