By Jeffrey Krauss,
Loophole Labeler
and President of Telecommunications and Technology Policy
When Congress amended Section 309 of the Communications Act in 1997 to require TV stations to shut down their analog NTSC broadcasts in 2006, it also created a set of big fuzzy loopholes that allow the FCC to grant extensions of time. One loophole says that this shutdown deadline does not apply if at least 15 percent of households in the market do not have access to all the digital broadcasts in the market. Another loophole says that the deadline does not apply if any network affiliate TV station in the market is not broadcasting a digital signal. But the statutory language is not very precise, and it isn't enough to say "here's what we all think they meant." The FCC has just started up a proceeding that, among other things, will try to clarify (and perhaps narrow) the Congressional loopholes.

The first task is to define what is meant by "market," because all the loopholes use that term. Nielsen Media Research has defined "designated market areas" or DMAs that cover the country. But in large DMAs that include large rural areas, it isn't likely that viewers will have access to all the digital TV stations in the market. Many will be too far away. In addition, some TV stations broadcast into more than one DMA, so the analog shutdown has to be synchronized, because it makes no sense to give a station more time to discontinue analog broadcasts in one DMA but not the other.

Alternatively, a station's market could be defined by its signal coverage area. But because nearby TV stations have signals that largely overlap, but not entirely, every TV station would have a unique "market" that is slightly different from its neighbors. And it is not clear whether stations that use TV translators to extend their coverage into remote rural areas should count those rural areas as part of their market.

The 15 percent test has two prongs, and both must be met. First, if a cable system or other multichannel video programming distributor (MVPD) carries all the local digital television signals, and at least 85 percent of households subscribe to that service, then the loophole can be closed. But cable systems seldom carry all the local TV stations, making it harder to close the loophole. The FCC might decide that "all" means "all the stations that are entitled to must-carry," which then makes it easier to close the loophole.

But the second prong of the 15 percent test requires that a household have either a digital-to-analog converter, or a digital TV receiver "capable of receiving the digital television service signals of the television stations licensed in such market." For cable subscribers, a cable set-top box would satisfy the converter requirement. But for off-air reception, the "capable of receiving" language is ambiguous. If a receiver is working properly but simply located outside a station's normal coverage area, is it "capable of receiving" that station? And suppose a viewer is outside the station's coverage area, but can receive the station on a TV translator. And suppose the TV translator downconverts the digital TV signal and rebroadcasts it as an analog signal. How should the language of the law be interpreted in that case? Does reception of an analog version of the digital signal satisfy the test?

There are ways that TV stations can use the loopholes to delay the end of analog transmissions. For example, the FCC allows a station to broadcast a digital signal with minimum power, so the digital signal does not replicate the analog service area. If it were to discontinue its analog signal, viewers that are within the analog coverage pattern but outside the digital coverage pattern will lose service, which is contrary to what Congress intended. In this case, political pressure from these viewers will keep the loophole open.

TV stations have strong incentives to keep the loophole open, and continue broadcasting their analog signal, for as long as possible. At some point way off in the future, it might be more profitable for a broadcaster to shut down the analog transmitter and save the operating costs, but only after a large majority of viewers are actually watching the digital broadcasts. Otherwise, the broadcasters risk the loss of advertising revenues. The FCC, on the other hand, is in a hurry to move the broadcasters off the analog frequencies so it can auction them off.

For the cable industry, the incentives are mixed. During the transition, cable systems will be carrying all the must-carry analog signals and have voluntarily agreed to carry some digital TV signals as well. So getting rid of the analog signals as soon as possible will free up some channel capacity. On the other hand, cable operators will be faced with a huge demand for digital-to-analog set-top boxes to feed legacy NTSC receivers, so there will be a big spike in capital expenditures.

But the cable industry is more of an observer here. The fight over the loophole is mainly between the broadcasters, who want to keep their analog spectrum as long as possible to continue to serve legacy TV sets, and the FCC, which wants it back as soon as possible. Which side are you on?

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