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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Comments: FCC-ATV--02/04/92)
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.
Comments: FCC-ATV--02/04/92)
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.
# # #
MEDIA CONTACT: Brenda Mack, Office of Public Affairs
202-326-2182
STAFF CONTACT: David Reiffen, Bureau of Economics
202-326-2027
(V920002)
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