Switching to Digital Television: Business and Public Policy Issues

Television is currently undergoing a major transformation. The old analog standards are being replaced by new digital standards, widely perceived to be technologically superior. Digital television (DTV) makes possible the delivery of a signal virtually free of interference, with better image and audio quality, and improved interactivity. In addition, data compression technologies allow for a more efficient use of bandwidth. DTV gives the flexibility of increasing the quality and the number of channels, while at the same time freeing up bandwidth for alternative uses. These benefits can only be realized if broadcasters as well as viewers are willing to invest in the new technology. On the supply side of the market, broadcasters need to invest in digital transmission equipment and make content available on the digital platform. On the demand side, viewers must be able to receive the digital signal either with a decoder (so called ‘set top box’, STB) or an integrated digital television set. In addition, costs and benefits are unevenly distributed across viewers and broadcasters, and vary depending on the television delivery platform. Policy makers in the US and Europe have taken a keen interest in the transition process. In this paper, we explore the main challenges for the transition to digital television. In particular, we