The looming digital transition
The National Association of Broadcasters (NAB) has a clock on its DTV Web site ticking away the minutes to Feb. 17, 2009, a reminder that the date of the congressionally mandated switch to digital TV is creeping up quickly.
The mandate, part of the Reduction Act of 2005, targets over-the-air broadcast stations, but there are some technical issues that cable companies will have to work out with their broadcaster partners.
And make no mistake, viewers will most certainly be calling their cable providers to complain should any aspect of the transition be fumbled, from the quality of the video to confusion about analog-to-digital converter boxes for analog TVs.
A year and a half is not that much time to get all the details ironed out – everything from consumer education to must-carry rules.
The questions are nearly endless. How will consumers react to the digital switch? What will it cost them? What’s being done to ease the potential transition for not only consumers, but retailers, broadcasters, cable, manufacturers, and all affected parties?
This issue is forcing the various industry segments to play nice, as they figure out the best ways to educate consumers and address the technical and logistical challenges presented by the digital transition.
There is already an unprecedented amount of cooperation and coordination among the large and growing number of companies, industry associations, and government agencies involved, to make sure consumers get a consistent message and a thorough response.
“When Congress passed the rule, we made consumer education the highest priority,” said Jonathan Collegio, vice president for digital TV transition at NAB. “But broadcasters have also spent $5 billion in infrastructure upgrades, and 92 percent of the broadcasters are up to date on digital. However, only about 40 percent of U.S. consumers know it’s happening. We’re now aggressively laying the groundwork for our consumer education campaign.”
The NAB, he explained, is helping to coordinate retailers, broadcasters, cable and organizations that represent all consumer groups, including those that are disproportionately affected by the digital transition, such as the elderly. The reach has extended even to Goodwill Industries, which expects to be receiving an inordinate number of analog TVs.
Currently, more than 100 organizations are part of the Digital Television Transition Coalition, which has taken on the responsibility of educating consumers about the transition. And it’s a wide-ranging, diverse group.
|Congress passed a law Feb. 1 of 2006, setting the final deadline for the DTV transition for Feb. 17, 2009. Here is what key organizations are doing to prepare both consumers and their respective industries for the transition.|
The National Association of Broadcasters [NAB] is aggressively laying groundwork for the direction of a consumer education campaign, and launching a "massive" speaker's bureau campaign in local communities.
The Cable & Telecommunications Association for Marketing [CTAM] is crafting a DTV transition message, particularly about the coupon program and the cable industry's role in the transition.
The Consumer Elctronics Association [CEA] is assuming a greater role in consumer education versus its past role in the technology and standards spaces. It's also working with retailers on a variety of fronts via its training modules.
The National Cable & Telecommunications Association [NCTA] is working with other industries on consumer education, technology, engineering and operational issues.
“We need to make sure every organization that has a stake in this transition is sending the same message, and [that] includes libraries, opinion leaders, grassroots organizations and a cross-section of broadcast, cable, consumer electronics, retailers and more,” Collegio said.
The message, which is in the process of being crafted by the coalition, will be delivered via PSAs, Web sites, road shows, local speakers bureaus and through individual broadcast and cable systems nationwide, and is slated to begin in January of 2008.
In other words, while there’s more than a year and a half to go until the actual transition, there’s a preliminary deadline in only six months.
“You would think that with a project culminating in under two years, you’d have time. But February 17 of ’09 is approaching, and there is an increasing sense of urgency to get it right,” said Rob Stoddard, senior vice president of communications and public affairs for the National Cable & Telecommunications Association (NCTA). “Engineering and technical people have to have a full understanding of cable signals to analog homes, and consumer education is a top priority. None of it’s easy, and there remain lots of challenges,” he said.
For cable, few serious technical challenges remain since the industry has enormous experience with digital video. From the cable industry’s perspective, the issue revolves around who gets the first call from consumers up to, and after, Feb. 17 of 2009.
“Customers will call their cable companies for advice on hardware and digital TV equipment. CSRs will get the first calls so there’s an effort underway to address that. Right now, however, we’re not close to solving it,” Stoddard admitted.
Consequently, The Cable & Telecommunications Association for Marketing (CTAM), has joined the coalition to help with the messaging.
“The Coalition is focused on over-the-air households, so there could be confusion created among the 85 percent of households with digital, who aren’t affected by the transition. We’ve got to address those consumers,” said Char Beales, president and CEO of CTAM.
CTAM has a dual focus, helping cable operators on the one hand and their customers on the other. To address MSOs’ internal concerns, CTAM has created a council with multiple committees, including technology, customer care, programming and manufacturing. The consumer education piece will focus on getting information to consumers about what cable is doing about the digital transition.
“The council will provide core materials for MSOs, but we’re still working on the messaging, since all the pieces to the puzzle haven’t been decided, which include some technology issues. There are a lot of unknowns, so we need clear, simple, consumer-oriented messaging,” Beales added.
One huge piece to the puzzle is who will manufacture the converter boxes that will allow the remaining analog customers to receive digital signals. Todd Sedmark, communications director for the National Television and Information Administration (NTIA), said, “Manufacturers interested in participating have looked at the specs and are developing boxes that will meet our requirements and demonstrate that they meet the standards, which are being determined by our technical experts. The number of manufacturers hasn’t been determined. We’re working on that now.”
LG, Samsung, and Thompson RCA are some of the manufacturers who have surfaced as potential suppliers of the set-top boxes.
The converter boxes will be used in conjunction with the NTIA’s coupon program, which allows two $40 coupons per household to be applied to the purchase of an analog-to-digital set-top box, which Sedmark estimates will cost consumers between $55 and $75. The coupons expire 90 days after shipment and are only good for converter boxes that meet NTIA specs.
