Nearly $1 BN Set-Top Box Subsidy May Not Be Enough

With the US Congress having approved a plan just eight days ago to provide households with as many as two coupons, each good toward $40 off the purchase of a converter set-top box enabling existing television sets to receive digital programming over the airwaves after February 17, 2009, LG - expected to be a major producer of STBs - predicted that its models would end up selling for $60 apiece.

The comment came from John Taylor, LG's vice president of US government relations, in a public statement that was cited this morning by Reuters.

LG joins Samsung and the RCA division of Thomson Consumer Electronics in announcing the availability of set-top boxes next January, when the coupon program is officially launched. Both Thomson and Samsung have acknowledged the $40 value for each coupon, in so doing implying that its STBs would sell for that amount. But LG's comments seem to imply that $60 may be the going rate.

Subscribers to digital cable systems who don't intend to pick up over-the-air signals may not need STBs. Instead, these devices would be intended for the 34 million US households, by National Association of Broadcasters estimates, that still rely on terrestrial broadcasting, and for whom billions of dollars in transmitter upgrades has already been invested by TV stations.

Still, these STBs will likely be fairly utilitarian devices, which may lead some to wonder why a manufacturer would want to charge a premium. One clue came from Samsung today, whose representatives at the same meeting with LG cited the fact that the coupon program takes place in January, after the holiday purchasing season has already ended - thus making promotions difficult during an historically slow sales period.

Congress has set aside $990 million for the converter box subsidy, with the option of increasing funding by $510 million if, for some reason, it turns out the $80 per household isn't enough. Lawmakers had originally planned to set aside $463 million until they had seen the first wave of cost estimates by electronics manufacturers.