American consumers will purchase more than 45 million DTVs
and will be overcharged more than one billion dollars in the
crucial digital transition years of 2008 and 2009 alone”

What?  The transition to digital TV is a massive overcharging scam?

That’s the gist of a filing last week to the FCC by two US-based TV makers, upstart VIZIO and Westinghouse Digital Electronics, in an aptly named coalition, CUT FATT.

The filing has caught good timing — a delay in the long-set-in-stone turn-off date of analog TV is being debated in Congress, with various industry interests weighing in.

But the filing isn’t about analog shutoff glitches, it’s a proposal to address the broken patent licensing situation that has made the US’s digital TV system uncompetitive in the global marketplace:

“the total cost of rampant overcharging has already dwarfed the entire transition subsidy provided through the National Telecommunications and Information Administration converter box program”

“the FCC’s 1996 policy of ad hoc enforcement to prevent DTV price gouging by patent holders is now hopelessly inadequate.”

And citing the FCC chairman’s own response to a 2008 congressional inquiry:

“Chairman Kevin Martin conceded that the FCC is shockingly ignorant of the technology the government forces Americans to buy…. The Consumer Electronics Association and several other parties have alerted the FCC to problems involving DTV patent licensing practices, but the FCC has not yet taken any action to investigate alleged abuses or impose appropriate remedies.”

Ouch — harsh light indeed.

Significantly, VIZIO and Westinghouse are the only US-based companies mentioned in a recent analysis of the bloody price and feature acceleration war gripping the global TV industry, an industry that since 1996 has migrated almost entirely out of the US.  Both are actually closely tied to Asian suppliers, and are on the receiving end of a patent ecology that tends to be controlled by larger consumer electronics companies, independent patent “trolls”, and other vested interests.

The filing puts a lot of stock in setting a price baseline based on “international comparables” as a methodology to corral patent holders into an acceptable framework — an interesting idea in itself, but one that risks simply embracing superficial concessions in a still-broken system and also one that opens the door to the more fundamental question — how did we get into this mess in the first place, over the decade since the US DTV system was adopted by the FCC, and what would be a better systematic policy approach?

I suggest this broader question is the starting point for considering a “new deal” in digital TV, one that addresses long-neglected issues of “who-wins-who-loses” and appropriate roles for government oversight (sound familiar in the current economic climate?)   For a start in the analysis needed, click here, or here.