**FEDERAL COMMUNICATIONS COMMISSION**

**MEDIA BUREAU STAFF REPORT**

**CONCERNING**

**OVER-THE-AIR BROADCAST TELEVISION VIEWERS**

MB DOCKET NO. 04-210

February 28, 2005

PAGE

[I. INTRODUCTION 2](#introduction)

[II. RECORD EVIDENCE 3](#__RefHeading___Toc93282058)

[A. Analog OTA Television Sets in TV Households
3](#analog-ota-television-sets-in-tv-households)

[B. Reasons that Households Use OTA Television and Do Not Subscribe to
an MVPD.
7](#reasons-that-households-use-ota-television-and-do-not-subscribe-to-an-mvpd)

[C. Digital-to-Analog Converters 8](#digital-to-analog-converters)

[D. Consumer Education 9](#consumer-education)

[III. ANALYSIS 9](#analysis)

[A. Addressing the Remaining Analog OTA Households at the Switch-Over
Date
9](#addressing-the-remaining-analog-ota-households-at-the-switch-over-date)

[1. The Timing and Nature of the Switch-Over
9](#the-timing-and-nature-of-the-switch-over)

[a. The Timing of the Switch-Over 9](#the-timing-of-the-switch-over)

[b. The Nature of the Switch-Over 9](#the-nature-of-the-switch-over)

[(i) Simultaneous End of Analog Service](#__RefHeading___Toc93282068) 15

[(ii) Analog "Fade to Black" 9](#analog-fade-to-black)

[(a) The "Lifeline" Approach 9](#the-lifeline-approach)

[(b) The "700 MHz Reclamation" Approach
9](#the-700-mhz-reclamation-approach)

[2. Consumer Education 9](#consumer-education-1)

[3. Digital-to-Analog Conversion Equipment
9](#digital-to-analog-conversion-equipment)

[B. Summary of Options 19](#__RefHeading___Toc93282074)

[IV. CONCLUSION 9](#conclusion)

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

# INTRODUCTION

1.  This Report is intended to aid Congress in directing this country's
    transition from analog to digital television ("DTV"). A timely and
    successful conclusion to the DTV transition would benefit the
    American public by: (1) preserving a free, universal broadcasting
    service in a digital world; (2) bringing consumers the benefits of
    new digital services; and (3) promoting spectrum efficiency and
    rapid recovery of broadcast spectrum for other uses.[^1]

2.  In particular, the need to make more efficient use of the
    electromagnetic spectrum has become increasingly acute over the past
    several years. At the end of the DTV transition, 108 MHz of spectrum
    in the 700 MHz band currently used by broadcast channels 52-69 will
    be made available for other wireless services -- 24 MHz for urgent
    public safety needs and the remainder for advanced commercial
    wireless services. Thus, beyond the immediate auction revenues for
    the commercial wireless spectrum -- which could be significant --
    freeing the 700 MHz spectrum for other uses would result in immense
    benefits to the United States in terms of homeland security,
    innovation and investment in new technologies, new employment
    opportunities, and international competitiveness.

3.  But bringing the transition to a timely conclusion may also entail
    potential costs. Some consumers, especially those that rely on
    over-the-air television service and have not made the switch to
    digital when the transition occurs, may have to take action to avoid
    a disruption in service. Specifically, these consumers will have
    to: (1) purchase a new DTV set with a built-in digital broadcast
    tuner; (2) obtain a digital-to-analog converter box that will
    convert over-the-air digital signals to analog for viewing on legacy
    analog sets; or (3) subscribe to a multichannel video service
    provider ("MVPD"), typically cable television or Direct Broadcast
    Satellite ("DBS").

4.  In order to explore this issue, on May 27, 2004, the Commission
    released a Public Notice[^2] posing several questions about U.S.
    television households[^3] that receive broadcast television only in
    analog format and "over the air" via an indoor or outdoor antenna
    ("analog OTA households").[^4]

5.  The Public Notice asked, first, for factual data about how many OTA
    households there are, who their members are, where they are located,
    and why they do not subscribe to an MVPD. Second, the Public Notice
    asked for advice about how best to provide for OTA households when
    analog broadcast television service is ended ("the switch-over
    date").[^5] Comment was sought on whether a government support
    system should reach all such households or only those that satisfy a
    means test, whether support should be given for one or more TV sets
    in such households, and what form any government support system
    should take.

6.  The Commission received comments from 47 parties, and reply comments
    from 12. The following paragraphs summarize the commenters'
    statements and opinions. We also include our own research, and that
    of some others, about the subjects raised in the Public Notice.

    []{#__RefHeading___Toc93282058 .anchor}

# RECORD EVIDENCE

## Analog OTA Television Sets in TV Households

7.  [Analog OTA Households.]{.underline} Commenters estimate that the
    percentage of TV households that are OTA-only range from 13%[^6] to
    19%.[^7] The Commission's current estimate, as reported in its
    annual report on competition in the MVPD market, is 14.86%.[^8] This
    number has fallen slowly but generally steadily in recent years.[^9]
    In the absence of a definitive study, the following pie chart
    illustrates our best estimate of current conditions (rounding up to
    15%):

8.  The foregoing data and estimates are nationwide. It appears that the
    percent of OTA households varies substantially from one market to
    another. For example, in ten of Nielsen's Designated Market Areas
    ("DMAs"), over 80% of TV households subscribe to cable service.[^10]
    When DBS subscribers to local-into-local service are added, the
    total MVPD subscribership in most of these markets exceeds 85%.  In
    contrast, in thirteen DMAs, under 50% subscribe to cable.[^11] Given
    the importance of an accurate assessment, funding of a formal study
    would be helpful to establish the precise number of OTA households
    on a market-by-market basis, and to forecast how those numbers are
    expected to change over the next several years. 

9.  [MVPD Households with OTA TV Sets.]{.underline} Millions of TV
    households subscribe to MVPD service but also have one or more OTA
    television sets. One commenter estimates that almost half of DBS
    subscribers, approximately nine million households, watch their
    local channels over the air.[^12] Many more households, several
    commenters note, subscribe to MVPD service but also have one or more
    OTA TV sets for television viewing in kitchens, on patios, in
    recreational vehicles and at sports events,[^13] and for
    non-television uses such as playing games, VCR tapes, and DVDs.[^14]
    Two commenters estimate the number of OTA sets in MVPD households at
    around 30 million.[^15]

10. [Demographic Characteristics.]{.underline} Commenters state that
    analog OTA households are somewhat disproportionately
    African-American,[^16] Hispanic,[^17] and low-income.[^18]

11. Some commenters also state that households with certain demographic
    factors are more likely to be OTA households, including households
    being headed by women with children,[^19] having few children,[^20]
    or having unemployed adults.[^21] Individual commenters allege that
    Hispanic households are more likely to be OTA households if Spanish
    is the first language spoken in them,[^22] no one has more than a
    high school education,[^23] or the household is in certain
    locations.[^24]

12. Commenters disagree as to whether particular age groups are more
    likely to comprise OTA households.[^25] One commenter notes that
    college education or its absence is not a predictor that a household
    is an OTA household[^26] while another correlates high school or
    less education with being an OTA household.[^27]

13. [Geographic Characteristics.]{.underline} One commenter states that
    OTA households are not disproportionately located in urban,
    suburban, or rural areas.[^28] It also points out wide disparities
    in the percentage of OTA households in different communities, for
    which there is no immediately obvious explanation. For example, the
    Palm Springs, California, and Parkersburg, West Virginia, DMAs[^29]
    have the lowest percentages of OTA households in the country (6%),
    and the percentages of OTA households in the most populated DMAs
    range from about 10% in the Atlanta, New York City, Philadelphia,
    and San Diego to nearly 30% in Dallas, Minneapolis, and Salt Lake
    City.[^30]

14. Some commenters state that disproportionate numbers of OTA
    households are in certain southwestern[^31] and western areas.[^32]
    Two commenters imply that there are especially high percentages of
    Hispanic OTA households close to the Mexican border and that they
    use analog OTA television to receive not only U.S. OTA analog
    stations, but also Mexican stations.[^33] They predict that if U.S.
    OTA stations stop analog broadcasting and Mexican stations continue,
    these Hispanic households will remain OTA-only and will need more
    than average incentive to obtain digital television from U.S.
    stations.[^34]

## Reasons that Households Use OTA Television and Do Not Subscribe to an MVPD 

15. OTA households give several reasons for relying on OTA television
    and not subscribing to an MVPD. In one commenter's survey, 59% of
    OTA households indicate that their reason for remaining OTA is that
    "television is not a priority for them."[^35] Similarly, a 1998
    study found that, even for the very poor, the decision not to
    subscribe to cable was more often the result of preference than
    poverty.[^36] A later study reached a comparable conclusion.[^37]
    This consensus is consistent with the statement of one commenter
    that OTA households watch 30% less television than MVPD
    households.[^38]

16. According to a commenter's survey, fewer than 30% of OTA households
    state that lack of funds plays a role in their decision not to
    subscribe to an MVPD.[^39] Another commenter states that the dearth
    of Spanish-language channels explains relatively low subscription to
    MVPDs among Hispanic households.[^40] Assuming that 15% of
    households are OTA households and that the reasons for their not
    subscribing to an MVPD are 60% lack of interest, 30% lack of funds,
    and 10% other, the reasons that OTA households use OTA television
    may be illustrated in the following diagram.

