Impact on the Consumer

Why Do Americans Pay More?

Since July 1, 2007, the Federal Communications Commission (FCC) has required every television sold in the U.S. to include a digital tuner. When the FCC adopted the Advanced Television System Committee (ATSC) standard as the mandatory United States digital television (DTV) standard, it promised to protect consumers from unreasonable and discriminatory patent fees. Unfortunately, the FCC did not adopt specific enforcement rules, and many companies claiming to hold necessary patent rights are charging American consumers royalties that are 20 to 30 times more than consumers pay in other countries.

Royalties for the ATSC standard cost American consumers between $20 and $30 in additional costs per television, compared to flat rate royalties of about $1 per set for the standards used in Europe and Japan. This was not supposed to happen. Companies persuaded the FCC to adopt the ATSC standard by committing to license their technology either for free or on reasonable terms. But those companies and their patents have been sold, and the new foreign owners are making vast windfall profits overcharging Americans.

They know Americans have no choice: Anyone who buys a television must pay the ATSC tolls, and with analog service going dark, American’s must buy televisions.

Why Now?

With the conversion to digital television slated for June 12, 2009, American consumers are poised to spend more than $2 billion on digital TVs in the next few months. The extension of the digital television transition will allow millions of Americans more time to obtain converter boxes with the help of $40 coupons provided through the National Telecommunications and Information Administration (NTIA) coupon program. Unfortunately, in this critical transition year, consumers will be overcharged up to $1 billion and perhaps more by parties controlling rights to use the ATSC digital television standard that the FCC adopted in 1996. The overcharges in 2008 and 2009 alone will dwarf all consumer savings through the NTIA program, and the price gouging will continue until the FCC takes action.

American consumers are willing to pay a fair rate, but they are not willing to be victim of uncontrolled price gouging. These abuses by DTV patent holders will continue unless and until the FCC takes action.

The Coalition United to Terminate Financial Abuses of the Television Transition (CUT FATT) has filed a Petition for Rulemaking and Declaratory Relief asking the FCC to hold ATSC patent holders to their “free or reasonable” licensing obligations. Those who think Americans should pay 20 or 30 times what consumers in other countries pay for DTV standards should be required to explain what Americans are getting for their money.