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The Television Wars

Thanks to months of government-sponsored commercials for cable converter boxes, almost all of us expect a transition from analog television signals to exclusively digital television next month. But the incoming Obama administration is advocating that the great flipping of the analog switch to the "off" position be delayed, citing a shortage of funding for converter box coupons.

Ars Technica now reports that a key DTV adviser to the Obama transition team may have a financial interest in delaying the DTV transition:

Among those with a vested interest in the debate over a DTV delay is Clearwire, which has been racing to deploy its 4G WiMAX networks ahead of competitors wedded to the LTE standard. And Ars has learned that Clearwire Executive Vice President R. Gerard Salemme has been playing a key advisory role on the DTV changeover within the Obama transition team.

Ars explains how any DTV delay will disadvantage Verizon, a Clearwire competitor:

[A] longer, more disruptive delay might provide some breathing room for Verizon competitor Clearwire. That company is seeking to build market share for its own WiMAX network, a joint venture with Sprint, before LTE is ready for prime time. Clearwire has boasted that it remains years ahead of the competition, but while WiMAX networks in Portland and Baltimore are already up and running, scheduled expansions to other cities have been delayed until late 2009, even as Verizon has bumped up its own schedule. The company's stock has now been in free-fall for months, and several major backers recently announced they would take major write-downs on their investments in Clearwire. (The roster of large investors in Clearwire includes Obama-ally Google.) A toxic negative feedback loop in investor confidence could leave it unable to finance its promised buildouts for 2009. With any transition delay certain to push the spectrum handover into the next quarter of the fiscal year, if not further, the attendant uncertainty could also factor into investment decisions as Wall Street--and equipment makers--decide which standard to back...

[Salemme's] high position with a primary competitor of Verizon--the company most vocally protesting that it would be adversely affected by a delay--creates an unavoidable appearance of conflict of interest.

Litigation may ensue if a transition delay prevents companies that have purchased portions of the soon-to-be-free analog spectrum for new purposes from taking possession on schedule. As FCC Commissioner Robert McDowell stated last week, "there are companies paying hundreds of billions of dollars to use this spectrum, and they expect the goods to be delivered."

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Rafael Mangual
Project Manager,
Legal Policy

Katherine Lazarski
Manhattan Institute


Published by the Manhattan Institute

The Manhattan Insitute's Center for Legal Policy.