## Digital-to-Analog Converters

17. Consumers who do not subscribe to a MVPD or purchase a digital
    television set can continue to receive OTA television after the
    transition and view it on their analog television sets if they
    obtain a digital-to-analog converter. Such a converter may consist
    of a box with numerous features or a simple device designed only to
    convert digital signals for display on an analog set.[^41]
    Commenters differ somewhat about the current availability and cost
    of converters. One commenter claims they are difficult to find,[^42]
    but others quote current prices, indicating that they are available.
    Current prices range from \$80 to \$1,000, with \$300 the price
    cited most often.[^43] Commenters are unanimous in expecting prices
    to fall significantly, as with many other consumer electronic
    products, as demand and manufacturing volumes increase.[^44]
    Different commenters predict prices to be under \$100 by late 2005,
    [^45] \$100 by 2006;[^46] \$67 by early 2007;[^47] and as low as
    \$50 by 2008.[^48]

18. There are several proposals for the capabilities that the converters
    should have. Commenters advocate that converters be able to receive
    "all of the multiplexed channels transmitted by DTV stations,"[^49]
    to provide down-resolution for signals for connections to analog TV
    sets, and to work with remote control, closed captioning, and a
    PSIP-based programming guide, all in compliance with all safety and
    Energy Star requirements.[^50] One commenter advocates requiring
    that converters receive all digital formats for High Definition and
    Standard Definition on any VHF or UHF broadcast channel, connect to
    an existing analog TV receiver via channel 3 (or 4) radio frequency
    interface, work with digital broadcast signals in the same receiving
    configuration (antenna, location, etc.) as used for current analog
    reception, be able to receive and display signals under the most
    challenging conditions (including low signal level and severe
    multipath and adjacent channel interference conditions), and be able
    to accommodate closed captioning, program ratings, and the broadcast
    flag.[^51] Other commenters add that converters should be compatible
    with remote controls, VCRs, and DVRs, and should be capable of
    installation by ordinary consumers.[^52]

19. A near-term switch-over deadline may be less disruptive to consumers
    if digital-to-analog converter boxes are readily available and/or
    their costs are subsidized. Many commenters suggest that the
    government should aid consumers' purchase of converters so that
    analog-only TV sets will continue to display OTA television
    broadcasts after analog transmissions are terminated.[^53] Support
    is voiced, at a minimum, for programs that would give low-income OTA
    households[^54] part of the price of one converter.[^55] If
    eligibility for a converter were limited to the OTA households that
    did not subscribe to an MVPD due to lack of funds, a small
    percentage of households would qualify for support. Other commenters
    advocate broader support,[^56] such as for every household,[^57] for
    the full price of a converter,[^58] for DTV-ready television
    sets,[^59] and for some element of subscription to an MVPD.[^60]

20. Commenters address many other aspects of the support programs they
    advocate.[^61] The vast majority of commenters who express a
    preference between vouchers and tax credits prefer vouchers.[^62]
    There are many different suggestions of who should pay for any
    government support program. Those mentioned are consumers generally,
    some or all 700 MHz licensees (via their post-auction payments of
    their winning bids),[^63] broadcasters that are slow to begin and
    expand their digital coverage,[^64] advertisers, cable operators,
    and television set manufacturers and retailers.[^65]

## Consumer Education

21. Consumer education efforts, particularly in the next few years,
    could have a significant impact on the number of analog OTA
    consumers at the switch-over date. One commenter estimates that
    there may be 73 million analog-only sets in use in the U.S. that are
    not connected to an MVPD service.[^66] Although the Commission's DTV
    tuner mandate began to apply in July 2004 to the largest sets, it
    will not become fully effective on smaller sets until July
    2007.[^67] Meanwhile, millions of new analog-only sets continue to
    be sold each year.[^68] Many consumers are buying these sets unaware
    that the DTV transition is occurring and that, when the transition
    is over, analog-only sets will no longer receive OTA signals without
    the use of external reception equipment.[^69] In sum, there are
    millions of households that will need to learn that, someday, some
    or all of their television sets will be inoperable unless they buy a
    converter, subscribe to an MVPD service, or take some other action.

22. The Commission has pursued various DTV consumer education
    initiatives within its existing resources and expertise. In 2002,
    for example, Chairman Powell publicly challenged the industries
    involved in the transition to do more to educate the public and
    promote consumers' digital programming options.[^70] More recently,
    the Commission launched a new consumer-oriented web site devoted to
    the DTV transition, www.dtv.gov. The site provides detailed
    information about DTV, including web links to broadcasters, MVPDs,
    manufacturers, retailers, and others.[^71] The Commission is also
    making available a "shopper's guide" for those consumers who are
    considering purchasing a DTV set and assists consumers through its
    toll-free Consumer Call Center.[^72] In addition, several major
    retailers have agreed to distribute a consumer "tip sheet"
    describing DTV terms and explaining the future limitations of
    analog-only televisions.[^73]

23. Some commenters propose more aggressive measures to educate the
    public, such as mass mailings by the Commission to every U.S.
    household.[^74] In Berlin, Germany, for instance, where analog
    broadcasting was ended in 2003, an intensive consumer education
    campaign was launched to inform consumers before the digital
    switch-over, including public service announcements and "crawls" on
    broadcast television, and a letter sent by the government to every
    home.[^75] Another proposal in the comments \-- and the subject of
    an ongoing Commission rulemaking \-- would require a warning label
    on analog-only sets to inform consumers about the potential
    limitations of the equipment at the switch-over date.[^76]

# ANALYSIS

## Addressing the Remaining Analog OTA Households at the Switch-Over Date

24. Although current numbers of analog OTA households are instructive,
    the most relevant figures will be the numbers of households that
    rely on OTA analog service for information and entertainment on the
    switch-over date. Various factors will determine how many analog
    sets will be in use on the switch-over date and how long they will
    remain in operation. Some factors, such as the price of DTV sets and
    the amount and popularity of digital programming, are largely
    marketplace-driven.[^77] Other factors, such as setting deadlines
    for broadcasters to transmit at full power, phasing in digital
    tuners, and pressing for the development of "plug-and-play" DTV
    sets,[^78] are already the focus of significant government
    involvement.[^79]

25. The Commission will continue to use formal and informal means to
    ensure progress towards completion of the transition. Additional
    government efforts, however, could affect the size of the legacy
    analog problem and its impact on viewers on the switch-over
    date: (1) the timing and nature of the digital switch-over date
    itself, including whether analog broadcasting is ended all at once
    or phased-out gradually; (2) consumer education; and (3) assistance
    for the purchase of digital-to-analog conversion equipment or
    services. Each of these factors is discussed below.

### The Timing and Nature of the Switch-Over

26. The timing and nature of the digital switch-over date will have a
    direct impact on the number of analog sets still in use. On one
    extreme, a near-term, nationwide date certain would occur when the
    greatest number of legacy analog-only sets are still in use.
    However, a near-term deadline if combined with an intensive consumer
    education effort could deter many consumers from purchasing
    additional analog-only equipment. At the opposite extreme, the
    switch-over date could be set to reflect the natural retirement of
    analog equipment. For instance, assuming an outside useful life of
    25 years for analog sets, the switch-over date could be set for 25
    years from the date the DTV tuner mandate is fully effective in 2007
    (*i.e.*, 2032). Each extreme, and the variations in between, will
    affect the number of households that will have purchased digital
    equipment before the deadline, how much analog equipment will remain
    in operation, and the price of digital-to-analog converters and DTV
    sets for those consumers who otherwise might lose service.

#### The Timing of the Switch-Over

27. Providing support for a near-term deadline, sales of DTV equipment
    are rising rapidly, with approximately 1.4 million DTV units sold in
    2001, 2.5 million in 2002,[^80] 4 million 2003,[^81] and 7.2 million
    in 2004.[^82] CEA projects 10.77 million DTV units will be sold in
    2005, 16.77 million in 2006, 23.25 million in 2007 and 27.05 million
    in 2008.[^83] Up to now, most DTV units sold have been video
    monitors, without any internal DTV reception capability.[^84] As the
    Commission's DTV tuner mandate becomes effective, however, an
    increasing percentage of those sets will contain integrated DTV
    broadcast receivers.[^85] In addition, under the Commission's rules,
    all one-way plug-and-play DTV sets now entering the marketplace must
    include an over-the-air DTV tuner.[^86] The confluence of rapidly
    increasing set sales and the Commission's DTV tuner and
    plug-and-play mandates means that every year millions more
    television sets should be in consumers' homes that will be able to
    receive broadcast service at the switch-over date. From 2007 on, the
    figures could approach 20-30 million digital receivers sold per
    year.[^87]

28. As a corollary, the number of analog-only sets in use will decline
    over time, especially in 2007 and beyond, when the DTV tuner mandate
    becomes fully effective. Given that analog-only sets will continue
    to be sold until at least 2007, however, it may be decades before
    all analog-only sets are retired from service naturally.

