Huge Pentagon Grants Sought to Develop HDTV : U.S. Electronics Firms to Ask for $100 Million a Year, $1-Billion Loan Guarantee
A major group of U.S. electronics firms will urge Congress to help the industry develop a new generation of television technology through Pentagon grants of $100 million a year over the next three years and loan guarantees of as much as $1 billion, industry sources said Monday.
The American Electronics Assn. plan for entering the high-definition television business, which will be presented to the Senate Commerce Committee today, has been long awaited because of the intense interest on Capitol Hill and within the Bush Administration over how to prevent U.S. companies from being shut out of a field now led by Japanese and European concerns.
HDTV, as it is called, promises to bring a much higher quality of picture and sound to home television in the 1990s and is expected to be a $50-billion market by the end of the century. It is also likely to help spur major advances in imaging and other technologies useful in a wide range of electronics applications. But the development of the new technology will be costly, and U.S. firms have been reluctant to risk their own capital in a field where foreign companies are already well entrenched.
The AEA plan, which was prepared by the Boston Consulting Group under the aegis of 36 major electronics companies, envisions the establishment of a new corporation to undertake joint development and manufacturing of high-definition television equipment. It would rely largely on U.S. firms to support the effort with their own funds, sources said, but would not necessarily exclude foreign companies.
“It’s clear we’re going to need a lot of new money invested in the business if we are going to remain competitive with the Japanese in HDTV,” said one industry official involved in preparation of the report. “Unfortunately, there is no way to generate all that capital through private sources.”
Plans to Spend Less
The AEA proposal was scheduled to be discussed Monday night by representatives of the firms backing the study, sources said, and could be subject to minor modifications before it is released.
The Pentagon, through its Defense Advanced Research Projects Agency, plans to spend only about $10 million a year on HDTV research, far short of what the firms think is necessary to revive an American consumer electronics industry.
The Defense Department has agreed to support work on television technology because it needs high-resolution computer screens for military uses and because it wants to help provide a new market for U.S. semiconductor manufacturers. But the defense agency officials have been reluctant to serve as a major source of funds out of fear that Pentagon demands could undercut the ability of U.S. firms to compete in civilian markets.
Commerce Secretary Robert A. Mosbacher, who is in charge of developing the Bush Administration’s policy on the new technology, has been seeking to help U.S. firms enter the HDTV business by proposing to relax antitrust laws.
Even before taking office, Mosbacher told Congress that he favors allowing American companies to form manufacturing consortiums to help them compete with the Japanese and Europeans, and he has pursued that approach during the past few months.
But Mosbacher so far has been unwilling to endorse any requests to commit large sums of government money to the effort, telling industry officials that the federal budget deficit precludes major new expenditures on such risky ventures.
Global Battleground
Moreover, U.S. firms are already allowed to work together on research and development without violating antitrust laws, and most analysts in the field doubt whether further relaxation of antitrust restrictions alone will be enough to encourage American companies to re-enter the consumer electronics business.
“We’re in the midst of a fierce global battleground,” said David Staelin, a leading electronics engineer at the Massachusetts Institute of Technology. “Doing something about antitrust may be a fine idea, but it’s going to take a lot more than encouraging words from the government to match what our competitors are doing.”
Several members of Congress, including Rep. Edward J. Markey (D-Mass.) and California Rep. Mel Levine (D-Santa Monica), have been urging the Bush Administration to make HDTV a model for rebuilding U.S. competitiveness in a number of high-technology areas.
But others question whether the government should focus its support for new technologies on high-definition television when U.S. firms are so far behind their foreign competitors.
With the exception of Zenith, there are no U.S.-owned manufacturers of television sets or video recorders. The 36 companies behind the HDTV proposal include Zenith along with IBM, American Telephone & Telegraph, Apple, Digital Equipment, Hewlett-Packard and Motorola.
