NCPA - National Center for Policy Analysis


October 26, 2005

Late last week, the Senate Commerce Committee, chaired by Sen. Ted Stevens (R-Alaska), voted to spend $3 billion on subsidies for people with old television sets. Even more startling, this massive new spending program is a part of the committee's contribution to the budget reconciliation bill -- legislation that was intended to showcase Congress's new resolve on spending, says James L. Gattuso, a research fellow at the Heritage Foundation.

The subsidies are tied to ongoing efforts to complete the long-delayed transition from the existing analog television broadcast system to a more advanced, digital system.

  • Currently, U.S. broadcasters transmit in both modes, using previously licensed frequencies for analog broadcasts and new spectrum given to them for digital broadcasts.
  • When the transition is complete, the old frequencies are to be auctioned off and used for a host of new telecommunications services.
  • Most importantly for congressional budgeteers, those auctions are expected to raise huge amounts of revenue -- $10 billion according to the Congressional Budget Office and more than twice that amount according to some outside estimates.

"We plan to provide a set-top everyone who needs a box," said Sen. Stevens early last week. Specifically, the legislation provides for the federal government to pick up almost the complete cost of the set-top devices, which would convert the digital signals to analog signals that can be displayed on existing television sets. It estimates the cost of converters will be $50 to $60 apiece. Consumers would be responsible for only a "co-pay" of $10.

Ultimately, however, subsidies are the wrong thing to do, says Gattuso. There is no federal entitlement to analog television, nor should there be one. Viewers have been on notice of the transition for nearly a decade, and there is no reason for those who have prepared for it to subsidize those who have not.

Source: James L. Gattuso, "Another Bridge to Nowhere? The Senate's $3 Billion Subsidy for Aged Television Sets," Heritage Foundation, WebMemo #891, October 24, 2005.


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