#### The Nature of the Switch-Over

29. Regardless of *when* the switch-over occurs, *how* the government
    terminates analog service will have an impact on the size and scale
    of the legacy analog problem. Two general approaches are described
    below.

##### Simultaneous End of Analog Service

30. Under this approach, all analog broadcasting ends simultaneously in
    a particular market. That is, analog OTA viewers in a particular
    market would switch from having their current level of analog
    service one day to having no analog service the next. This could
    occur either nationwide or on a market-by-market basis. Section
    309(j)(14) of the Communications Act, for instance, contains a
    target nationwide end of analog service on December 31, 2006, but,
    under certain conditions (*e.g.,* 85 percent of viewers in a
    particular market do not have access to the digital signals),
    market-by-market extensions of the analog shut-off can be granted.
    In either case, whether the analog signals are terminated nationwide
    at the end of 2006 or later on a market-by-market basis, Section
    309(j)(14) contemplates that analog television service will end all
    at one time from the point of view of any particular consumer.[^88]

##### Analog "Fade to Black"

31. Another potential approach would ensure that not all analog
    broadcasting ends at the same time in a particular market. Instead,
    analog broadcasting would be phased out in order to continue to
    provide some level of analog broadcast service to existing analog
    sets. Analog OTA viewers would thus continue to have access to some
    local broadcast programming on their existing equipment, including
    emergency information, even if they took no action before the
    switch-over. There are at least two potential "fade to black"
    scenarios.

###### The "Lifeline" Approach

32. At the switch-over date, a small number of analog television
    stations would be licensed to operate in each market.[^89] The pool
    from which these licensees are selected could be limited to existing
    broadcasters (which would simply be continuing their analog service)
    or opened to new applicants. This would ensure that analog OTA
    viewers continue to have access to at least some television
    programming without digital-to-analog converters. Eventually, when
    the number of analog OTA viewers is sufficiently small, all analog
    service would be terminated. This approach provides analog OTA
    households with an additional choice. Those for whom television
    service holds little value could do nothing and rely on the
    truncated analog service, while those who value television service
    more highly could obtain a digital-to-analog converter to receive
    the full complement of broadcast programming. In addition, a
    truncated service may be a preferable solution to converters for
    non-primary television sets in OTA households (or for those
    additional sets in MVPD households that are not connected to the
    MVPD service), especially for small or portable sets for which a
    converter box may be impractical.

33. Some of the potential issues with a "lifeline" fade-to-black
    approach are: (a) finding spectrum on which these continuing analog
    stations could operate; (b) recognizing that not all pre-transition
    analog programming would be available; (c) establishing an
    economically viable analog service; and (d) accepting the
    opportunity costs of not being able to use the spectrum for other
    uses (*e.g*.*,* secondary services like low-power television).

###### The "700 MHz Reclamation" Approach

34. Analog service would "fade to black" in stages, beginning with
    stations in the 700 MHz band (channels 52-69). First, a deadline
    could be set for all stations to be cleared from channels
    60-69.[^90] This might be accomplished through voluntary means (such
    as private payments to stations willing to vacate early), but would
    be followed by a mandatory deadline. Stations on those channels
    would be required to turn off their analog signals and discontinue
    service. OTA analog viewers of these stations would lose service
    from these stations only. Digital stations on channels 60-69 would
    be moved to channels within the core broadcast spectrum and required
    to continue to operate.[^91] If possible, the Commission would find
    vacant channels on which to operate in digital within the core; if
    necessary, however, the digital stations would be required to
    displace their existing in-core analog operations. This would ensure
    that the process continues to move the transition forward, not
    backward. Under the Commission's current rules, the digital-only
    stations would then be entitled to mandatory carriage on local cable
    systems. Next, a second hard deadline would apply to channels
    52-59,[^92] and a similar process would occur: analog stations would
    cease operation and digital operations would move into the core.
    Finally, a third deadline could be established for stations within
    the core (or no deadline could be set and the marketplace could
    dictate when the remaining analog stations turn in their licenses).

35. The benefit of a "700 MHz reclamation" fade-to-black approach is,
    foremost, early reclamation of the 700 MHz spectrum for public
    safety and advanced wireless services. But it also could have a
    salutary effect on the transition, by making it clear to consumers
    that the process is, in fact, moving forward, and that analog
    service will be diminishing further over time.

36. Some of the potential issues with such an approach are: (1) the
    greater hardship imposed on stations on channels 52-69 (including
    the loss of their analog revenue streams and/or the cost of moving
    digital operations), many of which are relatively new entrants and
    were allotted those frequencies because lower frequencies were
    already occupied; (2) the greater hardship imposed on viewers of
    those channels, which, even though they tend to be more lightly
    viewed, often provide Spanish-language, religious, educational or
    other niche programming; (3) the potential of losing a popular
    analog service from one of the four major networks, whether because
    it was operating in analog on channels 52-69 or its digital
    operation on channels 52-69 displaced its in-core analog
    operation;[^93] (4) finding in-core spectrum on which the digital
    stations can operate without causing undue interference; (5) the
    likelihood that existing analog stations (and possibly some digital
    stations) would be subject to interference levels during the
    phase-out that are unacceptable under current rules;[^94] and (6) if
    no deadline is established for in-core analog stations, the
    inequitable treatment among broadcasters and the possibility that
    enough analog broadcasting will remain that the complete transition
    to digital will not occur.

### Consumer Education 

37. To the extent an aggressive and comprehensive effort is launched to
    inform consumers about the coming transition and the limitations of
    analog-only sets after the switch-over, it is less likely that
    consumers will buy new analog-only equipment and the legacy problem
    will be reduced. Such a campaign could also provide an incentive for
    consumers who would not otherwise have been in the marketplace to
    purchase digital equipment. If a near-term date certain were
    established, the message to consumers could become clearer and more
    effective. By contrast, to the extent the switch-over date is
    uncertain or more distant, consumer education efforts become more
    difficult and less effective since consumers cannot be told with
    specificity when and how to prepare themselves. Indeed, the lack of
    a clear message on when analog broadcasting will end may contribute
    to consumers' lack of understanding that analog broadcasting is
    terminating at all.

### Digital-to-Analog Conversion Equipment

38. As noted above, most commenters expressed a preference for some form
    of government subsidy of digital-to-analog converter boxes at the
    end of the transition. If a government subsidy is adopted, it could
    be limited in one or more ways -- *e.g.*, only one converter box per
    household, only a portion of the converter box price covered, only
    low income households or only households that do not subscribe to an
    MVPD qualify, or only a subsidy for converter boxes and not for
    subscribing to an MVPD service or purchasing a new digital set.

39. The more targeted the subsidy, the greater the number of analog-only
    OTA sets at risk of going dark on the switch-over date. For
    instance, a targeted subsidy to provide one converter box to every
    low-income household could put at risk: (1) second, third or fourth
    analog sets in low income OTA households; (2) all analog sets in OTA
    households that do not qualify for the low income subsidy; and (3)
    analog sets in MVPD households that are not connected to the
    network.

40. On the other hand, the more targeted the subsidy, the less expensive
    the program will be for the government. For instance, assuming that
    there are 113 million television households at the end of 2006 (the
    statutory target deadline),[^95] that converter boxes cost \$67 at
    that time,[^96] and that the number of over-the-air viewers remains
    constant (15% of households do not subscribe to an MVPD, 4.5%
    because of lack of funds): [^97]

-   A government support program for households that do not subscribe to
    an MVPD due to lack of funds, which provides a free converter box or
    an equivalent subsidy to purchase a new DTV set or subscribe to an
    MVPD service, would cost approximately \$340 million.

-   A government support program for all households that do not
    subscribe to an MVPD service, which provides a free converter box or
    an equivalent subsidy to purchase a new DTV set or subscribe to an
    MVPD service, would cost approximately \$1.1 billion.

-   A government support program that, for administrative simplicity,
    provides a \$67 subsidy to every TV household to be used towards the
    purchase of a converter box or new DTV set or to subscribe to an
    MVPD service, would cost approximately \$7.6 billion.

Instead of direct government subsidies to viewers, broadcasters or
participants in the 700 MHz auctions could be required to help OTA
viewers avoid disruption at the end of the transition. For instance,
broadcasters could be subject to a spectrum fee for use of the analog
spectrum beyond December 31, 2006, the proceeds of which could be used
to buy converters, digital sets, MVPD subscriptions, or provide other
means of ensuring that OTA viewers maintain access to broadcast
television. Another approach would be to assign broadcasters bidding
credits in upcoming 700 MHz auctions, which could be sold to auction
participants. The broadcasters would then be required to provide similar
means of ensuring that OTA viewers maintain access to broadcast
television. Yet another alternative would be to require that auction
winners, before they begin non-broadcast service and before broadcasters
end analog service, ensure OTA viewer access to broadcast television.

