Regulators vote to give TV stations digital licenses Move is called $70 billion handout by lawmakers, Common Cause

April 04, 1997|By BLOOMBERG NEWS

WASHINGTON -- Federal regulators voted yesterday, as expected, to give digital airwave licenses to the nation's 1,600 TV stations so they can bring sharper, movie-quality pictures to the 10 biggest U.S. markets by Christmas 1998.

The Federal Communications Commission's decision comes as Republican Sen. John McCain, who chairs the Senate committee that has jurisdiction over telecommunications policy, some other lawmakers and groups like Common Cause are complaining that the plan amounts to a $70 billion handout.

But Congress told the FCC to give out the licenses this month.

"This represents tens of billions of dollars to the broadcasters' balance sheets," said George Reed Dellinger, analyst at HSBC Washington Analysis.

Major television networks cleared the way Wednesday for approval of the license allocation, agreeing -- under pressure from FCC Chairman Reed Hundt -- to speed their timetable for rolling out the new generation of television broadcasting.

The CBS, NBC, ABC and Fox networks pledged to begin the new broadcasts in the top 10 markets within 18 months, although the agency said it more likely will be 24 months, FCC officials said.

The 18-month time frame is a "stretch," said ABC spokeswoman Julie Hoover, adding that some of the equipment that will be needed to operate these networks hasn't been designed yet.

Hundt and Commissioner Susan Ness wanted a Christmas 1998 target date for digital TV in the top 10 U.S. markets because that's when consumers might first consider buying new sets.

News Corp.'s Fox, Westinghouse Electric Corp.'s CBS, General Electric Co.'s NBC, the Walt Disney Co.'s ABC and other TV broadcasters are expected to spend from $1 million to $10 million a station -- a total of about $6 billion over the next 10 years -- for digital studio and transmission equipment, estimates Harris Corp., the biggest maker of digital equipment.

"We are spending a huge amount of time and money to transform our network to provide cutting edge technology," said ABC's Hoover.

She said she didn't know how ABC would take the cost, as a one-time charge or divided over fiscal quarters.

It's these costs, in part, that make broadcasters like ABC and CBS take issue with the idea that the new licenses represent a windfall.

"Those who say this is a giveaway and that we are profiting from this misunderstand the system," Hoover said.

"We are trying to provide what we have provided for many years the only free mass media that the U.S. has," said Gil Schwartz, a spokesman for CBS.

Electronic systems producer Harris Corp. should benefit "to the tune of $1 billion to $2 billion" over the next few years, said Lawrence Harris, an analyst at Jackson Partners & Associates in New York. Already, the company has been asked to provide digital technology for more than 100 stations, the analyst said.

At the outset, sets to receive the high definition digital broadcasts likely will cost about $1,000 to $1,500 more than an analog set costs today. Within five years, however, that premium should come down to $500 to $700 a set, and by 2008 should be $200 to $300, according to France's Thomson Consumer Electronics, which will make the sets under its RCA brand.

Consumers who don't replace their old sets by 2006, or perhaps later, will need to spend about $150 to $300 for a converter box so the set will work. On the other hand, if they have cable TV and their service uses digital technology, they can get the TV signal -- without the high definition picture.

About 60 to 70 percent of U.S. consumers already have cable or satellite TV, said Ted Henderson, an analyst at Janco Partners Inc. Henderson considers it unlikely that the bulk of these consumers will buy the new sets.

Pub Date: 4/04/97

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