That’s The Price We Pay (For DTV)
by Rich Fiscus on August 23rd, 2008
It’s amazing that with all the money the FCC is getting from the February, 2009 DTV transition, somehow there isn’t enough to pay more than $40 of the consumer cost for a DTV converter box. This is perhaps the biggest reason why the boxes are so scarce, and contribute to what will probably end up being a huge PR nightmare for Congress and a shining example for the rest of the world to avoid following.
What’s sad is it’s mostly a matter of greed. The Federal Government is too busy counting the revenue from airwave auctions to consider whether more of it should be spent on getting consumers ready to have their analog TV signals switched off.
Let’s start with the basic economics of production and distribution. After all, the most fundamental part of getting DTV converters in the hands of the people who need them is actually making them and getting them on store shelves. If you want this done on a large scale you have to provide some sort of incentive for everyone in the supply chain to deal with them. That means profit.
So obviously it makes sense to simply figure out the cost to get a converter box to market with minimal profit per unit and issue vouchers for that amount. So of course the government has taken a completely different approach. Instead they’ve decided to come up with what bureaucrats consider a reasonable amount and leave it up to consumers to pay the difference, which amounts to anywhere from $10 - $20 per converter. This isn’t a question of price gouging. In fact its led to a shortage of boxes on store shelves, perhaps due to the lack of profitability.
As far as I know there’s exactly one manufacturer making boxes which can be purchsed for the $40 voucher value (plus applicable sales tax). Those boxes are from Echostar / Dish Network. And they’re not being sold for a profit. In fact Echostar has said they’re losing money on every sale. Instead they’re being used as a PR measure in the hope that it will foster goodwill among potential Dish Network customers.
Unfortunately most manufacturers can’t really use the boxes for that purpose. As a result consumers have to come up with as much as half the value of the vouchers out of their own pockets. That doesn’t even take into account the cost of purchasing a new antenna for people in areas with questionable reception. Meanwhile the FCC is preparing to collect enough money from auctioning off the broadcast frequencies being vacated to pay for all of this - probably multiple times.
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