41. Several commenters express optimism that marketplace forces and the
    Commission's DTV tuner mandate will help alleviate the risk that OTA
    households will lose access to broadcast television service.[^98]
    Broadcasters, MVPDs and others have a financial incentive to serve
    these households and may help cushion the impact at the end of the
    transition (*e.g.*, a local broadcaster may give away converter
    boxes with its station logo on it, or MVPDs may offer discounted
    hook-ups near the switch-over date). In addition, the fade-to-black
    approaches described above are another way to provide a measure of
    continuity of service without a direct government subsidy. Finally,
    of course, as digital-to-analog conversion equipment becomes
    increasingly affordable, more consumers could be expected to
    purchase their own equipment at retail. To the extent that the above
    mechanisms can be relied upon, the government would reclaim the
    spectrum at a lower cost and would avoid the burdens of creating and
    administering a subsidy program.

## Summary of Options

42. Based on the above discussion, this Report summarizes a range of
    possible options for addressing analog OTA viewers at the end of the
    transition. These options describe the tension between advancing two
    important government interests: reclaiming the 700 MHz spectrum for
    public safety and advanced wireless services, and protecting analog
    broadcast television viewers from a disruption of service. In brief,
    the shorter the transition, the more the public interest in spectrum
    reclamation will be advanced, but at the greatest risk of consumer
    disruption. The longer the transition, by contrast, the more the
    government's interest in avoiding consumer disruption will be
    advanced but at the expense of spectrum reclamation and related
    economic growth.

43. As noted above, the 108 MHz of spectrum that will be recovered at
    the end of the transition will will be used to address the critical
    needs of first responders and other public safety needs, and will
    bring tremendous benefits to consumers and the U.S. economy. This is
    "beachfront" spectrum, with propagation characteristics that make it
    ideal for providing wireless broadband access through foliage and
    building walls. Not only would the immediate revenues from an
    auction of this spectrum potentially be significant (the value
    substantially increased if there were a date certain when the
    spectrum will become available) but, more importantly, the advanced
    services that will be introduced in this spectrum could provide
    continuing benefits many times greater in terms of the economy,
    jobs, and international competitiveness. The opportunity costs of
    keeping this spectrum encumbered by analog broadcasting grows with
    each passing day.[^99]

44. The appropriate balance between rapid recovery of the 700 MHz
    spectrum and avoiding consumer disruption will depend, in part, on
    what additional steps the government is willing to take before and
    during the switch-over to help consumers who otherwise might lose
    broadcast television service.

-   A near-term, nationwide date certain for the termination of all
    analog service (*e.g.*, December 31, 2006).

    -   Public safety officials and advanced wireless service providers
        gain access to 700 MHz spectrum most quickly.

    -   Auction revenues likely to be higher due to certainty of
        nationwide, near-term spectrum availability.

    -   Date certain would enable concentrated, nationwide consumer
        education and market promotion efforts.

    -   Consumers, broadcasters, wireless providers, manufacturers, and
        retailers must prepare rapidly for switch-over.

    -   Increased urgency of consumer education efforts, including
        potential labeling requirements on analog-only televisions.

    -   The Commission's channel election/"re-packing" schedule would
        need to be accelerated.[^100]

    -   Because DTV tuner requirements will not be fully effective until
        July 1, 2007, sets with screens under 25 inches or peripherals
        like VCRs may still be sold with analog-only tuners after
        switch-over date.

    -   Likely to have highest number of analog-only sets still in use
        and highest cost of converter equipment of any option -- both of
        which may affect the cost of any potential government support
        program.

-   A slightly later nationwide date certain (*e.g*., January 1, 2009),
    either pursuant to a statutory change establishing a date certain or
    as contemplated by the transition plan developed by the Media Bureau
    at the direction of Chairman Powell (a/k/a "the Ferree Plan").[^101]

    -   Statutory change setting date certain would eliminate chance
        that some markets may not meet current statutory threshold on
        anticipated switch-over date under Media Bureau Plan.

    -   Public safety officials and providers of advanced wireless
        services gain access to 700 MHz spectrum only two years after
        target deadline originally set by Congress and can begin
        preparations (*e.g*., auctions can be held, equipment can be
        designed and manufactured).

    -   Potential decrease in auction revenues compared to above option
        because under the above option commercial wireless providers
        could make use of the spectrum earlier.

    -   Consumers, broadcasters, wireless providers, manufacturers, and
        retailers begin to prepare for date certain switch-over but with
        less disruption than above option.

    -   Government and industry have additional time to educate
        consumers about the transition and how to prepare themselves for
        the switch-over date.

    -   The Commission's channel election/"re-packing" plan can proceed
        as scheduled.

    -   DTV tuner mandate fully phased in and fully effective for 18
        months, thereby increasing digital set penetration and reducing
        costs of digital equipment.

    -   Fewer analog-only sets likely still in use, as analog sets being
        retired are replaced largely with digital sets (especially with
        aggressive consumer education efforts); coupled with declining
        cost of converter boxes, cost of potential government subsidy
        program potentially reduced.

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-   The current market-by-market statutory test (the "85% test"),[^102]
    relying solely upon consumer purchase of digital reception equipment
    to reach the statutory threshold -- *i.e.*, not counting MVPD
    households towards the statutory threshold.

    -   Potential disruption to OTA viewers reduced, because transition
        would occur only when the great majority of homes had actually
        purchased digital reception equipment.

    -   Lose benefits of nationwide date certain for public safety and
        commercial wireless providers waiting to occupy 700 MHz band.

    -   Lose benefits of nationwide date certain for consumers,
        broadcasters, manufacturers, and retailers, who do not know when
        switch-over will occur in any particular market.

    -   Significant decrease in auction revenues likely due to lack of
        date certain and nationwide transition.

    -   Difficult to educate consumers and plan for the switch-over
        (*e.g*., ordering and distributing converter boxes) when the
        switch-over date is uncertain.

    -   Difficult and costly to determine when statutory factors are met
        in a given market.

    -   Once statutory factors are found to be present in a particualr
        market, difficult to turn off analog signals to the extent
        consumers receive little advance notice.

    -   Potential disparate switch-over in adjacent markets may
        interfere with stations' channel changes (*i.e.,* a station in a
        market where the switch-over has occurred may need to move to
        its ultimate digital channel, but that channel or another
        interfering one may still be in use for analog broadcasting in a
        nearby market), make consumer education efforts more difficult,
        and hinder switchover preparation efforts.

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-   An analog "lifeline" fade-to-black service continues for some period
    after the switch-over date (in conjunction with any of the options
    described above).

    -   Continuation of truncated analog service complicates consumer
        education efforts but also makes them less consequential for
        analog viewers.

    -   Government equipment subsidy reduced or eliminated to the extent
        consumers can rely on "lifeline" service.

    -   Potential difficulty of maintaining economic viability of
        remaining analog stations as number of analog viewers dwindles.

    -   Basis for selecting analog "lifeline" broadcasters, programming
        requirements, and final termination, if any, unclear.

    -   Viewers will retain emergency information but could lose popular
        and/or unique programming.

    -   Potential interference difficulties with retaining analog
        service in congested markets.

    -   Potential of restricting deployment of other services in
        broadcast band (*e.g*.*,* secondary services like low-power
        television).

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-   "700 MHz reclamation" fade-to-black approach is adopted -- e.g.,
    channels 60-69 reclaimed in 2007, channels 52-59 reclaimed in 2009,
    and all analog service terminated on channels 2-51 in 2012.

    -   Provides certainty for broadcasters, manufacturers, retailers,
        and new spectrum users including public safety.

    -   Auction revenues from channels 60-69 similar to first option,
        above (December 31, 2006 transition date); auction revenues from
        channels 52-59 similar to the second option, above (January 1,
        2009 transition date).

    -   Potential interference problems with additional digital stations
        being moved into the core spectrum.

    -   Viewers will retain emergency information but could lose popular
        and/or unique programming.

    -   Viewers will not lose analog service completely until 2012 but
        some specialized stations will be disproportionately displaced
        (e.g., foreign language).

    -   Stations currently operating on channels 52-69 will be
        disproportionately burdened.

    -   Government support program for viewers, if needed, less costly
        to the extent it can begin after all analog service is
        terminated.

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-   No analog switch-off until all analog-only equipment is retired
    naturally.

    -   Public safety loses access to vital spectrum for decades.

    -   New advanced wireless services delayed for decades.

    -   Consumer education and labeling become less important.

    -   Auction revenue significantly decreased.

    -   Government equipment subsidy unnecessary.

    -   Minimal disruption to analog OTA households, which retain access
        to analog service for the useful life of their analog-only
        equipment.

# Conclusion 

45. The Media Bureau Staff hopes that this Report will contribute to the
    ongoing discussion on these issues and looks forward to working with
    Congress, the Commission and all interested parties to bring the
    digital television transition to a speedy and successful conclusion.

