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Bewildered by the digital revolution? Broadcasting & Cable is here to help sort it out
Staff -- Broadcasting & Cable, 4/9/2000 8:00:00 PM
1. Does anyone actually think high-definition television is ever going to be regularly deployed to viewers other than for the Super Bowl, big movies and Oscar-like events?
HDTV supporters are convinced there is demand for high-definition programs, especially movies and general-season sporting events. "Prime time dramas are really good to look at, but live sports in HDTV is dazzling," says Matt Miller, chief executive of DTV chip maker NxtWave Communications. The real question is whether that service will bring stations sufficient income to compete with multicasting and data services.
2. Broadcasters have been searching for the "killer app" that will spark consumer demand for digital television receivers. Has datacasting replaced high-definition pictures or multichannel service in station owners' minds?
Stations that rely on one type of digital service are likely to get burned. Instead, DTV broadcasters must offer several platforms and cater to consumers' varying needs. But datacasting does give stations a new type of product to offer rather than simply prettier pictures or more channels. "More people are becoming educated about the capacity and power of the digital asset," says Molly Glover, director of new media development at Granite Broadcasting. "Those participating in this service are going to become digital sooner rather than later."
3. Who are stations' likely customers for datacasting, and how would broadcasters make money from it?
There are a number of ways, such as advertising, getting a cut of goods sold and leasing of the spectrum itself to data providers. Geocast Network Systems, one of the most prominent outfits planning to help broadcasters use their surplus broadcast spectrum, plans to market to household consumers and share advertising and e-commerce revenue with broadcast partners.
The major datacaster groups-Geocast, iBlast and the Broadcasters'Digital Cooperative-would only use a small portion of member stations' digital spectrum.
The rest would still be available for conventional programming and multicasting, though high definition may be more of a problem. If this works for broadcasters, of course, it could help erase the loss of income that is likely as networks cut affiliate compensation. And if it really works, it could be an enormous and brand new revenue stream.
4. What services would be offered?
Content could vary from coupons and catalogs to full-motion video and CD-quality audio-all without tedious delivery times. Some datacasters see their services complementing a cable modem, with the modem acting as a back-channel to allow for purchases of goods.
5. How would consumers get datacasting?
Datacasters would sell space to firms that could use it to allow consumers to download music, computer applications and other items quicker than through the conventional Internet. Special interactive receivers could be attached to television sets, or broadcast receiver cards could be inserted in personal computers. For example, iBlast expects future PCs to come with an antenna about the size of a desktop flag.
6. If broadcasters rake in cash from spectrum-pooling businesses like Geocast, iBlast and Broadcasters Digital Cooperative, will Congress rethink its decision to give the industry free spectrum?
Broadcasters still wince at the notion of getting "spectrum for free," but increasingly it looks like they did get an incredible deal. Early government estimates pegged the worth at $70 billion, while some broadcasters said it's a fraction of that amount-perhaps $5 billion.
The real answer may come soon. The government will auction spectrum now used for analog TV channels 60-69 in June to new users, providing an indication of what spectrum is worth.
Even if bids are high enough to shock lawmakers, there is little chance the government will rewrite the terms for the transition. If spectrum leasing turns into a lucrative business, so much the better for the government's coffers: Uncle Sam gets 5%.
7. Will broadcasters face increased public interest obligations for their digital businesses?
Not if they can help it. NAB and other industry groups are fighting hard against any new duties, especially any that might reduce the profits from all that free spectrum. "To burden new services with children's programming, political broadcasting and other far-ranging requirements would inhibit their introduction and development and is patently contrary to the public interest," says Richard Zaragoza, counsel for the State Broadcasters Association.
Under congressional order, the FCC is examining whether digital broadcasters that offer multiple channels and ancillary services should face increased obligations than they now face for analog operations. The review has rekindled debates over imposing free airtime for political candidates and setting specific quotas for local and public affairs programming, but lawmakers would likely balk at efforts to impose new rules in those areas.
