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.

Sun Microsystems has released a royalty-free Java specification as an alternative to the royalty-encumbered “GEM” and “MHP” family of digital TV specifications developed by the European Digital Video Broadcasting group and associated groups.

“GEM” and “MHP” may not be exactly household words, but they are the backbone specifications of the interactivity layer of Blu-ray, US cable’s “tru2way” platform, and national DTV adoptions in Italy, Korea, and elsewhere.

The backstory to this seemingly minor announcement should be evaluated closely by anyone around the world interested in the still-emerging field of digital TV deployments — it will provide eye-opening insight into the techno-politics of royalties, and the alternatives.

This royalty-free/open source specification work, announced in March 2008, has been a collaboration between Brazil’s Digital Television forum (SBTVD), the Brazilian government, Sun, and leading DTV vendors in Brazil to provide a royalty-free foundation to Brazil’s Ginga interactivity specification for DTV.

Patent royalties have been a painful aspect of digital TV rollouts around the world and belatedly recognized as problematic in the US.

Brazil is leading the charge of developing countries that are rethinking the business-as-usual approach of the developed world to the nexus between patent pools, standards, and open source (the word “neocolonial” comes up not infrequently when one looks at efforts by patent pools from developed countries to charge developing countries royalties to “join the digital TV era”).

Brazil has applied this fresh thinking to its digital TV rollout.  In 2006, Brazil chose the Japanese ISBD digital TV and mobile broadcasting standard in an MOU with Japan to “allow Brazilian companies to use the technology without paying royalties” — much to the chagrin and nay-saying of the royalty-encumbered European DVB and US/Korea ATSC standards.  The move sparked ongoing techno-geopolitical debates, but nonetheless has helped to up (or more accurately lower) the royalty ante for future DTV adoptions — like the already royalty-free UK MHEG-5 specification dodging the patent-pool bullet and enabling more royalty-free options for digital TV deployments.  One might suspect downward price pressure and bargaining leverage may have been in the picture when the MHP patent pool quietly lowered its prices.

Congratulations to the many incredibly talented people that have brought out the world’s newest and most innovative (and royalty-free!) interactive specification for digital TV, and thanks for the opportunity to help!