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IBM Gets the DTV Gig

August 17, 2007 | Author: Ibex Marketing

Congress and the FCC have decided that on February 17, 2009, analog television terrestrial broadcasts — “over the air” — will cease. This frees up all those radio spectrum frequencies for other uses, including the sale of some ranges to private businesses, which will bring billions of dollars into the federal coffers. Congress is concerned that many Americans are not aware of the cut-off, and that they will not have access to over the air television after that date. So a portion of the funds from the spectrum sale is to pay for rebate coupons that consumers can use to buy digital tuners for their old TV sets.

The Department of Commerce announced this week that IBM will be the lead contractor on the coupon program. The company is charged with distributing up to $1.5 billion worth of the $40 coupons. The program will start in January 2008, and households can request up to two coupons. After the initial batch of coupons worth $990 million are distributed, an additional $510 million worth may be distributed. If this program gets to this second group, they will only go to homes that do not have any other source of television content, such as cable or satellite service.

IBM will collect about $200 million to run the program from now until it ends in March of 2009.

Less than 25% of American households rely just on over the air broadcasts for television service, and all new televisions already have the digital tuner required to receive the digital signals. (Local TV stations are broadcasting in both analog and digital today, in almost all markets.) And I expect that add-on digital tuners will cost less than $50 as the market grows next year; some sources I’ve spoken with say that they would not be surprised by a $25 price point. As a result, I believe that the problem will be more a matter of educating the consumers about the upcoming change, and what their options are, than people not being able to afford the transition to digital broadcasts when it happens.