Press Releases

FOR IMMEDIATE RELEASE | JANUAR 2, 2009

The Great Untold Story of the DTV Transition:
U.S. Consumers Paying More in Patent Royalties

Coalition United to Terminate Financial Abuses of the Television Transition Files FCC Petition Urging Protection of American Consumers

Washington, DC – With the transition to digital television just 46 days away, the Coalition United to Terminate Financial Abuses of the Television Transition, or CUT FATT, today filed a petition demonstrating that companies claiming to hold patents needed to comply with FCC standards are exploiting the digital television transition to earn more than $1 billion in excess profits from American consumers. CUT FATT asks the FCC to hold abusive parties accountable and impose rules that stem rampant and continuous overcharging of consumers.

“This is the great untold story of the transition to digital television,” said Amos Snead spokesman for CUT FATT, a coalition formed in mid-2008 to raise awareness among Members of Congress and the FCC concerning uncontrolled price gouging by ATSC patent holders and to urge protection of American consumers. “Since 2007, American consumers have been paying more than twenty to thirty times what consumers in Europe and Japan pay in royalties for basically the same technologies. What’s worse, patent holders bundle allegedly essential technology with worthless patents, jack up the rates, and stick consumers with the bill. The FCC created this system, and it’s time for the FCC to fix it by establishing basic rules that make pricing fair and transparent. American consumers are willing to pay a fair rate but they are not willing to be victim to uncontrolled price gouging.”

Since July 1, 2007, the FCC has required every television sold in the United States to include a digital tuner. As part of the purchase price of each television sold, consumers pay royalties to the holders of Advanced Television System Committee (ATSC) approved patents. With analog televisions going dark in just weeks, these patent holders are demanding that American consumers pay between twenty to thirty dollars for patent rights that cost $1 or less in other parts of the world, including Europe and Japan. It is estimated that in 2008 and 2009 alone, American consumers will pay well over one billion dollars in excess royalty fees to complete the conversion to digital television that Congress has required. In Europe and Japan, the cost of comparable rights would be about $65 million.

“The unfortunate reality is that these fees disproportionately hit lower income Americans who tend to buy smaller, lower-cost televisions where the cost of the patent is a greater percentage of the overall cost of the television,” said Snead. “We recognize that patent holders need to be fairly compensated for their intellectual property. However, charging American consumers twenty to thirty times more than consumers are paying anywhere else in the world seems exorbitant, unfair and unnecessary.”

Patent Costs as a Percentage of Gross Margin

In addition, holders of these patents could receive a windfall payment of approximately $318 million from U.S. taxpayers through the National Telecommunications and Information Administration (NTIA) TV Converter Box Coupon Program. The windfall represents tens of millions more than the companies invested to develop the ATSC standard in the first place.

In the petition filed today, CUT FATT asks for a two-step remedy to protect consumers from abusive ATSC patent licensing practices.

• The FCC should immediately declare that DTV royalty demands that exceed international comparables are presumed to violate the FCC’s existing rules, and each patent holder demanding higher fees should be required to prove that its license fees are reasonable and non-discriminatory.
  
  
• The FCC should initiate a rulemaking proceeding to establish basic rules for the licensing of patents essential to implementation of FCC-mandated DTV receiver standards.

CUT FATT also asks the FCC to clarify what patents are actually “essential” to comply with FCC regulations.

“A government that creates a mandatory standard and then forces its citizens to buy tens of millions of digital televisions and receivers using proprietary technology quite plainly must protect those citizens from uncontrolled price gouging that the government itself enabled,” the Coalition argues in its Petition for Rulemaking. “With more than 62,000 DTV sets sold every day, the total cost of rampant overcharging has already dwarfed the entire transition subsidy provided through the NTIA converter box program. The abuse will continue unless and until the FCC takes action.”

For more information or for copies of the the Petition for Rulemaking, contact Amos Snead at amos.snead@fd.com, 202-715-1531.