Home > Economic policy > The $10 solution

The $10 solution

August 11th, 2005

As with most aspects of telecommunications policy, I’ve been singularly unimpressed by the government’s handling of digital TV policy. We seem to be lumbered with an incredibly costly design, to which we will all be forced to switch in 2008 or thereabouts. However, I’ve been contacted by Alex Encel who argues that the government could resolve many of the problems by bulk ordering set-top boxes (he estimates $10 a box), giving them away (I may be reading this into his proposal, but I think that’s what he ends) and shutting down analog broadcasts immediately. The revenue from reselling the spectrum would more than offset the cost of the boxes. I can’t see an obvious flaw in this, though I’m taking the $10 cost estimate on trust. As Alex points out, you can buy a VCR for $99 these days, and it has a whole bunch of moving parts as well as the basic electronics. Anyway, I hope there are some technically minded readers who can comment on this.

Submission by Alex Encel to Committee, CITA (REPS)

I have done some additional research on the potential price of set-top boxes and if we start with the premise of supplying every TV in Australia not connected to digital we are getting into the $10 per unit price area, (I can supply how I got to this figure if required). On this basis we could close down analogue in 2006 as TV owners would have little cause for complaint if a DTV box was supplied free.

Let’s assume a one-off cost of $130 million. To offset this cost, each year there would be considerable economic benefits. For example, no need for dual broadcasts means no dual maintenance costs are involved. Presently there are some restrictions due to potential interference with analogue broadcasts. Increased transmission power on digital would mean better reception of digital and increased usability of indoor antennae to receive digital.

The realisable value of the analogue spectrum no longer requred for TV broadcast would depend on what is allowed to be done with it and how it was sold, but obviously there are substantial benefits involved otherwise there would have been no point into getting into closing down analogue in the first place. There would still be a minority of people with access problems of one kind or another. The vast majority of people are able to walk into a shop, buy a set-top box and connect it themselves, but a few will need help. From experience there is usually someone around who will help them without charge.

Some people’s old and tired antennas would need to be replaced but this is simply bringing forward what should be done anyway. I can’t claim there would be zero complaints with this scenario but I believe the vast majority would be small and manageable compared to those that would be encountered with alternative strategies.

I think it is worth looking at how other countries have handled the general introduction of DTV, I have attached a website address which I found interesting, particularly the case study on Germany by Ed Wilson.

http://www.digitacj.orn/events/sspubIicevent paper.htm

Categories: Economic policy Tags:
  1. wilful
    August 11th, 2005 at 16:22 | #1

    I got a free STB with my recent widescreen TV purchase, and I think it’s pretty darn good, apart from the fact that there’s still nothing on. I can see the potential however.

    There is absolute buckleys chance of switching off analogue by 2008. Imagine the outrage from the grannies of the world. People hate mandated change to something as “important” as their tellies (never mind changes to senate rules etc), and the improvements for many with old sets would be minimal. They just wouldn’t get it. A free or near enough STB may be logical and good policy but the public would go ‘huh? no thanks’

    The DTV failure by Alston (I think it was), bullied and harassed by Packer et al, was entirely unsurprising. This is just one more example of how big a bunch of dinosaurs we have in charge. The unrealised industries in generally creative, future looking sectors are probably worth many billions in future balance of payments. Not that anyone in Govt (with the possible exception of Kate Lundy) would have an iota of a clue about this.

  2. James
    August 11th, 2005 at 16:23 | #2

    Now I’m not an economist, but this post seems to suggest that the benefit of this plan is that government would be able to sell spectrum which it otherwise wouldn’t. Surely this plan would only allow the government to sell spectrum a few years earlier than otherwise? This, to me, seems to be a far more modest benefit to weigh up against the cost.

    As to the point of eliminating dual maintenance costs, some of these savings would be felt by ABC & SBS, but also by commercial TV. So, the taxpayers would be giving the networks a handout without asking anything in return. Maybe an industry-specific levy would be appropriate in this instance.

    Feel free to pick holes, these are just some thoughts that occured to me and I’m not claiming any expertise..

  3. wilful
    August 11th, 2005 at 17:28 | #3

    So, the taxpayers would be giving the networks a handout without asking anything in return.

    You’re kidding me, right? That’s been the whole entire point of how DTV ahs been handled in Australia – ensure thet their cosy little oligopoly is maintained while other services and potential entrants are restrained (hence no TiVo for Australia (just one example)).

  4. James
    August 11th, 2005 at 17:42 | #4

    I’m not sure I follow… you point out (correctly) that the networks are currently being given first class treatment to the wider public’s detriment, and are not being asked to provide good consideration in return. Are you saying that this is meant to justify them being given a further handout, or are you making a different criticism of what I said in my comment?

  5. wilful
    August 11th, 2005 at 17:57 | #5

    Sorry, I’m being cynical. I totally agree with your comment, however in practice, we know that’s not how it would work.