So, free additional channels are unlikely to face new obligations. Subscription or pay-per-view services, which already are subject to government fees, will largely be free of any obligations, save for possible restrictions on interactive marketing to children and efforts to track their viewing habits.
8. Is the lack of a clear business plan for DTV hurting broadcasters'ability to get the financing they need to build digital facilities?
Looking at it one way, getting Wall Street interested will be a cinch if digital broadcasters can repeat the trick of many dotcom retailers: Neither one has figured out how to make money off their new businesses, but dotcoms tend to get rewarded for that.
Stations themselves are making gobs of cash in their traditional analog operations, a definite negative in the crazy digital world. Because of their longstanding ties to the capital markets, major station owners and the networks have ready access to financing.
"The major players have a lot of capital and expertise they could throw at digital TV," says telecommunications attorney David Siddall. Smaller or financially struggling operations, however, may have to lease part of their digital spectrum to the large telecommunications firms to finance their buildouts.
9. Nobody really cares about Jay Leno in high-definition or most of today's other HDTV offerings. Will stations ever have high-quality digital programming, given that equipment manufacturers and Hollywood can't settle on copy-protection standards?
Frustration with Hollywood has prompted the FCC to threaten the "big stick" of government-imposed copy-protection rules.
But in reality, the agency barely has a twig to swing. The FCC has near zero authority over copyright issues. But until strong copy protection is reality, HDTV supporters are encouraging networks and stations to produce more high-definition content in-house, especially sports.
10. What's the copy-protection fight about?
Hollywood, led by the Motion Picture Association of America, worries that viewers will pirate perfect digital copies of movies and other programs and wants digital recorders to limit the number of copies that can be made from a particular program and even the number of times a recording can be watched.
The Consumer Electronics Association says viewers should have unlimited personal use of their digital libraries.
11. DTV sets still won't work with cable. How can broadcasters tap into the 70% of households that rely on cable for TV services, if the cable industry and equipment makers are still haggling over something so trivial as what size sets will be labeled "cable ready"?
Manufacturers want customers to know that small digital sets designed to fit on kitchen counter tops will work with cable, but don't want to outfit them with costly interactive connections that are unlikely to be used in tabletop sets.
The cable industry doesn't want these sets to be labeled cable ready, in large part because they remember the consumer complaints when the earliest "cable-ready" analog sets had to be outfitted with converter boxes when cable systems expanded their channel lineups. Both sides say they are close to an agreement, perhaps by labeling sets as "one way" and "two way," and it should not delay the Christmas 2001 introduction of cable-ready sets.
12. Will disputes over DTV transmission standards, particularly the 8-VSB modulation technology, slow the DTV transition?
Forget about a delay in the government's timetable. FCC Chairman William Kennard and other agency officials say no how, no way will they slow down the rollout schedule.
Although 8-VSB supporters say opposition to the current technology is driven by some stations'desires to postpone their buildout costs, broadcasters have already undercut that argument. The evidence: Even Sinclair Broadcasting officials, the most ardent proponents of a change in the transmission standard, say a station's cost of switching from 8-VSB to their preferred method, Europe's COFDM, would be so low that there is no reason to slow down construction of towers and digital facilities.
"There is no reason to affect the buildout schedule, because we know we will have COFDM one day," says Sinclair technology chief Nat Ostroff.
13. If the transmission method is altered, will the government be forced to rewrite the digital channel allotments?
A new transmission standard would result in signals with different propagation and coverage areas than the current method approved by the Advanced Television Standards Committee. But the FCC could keep the same allotments if stations simply adjusted their power levels and used antenna pointing to keep the signals within their allotted geographic boundaries.
14. So why the fear of allowing COFDM?
Equipment manufacturers say that adding COFDM technology to DTV-receiver manufacturing lines would slow the rollout by two to three years.
