Well, I'm no engineer. But when cell phones went from analog to digital it not only freed up a lot of bandwidth (more calls can fit in less frequency) but also decreased the power needed to transmit.

If that is analogous to television's conversion, they get a key piece of their spectrum back, the reception footprint may actually grow, and they don't need to give as much bandwidth out (or they can at least fit more content into the same amount).

In any case, it can be argued that the cost is justified since the FCC (AKA the government, AKA us) gets a lot back in return. It's not just a gimmick to sell TVs and set-top converters (although it's probably that too).