  6. August 11th, 2005 at 18:57 | #6

    I have an old TV next to my bed. Its main advantage is that it does not have a remote. A remote would be awkward for me to use when in bed, but I have no trouble finding the buttons on the TV in the dark.

    Would these proposed “upgrades” improve things away from what I find convenient, force me to fumble around for a remote and spot where its buttons are in the dark?

    I use this old hardware precisely because it suits my needs. I wouldn’t want a new car with all those no longer optional extras anyway (their development is not a product of a free market but of a money auction logic, anyway).

    Grump, grump. And I prefer this DOS based browser to anything Microsoft Windows based too.

  7. 16
    August 12th, 2005 at 06:50 | #7

    Leading to the phrase to be well known in the future:

    All the functionality of a government set-top box.

  8. Ian Gould
    August 12th, 2005 at 09:13 | #8

    PML.

    A set top box (the basic sort) simply converts the digital signal picked up by your current antenna to the analog format required by your current TV.

    It should simply plug into your existing equipment and, provided you have a spare power outlet, shouldn’t cause any disruption.

    The real economic pain will come when you need to replace your current set with a digital one.

  9. Alex Encel
    August 12th, 2005 at 10:44 | #9

    My A$10 free set top box figure for all Australian TVs was based on purchase at a direct export level. Australian STBs have to be specially made for our requirements in small quantities.
    STBs are being exported to larger markets at around 20 USDand expected to fall towards the US$10 in the future. Depending on how basic a generic box was acceptable A$10 may be a high figure as the order would be a lot over a hundred times what can be considered a good order in international terms
    I am sure there will be people who will grumble at any change. If we accept this analogue will never be closed
    The only real problems are at a political level

  10. Blogless Clive
    August 12th, 2005 at 11:36 | #10

    I’ve often felt tthe only way to get significant conversion
    to digital TV would be for the Govt. to hand a *free* basic STB
    to every voter at the 2007 federal election. Switch off analogue
    at midnight Dec 31 2007. Everywhere. No exceptions for the regionals.
    Sure, a few rich buggers might need to buy an extra box or two.
    But pretty much everyone who counts would be covered.

  11. Ian Gould
    August 12th, 2005 at 13:23 | #11

    Recent articles in New Scientist (no links handy, sorry) suggest that digital broadcasting is actually proving inferior in its coverage to analog and millions of television viewers have lost service as a result.

  12. Alex Encel
    August 12th, 2005 at 14:05 | #12

    To Ian,

    it is risky to comment on articles you haven’t read but possibilities include inadequate digital infrastructure and keeping the transmission power down to avoid interference with analogue

  13. August 12th, 2005 at 14:22 | #13

    The only problem with this plan is that video recorders will also stop working. Would your largesse extend to replacing video recorders with the equivalent (which either means a HDD recorder or a DVD recorder)?

    There’s no way in the world you’d be able to replace them for $10 per unit – more like $50-100, even in bulk. And if you want to just give VCR owners a second STB as an input for the VCR, I hope you intend to factor the cost of teaching little old ladies how to use the awkward combination of digital tuner and analog VCR… :)

  14. derrida derider
    August 12th, 2005 at 14:47 | #14

    Alex is right – the only reason Australian STBs are expensive is that we have our own standard slightly incompatible with other people’s. This was an utterly outrageous decision – more so than those that directly hobbled competitiors or gave away free spectrum. The justification is supposed to be technical, but it’s hard to see how it was good for anyone but those who have an interest in delaying DTV as long as possible.

  15. Ian Gould
    August 12th, 2005 at 15:02 | #15

    Alex,

    From memory part of the problem is that where an analog signal is interfered with by buildings etc, you get a slightly degraded version of the program, where a digital signal is interfered with simialrly it becoems indecipherable.

  16. Luke
    August 12th, 2005 at 16:25 | #16

    While it is Government policy to shutdown the analog transmission in 2008, there are no great moves by the current commercial stations to encourage such a switch. There is little additional content available on the digital spectrum – and moves towards multichanneling by the Seven network have been stymied by others whose interests coincide with PayTV. The ABC have tried but are restricted with funding limitations to pump out new content.
    Government would prefer to have the bulk of the market (say 70-80%) have adopted digital TV before funding the laggards with cheap STBs. But current policies limit digital uptake (ie datacasting debacle, mulitchanneling limitations, HDTV, existing broadcasting licences). It’s a deplorable situation – where the consumers lose and traditional incumbents win.
    What’s better – Government funding of cheap generic STBs and continued status quo of lack of innovation in TV broadcasting or open up digital TV to alternative uses – perhaps a fourth digital only commercial TV station, perhaps allow multichanneling if that’s what a broadcaster wants to try out (wow – four different Big Brother camera angles!).
    Beware Government mandated technology introductions!

