VIEWPOINTS : HELPING HAND, NOT A HANDOUT : U.S. Can Spur Industry’s Development of HDTV Without Giving Away Billions of Taxpayer Dollars

The excitement over high-definition television is taking the thumbs-up, thumbs-down course of many media-driven phenomena in our society.

A few months ago opportunities abounded, as proponents of HDTV, which features sharper, movie-quality images, spoke of a product with U.S. sales potential of at least $10 billion annually early in the next century. More important, it was argued that HDTV’s high demand for chips will ensure the survival of American makers of semiconductors.

The American Electronics Assn. and other supporters of HDTV climaxed their drive with a call for $1.35 billion in government money for research, development, manufacturing and marketing. The alternative: Japanese and European dominance of another leading technology.

Now the big guns of laissez faire are at the firing line and laying down a barrage: Government financial support for HDTV smacks of Michael S. Dukakis-style industrial policy, the very thing the voters supposedly repudiated in November.

And it’s not clear that a market for “super television” will ever exist, detractors say. HDTV supporters have “concocted a witch’s brew of proposals for massive public sector intervention,” American Enterprise Institute analyst Claude Barfield wrote recently.

Perhaps the uproar will die down in the weeks to come. Then the Bush Administration, which has said it will unveil its own HDTV plan in July, can ponder the complex question in a cooler atmosphere. The Administration has recognized that with foreign competitors pouring millions into HDTV development, the United States cannot ignore this technology.

What is needed now is a policy that encourages U.S. industry without irreversibly committing government resources. Their rhetoric aside, both HDTV supporters and skeptics have arguments and ideas that are worthwhile. Some of the more important ones:

- The Defense Department shouldn’t be relied upon to jump-start the HDTV industry.

The Pentagon’s Defense Advanced Research Projects Agency, or DARPA, this year is putting $30 million into HDTV research and development, in part because the military needs a healthy U.S. semiconductor industry for weapons manufacturing and because HDTV variants will have uses in military simulations, mapping and intelligence analysis.

Using DARPA funds for these purposes is OK, because the agency has a 30-year track record of placing money wisely for military goals.

DARPA, however, isn’t designed for major involvement in developing a civilian sector, mass market product. “We’re talking about reestablishing an industry (consumer electronics) that the U.S. has given up,” said Ron Brumbach, head of the Boston Consulting Group team that produced the AEA’s recommendations.

- Keep overall government financial support modest. It’s not clear whether HDTV has the potential to be just a better television screen or the basis of a digital electronic system for education, work and shopping as well as entertainment.

For all his enthusiasm for HDTV, Brumbach points out that opinion polls have not established that consumers want the technology. Companies are reluctant to enter the market because televisions are a risky, low-profit sector.

At this stage, it seems imprudent to commit more than $1 billion to an unrefined idea that business is less than enthusiastic about. It is more appropriate for the government (apart from the DARPA) to contribute a modest share to key companies such as Zenith and AT&T; that are equipped to handle the big investment that HDTV will require.

And the industry should be willing to risk its own money on a substantial part of the cost. If the government gets too involved, “people will line up at the Commerce Department for special deals,” Brookings Institution economist Robert Litan said. “It could shift the energies of American corporations from the marketplace to getting government assistance.”

- Don’t undermine our trade policy. For decades, the thrust of this policy has been anti-protectionist and anti-subsidy.

The AEA proposal, however, would mandate U.S. production of HDTV and purchase of U.S.-made chips. This could lead to a long-term commitment of government funds to supporting inefficient domestic production. Backers of this approach would argue that our foreign competitors don’t play by free trade rules, so why should we?

But in the long run, this attitude will weaken our arguments for open markets abroad. This would be unfortunate, because the day is past when the domestic market alone is sufficient to keep American companies growing. This should be obvious, but U.S. firms still aren’t getting the message, according to the findings of a massive study on productivity conducted by the Massachusetts Institute of Technology and released earlier this month.

- Expand antitrust law exemptions. American companies’ dominance of the domestic marketplace has required strict observance of antitrust principles in the past, but with the emergence of global competition, the threat of collusive behavior has lost much of its punch.

Earlier in the decade, the government gave companies the go-ahead for joint research efforts. Now it seems appropriate to expand this to joint production of some new products such as HDTV. But this move will make it even more important to shun trade protection of the HDTV industry. Foreign products will be necessary to maintain price competition.

The Bush Administration should also carry through on its commitment to make the R&D; tax credit permanent. At the same time, the Administration should push for the speedy adoption of HDTV broadcasting standards by the Federal Communications Commission, so that the industry can plan accordingly.

The most important thing for the Administration to do, though, is to keep its head. No one technology is sufficient to revive American consumer electronics completely, but with the Europeans and Japanese hard at work on HDTV, the government should create some incentives to keep America in the game.