Millions Of US Homes Still Unprepared For Digital-TV Switch
June 11 2009 - 4:31PM
Dow Jones News
Viewers who get their television programs free, over-the-air and
without a converter box will find themselves without service
starting Friday, when the federally-mandated transition to an
all-digital broadcast spectrum becomes final.
Those households - Nielsen Co. estimates about 2.8 million homes
still aren't ready for the transition, while the National
Association of Broadcasters says it's more like 2.1 million - will
then become the focus of a scramble by broadcast stations, cable
operators, satellite providers, telecommunications companies,
retailers and policymakers to get them back to watching TV.
The affected households are likely concentrated in low-income,
older and rural demographics. The market least ready, according to
Nielsen, is Albuquerque-Santa Fe, where 7.6% of the households
remain unready.
Industry watchers say some affected viewers will be motivated to
buy a digital TV. The Consumer Electronics Association says TV
sales are up about 32% in 2009 despite the recession, though lower
prices are likely driving sales.
Others will buy a digital converter box for their old analog TV,
and the government has launched a program to provide vouchers for
up to two $40 coupons per household to help defray the cost; the
program has been extended through July. Some, meanwhile, may simply
stop watching TV altogether, while others may protest the change.
Some level of public outcry is expected.
The cable, satellite and telecommunications industries are
hoping that many disenfranchised viewers will bite the bullet and
subscribe to a pay-TV service. A number of cable executives have
said the transition provides a tailwind to their industry, which is
struggling with a subscriber slowdown amid the recession.
"We've seen an increase in call activity in some markets as we
ramp up for the transition," said Alana Davis, spokeswoman for
Comcast Corp. (CMCSA).
Comcast, the nation's largest cable provider, has been
particularly aggressive in advertising to those affected by the
digital transition. Davis said the company has launched a
"rapid-response team" to quickly deploy cable wiring and boxes in
transitioning homes, and it is offering promotional deals such as
free basic video service for a year with a subscription to its
phone or Internet service offerings.
Cablevision Systems Corp. (CVC), Time Warner Cable Inc. (TWC),
Verizon Communications Inc. (VZ) and AT&T Corp. (T) also have
targeted those affected by the transition and have worked to assure
their existing customers that they won't be affected by the
switch.
Satellite-TV companies have reported muted impact in the lead-up
to the transition.
"I think, clearly, the digital transition was a positive,"
DirecTV Group Inc. (DTV) Chief Executive Chase Carey said during an
investor conference last month. "I think it's really tough to
quantify how big a one. I don't think it was a major positive."
Dish Network Corp. (DISH), however, didn't see much benefit. CEO
Charles Ergen said during the company's quarterly conference call
last month that its competitors likely benefited more because
Dish's marketing effort hadn't been as strong in recent months. He
said there was no material impact from the transition.
The next few months and the ensuing financial reports from the
industry will shed more light on the opportunity posed to pay-TV by
the transition, and its effects in the market will continue to play
out after the deadline.
Hudson Square Research analyst Jeffrey Wlodarczak said the
transition could be "a larger-than-expected driver" for cable and
satellite stocks, given the low valuations in the sector, though he
forecasts a decline in net new video subscriber additions for the
industry of 20% in the second quarter.
Wlodarczak recommends shares of DirecTV, Dish, Liberty
Entertainment (LMDIA),Time Warner Cable and Comcast.
For their part, broadcasters downplayed the significance of the
event privately and directed inquiries for this story to the
National Association of Broadcasters, which says 82% of U.S.
households relying exclusively on antennas to watch TV are fully
prepared for the switch.
The broadcast industry is already reeling from the drop in ad
markets because of the recession, particularly in local media
markets. Any loss of viewers stemming from the transition will only
add to their woes.
The federal government delayed the transition, which was
originally set for February, as millions of households were
estimated to be unprepared. Since then, Nielsen estimates the
number of unprepared households has been cut in half due to public
awareness efforts by broadcasters and government agencies.
-By Nat Worden, Dow Jones Newswires; 201-938-5216;
nat.worden@dowjones.com
(Roger Cheng contributed to this report.)