It’s a simple decision for President Barack Obama. Does his new team back big business (in the shape of Qualcomm) or does it back more than a million American homes who might be cut off from their favorite TV channels?
For any administration that follows the Bush show, it simply has to use any and every opportunity to show that it is people friendly not big business friendly, and anyway, upsetting Qualcomm, the only continued big name which has spoken out against delaying the digital switchover from February to a new date in June, is a lot less worrisome than upsetting a giant like Verizon.
Verizon has withdrawn its opposition to the delay plan, neatly sidestepping a collision with the new administration, virtually on day one, and now adopts the same position as its big rival AT&T, which is that a brief delay, purely in the interests of ensuring that all US citizens have a chance to order a $40 coupon and buy a converter box, is acceptable. This is despite the $billions that has been paid for the spectrum (roughly $20 billion).
This delay is not so that the new FCC chairman, when appointed, can try to stop digital switchover being a mess. Because it will be. But simply because there is a shortfall in the coupon program for digital converters. This has come about for lots of reasons. The Coupons expire, there was more demand than everyone realized, and people left it too late to convert, simply because they hoped the whole issue would go away ‘ creating a late run on converter box funds, which had already been depleted. Some sources suggest that it is a shortfall as high as $650 million, the amount called for by one House Committee, but at $40 a time that would buy over $15 million set top converter coupons, and at a maximum of two per home, that could help out at least 7.5 million homes.
However Qualcomm has offered a compromise and publicized its position by displaying the letter it sent to the House of Representatives and the Senate on January 19. In it Qualcomm asks that the FCC grants exceptions to nine TV stations in Boston, Houston, Miami and San Francisco markets, which would continued on schedule and stop broadcasting on February 17th as planned. This is because it says it has spent hundreds of $millions preparing those and other markets for launch on February 18th.
We did point out that this was vital for Qualcomm in our assessment last week. It needs to be up and running now so that AT&T and Verizon see MediaFLO as a nationwide service immediately and begin promoting it at last. Qualcomm has quietly hinted in the past that it would also ‘buy in’ lots more content which requires up front payments. It may well have contractually committed to this content and be stuck with the fees.
And all of this we see as a last gasp attempt to take MediaFLO from reaching just hundreds of thousands of customers, overnight into the millions, before ATSC M/H has a chance to capture the imagination and fire up its own Eco-System later in the year. The ATSC M/H channels don’t have to wait for switchover as they are brought about by an adjustment to the existing digital channels, which TV stations are already broadcasting.
Qualcomm said it had a total of 15 markets ready for MediaFLO launch, covering 40 million additional people, but if it is given the go ahead to broadcast in Boston, Houston, Miami and San Francisco it would be fine to hold back in 11 other new markets, as well as expanding coverage in 25 existing MediaFLO markets.
If AT&T and Verizon come out and say to Qualcomm, ‘Hey if we have to wait until June, let’s pull the MediaFLO launch until June,’ it may find itself head to head with ATSC M/H offerings, or at least have them launch too soon after it to make much difference. The letter from CEO Paul Jacobs talks about the move ‘penalizing Qualcomm for having acted as a responsible FCC licensee in following the law and making the investments necessary,’ which isn’t exactly a legal threat, but that’s about as close as you get to making such a threat on an inauguration day.
Democrat leaders now appear fairly sure that a bill to delay the DTV transition until June 12 can be mounted successfully. The public safety community is also up in arms over the change and is asking that the 700 MHz first responder spectrum is also made an exception. Too many exceptions would be seen to be as bad as making no call on the delay at all, but we can see there is room for a sweeping compromise of sorts here and would expect Obama to see it through.