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High-Definition TV: Government or Market Choice?

726 words                     The Freeman
page 1 of 3                   Foundation for Economic Education
                              Irvington-on-Hudson, New York 10533
                              (914) 591-7230

         High-Definition TV: Government or Market Choice?
                          by Gary McGath

     High-definition television (HDTV) promises to be the biggest
breakthrough in video broadcasting since color.  It will offer
wider pictures with much more detail and clarity; watching TV
will be almost like seeing a movie in a theater.
     The technology for HDTV exists today, and it is even in
operation in Japan.  Unfortunately, there isn't an industry
standard for American HDTV.  In accordance with conventional
wisdom on broadcasting, the Federal Communications Commission has
to approve a standard.  There is no shortage of ideas -- the FCC
has about 20 proposals under consideration.
     The problem is one of trade-offs between the higher quality
offered by HDTV and compatibility with the existing National
Television System Committee (NTSC) technical standards adopted by
the FCC in 1941.  A TV channel occupies a certain band-width, a
"space" in the spectrum of broadcast frequencies.  If HDTV
signals could occupy more than one channel's band-width, the task
of sending a high-quality picture would be easier; but then fewer
stations could operate in a given geographic area without
interfering with one another.
     Ideally, a broadcast signal would occupy the same band-width
as an existing TV channel, would be received by existing TV sets,
and would contain extra information that the new HDTV sets could
receive.  But whether it's possible to meet the technological
limitations and provide full compatibility with existing TV is a
hotly debated question.
     The proposals before the FCC will put an initial premium of
$500 to $1,500 on an HDTV set compared to a conventional set,
even though studies have indicated that most people who are shown
both images don't consider the improvement worth more than $100.
The costs of new technologies decrease with time only if they
find a market to begin with.  The new broadcasting equipment for
HDTV also will be expensive; a large potential audience will be
needed to justify its cost.
     Government approval of a standard doesn't automatically lead
to market success, as is illustrated by the FCC's early
experience with color television.  In 1950, the FCC approved the
CBS system for color TV, which involved a color wheel rotating in
synchronization with successive frames of the picture.  Not only
was this method incompatible with existing black-and-white sets,
but it also added a major mechanical component to the TV sets of
the day.  Because the CBS system was a commercial failure, the
FCC reversed itself in 1953 and approved RCA's system, which is
the one used today.
     There are currently about 20 major television manufacturers
in the United States; of these, Zenith is the only one that is
domestically owned.  Not surprisingly, Zenith's proposal is one
of the leading candidates -- perhaps because it really is one of
the best, though it's hard to avoid the impression that its
political position plays a major role.
     The ideal implicit in the FCC's approach is a single
standard that would serve the country for the next 30 years or
so.  Fixed standards offer some significant economic advantages:
people don't have to replace obsolete equipment or get multiple
sets to receive incompatible formats.  The equipment, however,
becomes obsolete, and nothing can replace it.  Today's National
Television System Committee broadcasting standard is in fact
ancient technology, established in the early days of television.
If computers had suffered the same fate, we'd still be using
room-sized machines with less power than today's five-pound
     What path might HDTV follow, if it were left to the choices
of the market?  Its first appearance wouldn't be on the broadcast
market, but on a market like cable where there is a greater
emphasis on quality and a closer link between the viewer and the
broadcaster.  Viewers could be guaranteed a full schedule of HDTV
programming, and could be directly billed for premium-quality
broadcasting.  We could expect to see cable companies offer
discounts for advance subscriptions, enabling them to raise
capital, and to determine whether the market really is there.
     A non-broadcast path to HDTV could open up remarkable
possibilities.  Fairly soon, fiber optics may replace metal wire
for non-broadcast communications.  If this happens, tremendous
amounts of band-width will be available, and true digital
television would become possible.  Finding band-width for signals
sent over the airwaves would become as obsolete an exercise as
finding a hitching post.  But if the FCC holds non-broadcast TV
back to the level of the broadcast medium, this won't happen.
Mr. McGath is a software consultant in Hollis, New Hampshire.
This article is adapted from the October 1989 issue of The
Freeman, published by The Foundation for Economic Education,
Irvington-on-Hudson, New York.

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