The cost for the program, he added, is approximately $1.5 billion. The money has been borrowed from the Treasury Department, an advance on the 700 MHz spectrum auction planned for next January.
“We have budgeted $5 million for the education program and are reviewing proposals from contractors to run the program. We should have a contractor by Labor Day. Currently, we’re gearing up for a very public effort nationwide for DTV transition,” Sedmark said.
Part of that process is partnering with organizations such as the NCTA, NAB, CEA (Consumer Electronics Association) and a host of government organizations that have responsibility for food stamps, social security, aging and several more areas, Sedmark noted.
From 2002 to 2008, 115 million digital TVs will have been sold. There will be about 20 million households receiving over-the-air only. Fifteen million households will have analog TV not connected to cable or satellite. “We don’t want a lack of information prior to Feb. of ’09, because people are transitioning to digital right now. It’s six months to liftoff,” Sedmark said.
For retailers, the digital transition, most notably the coupon program, can be viewed as either a curse or a blessing: Curse because of the staffing and training issues; blessing because of the store traffic expected to result from converter purchases.
“Retailers will play a vital role in the transition, so consumer education has a primary role. But they are in a unique position since they are the public face to the electronics industry. It’s important they arm their staffs with transition information. We will have training modules available once the coupon program launches in January of ’08. But the transition is being considered an enormous opportunity for retailers,” said Jason Oxman, vice president of communications for CEA.
At least an opportunity in theory. Added Sedmark: “It’s a voluntary effort by the consumer electronics industry to ensure the success of the coupon program. We’re grateful to those that are part of the process. We think they will play a great role in helping consumers with their purchases of the converter boxes.”
Oxman does, too, and has evidence to back up his belief. “At the end of 2007, 82 million digital sets will have been sold, and that is driving the sale of high-end audio equipment as well. It’s generating business for consumer electronics retailers and an explosion of interest in high definition TV sets,” he said. It’s driving some challenges as well, Oxman admitted. “All of our partners need to be engaged in the consumer education process. We have plenty of tools, but it’s the last step to [the] transition and we must make sure no consumer is denied [the] benefit of the transition.”
TECH ISSUES FOR CABLE
There are some remaining technical issues as well, albeit not serious enough to slow down the transition, particularly for the cable industry.
“It’s the learning curve, so we’re working hard to gain a complete understanding of how the transition might affect cable systems on a technical basis,” said Bill Check, senior vice president of science and technology for the NCTA. “So, we’ve begun reaching out to cable’s CTOs and other technical experts to have a broad discussion of the technical aspects of the transition as they pertain to cable. We want to better understand what impact the final cut-over from analog to digital broadcasting will have on cable systems.”
Some of the questions being addressed, he said, include the impact of post-transition digital frequency on where a local broadcast station will be located. Also, what must be done to properly map that frequency to existing channel lineups? Will there be a difference between a broadcaster’s analog service and its digital service coverage? And, what needs to be done, if anything, so that cable engineers, installers, technicians and other technical personnel can continue to deliver the best quality signal to a cable customer?
Cable’s experience with digital is a key to answering those questions, Check said. “Cable systems have already added literally hundreds of digital broadcast channels to their lineups, so we’ve gained great transition experience in that regard. The remaining transition in 2009 is essentially the last mile of the marathon. Now, it’s about communication.”
And the communication engine that will drive the digital transition message to consumers is revving up. “Cable has made a major commitment, in partnership with the broadcasting and consumer electronics industries, to educate consumers about the transition,” Check added.
Much of that commitment begins with CTAM, and its growing effort to create the right message for cable customers – that the digital transition will have minimal, if any, effect on them. And that the transition is a good thing.
“All of the MSOs are committed to taking care of their customers, but in different ways. So we have to provide umbrella messaging, with more specifics. The challenge is to provide clear consumer messaging that MSOs can use to ready their customers for the transition,” Beales noted.
For local broadcasters such as KUSA, an NBC affiliate in Denver, technical and operational issues remain, and the communications strategy is just now being developed.
“We have lots to do. We’re currently building a tower on nearby Lookout Mountain, which should be completed by Q1 of 2008. But in the meantime, we have a low-power facility in downtown Denver, so we have some logistical issues. But we have a good plan for the transition and will be alerting the public about how it will change their homes,” said Mark Cornetta, president and GM of KUSA and KTVD.
Alerting the public, Cornetta added, is the key element to the digital transition. “We will put together PSAs from the NAB, but will create our own as well. We are also planning to use talent on radio shows.”
“The education campaign hasn’t started yet, but it is a huge part of the digital transition. There could be lots of confusion about the coupon program and the types of set-top boxes used. And retailers must be educated as well,” he said.
Additionally, there are still uncertainties about the must-carry rule. Will cable have to carry the extra channels? Also, how is the $5 billion investment in broadcast upgrades to be made up? And how does the digital transition help the revenue sides, especially the broadcasters? “Those are some remaining challenges,” said Michelle Abraham, principal analyst for the research group In-Stat.
Good questions. Some of them might not be answered until February of 2009. In the meantime, the Coalition is elevating the digital transition issue to full alert status.
Concluded Stoddard: “All of the efforts are underway, and we’re eager as an industry to take a leadership role in the digital transition. But there are lots of challenges, and we’re hearing from several government agencies that there is an urgency for consumer education. And all of the industries – cable, broadcasting, consumer electronics – have tremendous stakes in the transition. This train is picking up steam.”