Exec Nervous About Supply Of DTV Converter boxes

At the Consumer Electronics Show (CES) in Las Vegas, Best Buy Inc.’s chief executive Brad Anderson is reported to be very nervous about the supply of converter boxes.Will the retailers meet the demand? In Bussiness Week Anderson looks at the possible lack of converter boxes in store saying: “I think it’s one of the biggest risks our industry has.”

Steve Eastman, VP at Target thought more the transition as a great marketing force and about his own business, saying “From a category standpoint, I think it’s great _ it’s getting people to talk a lot about HD
and what technology they have in their home,” he said according to Washington Post.

(Once again a proof that the “HDTV hype vs DTV transition needs” will be a challenge for under-informed consumers to figure out and relate to.)

In my mind this is one of the worst scenarios you can imagine. Consumers are pushed by infomercials and government sponsored information campaigns to act on a very specific alert, if they can’t fulfill that it is a very deep crisis that will put consumers trust at stake. And the whole transition as such!

I think the background is this:

Most of the converter boxes are manufactured overseas. Parts for converter boxes is a global commodity. Many other countries like U.K and other European countries are gearing up for transitions. That means many markets are competing for converter boxes to be delivered to the domestic consumers.

We experienced in Sweden some critical moments of supply shortages of converter systems for apartment buildings but never for consumers. Some components where flown in from China on passenger airlines and rushed to factories to be assembled in a rush. One of the reasons Sweden didn’t have dips in supply, is that Sweden has the same technical DTV standard as most other countries. US has picked a different version together with Japan and South Korea. That means in my mind, U.S will have a different position to be able to have supply from manufacturers general production lines. That also creates a shrinking market of supply for the U.S.

Also, the tests for converter boxes in Sweden,were changed and made slimmer during the transition to become faster and to a lower cost. At one point they were free to speed up the process and lower the threshold to enter the market.

Converter boxes that are to be sold in the U.S is the first generation of boxes. That will always mean more problems. Look at the first generation of Iphones for example. The difference is that it is easy to update the software in an Iphone. For an elderly consumer it is pure rocket science to download new software to their converter box manually. You have to do that if the box can’t make it automatically. And boxes will probably differ on this. NTIA should demand that boxes can update software automatically. Today that is not the case. It would probably increase the cost.

Boxes that are to be eligible for the converter box coupons must meet certain rules and, I think, must be tested before they enter the market. NTIA should make sure that the testing is made as easy and swift as possible so it doesn’t become a bottleneck that delays boxes to enter the market. Today no one have asked any questions about the procedures for testing and how the boxes are made.

This is one of the most important parts of a transition to keep track of. If there is a lack of boxes in stores consumers will become very very upset.

Anders Bjers

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2 Responses to Exec Nervous About Supply Of DTV Converter boxes

  1. crolia thomas says:

    Some countries are always out to stick it to the consumers, especially the elderly. What a shame! How much are these converters going to cost?

  2. I live in milwaukee Wi. Today 2/5/08 I tried to locate a converter box distributer in my area and could not find one in a 30 mile radius. If I applied for a coupon that is only good for 90 days and it expires while trying to locate a vendor will they renew them?.

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