Consumer Group Petitions FCC to Lower Costs of Digital TV Sets

By Kim Hart
Washington Post Staff Writer
Friday, January 2, 2009

A consumer advocacy group plans to file a petition today with the Federal Communications Commission in a bid to reduce the costs of digital TV sets.

The petition asks the FCC to revise its rules for digital television patent licenses, arguing that TV manufacturers are charged too much to use the technology, which in turn causes prices for digital TV sets to balloon.

U.S. television buyers pay about $30 more per digital set than consumers in other countries, according to an ad hoc group called the Coalition United to Terminate Financial Abuses of the Television Transition, or CUTFATT. That's because electronics makers are being overcharged to use the intellectual property for digital tuners and other parts in TVs and converter boxes, the coalition said, and that price is passed on to the consumers.

"The costs hit the poorest Americans the hardest and place hugely disproportionate burdens on Americans that rely on free over-the-air broadcasting to watch television," the coalition said in its petition.

Digital TVs first hit store shelves in 1998 after the FCC approved American standards for the technology. But with price tags above $10,000, most were too expensive for average TV watchers. Prices have since fallen dramatically, and many consumers are buying digital sets to prepare for the nationwide transition to digital TV on Feb. 17, after which analog sets will not work without a converter box.

Americans are expected to buy more than 45 million digital TVs during 2008 and 2009, according to the Consumer Electronics Association. CUTFATT, which was formed to raise awareness in Congress and the FCC about the patent licenses, says consumers will be overcharged by more than $1 billion during that period.

On Monday, the coalition plans to file a formal complaint against a number of companies, that, according to the group, demand higher-than-necessary royalties for use of digital television patents.

"American consumers are paying higher prices for digital TV sets and converter boxes and we think someone should stand up for them," said Amos Snead, spokesman for CUTFATT. "We're not asking the FCC for price controls, what we're asking for is transparency."

The coalition wants the FCC to require patent holders who charge high fees to prove that their license fees are reasonable. It also wants the FCC to create basic rules for licensing of patents to prevent possible price gouging, Snead said.

In April, Sen. John F. Kerry (D-Mass.) asked FCC Chairman Kevin J. Martin which patents are essential for manufacturers to make and sell digital TVs and which companies own them. Martin responded that at least 16 groups license such patents on behalf of companies including GE, Hitachi, Samsung, LG Electronics, Sharp and Alcatel Lucent.

But Martin said the agency does not keep track of the amounts they charge for patent licenses "because those licenses are business arrangements that are negotiated on a case-by-case basis."

CUTFATT has asked the FCC to adopt a "patent-pool" system such as the ones in Europe and Asia, which allow TV manufacturers to pay a flat rate of about $1 per set for the rights to all the necessary patents. In the United States, the group said, manufacturers are charged $20 to $30 for the needed licenses.

Europe and Asia have adopted different standards for the digital technology.

Martin said the FCC tried to avoid regulatory intervention when the digital TV standard was adopted in 1996 because it was a nascent technology. He said the commission was aware of issues regarding access to patent rights and will take "appropriate action if a future problem is brought to its attention."

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