**APPENDIX**

**LIST OF COMMENTERS**

[List of Commenters:]{.underline}

700 MHz Advancement Coalition

700 MHz Licensees (12 individual filers of identical comments)

Aloha Partners, L.P.

Association of Public Television Stations (APTS)

Steven R. Bartholemew

Mark D. Bulla

Capitol Broadcasting Co., Inc.

Citizens Tel. Cooperative

Civil Rights Organizations

The Community Broadcasters Association

Consumer Electronics Association (CEA)

Entravision Holdings, LLC

The Envisioneering Group

Information Technology Industry Council

Intel Corp.

Thomas J. Karnauskas

Bill Keough

LG Electronics U.S.A., Inc. (LG/Zenith)

Chris Llana

Albert Manfredi

Michael J. Martel

Minority Media & Telecommunications Council

Motorola, Inc.

National Association of Broadcasters & Association for Maximum Service
Television (NAB/MSTV)

New America Foundation

Paxson Communications Corp.

Mike Petrozello

Lance Pickup

RadioShack Corp.

Gary Sileski

Sinclair Broadcast Group

Thomas C. Smith

Univision Communications, Inc.

The Walt Disney Co. (Disney)

Zappala & Wargo

[List of Reply Commenters:]{.underline}

EchoStar Satellite, L.L.C.

Consumer Electronics Association

CEA

Home Box Office

Industrial Telecommunications Association

Chris Llana

NAB/MSTV

National Cable & Telecommunications Association (NCTA)

Kent R. Parsons (State of Utah Television Translator Coordinator)

Paxson Communications Corp.

Univision Communications, Inc.

[List of Ex Parte Presentations]{.underline}

Digital Transition Coalition

[^1]: *See Fourth Further Notice of Proposed Rulemaking/Third Notice of
    Inquiry* in MM Docket No. 87-268, 11 FCC Rcd 6235 (1995).

[^2]: *Media Bureau Seeks Comment on Over-the-Air Broadcast Television
    Viewers*, 19 FCC Rcd 9468 (2004).

[^3]: We define a "television household" or "TV household" as a
    household that has at least one television receiver in it. TV
    households are estimated to be slightly more than 98% of all
    households in the U.S. CEA Comments at 2 (citing 2002 Census data).
    Nielsen projects that in January 2005 there will be approximately
    109.9 million TV households in the U.S. Press Release, Nielsen Media
    Research (Aug. 24, 2004), *Nielsen Media Research Estimates 109.6
    Million TV Households in the U.S.,* http://www. nielsenmedia.com/
    (visited Nov. 19, 2004).

[^4]: A small number of TV households (177,000, according to NAB/MSTV)
    view digital television today (exclusively over-the-air and not via
    cable or satellite service). NAB/MSTV Comments at 5 n.14, Attachment
    A at 5. Because of that small number and for simplicity, we will
    sometimes refer to analog OTA households as "OTA households." We do
    not count as an OTA household a TV household that subscribes to an
    MVPD but also has one or more additional television sets that
    receives only over the air signals (*infra* ¶ 9).

[^5]: Some households that subscribe to MVPD service could lose their
    local over-the-air channels when analog broadcasting ends. These are
    households whose MVPD does not provide them with local channels,
    such as DBS subscribers who do not (or cannot) subscribe to local
    channels, or subscribers to Satellite Master Antenna TV systems.
    These households are similar to OTA households in that, when analog
    broadcasting ends, they will need to upgrade to digital service or
    buy a converter if they wish to continue to view local channels on
    their analog TV sets.

[^6]: CEA Comments at 2-3 ("under 13%," taking data from various sources
    between 2001 and 2003 and measuring households); *see also* Sinclair
    Comments at 3-4 ("approximately 13 percent," from a recent telephone
    survey of "approximately 2,000 households" in markets where Sinclair
    operates stations); *see also* Capitol Broadcasting Comments at 4
    (OTA broadcaster in the Charlotte and Raleigh-Durham DMAs puts the
    percentages there at 13-17%, evidently of TV households, based on
    2003-04 data from various sources); Disney Comments at 2 (based on
    two recent professional telephone surveys it commissioned, putting
    the percentages at 9.1 of TV households in New York City and 15.3 in
    Los Angeles).

[^7]: NAB/MSTV Comments, Attachment A at 7. NAB/MSTV estimate that the
    number of households in this category is 20.5 million. *Id.* at ii,
    2, Attachment A at 3 (based on 2003-04 data from various sources).
    NAB, citing Knowledge Networks/SRI's *Home Technology Monitor
    Survey* (Spring 2004), estimates that the mean number of TV sets per
    OTA household is 2.2. *Id.*, Attachment A at 5.

    We note that the U.S. Government Accountability Office, apparently
    relying on the same Knowledge Networks survey as NAB/MSTV, recently
    testified that 19% of U.S. households rely exclusively on OTA
    service. *See* Statement of Mark L. Goldstein, Director, Physical
    Infrastructure Issues, GAO, Before the House Subcommittee on
    Telecommunications and the Internet, Committee on Energy and
    Commerce, February 17, 2005, at 2-3, 18.

[^8]: *See Annual Assessment of the Status of Competition in the Market
    for the Delivery of Video Programming*, Report FCC 05-13 ("*Eleventh
    Annual MVPD Competition Report*") in MB Docket No. 04-227, released
    Feb. 4, 2005, at 115. This and other estimates in the *Report* are
    based on data from A.C. Nielsen Co., Paul Kagan Associates, Inc.,
    and other sources named at ¶ 19 of the *Report*). The estimates of
    OTA households herein may include a number of households that are
    using MVPD service without paying for it, and thus overstate the
    number of OTA households. On the other hand, estimates of MVPD
    households herein may overstate their number by counting as two MVPD
    households each TV household that subscribes to both cable and DBS
    service. One source opines that approximately 3% of households
    subscribe to both these services. CEA Comments at 3. The net effect
    of these inaccuracies is unknown.

[^9]: *See Eleventh Annual MVPD Competition Report, supra* note 8 at
    115, Appendix B, Table B-1 (OTA households 17.69% of total TV
    Households as of June 2000, 15.78% as of June 2001, 16.96% as of
    June 2002, 15.82% as of June 2003, and 14.86% of total TV households
    as of June 2004). One commenter opines that the percentage of OTA
    households is growing. *See* Civil Rights Organizations Comments at
    9; *see also* The Minority Media & Telecomm. Council Comments at 1
    (incorporating the statistics used in Civil Rights Organization's
    Comments). But this appears based on a misinterpretation of an
    abrupt increase, stated in the Commission's *Ninth Annual MVPD
    Competition Report*, 17 FCC Rcd at 26975, in the number of
    television households in the most recent year (July 2001 through
    June 2002). The abrupt increase results from an actual number from
    the 2000 Census being used after years of using estimates based on
    the 1990 Census that proved low. In our opinion, it does not reflect
    the actual increase in TV households in that year or a decrease in
    MVPD households.

[^10]: These markets are Honolulu, Hartford-New Haven, Boston,
    Springfield-Holyoke, San Diego, Philadelphia, Palm Springs,
    Providence, New York, and Harrisburg-Lancaster-Lebanon-York. 

[^11]: These markets are Fresno-Visalia, Dallas-Ft. Worth, Bangor,
    Meridian, Duluth-Superior, Harlingen-Weslaco-McAllen-Brownsville,
    Salt Lake City, Missoula, Twin Falls, Springfield, MO, Idaho
    Falls-Pocatello, Boise, and Fairbanks.  DBS local-into-local
    penetration brings all but one of these markets (Fairbanks) above
    50% total MVPD penetration in 2004.

[^12]: Univision Reply Comments at 3 n.6 (citing Nielsen 2003-04
    research). These households may watch their local channels on the
    same TV set on which they receive DBS, or on another TV set. *See
    also* APTS Comments at 5-8; Univision Comments at 2 n.1, 6.

[^13]: Envisioneering Group Comments at 3; Univision Comments at 6; *see
    also* CEA Comments at 4 (32% of all cable- and DBS-subscribing
    households have at least one OTA TV set); CEA Reply Comments at 2
    (same); Disney Comments at 2 (20% of viewers in New York City and
    22% in Los Angeles); Envisioneering Group Comments, Attachment at
    1-2 (stating that there are 184 million small-screen TV sets in
    daily or weekly use and 59 million more public-facility and handheld
    TV sets; the latter are "on the go, at jobs, and in public" at
    places such as in offices, airports, hospitals, and waiting rooms).

[^14]: CEA Comments at 4; CEA Reply Comments at 2; *see also* NAB/MSTV
    Comments, Attachment A at 4 (18 million households have one or more
    OTA-only TV sets); RadioShack Comments at 3 (citing Representative
    Boucher as stating that at least 30% of households use one or more
    TV sets to receive signals over the air).

