digital three-card trick, ipa reveiw

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  • 8/14/2019 Digital Three-Card Trick, IPA Reveiw

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    E V I E WR

    12 MARCH 2000

    WHEN unveiling the Govern-ments recent decisions ondigital television, the Min-ister for Communications,

    Senator Richard Alston, is reported tohave said that the Government was par-ticularly concerned to ensure that thedecisions were in the best interest ofconsumers and provide them with ac-cess to the worlds best services, a rangeof choices and quality television(Collins, 1999). In reality, consumerswill get very littleincumbent network

    owners will be the primary beneficiar-ies. In some ways, the digital decision islike the notorious three-card trickwhere unsuspecting players have threedubious choices to part with theirmoney; consumers should be careful notto fall for exaggerated claims.

    What lies under the three digitalcards facing consumers? According tothe Ministers media release (Alston,1999), analog television viewers want-ing to receive digital television willhave the choice of an HDTV set thatoffers cinema quality pictures as well as

    access to the new datacasting services;a cheaper SDTV set that offers accessto the new services and better recep-tion and picture quality than existinganalog sets; a set-top box that gives ac-cess through their existing analog TVset to the new services but with exist-ing picture quality. Only those witha strong desire to acquire new technol-ogy or with money to throw away willrush to pick one of three cards on offer.Lets look at the three choices in in-creasing order of their likely cost to

    consumers.

    GETTING NOT VERY MUCH

    FOR YOUR MONEY

    A set-top box is expected to cost around$500 to $1000, depending on whetherit is to decode SDTV or HDTV signal.What will you get for your money? Youwill get a new gadget to sit on top ofyour current analog TV set. With it youwill be able to receive a digital televi-sion signal. Why you would want to doso is puzzling since you already have ac-cess to exactly the same programmes

    with your analog television set. Broad-casters are required by law to supply theanalog signal at least until the end of

    FRANCO PAPANDREA

    Digital Three-Card Trick

    2008. Because the digital signal is re-sistan t t o snow and ghosting, picturequality may improve slightly. By itself,however, this is unlikely to be a suffi-cient motivator for people to spend$500$1000. Most Australians arequite happy with their current analogtelevision pictures and many of themhave not even been prepared to spendan extra $50 to install an external aerialthat would provide similar improve-ments. An expectation that they wouldnow be prepared to spend ten t imes that

    amount for a slight improvement inquality, therefore, seems to be un-founded.

    In addition to picture improve-ments, a set-top box may be able to pro-vide access to multichannelling, en-hancements and basic datacasting. Un-restricted use of these capacities of dig-

    ital television would have provided arich menu of new and competit ive serv-ices for viewers and would have pro-vided a significant incentive for themto spend their money willingly to getaccess to them. But the Governmenthas prohibited virtually all of these ap-pealing possibilities. The use of multi-channelling will be restricted to somebasic enhancements and to cater foroverlaps (for example, cricket over-running into a scheduled news pro-gramme) and datacasting will be for-bidden to provide television-like pro-

    grammes. By imposing a convolut ed setof restrictions, therefore, the Govern-ment has ensured that many of those

    likely to have been attracted by an in-creased and appealing range of newservices will not now find the permit-ted additional services a sufficientlyattractive incentive to part with theirmoney.

    If you have more money to spare,you can go for the second card. For$2000 to $3000 you can get a standarddigital TV set. With it, you will be ableto avoid cluttering the top of your TVset with a set-top box. The services youget will be the same, except that for the

    extra money you also get a wide formatscreen. This is much like the viewingportion of the screen for foreign filmsshown on SBS (without the blackbands at t he top and bottom). The sizeof the screen will depend on how muchmoney you are prepared to spend. Un-less you value the wide screen formathighly, there would be little reason toprogress to this stage while your analogTV set cont inues to work well. If yourset is a few years old, however, and youare thinking of changing it, you maywant seriously to consider a digital set.

    But even then, you would have an in-centive to wait a while until a signifi-cant level of market penetrat ion by dig-ital sets is achieved and economies ofscale bring down the prices of digitalTVs.

    With still more money to spare, youcan go all the way and buy an HDTVset for a minimum of around $8000.Th is will give you all the th ings you getwith a wide-screen standard digital setand for the extra $6000 you will be ableto receive 20 or more hours per week

    of your programming in high-definitionversion. Another likely side-benefitwould be that you can brag to yourfriends about your being one of the veryfew people to have an HDTV set. If USdevelopments (where HDTV andSDTV are already available) are anyguide to what is likely to happen here,you will be able to brag for quite a while,as not too many others will be follow-ing your example.

    We are told that Australians are ea-ger adopters of new technology. This istrue in some respects (for example, mo-

    bile telephones), but not so for others(for example, AM stereo radio). Whatseems to make the difference is whether

    Consumers will

    get very littleincumbent network

    owners will be

    the primary

    beneficiaries

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    E V I E WR

    13MARCH 2000

    the new technology offers somethingsubstantially different and additional towhat the old technology provides.Adoption of black and white TV setsand colour TV sets was high becausethe new technology offered highly de-sirable benefits that were not otherwiseavailable. It remains to be seen, of

    course, whether the few extra benefitsthat have been sanctioned by the Gov-ernment will be sufficient to encour-age many of us to become early adoptersof digital TV.

