FOR YOUR INFORMATION............................FEBRUARY 4, 1992
FCC RULES REGARDING INTRODUCTION OF ADVANCED TV TECHNOLOGY SHOULD BE FLEXIBLE AND ALLOW MARKETPLACE TO DETERMINE VALUE, FTC RECOMMENDS
Staff of the Federal Trade Commission have recommended that the Federal Communications Commission permit flexibility in a proposed plan regarding the introduction of advanced television (ATV), and allow market forces to influence whether ATV -- for example, high-definition television (HDTV) -- eventually should replace conventional television. The FTC staff also recommended choosing a low-cost procedure to allocate ATV spectrum. The comments, written by the FTC's Bureau of Economics, were submitted Jan. 31 in response to a Nov. 18, 1991, FCC notice of proposed rulemaking (NPRM). The NPRM proposes, among other things, a plan for the initial allocation of spectrum to an ATV technology, be it HDTV or some other television technology that would provide improved audio and video quality over existing conventional television (NTSC), and for the transition from NTSC to ATV. (NTSC stands for National Television Systems Committee and refers to the existing broadcasting system.) In the next few years, the FCC is expected to choose among several HDTV and other ATV technologies, selecting a single industry standard for the United States. Because, for most of these technologies, ATV and NTSC could not be broadcast on the same channel, the FCC then would allocate spectrum for the ATV technology chosen.
According to the FTC staff comments, economic-efficiency considerations suggest that the determination of how much spectrum to allocate to ATV, as opposed to alternative uses, should be guided by market forces. This suggests, in turn, regulatory actions that would promote altering the amount of
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spectrum allocated to alternative uses as conditions change. Similarly, efficiency considerations suggest that at least a portion of the spectrum currently allocated to NTSC be retained for that purpose, rather than being reassigned to some other use (as proposed).
The staff also recommended allowing broadcasters more time for constructing ATV facilities, rather than requiring construction of these facilities within two years of receiving a permit. According to the staff, the risk of setting a deadline that is too short is that broadcasters might invest in new facilities too quickly. If a superior technology were to appear soon afterward, either the construction would have been wasteful or an inferior technology would become the standard.
The FTC staff also urged that the FCC allow greater flexibility as to simulcasting. "Mandating simulcasting of ATV and NTSC programs or establishing a date after which NTSC broadcasting will terminate may not produce the economically efficient result. Rather, economic efficiency would likely be promoted by allowing broadcasters to determine the mix of ATV and NTSC broadcasts," staff said.
According to the NPRM, the majority of NTSC license holders will be awarded ATV licenses. But there may be areas of the country where the number of eligible applicants exceeds the num- ber of available licenses, or vice versa. The FTC staff sugges- ted that a lottery might be better than comparative hearings to allocate ATV licenses when the number of eligible applicants is greater than the number of licenses to be awarded. According to the comments, choosing among eligible firms on the basis of financial qualifications or projected program viewership may involve significant costs to both the applicants and the FCC. "As long as the costs of transferring licenses are kept low, ATV authorizations will tend to be acquired by those firms with the highest expected viewership and financial stability," the staff explained.
In locations where the number of eligible applicants is smaller than the number of ATV channels, channels will be available to firms other than current broadcasters. In these locations, a filing fee that is too small might encourage a large number of firms to attempt to obtain channels and, thus, raise administrative costs.
These comments represent the views of the Bureau of Economics of the Federal Trade Commission, and not necessarily the views of the Commission or any individual Commissioner.
Copies of the comments are available from the FTC's Public Reference Branch, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-326-2222; TTY 1-866-653-4261.
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MEDIA CONTACT: Brenda Mack, Office of Public Affairs 202-326-2182
STAFF CONTACT: David Reiffen, Bureau of Economics 202-326-2027