[^15]: *See* APTS Comments at 10 (citing a 2001 NAB estimate of 34.5
    million); NAB/MSTV Comments at ii, 2 (estimate of 28 million based
    on 2003-04 data). Assuming the accuracy of NAB/MSTV's 28 million
    estimate and its estimate that there are 45 million sets in OTA-only
    households, there are a total of 73 million OTA TV sets in U.S.
    households.

[^16]: APTS Comments at 9 (18% vs. 12% "general population," based on
    Nielsen data provided to PBS and "generally confirmed" by a study
    named The Broadcast Household Story, conducted by Knowledge
    Networks, and commissioned by the Corporation for Public
    Broadcasting); NAB/MSTV Comments, Attachment A at 7 (23% vs. 19%,
    based on Spring 2004 Home Technology Monitor Survey by Knowledge
    Networks/SRI); Sinclair Comments at 5 (18.57% nonwhite vs. 11.83%
    white, based on study by Sinclair's recent telephone survey of
    "approximately 2,000 households" in markets where Sinclair operates
    stations). *But see* Disney Comments at 2 (61% of nonsubscribers to
    pay TV service are non-white adults; data drawn from New York City
    and Los Angeles only in two recent telephone surveys); CEA Comments
    at 3 (ethnicity is not a major factor, based on a CEA survey
    conducted in November 2001).

[^17]: Entravision Comments at 1 (28% of Hispanic households, citing the
    2004 US Hispanic Market Report); Sinclair Comments at 5 (18.57%
    nonwhite vs. 11.83% white); NAB/MSTV Comments, Attachment A at 7
    (27% vs. 19%); Univision Comments at i, 8-9 & n.11 (33% of Hispanic
    viewers or households and, according to Nielsen data, growing;
    citing Nielsen Media Research, NHTI, 2004 and 1999-2004). Univision
    Comments at 9 n.12 note that Hispanic households have more people in
    them than average U.S. households.

[^18]: Capitol Broadcasting Comments at 4 (data drawn from Charlotte and
    Raleigh-Durham only, citing Scarborough Media Research data from
    2003 and 2004); NAB/MSTV Comments, Attachment A at 7-8; Sinclair
    Comments at 5; Disney Comments at 2. *See also* Civil Rights
    Organizations Comments at 11-14 (stating that in poor households
    there are probably millions of TV sets that are passed along from
    parents to children, or in informal disbursements of poor decedents'
    estates, and thus remain in homes and in use although they are not
    reflected in records of commercial sales). *But see* CEA Comments at
    3 (income is a minor factor, based on CEA study noted above).

[^19]: APTS Comments at 9 (slight factor).

[^20]: CEA Comments at 3, citing CEA study noted above.

[^21]: Capitol Broadcasting Comments at 4 (data drawn from Charlotte and
    Raleigh-Durham only).

[^22]: NAB/MSTV Comments, Attachment at 7-8.

[^23]: *Id.*

[^24]: *See infra* ¶¶ 13-14*,* citing above sources and Dennis Haarsager
    & Television Bureau of Advertising (November 2003) and Hispanic Fact
    Pack in Annual Guide to Hispanic Advertising & Marketing, Supplement
    to [Advertising Age]{.smallcaps} at 35 (2004).

[^25]: APTS Comments at 9 (under 55, citing same data as above and 2004
    telephone survey conducted by Magid Media Futures); CEA Comments at
    3 (under 34 and over 55); Envisioneering Group Comments at 5 (over
    age 50, citing its own 2003-04 research of multiple TV owners);
    Disney Comments at 2 (over 50; data noted above from New York City
    and Los Angeles only).

[^26]: APTS Comments at 9 (citing same data as above, except Magid Media
    Futures study).

[^27]: NAB/MSTV Comments, Attachment at 7-8.

[^28]: APTS Comments at 9.

[^29]: Nielsen has divided the continental United States, Hawaii, and
    parts of Alaska into 210 "DMAs," or Designated Market Areas. DMA
    boundaries are based on viewing patterns. No two DMAs overlap.

[^30]: APTS Comments at 8 & Appendix A.

[^31]: Univision's Comments at 9-10 (naming Dallas-Ft. Worth, Fresno,
    Houston, Los Angeles, Phoenix).

[^32]: NAB/MSTV Comments, Attachment at 8.

[^33]: Entravision Comments at 2-4; Univision Comments at 10-11 (naming
    Albuquerque, Harlingen, Laredo, San Antonio, San Diego); *see also*
    APTS Comments at 8 (observing that southernmost Texas, the
    Harlingen-Welasco-Brownsville-McAllen DMA has the highest percentage
    of OTA households of any in the country).

[^34]: Entravision Comments at 3; Univision Comments at 11.

[^35]: CEA Comments at 4.

[^36]: *See* New America Foundation Comments, Attachment (J. H. Snider &
    Michael Calabrese, *A Consumer Tax Credit Can Unplug Analog TV,
    Reduce the Deficit & Redeploy Low-Frequency Spectrum for Wireless
    Broadband* ("New America Foundation Position Paper")), citing Roger
    Kieschnick & B.D. McCullough, *Why Do People Not Subscribe to Cable
    Television? A Review of the Evidence* (1998), available at
    www.tprc.org/abstracts98/kieschnick.pdf. The New America Foundation
    Position Paper, at 6, also posits that for a poor household, cable
    television is a rational spending decision -- many channels, 24
    hours a day for every family member, for the same price as one
    ticket to a professional basketball game or cultural event.

[^37]: Robert W. Crandall & Harold Furchtgott-Roth, [Cable TV:
    Regulation or Competition?]{.smallcaps} at 147 ("Cable demand is
    only slightly sensitive to household income") (Brookings Inst.,
    Washington, D.C., 1996).

[^38]: CEA Comments at 4.

[^39]: CEA Comments at 4; *see also* Disney Comments, Appendix at 1 (in
    survey of Los Angeles and New York OTA households, 35% cite cost as
    reason not to subscribe to MVPD, 34% cite personal choice, and 43%
    say that OTA picture quality is good or excellent). In one
    commenter's survey, 53% of non-MVPD respondents stated that MVPD
    service was "too expensive." Sinclair Comments at 6-7 (survey in 37
    of 39 markets in which it operates TV stations). "Too expensive" may
    be a relative statement about a household's spending priorities,
    however, and may not indicate inability ("lack of funds") to
    subscribe to an MVPD. Also, the survey did not offer lack of
    interest in television as one reason for not subscribing to an MVPD.
    Instead, the other reasons offered to Sinclair's respondents were
    that they were interested only in local stations (15%), that MVPD
    service was poor (2.4%), that MVPD service was unavailable (2.4%),
    and other reasons (28.8%).

[^40]: Entravision Comments at 2.

[^41]: For example, DBS service has always included a receiver box that
    converts the digital signals received from the satellite to analog
    for display on subscribers' analog televisions. A converter box
    would function in a similar fashion for OTA viewers.

[^42]: Chris Llana Comments at 2; RadioShack Comments at 5-6 (stating
    that there are very few converters for OTA television that do not
    also have the ability (with accompanying cost) to downconvert cable
    or satellite).

[^43]: APTS Comments at 17 (\$300-400); Civil Rights Organizations
    Comments at 10 n.16 (Best Buy charged \$400 in 2003); NAB/MSTV
    Comments at 13 (\$300 or more, but none are currently available with
    Standard Definition-only outputs); New America Foundation Position
    Paper, *supra* note 36, at 6 (\$80, not citing any authority);
    Thomas C. Smith Comments at 5 (noting Motorola converter for \$299);
    *see also* RadioShack Comments at 7 (citing CEA as claiming that
    current prices are \$300-\$1,000, but adding that current converters
    are capable of downconverting cable and satellite transmissions,
    which capability (and accompanying cost) OTA converters may not
    need).

[^44]: Envisioneering Group Comments at 6-7 (eventually will become
    impulse purchases); NAB/MSTV Comments at 11, 13-14. *But see* Paxson
    Reply Comments at 7 (cautioning against expecting converter prices
    to fall very far, noting past predictions of low prices for DTV sets
    that have not come true).

[^45]: LG/Zenith Comments at 2 (noting that they will receive and
    demodulate all 18 DTV formats).

[^46]: Alfred Manfredi Comments at 1 (predicting that by then television
    sets with integrated digital tuners will be no more expensive than
    analog sets are today); *see also* EchoStar Reply Comments at 8
    (claiming that converters will be obsolete when HDTV sets become
    affordable).

[^47]: Motorola Comments at 7 (estimated price on Dec. 31, 2006).
    NAB/MSTV's Comments at 14 and RadioShack's Comments at 7-8 cite
    Motorola's \$67 prediction with evident approval.

[^48]: LG/Zenith Comments at 2 (noting that they will receive and
    demodulate all 18 DTV formats).

[^49]: Civil Rights Organizations Comments at 10 n.16. *See also*
    Univision Comments at 14 (converters should be able to display all
    multicast channels, closed captioning, and emergency alert
    information).

[^50]: Motorola Comments at 7.

[^51]: NAB/MSTV Comments at 12-13 & n.27 (pointing to recently approved
    ATSC Guidelines as a "guiding light" for minimum standards for
    converters).