    WHAT MIGHT HAVE BEEN

    It could have been different . Digital tel-evision and similar services have thecapacity to offer a vast array of newservices providing considerable benefitsto consumers. The potential array ofnew products and services will un-

    doubtedly expand, with technologicaladvances further increasing consumerappeal. But the Government says thatis not to be so. According to the Min-ister, we already have the best televi-sion system in the world. But even ifthat were true, why should it not be im-proved further? Implicitly, what theMinister is saying is that we should begrateful for what we have and shouldnot yearn for what we could have. In asense, it is like going to an appealingrestaurant with an extensive attractivemenu only to be told by the waiter that

    three-quarters of the listed items are notavailable.

    Why is the choice denied to us? Farfrom offering consumer choice and pro-moting the public interest, t he digitaltelevision decision is about protectingthe interests of incumbent televisionnetwork proprietors. All the elementsof the convoluted set of restrictionsstem from the Governments decisionto ban new commercial television serv-ices until at least the end of 2006. Thebanning of potential competitors to es-

    tablished television operators is notsomething new. Formally or informallyit has been in place in larger capitalcities since the licensing of the thirdcommercial channel more than threedecades ago. The introduction of pay-television was also banned for manyyears for the same reason.

    The Government would have us be-lieve that incumbent broadcasters de-serve special treatment. When an-nouncing the Governments initial de-cision on digital television, includinga ban on the licensing of new commer-

    cial services until 2006, the Ministerargued that while the Governmentwould normally welcome additional

    competition, in any industry, as healthyand likely to lead to benefits for theconsumer, because of the special cir-cumstances facing them, Australiasfree-to-air and pay-television industriesdeserve a degree of special treatment,and the Government makes no apolo-gies for [the] decision (Alston, 1998).

    The special circumstances noted werethe cost of digital conversion for free-to-air broadcasters and the relative in-fancy of the pay-television industry. Ifthe cost of introducing new technol-ogy were to be a legitimate reason forlimiting competition, every industry inAustralia would be seeking and wouldbe entitled to protection. Yet the Gov-ernment has been winding down pro-tection for other industries.

    The recent digital television deci-sion is a further widening of the pro-

    tection already afforded incumbent net-

    work owners. They are now not onlyprotected from additional commercialoperators but also from anything thatmay take viewers away from them. Thatis why datacastingwhich has the ca-pacity to offer many exciting and in-novative services that are likely to ap-

    peal to consumershas been bannedfrom providing anything that remotelyresembles products offered by commer-cial television services. The ban is asludicrous as, say, prohibiting licenseesof new pubs to sell anything that looksor tastes like beer, wine or spirits.

    Protection of incumbent networkowners from competition by new en-trants is as shortsighted as the made-to-measure tariff protection of manu-facturing industry of earlier decades.And, as it did for manufacturing, pro-tection of incumbents will undoubtedly

    have a negative effect on the develop-ment of an innovative and competitiveinformation services industry. In any

    event, it is unlikely to provide morethan short-term relief to the networks.While the Government can clearly useits powers to ban competitive entry intoover-the-air broadcasting and data-casting services, it is virtually power-less to prevent consumer access toalternative sources of those services.

    The Internet is already providing ac-cess to a vast range of information andentertainment services including somethat already compete directly with es-tablished free-to-air broadcasters (forexample, Internet radio services).

    The history of Australian broadcast-ing is littered with examples of costlymistakes by governments intent on pro-tecting the private interests of estab-lished broadcasters with little consid-eration of market forces and consumerdemand. As a result, the Australian

    public has regularly been denied accessto popular services that people in othercountries had been enjoying for manyyears. The highly prescriptive digitalconversion decision is simply the lat-est example of misguided governmentintervention and is likely to be as costlyas previous mistakes. If the Govern-ment is really interested in advancingconsumer interests rather than those ofa few powerful individuals, it should dowhatever it can now to amend its deci-sion and allow orderly market processesto determine the nature and structure

    of services to be provided.

    REFERENCES

    Alston, R. (1999), DigitalNewChoices, Better Services for Austral-ians, Media Release (166/99) bySenator the Hon. Richard Alston,Minister for Communications, theInformation Economy and the Arts,21 December.

    Alston, R. (1998), Digital: A personalmessage, Media Statement (36/98)by Senator the Hon. Richard

    Alston, Minister for Communica-tions, the Information Economy andthe Arts, 24 March.

    Collins, L. (1999), Choices Dont Ex-tend Competition, The AustralianFinancial Review, 22 December.

    Dr Franco Papandrea is Associate Professor of

    Communication, and Director of the Communica-

    tion and Media Policy Institute, at the University of

    Canberra. His most recent IPA publication is

    Broadcasting Plann ing and Entrenched

    Protection of Incumbent Broadcasters.

    [email protected]

    The recent digital

    decision is a further

    widening of the

    protection already

    afforded incumbentnetwork owners

    I P A