  17. Alex Encel
    August 12th, 2005 at 16:31 | #17

    to Robert Merkel

    VCRs will not stop working.
    I’ve interested to know how you based your $50-$100 on the quantities that would be required
    As for the little old ladies we have sold STBs to them with little problem. Maybe they’ve got a son or grandson who shows them. If we base our policies on these types of problems analogue will never be closed down

    To Ian Gould

    There are situations in which analogue can be unwatchable and this can also happen with digital in a small minority of cases. There are cable and satellite solutions but the problems are solvable given the will.
    In any case the problems will need to be solved irrespective of when analogue is closed down

  18. Alex Encel
    August 12th, 2005 at 16:35 | #18

    To Luke

    2012 is now being flagged by Senator Coonan. I agree about the deplorable policy and have said so for years but having the analogue spectrum free means it is harder to justify doing nothing with it

  19. August 12th, 2005 at 16:40 | #19

    IG, I knew that. I was just using those as illustrative examples (like the car and the browser) to see how Procrustean the proposed solution might be. Sure, it would only hit the set top – but would that work once it was turned 90 degrees on its side for my viewing convenience, etc?

    Grump, grump. Ah, that’s better.

  20. August 12th, 2005 at 18:17 | #20

    I’ve never seen a sensible argument as to why we should be going digital for tv. Is there one?

  21. Ian Gould
    August 12th, 2005 at 18:36 | #21

    Francis,

    You can either fit more channels into the same amount of spectrum or squeeze the same number of channels into a smaller frquency range freeing up spectrum for toher uses.

    Adding channels has been pretty much killed here due to the lobbying of the commerical networks.

  22. Alex Encel
    August 12th, 2005 at 19:11 | #22

    I have fought and argued against the digital TV policy for years.
    While the discussions on the policy are interesting the question I want to know is can anyone see a significant flaw in my reasoning[apart from political will]about getting analogue closed down by 2006?

  23. August 12th, 2005 at 22:17 | #23

    As you know very well, VCR’s contain an indepedent analogue tuner; if analogue transmission is shut down they will lose the ability to record off-air. If you wire the VCR up through the same STB as the television, you will lose the ability to record one channel and watch another.

    Therefore, at a minimum, you would have to provide a second STB to serve as input to the VCR. Maybe you have some tricks for doing this that we amateurs don’t know about, but in my experience teaching Grandma to use a VCR is hard enough; trying to get her to figure out two STB’s, a VCR and a television (that’s four remote controls to deal with, remember) is just asking for trouble.

    In my view, the only feasible way to replace a VCR would be to replace it with a dual channel STB with a DVD or hard disk recorder. Even based on your figure of 10 USD for a tuner, we could probably add 5 USD extra for the second tuner. The cheapest DVD writer I could find was about 40 USD retail, or 34USD on Ebay (but most Ebay lowball prices have artificially low prices on the device and make their money back on exorbitant shipping costs). Even in huge quantities, I would be very surprised if you could buy the drive for less than 20 USD. That’s 35 USD, or 45 Australian dollars. And I didn’t throw in the IDE interface chip, which would probably be another buck or two.

    An 80GB hard disk goes for about 50 USD retail in the States, so let’s be extremely generous and say 25 USD in bulk. That’s 40 USD, or 51 AUD.

    Mind you, even at that price we could give out 5 million of the things for $250 million. What’s that spectrum worth again?

  24. Alex Encel
    August 13th, 2005 at 13:01 | #24

    to Robert Merkel

    Whenever analogue is closed down there will be some peoplewho suffer inconveniences as they see it. I can only repeat on that basis analogue will never be closed down. And of course new grandmas will continue to be produced.
    To supply the level of equipment you have suggested for free ,even though I don’t agree with your costings[the level of equipment suggested is far in advance what they have now] is impossible to imagine so we had best deal with what is potentially possible.

    there is another side of some people being inconvenienced. People who received poorer digital because the power is kept down to avoid interference with analogue. The potential of better services, reception, picture quality and programming . If we don’t believe this why did we go digital?

  25. Chris O’Neill
    August 16th, 2005 at 02:47 | #25

    Another thing that would motivate some people to buy a STB would be extra program material not on the analogue channels e.g. ABC2′s children’s programs are useful for people with young children at home. It looks pretty strange that most networks are broadcasting exactly the same thing on several digital channels and the analogue channel at the same time. What’s stopping them from broadcasting something different on at least one digital channel per network?

  26. James
    August 16th, 2005 at 13:54 | #26

    The law, I think.

  27. Chris O’Neill
    August 17th, 2005 at 00:14 | #27

    Not even one iota of program difference? As they say on their website, “ABC2 features a broad range of new and time-shifted ABC programming” and also “Specifically, the legislation prevents ABC2 from broadcasting drama, national sport, national news or current affairs, comedy and entertainment. However, there’ll be plenty of other programming to keep you busy”. So what are the commercial networks allowed to do? If we’re talking about the government putting up $100 million for STBs then saving that sort of expense should be enough to make the government think about allowing the commercial networks to offer some interesting programming.

Comments are closed.