[^52]: Thomas C. Smith Comments at 4; Univision Comments at 13-14.

[^53]: APTS Comments at 15-19; Civil Rights Organizations Comments at
    18; Bill Keough Comments at 1; NAB/MSTV Comments at 9-10 & n.22 (for
    OTA households); New America Foundation Position Paper, *supra* note
    36, at 2. *Cf.* Industrial Communications Association Reply Comments
    at 2, 4 (there should be some federal funding mechanism to
    facilitate the provision of digital equipment to over-the-air
    television viewers).

[^54]: 700 MHz Advancement Coalition Comments at 5 (support should be
    available to all persons on some form of low-income government
    assistance); Aloha Partners Comments at 4 (households below median
    household income); APTS Comments at 15-19 (at least households
    making less than \$25,000 a year); Citizens Tel. Cooperative
    Comments at 2 (one benefit per household, to spread the benefit
    among as many households as possible); Civil Rights Organizations
    Comments at 19 ("the truly needy," defined as households that do not
    subscribe to more than Basic MVPD service and that are eligible for
    a federal program for which only low-income persons are eligible,
    such as housing Choice Vouchers, School Choice Vouchers, National
    School Lunch Program, Food Stamps); Bill Keough Comments at 1
    (low-income consumers); Motorola Comments at 6 (low-income
    households).

[^55]: APTS Comments at 15-19 (advocating a one-year support of at least
    25% of the purchase price of a converter); Motorola Comments at 7-8
    (advocating support for the purchase of a converter or other
    "digital capable equipment," at least one per household); *see also*
    EchoStar Reply Comments at 6 (warning that a generous support
    program would discourage consumers from purchasing TV sets that can
    display digital signals received off air).

[^56]: Civil Rights Organizations Comments at 23-24 (noting that every
    supported household will bring closer the satisfaction of the 15%
    test and the return of analog spectrum).

[^57]: New American Foundation Position Paper, *supra* note 36, at 6-7
    (for every household, but for only one television set).

[^58]: Motorola Comments at 8 (\$67 per household, for a one-time
    expense of about \$840 million).

[^59]: 700 MHz Advancement Coalition Comments at 4; Aloha Partners
    Comments at 3; Citizens Tel. Cooperative Comments at 2; Civil Rights
    Organizations Comments at 18-19 & n. 30 (a converter or DTV-ready
    set, noting that the poor will benefit especially from having access
    to multicasting); Bill Keough Comments at 1; Minority Media &
    Telecommun. Council Comments at 5; New America Foundation Position
    Paper, *supra* note 36, at 6-7; EchoStar Reply Comments at 8-9.

[^60]: 700 MHz Advancement Coalition Comments at 4; Citizens Tel.
    Cooperative Comments at 2; Bill Keough Comments at 1; Minority Media
    & Telecommun. Council Comments at 5 (including MVPD will generate
    more programs oriented at minority and poor audiences); New America
    Foundation Position Paper, *supra* note 36, at 2, 7 (a DTV set, a
    cable or DBS set-top box, or the cost of establishing cable or DBS
    service); EchoStar Reply Comments at 8-9 (noting that including MVPD
    subscription would reduce the need to invent new converter
    technology and a new distribution channel). *But see* APTS Comments
    at 18-19 (warning that any ongoing support for MVPD subscriptions
    will cost billions a year); EchoStar Reply Comments at 10 (any
    support for MVPD should end with the sooner of (a) the useful life
    of the consumer's analog TV set or (b) the time when the consumer
    would have bought a digital set in the normal course of life).

[^61]: *See* Civil Rights Organizations Comments at 18-21 (discussing
    the funding and administration of a voucher plan involving
    broadcasters and retailers); RadioShack Comments at 8-9 (government
    should rely on retailers to administer any support program because
    they have infrastructure and experience, and government has
    neither); Univision Comments at 12, 14 (advocating a multi-year
    support program to avoid being overwhelmed and to allow for
    consumers that have two jobs or become unemployed). The Civil Rights
    Organizations state that any support fund could be administered by
    broadcasters, a trade association, or an organization serving
    low-income families, and that the National Urban League would help
    in the latter task. Civil Rights Organizations Comments at 21 &
    n.36.

[^62]: APTS Comments at 19-20 (few taxpayers will remember to use tax
    credits); Civil Rights Organizations Comments at 3; Bill Keough
    Comments at 1 (many poor households do not pay taxes); Minority
    Media & Telecommun. Council Comments at 4 (consumers are more
    familiar with vouchers than with tax credits; abuse and fraud are
    easier with tax credits); Motorola Comments at 7-8; Univision
    Comments at 13 (tax breaks would be ineffective, because many poor
    people do not pay taxes or have much sophistication in filling out
    forms). *But see* Aloha Partners Comments at 3-4 (tax credits are
    best, vouchers acceptable); New America Foundation Position Paper at
    2, 6 (refundable \$50 tax credit, available during a 12 month
    period).

[^63]: Aloha Partners Comments at 4-5 appear to advocate that all 700
    MHz licensees pay for the support program. Motorola Comments at 8,
    NAB/MSTV Comments at ii, 11, Univision Comments at 11 and EchoStar
    Reply Comments at 10-11 appear to agree that all 700 MHz licensees,
    or other licensees, should pay. Aloha Partners Comments at 5 and
    Mark D. Bulla Comments at 2-3 also note that making future 700 MHz
    licensees pay will depress future auction revenues and will entail
    difficult allocation issues. Many present licensees of 700 MHz
    spectrum stated that they have already paid for their spectrum and
    that making them, in effect, pay more would be unfairly and perhaps
    unconstitutionally retroactive. They favor paying for the support
    program from future auction revenues. They are 3G COMM, LLC; Acumen
    Technologies, Inc.; Cameron Communications, L.L.C.; Dickey Rural
    Services, Inc.; Kennebec Tel. Co.; North Dakota Network Co.; PVT
    Networks, Inc.; Polar Communications Mutual Aid Corp.; The Ponderosa
    Tel. Co.; Red River Rural Tel. Ass'n; Webster-Calhoun Cooperative
    Tel. Ass'n.; and Whidbey Tel. Co. *Accord* 700 MHz Advancement
    Coalition Comments at 5-8; Aloha Partners Comments at 5; Motorola
    Comments at 8. Paxson opposes putting any further obligations on 700
    MHz licensees, claiming that they are relatively small and
    financially weak. Paxson Comments at 11-12.

    For advocacy that future auction winners pay for any government
    support program, see Citizens Tel. Cooperative Comments at 1-2; New
    America Foundation Position Paper, *supra* note 36, at 7,

[^64]: Civil Rights Organizations Comments at 18, 21 (suggesting that
    slow broadcasters be able to excuse their slowness by generosity to
    any support program). According to the Civil Rights Organizations, a
    broadcaster's payment should be less than the value to it of its
    delay, but enough to pay for much support for the needy. *Id.* at
    20-21. *But see* Entravision Comments at 4 n.1 (arguing that
    broadcasters have already paid much to convert to digital and should
    not be burdened further).

[^65]: Civil Rights Organizations Comments at 3-4, 27-28 (calling for a
    negotiated rulemaking).

[^66]: See authorities cited *supra* note 15.

[^67]: The phase-in schedule of the DTV tuner mandate is as follows: (1)
    of receivers with screens 36 inches and above, 50% must include DTV
    tuners as of July 1, 2004 and 100% must include DTV tuners as of
    July 1, 2005; (2) of receivers with screens 25-35 inches, 50% must
    include DTV tuners as of July 1, 2005 and 100% must include DTV
    tuners as of July 1, 2006; (3) of receivers with screens 13-24
    inches, 100% must include DTV tuners as of July 1, 2007; and (4) of
    TV Interface Devices (VCRs and DVD players/recorders, *etc.*, that
    receive broadcast television signals), 100% must include DTV tuners
    as of July 1, 2007.

[^68]: In 2003, for instance, 25.4 million analog-only color TV sets
    were sold in the U.S. That number is expected to drop 17% in 2004 to
    23.6 million. CEA, *Digital America*, *Video*, *Analog Slips,*
    http://www.ce.org/publications/books_references/digital_america/video/analog_slips.asp
    (visited Jan. 10, 2005).

[^69]: In 2002, GAO reported that forty percent of the public had never
    heard of the transition to digital television, and another
    forty-three percent said they were only "somewhat aware" of the
    transition. *Additional Federal Efforts Could Help Advance Digital
    Television Transition*, GAO Report 03-7 at 15 (Nov. 2002) ("GAO
    Report").

[^70]: See Letters from FCC Chairman Michael K. Powell to Sen. Ernest F.
    Hollings and Rep. W.J. "Billy" Tauzin, dated April 4, 2002.

[^71]: DTV, http://www.dtv.gov/ (visited Oct. 7, 2004).

[^72]: DTV Shoppers Guide, http://www.dtv.gov/shopgde.html (visited Nov.
    9, 2004).

