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CBO Concerned About 2006 DTV Deadline

Washington -- The effort to end analog-TV service by 2007 is encountering negative feedback from the Congressional Budget Office related to whether the deadline might shortchange the federal government when it auctions the analog-TV spectrum to new users, especially bandwidth-hungry broadband-wireless companies.

The staff of Senate Commerce Committee chairman Ted Stevens (R-Alaska) has held preliminary talks with the CBO regarding the anticipated revenue from the auction should Dec. 31, 2006, become the deadline for TV stations to switch to digital-only transmission and surrender their analog licenses, which would be worth billions of dollars on the market.

“Just from purely a budget perspective, [the CBO said] the later the digital transition occurs, the more funding would be made available to the federal government through the auction process,” Commerce Committee majority staff director Lisa Sutherland said Tuesday at the Cable Television Public Affairs Association conference here.

At a time of huge budget deficits, the CBO’s analysis might prompt budget hawks in Congress to press for a later digital-TV deadline.

A CBO spokesman would not comment on Sutherland’s remarks nor confirm that CBO staff had held talks with Commerce Committee aides. The CBO reviews legislation for Congress to determine budgetary impact.

House Energy and Commerce Committee chairman Joe Barton (R-Texas) favors Dec. 31, 2006, and hopes to use some spectrum-auction proceeds to fund converter boxes in order to keep TV sets working for millions of low-income households that rely exclusively on free, over-the-air broadcasting.

High-tech companies -- including Intel Corp., Qualcomm Inc. and Cisco Systems Inc. -- formed a coalition last week to pressure Congress to enact Barton’s plan and provide them with certain access to airwaves that they want to use to bombard mobile devices with high-speed-data and video services.

The CBO is evidently concerned that a pre-2007 auction would produce a glut, serving to depress the value of the analog-TV spectrum due to FCC auctions in the pipeline that might attract the same bidders interested in the analog-TV spectrum.

An FCC source said a number of auctions were in the queue. The agency has indicated that it would auction 90 megahertz of advanced-wireless-services spectrum as early as June 2006.

Barton, who has not introduced his digital-TV bill, is hoping for House action by the August recess, said Will Nordwind, an aide to Rep. Fred Upton (R-Mich.), chairman of the House Subcommittee on Telecommunications and the Internet.

Barton, he added, remains committed to setting a firm deadline, coupled with a set-top-subsidy program.

“We hope that the proceeds from the spectrum auctions, when the broadcasters return their analog spectrum, will raise sufficient revenue to cover the cost of some type of converter program,” Nordwind said.

A study in February by the U.S. Government Accountability Office estimated that a converter-box program would cost $460 million-$10.6 billion, depending on box prices and the number of set-tops actually funded.

A member of the High Tech DTV Coalition -- the group backing Barton’s 2006 deadline -- issued a paper last week saying that 60 MHz of broadcast spectrum “could generate between $20 billion and $30 billion for the U.S. Treasury.”

It was unclear whether the CBO warned that a pre-2007 auction of the analog spectrum would fail to cover the cost of the set-top subsidy.

“Somehow, we need to even out that process in terms of having the money necessary to do the digital-transition set-top-box program with the desire to expedite this digital transition with a hard date,” Sutherland said.

Stevens and co-chairman Sen. Daniel Inouye (D-Hawaii) are beginning to call in the various players to discuss digital-TV-transition issues -- a process Sutherland called “listening sessions.”

On Thursday, the National Cable & Telecommunications Association was set to send representatives to brief Democratic staff on their digital-TV-transition concerns. A cable priority is the ability to downconvert digital-TV signals at the system headend in order to avoid the need to issue digital set-tops to millions of subscribers with analog-TV sets.

But Rachel Welch, a top legal advisor to Inouye, said headend downconversion would be a problem if people who paid thousands of dollars for HDTV sets received analog pictures from cable -- a concern also raised by the National Association of Broadcasters.

“The last thing any of us needs is a consumer backlash because we made an easy decision rather than facing up to our challenges to the transition,” Welch said.

In February, Insight Communications Co. Inc. CEO Michael Willner -- who runs a top-10 cable MSO -- told Upton’s panel cable customers with HDTV sets would not lose access to local HDTV broadcasters as a result of headend downconversion.