Critics of 8-VSB say the real fear is that financially troubled Zenith Electronics Corp., which holds key patents on today's standard, desperately needs to keep its technology as part of the U.S. digital standards to survive.
15. Will the FCC set standards for consumer receivers?
It's too early to say, given that FCC field tests of the latest 8-VSB receivers could last until fall. But equipment manufacturers and, for now, the agency oppose broadcast industry demand for government-imposed receiver performance levels.
"With early adopters spending thousands of dollars on a TV set, manufacturers will make sure performance exceeds expectations," says Michael Pettricone, vice president of government affairs, Consumer Electronics Association.
16. Has the FCC hindered the digital transition?
Depends on your point of view. The NAB and other groups say the FCC should be doing more: imposing digital cable-carriage rules and forcing quick resolution of cable-compatibility disputes.
"Building stations doesn't mean anything until we have an audience to receive digital signals," says NAB Lynn Claudy, technology chief. But the agency, cable and equipment manufacturers insist that the government would make a decision that prevents the type of flexibility needed for innovation, which ultimately would stifle consumer demand for digital service.
17. Are zoning and community complaints slowing the construction of DTV towers?
In isolated markets, yes. But in general, tower-siting problems are not slowing the rollout.
18. Auctions for returned spectrum begin in June and are required to occur again by 2002. Are the likely winners expected to fight for new legislation that would force broadcasters to leave the spectrum before DTV household penetration reaches 85%, the level that would trigger the scheduled return of all analog spectrum?
Although Kennard is encouraging broadcasters to accept early buyouts from spectrum winners, fears of a forced diaspora are overblown. "The broadcasters have rights that Congress gave them," he explains, "and nobody can take that away."
Others say the rollout out may not take as long as broadcasters predict anyway. To reach 85% penetration, cable companies and satellite providers could equip their converter and set-top boxes to receive signals from over-the-air digital antennas.
"Companies with a stake in the transition might assist in some fashion," says Washington attorney David Siddall, whose clients include Geocast, which wants to partner with broadcasters to offer datacasting services to consumers, and NxtWave, which is developing DTV receiver chips.
19. Will new government protections for low-power TV stations threaten the digital buildout?
Existing full-power stations have nothing to fear from the new safeguards, which protect eligible LPTV stations from losing their frequencies to new full-power stations that covet their channel allotments. Existing broadcasters, however, would not be able to relocate from their current digital allotments to new channels that protected LPTV outlets call home.
To be secured from encroachment, LPTV stations must broadcast 18 hours a day and offer three hours daily of local or self-produced programming. No more than 400 of the country's 2,200 LPTV licensees are expected to qualify.
20. Regulators say they may take channel 6 away from TV stations and give it to radio stations. Are they serious?
Despite repeated rejection by the FCC, public radio stations conjure this idea like a zombie from the grave. Noncommercial radio stations want the frequency for TV channel 6, which frequently interferes with the noncommercial band.
The agency's Mass Media Bureau has agreed to consider the idea again as part of the agency effort to create a digital standard for radio. But FCC sources say the commissioners themselves aren't giving the idea much attention and are unlikely to approve it.
21. Is the transition as a whole so screwed up that the broadcast, cable, computer, consumer electronics industries need a commission or a summit to fix it?
Whether the rollout is screwed up or simply suffering the inevitable snags of a major technological innovation is a matter of debate. But already there are industry or government panels and task forces devoted to fixing the specific problems.
It's unlikely a grand summit will be convened to tackle them all at once.
22. Digital proponents like to compare the technology's birth with other technological advances, such as color TV and the VCR. What's the real way to look at the transition?
Remember the CBS color wheel? No? That's because the FCC reversed itself and dumped the CBS color technology for RCA's rival method.
So, given that the government has tried to spur the industry-wide transition, the comparison to color TV is apt.
Will the government similarly step in to solve today's technology disputes? So far, no.
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