[^73]: The tip sheet was jointly developed by the Commission, CEA, and
    the Consumer Electronics Retailers Coalition.

[^74]: *See* APTS Comments at 27 (advocating broadcast advertisements, a
    letter to every household, displays at retail stores, involvement by
    local civic groups, telephone hotlines, and web sites); CEA Comments
    at 5-8 (advocating Public Service Announcements by broadcasters);
    Envisioneering Group Comments at 2-5 (most consumers do not
    understand what DTV is or how it differs from HDTV; especially
    needing education are senior citizens, low-income persons and
    renters; most households think they will need to buy an HDTV and
    that they will not be able to afford one, or that analog television
    will end gradually, as CDs replaced LP records and DVDs are
    replacing VHS); Bill Keough Comments at 1 (same as APTS); Chris
    Llana Comments at 1 (advocating an FCC mailing to every household);
    Thomas C. Smith Comments at 6 (advocating that retail sales
    personnel receive improved training, that devices be easier to
    install and use, and that recording DTV be easier); Univision
    Comments at 14 (advocating clear, multilingual written instructions
    and a toll-free help line). *See also* GAO Report at 39
    (recommending that Commission explore options for raising public
    awareness).

[^75]: Mark Landler, *Germany Zaps into Digital Television: Berlin's
    Hurry-Up Approach Could Set Example for Others,* [Int'l Herald
    Trib.]{.smallcaps} at [11]{.smallcaps} (Nov. 4, 2003); Thomas
    Hazlett, *Finally, Something Good on German Television*,
    http://slate.msn.com/id/2089424/ (visited Nov. 14, 2003).

[^76]: *See NAB*/MSTV Comments at ii, 8-9 (advocating that warning
    labels be placed on all non-DTV set boxes and that retail stores be
    required to demonstrate off-air DTV reception); *Second Periodic
    Review of the Commission's Rules & Policies Affecting the Conversion
    to Digital Television*, 18 FCC Rcd 1279, 1314-1315 (2003) ¶¶ 95-98.

[^77]: Even in these areas, the Commission has taken steps to spur the
    marketplace when necessary.  In April 2002, for example, Chairman
    Powell challenged major networks to provide HDTV or other
    "high-value" digital content during at least 50% of their prime-time
    hours. In addition to HDTV, "high value" digital content refers to
    interactive and/or multiple digital programming streams that may
    prove attractive to viewers.

[^78]: "Plug-and-play" sets enable cable subscribers to receive digital
    cable programming without the need for a separate set-top box.

[^79]: *See, e.g.*, *Second Periodic Review of the Commission's Rules &
    Policies Affecting the Conversion to Digital Television*, 19 FCC Rcd
    18279 (2004); *Implementation of Section 304 of the
    Telecommunications Act of 1996;* *Commercial Availability of
    Navigation Devices and Compatibility Between Cable Systems and
    Consumer Electronics Equipment* ("*Plug-and-Play Order*"), 18 FCC
    Rcd 20885 (2003).

[^80]: CEA, Press Room, *2002 Sales Turbocharge DTV Transition into New
    Year* (Jan. 27, 2003),
    http://www.ce.org/press_room/press_release_detail.asp?id=10155
    (visited Jan. 10, 2005).

[^81]: CEA, *Digital America, Video, DTV by the Numbers*,
    http://www.ce.org/publications/books\_
    references/digital_america/video/dtv_numbers.asp (visited Jan. 10,
    2005). CEA defines DTV products to include both sets with integrated
    DTV receivers and DTV monitors that cannot receive DTV broadcasts
    without an external reception device.

[^82]: CEA, Press Room, *Super Bowl XXXIX Boosts Digital Television
    Sales -- Strong December Sales Close Out Record Year* (Jan. 28,
    2005),
    http://www.ce.org/press_room/press_release_detail.asp?id=10681
    (visited February 4, 2005).

[^83]: *CEA Announces Another All-Time High for DTV as Cumulative Sales
    Top 13 Million Units*, CEA Press Release (Nov. 22, 2004).

[^84]: CEA, *Digital America, Video, Digital Television Inroads*,
    http://www.ce.org/publications/books\_
    references/digital_america/video/dtv_numbers.asp (visited Jan. 10,
    2005).

[^85]: As of July 2007, the only television sets that may not include a
    digital broadcast tuner are non-plug-and-play sets that are pure
    monitors (*i.e*., have no analog or digital broadcast tuning
    capability) or have screens less than 13 inches in diameter (7.8
    inches for digital sets with 16:9 aspect ratios).

[^86]: *Plug-and-Play Order*, 18 FCC Rcd at 20900-01 ¶ 34.

[^87]: In 2003, approximately 29.5 million television sets were sold in
    the U.S. CEA 2003 Market & Report Analysis. From July 2007 forward,
    all such sets would include digital broadcast tuners, except as set
    forth in note 85, *supra*.

[^88]: We ignore for the moment the possibility that some consumers may
    be able to receive out-of-market analog stations if the transition
    occurs on a market-by-market basis.

[^89]: Conceivably, only one such station would be licensed.

[^90]: There are 94 analog stations and 19 digital stations operating on
    channels 60-69.

[^91]: The digital stations would not be permitted to discontinue
    digital service and operate only in analog because this would
    retard, rather than advance, the digital transition.

[^92]: There are 98 analog stations and 141 digital stations operating
    on channels 52-59.

[^93]: There are 7 analog top-four network affiliates and 5 digital
    top-four network affiliates operating on channels 60-69, and 18
    analog top-four network affiliates and 84 digital top-four network
    affiliates operating on channels 52-59.

[^94]: The Commission's plans have assumed that analog broadcasting will
    end nationwide on the same day, and thus that channels 2 to 51 (the
    "core" channels) will be free of analog broadcasting on that day.
    Especially in densely populated areas, stations that now broadcast
    on channels 52 to 69 will move to newly freed core channels. If,
    however, markets switch over on different dates, then one channel
    may be needed for digital broadcasting in a market where the
    switch-over has occurred and the same channel or an adjacent one may
    still be in use for analog broadcasting in a nearby market.

[^95]: The predicted number of television households, 113 million, is
    based on there being 108.4 million households in the U.S. as of June
    2004 and that number growing at its most recent annual rate, 1.66%,
    through December 2006. *Eleventh Annual MVPD Competition Report*,
    *supra* note 8, at 115 (Appendix B, Table B-1).

[^96]: A near-term date certain for the end of the transition would
    accelerate demand and volume and drive down prices.

[^97]: The following examples do not reflect the costs or complexities
    of administering the subsidy program itself. Some of the more
    targeted options -- *e.g.*, providing subsidies only to OTA viewers
    and/or those who do not subscribe to an MVPD service due to lack of
    funds -- could be more costly and difficult to administer than
    less-targeted options.

[^98]: *See* Envisioneering Group Comments, Attachment at 2 (large- and
    small-screen DTVs will become popular); Motorola Comments at 6 (the
    free market will bring affordable DTV capability to most, but not
    all, households; non-poor households want high-end video display
    devices, implicitly for purposes *other than* watching TV); NAB/MSTV
    Comments at 9 (a substantial number of OTA households will have
    purchased DTV-capable receivers by the end of the transition
    period). *Cf.* Steven R. Bartholomew Comments at 3.

[^99]: Although we are unaware of specific valuations of the 700 MHz
    spectrum, one analysis estimated that 60 MHz of additional spectrum
    for cellular operators would produce a \$24 billion gain in annual
    consumer surplus. Thomas W. Hazlett & Roberto E. Muñoz, *A Welfare
    Analysis of Spectrum Allocation Policies* at 18-19 (AEI-Brookings
    Joint Center for Regulatory Studies 2004), available at
    http://www.aei-brookings.org/admin/authorpdfs/page.php?id=1024
    (visited Jan. 19, 2005).

[^100]: The Commission's channel election procedures, adopted in August
    2004, are designed to determine the final digital channel for every
    broadcaster in the U.S. The plan involves several rounds of
    elections by broadcasters and ultimately requires that the channels
    be assigned pursuant to a formal rulemaking proceeding. Currently,
    the Commission anticipates issuing the Notice of Proposed Rulemaking
    to assign final DTV channels in August 2006, making it unlikely that
    final channels would be assigned under the current schedule before
    December 31, 2006.

[^101]: For a description of the Media Bureau Plan, see Testimony of
    Kenneth Ferree before the U.S. Senate Committee on Commerce, Science
    and Transportation, June 9, 2004, found at http://commerce.senate.
    gov/hearings/testimony.cfm?id=1220&wit_id=3513.

[^102]: While the current statute sets forth three conditions that must
    be present in a particular market for the transition to occur --
    *i.e.*, all top-four networks broadcasting in digital,
    digital-to-analog conversion equipment generally available, and at
    least 85% of viewers have access to the digital broadcast signals --
    it is the latter condition that is commonly assumed to be the last
    factor that will be satisfied in a particular market and thus, for
    the sake of simplicity, we will refer to the statutory standard as
    the "85% test."