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TV Tax Paid by Big-Box Blitzers and Small-Business Supporters

Even with the much-hyped discounts, Black Friday deal hunters are still paying too much for their televisions.

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As a huge winter storm barreled toward the eastern half of the country last November, threatening freezing rain and several inches of snow, tents were popping up outside big box stores everywhere. “We’ve got a propane heater, and we threw a tarp over the tent to keep out the cold,” one man told USA Today in the days leading up to the most recent Black Friday. In Ohio, two tents went up outside a Best Buy more than a week before Thanksgiving.

Any product category could see discounts, but flat screen televisions often are the biggest draw. In the hours before the big day, hundreds of people wait anxiously for the doors to open, all in the hopes of getting a good deal.

How, then, might these deal hunters react if they knew that even with the Black Friday discount, they’re still paying too much for their televisions? As often happens, the extra cost is due to outdated mandates imposed by the federal government. Several years ago, an international standards body called the Advanced Television Systems Committee (ATSC) settled on a technical standard for digital over-the-air broadcasts. The Federal Communications Commission (FCC) requires television manufacturers to include a digital TV tuner with a specific collection of technical protocols that display digital TV signals sent via antenna or cable box. This requirement ends up costing about five dollars extra for every set sold.

Of course, the added cost of the ATSC mandate is felt by those who are buying TVs for reasons other than programming. As I have written previously, small businesses — and therefore many female-owned businesses — likely bear this burden disproportionately, because they are growing faster than the national average.

Though Black Friday may be the source of more tales of “extreme consumerism,” the following day is Small Business Saturday, a movement that arose in 2010, urging patronization of smaller local businesses. It is also a day for us to consider the hurdles faced by these “mom and pop” shops. The reality is that many smaller businesses never use televisions to receive digital broadcasting. Rather, they use TVs for a variety of displays and closed-circuit content. So these businesses are paying for multiple licenses they will never use. And if they are a seller of consumer electronics, our small-business customers are suffering the same fate as those that join the tent lines at the big boxes.

This de facto tax on consumers and small business owners would be bad enough if the tuner were a technical necessity. But for many applications, it’s not. In 2009, when the government enshrined this requirement into law, digital television broadcasts were the next big thing. Consumers who wanted to hook a fire hose of content to their shiny new TVs basically could choose from cable services or high-def over-the-air broadcasts. Today, TV signals are far from the only option available. Netflix, Hulu, Amazon Prime, YouTube, Vimeo and myriad other streaming services bring programming directly from the Internet to the television.

The foul-weather campers outside Best Buy and Target might not know about the ASTC tuner tax they’re forced to pay. But every cost-conscious camper knows that content providers like HBO are increasingly offering stand-alone subscription services online, without needing a cable box, and without needing an ATSC tuner. How would cord-cutters feel if they knew their brand-new television was required to carry an antiquated tuner that needlessly raises the price for everyone?

Skeptical lawmakers have called it a “hidden tax on American consumers,” and they’re right. American consumers buy about 40 million televisions each year. At five dollars per set, that’s a $200 million annual tax on consumers. The money goes to a group called “MPEG LA,” a privately-run for-profit patent pool administrator selected by the FCC. Adding insult to injury, a quarter of the patents within the ATSC standard are expired. Manufacturers are required to license these old patents, and likely pass the costs to the shopper.

It’s five bucks to MPEG LA for the ATSC standard, but that’s just one of many. Groups have complained to the FCC that American consumers pay $20, $30, perhaps as much as $40 extra in royalties for standards that may not be used. Who’s going to tell the frozen guy in the tent, spending the past week of his life camping out for that cheap TV, that some of those savings are offset by archaic government mandates and unnecessary licensing fees? Happy holidays!

Barbara Kasoff is president and co-founder of Women Impacting Public Policy (WIPP), a nonpartisan public policy organization advocating on behalf of its coalition of 4.7 million businesswomen, including 75 business organizations. Kasoff previously owned Voice-Tel of Michigan, where she applied her skills in management and communications to empower her companies to secure a solid foothold in the world of telecommunications. For many years, she has been an active supporter of small businesses and women entrepreneurs. She continues this work nationally and internationally speaking, educating, and advocating on leadership and the important policy issues that affect business growth.

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