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‘Hidden TV Tax’ Lets Company Profit From Every Set Sold

American consumers pay a “hidden tax” of $20 to $30 on every TV they purchase, and all $200 million of the annual proceeds accrue to a single for-profit company.

The Advanced Television Systems Committee (ATSC) sets standards for technologies that decode digital cable feeds, known as ATSC tuners, and their use is mandated by the Federal Communications Commission for all television sets sold in the United States.

Licensing rights to the tuners, though, are owned by MPEG LA, a for-profit Colorado company that charges a $5 fee for the compulsory product.

“The FCC’s disconnect with evolved technology and consumer interests is … evident in its own misunderstanding of a hidden TV tax pushed on consumers in the form of something called the Advanced Television Systems Committee patent pool,” argues Andrew Langer, president of the Institute for Liberty, in an op-ed for the Washington Examiner Monday.

MPEG LA also collects an additional $2 per set from licensing fees for MPEG-2, a separate standard related to video coding, bringing their total take to $7 for every television set sold in the United States. (RELATED: Consumer Tech Rip-Off From Patent Pools)

“That might not seem like a big deal to most consumers, but collectively it adds up to $200 million each year,” Langer says, pointing out that similar technologies cost about $1 per set in most of the rest of the world.

Part of the problem is that “nearly a quarter (22.4 percent) of the patents bundled into the ATSC standard are expired,” yet because they are packaged together, MPEG LA retains exclusive licensing rights to the whole bundle. Moreover, the standard has no relevance to the increasing number of consumers that are “cutting the cord” and abandoning cable, but such customers are still forced to pay the associated fees.

David Balto, a public interest antitrust attorney in Washington, D.C., claims in a recent study that while “patent pools may generate significant efficiencies and pro-competitive benefits … [they] may also cause anticompetitive effects if they result in price fixing, due to the collective pricing of pooled patents, coordinated output restrictions among competitors or foreclosure of innovation.” (RELATED: State Dep’t. Contract Officer Steers $52 Million To Secret Husband, Daughter)

Balto asserts that vigorous oversight is necessary to prevent the exploitation of patent pools, but notes that “[no] federal antitrust enforcer has challenged a patent pool in over 15 years,” even as patent pools have increased in size and complexity.

“These developments call for increased vigilance and enforcement by the antitrust agencies to ensure that pools and similar collective pooling and IP licensing arrangements properly fulfill their pro-competitive purposes … and do not devolve either by internal structural forces or anticompetitive intent on the part of pool members into mechanisms for suppressing competition and innovation,” Balto concludes. (RELATED: Congress’ Patent Reform Efforts Don’t Go Far Enough)

Yet Langer claims that, “The FCC persistently refuses to address these hidden fees, either because it is misinformed or content to turn a blind eye,” and urges Congress to reject the agency’s request for a 20 percent budget increase as long as commissioners continue to “[demonstrate] ignorance to their own policy.”

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