More TV Madness

by

Ross M. Miller
Miller Risk Advisors
www.millerrisk.com
November 28, 2005

As I write this, the U.S. Congress is working out the terms of just how much money to waste converting Americans from old-fashioned low-definition TV to some form of digital TV, including the increasingly popular high-definition TV (HDTV). Understandably, they would like to take RF spectrum away from television and auction it off for other uses. The terms of the original digital TV legislation allowed broadcasters to keep their legacy analog channels until digital TV reached 85% penetration. Under current projections, we will have a Starbucks on each Martian moon before that happens.

Congress, however, has become impatient for revenue and so they are changing the rules so that the forced conversion to HDTV will occur sometime in 2009. Because this conversion is believed to have a disproportionate impact on the disadvantaged, Congress is setting aside potentially billions of dollars to subsidize converter boxes. This commentary, my last one for 2005 (I take a writing vacation in December), will explain why this plan, like most of what Congress does, makes no sense.

Let me begin by stating that I have nothing against digital TV or HDTV and would be perfectly happy if Congress flipped the switch today. I have three working monitors in my house that can receive television pictures. The main one is currently hooked up to digital cable and is capable of displaying an HDTV picture if I ever get around to procuring an HDTV converter box from Time Warner. Given that my three favorite channels—CNBC, IFC, and TCM—do not yet broadcast in high-definition, this likely will not happen for some time. Monitor two is hooked up to analog cable and is used almost exclusively to view DVDs and the occasional VHS cassette. Monitor three is a vintage television that receives over-the-air analog TV. It is used for viewing sports on weekends, which I find to be an effective means of nap inducement.

Because the first two monitors can deal with pretty much any signal Time Warner sends down the tube, the conversion is inconsequential. Monitor two will need to get a cable box rather than mainline the RF signal directly, but I can handle that. The true television, complete with rabbit ears, will go blank in 2009 even if George W. Bush (who is guaranteed to sign whatever floats out of the conference committee) pays a personal visit to my house and installs a government-subsidized converter box.

I live about 15 miles from where almost all of the local television stations broadcast from high atop the Helderberg Mountains. The network VHF stations come in clearly enough, but the UHF stations are touchy—the sort where if you move the wrong way, the picture simulates the effect of several martinis. You may ask: What kind of television is digital TV? It is UHF, the touchy kind to begin with and being digital only makes it touchier. A poorly-received digital TV signal is effectively no signal at all.

You can surf around the web and read about all the experiences that people have had getting their HDTV-ready sets to grab digital signals from out of the ether. The bottom line is that unless you happen to live in exactly the right place, getting digital TV of any variety means major antenna hassle. And not just little antennas—big, ugly antennas that often require motorized rotors to point them in the right direction. Hence, a converter box, even one purchased with a $40 government coupon with a picture of Karl Rove on it, will be of little use without not just a big antenna, but also a technician to install it properly. If the price of converter boxes comes down to $40, which seems likely, then lots of people will have useless boxes gathering dust at taxpayer expense.

Now among the few friends and relations that I have who will admit to watching television, I am the only one who is sufficiently primitive to receive signals without the aid of a cable box or satellite dish. Anyone who follows these commentaries knows that I am not a Luddite. I am, however, a bit of a romantic and I find the idea of catching electromagnetic waves that come from the sky appealing in a retro sort of way. Moreover, I am not thrilled with the idea of someone drilling holes through my bedroom wall or floors. I am even less thrilled with having a giant antenna in my bedroom, on my roof, or in my nonexistent attic.

One has to wonder what the deal is with all of the untethered televisions in America, which number upwards of 75 million by some estimates. Who, other than the sort of person who writes commentaries on the Internet, would still receive over-the-air (OTA) television? Congress seems to think that it is people who are either temporarily or permanently without money, but my limited personal experience indicates otherwise. I suspect that even the rural poor who live well off the grid tend to either subscribe to satellite TV or pirate it. Who then is left to watch traditional TV?

My guess is that many of the OTA sets still in use are portable TVs owned by relatively affluent individuals. I have a cute 5-inch GE Spacemaker color set (purchased before I could have imagined I would some day work for the company) that I use as a mini-monitor from time to time and GE apparently sold lots of those little sets. A portable television, however, stops being portable one you hook it up to cable, satellite, or the sort of antenna required to get HDTV.

Essentially, the end of analog television means the end of portable television as we know it. But if the phone companies, Microsoft, and Apple have their way, portable television as we know will be gone well before 2009. This past year was the year that new forms of portable TV hit the radar screen. Even before Apple announced its video version of the iPod, Verizon was hawking Motorola phones with video capabilities—canned broadcasts of Wolf Blitzer, that sort of thing. My phone is capable of receiving the broadcasts; however, I spent most of my time off Verizon's video grid so I have not signed up, not that they currently have anything worth watching.

The other thing is that big-screen sets whose native resolution favors HDTV over standard broadcast TV are making serious inroads into the market as their prices plummet. While 85% penetration will have to wait, 50% penetration on the horizon regardless of what Congress does.

Of course, the emergence of HDTV seems unlikely to transform television from its current dismal state to anything worth watching anytime soon. And HDTV is not always an improvement. Bill Gross and Jim Cramer look bad enough in standard definition, in high-definition I do not think I could survive the trauma.

Ultimately, the conversion from analog to digital TV whenever it occurs looks to be a nonevent on par with the Y2K bug. If there is a grassroots movement to save analog TV, their PR folks are doing a really bad job of getting out the word. I must be typical of the oddballs watch over-the-air TV and, as far as I can recall, I was never summoned before a Congressional committee. (Given the stunning importance of the things that I do on a typical day, it is the sort of thing that I might easily forget about having done. It is about time for me to make another appearance on C-SPAN anyway as they have finally stopped rerunning my appearance at the Texas Book Festival at odd hours as a way of testing their transmitter.)

December is my month off from writing commentaries to deal with everything that cannot wait until next year. My first column of the new year, which will appear concurrently in Financial Engineering News, is a refinement of the discussion of financial time that I began in my Calendar Consciousness commentary. Happy holidays and see you in 2006.

Copyright 2005 by Miller Risk Advisors. Permission granted to forward by electronic means and to excerpt or broadcast 250 words or less provided a citation is made to www.millerrisk.com.