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Millions Could Be Without TV - Broadcasting & Cable

Millions Could Be Without TV

Powell's plan to speed digital delivery angers broadcasters, threatens HD
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Imagine this nightmare scenario: Millions of viewers see their TV screens go blank. Hundreds of stations are forced to give up their analog channels years sooner than expected. The horror comes courtesy of FCC Chairman Michael Powell, who is quietly floating the idea on Capitol Hill.

<p>Tuning In</p><p> Here's a snapshot of how people get TV, and how the broadcast DTV revolution has barely started</p>

U.S. TV homes:

111 million

Pay-TV homes:

94 million

TV homes with pay TV:

85%

HDTV sets:

9 million

TV homes with DTV:

8%

Stations airing in DTV:

1,155

Cost of digital conversion so far:

$4.5 billion

Total expected cost:

$16 billion

His goal is to accelerate the move to all-digital TV by allowing cable operators to convert a digital signal to analog. That household would then count toward the threshold at which broadcasters must return their spectrum.

The idea would radically rewrite the rules for America's DTV conversion, which calls for stations to give back analog channels when 85% of a market's homes receive a digital signal, either free over-the-air or by cable or satellite. If analog cable households count toward the 85%, stations in markets with heavy cable penetration would have to shut off their analog service sooner than expected.

Broadcasters are furious at the specter of losing millions of viewers. And their outrage is magnified by the prospect that cable and satellite homes won't get broadcast HD and multicast services that stations have spent billions ramping up to deliver.

"It would be a breach of faith," says Nat Ostroff, Sinclair Broadcast Group vice president of new technology. "This was not the understanding under which billions of dollars have been invested in HD delivery systems and transmission."

One distraught broadcast executive blamed the White House, since Powell is a presidential appointee. "I'm telling my Republican friends that broadcasters will work to defeat President Bush because Powell has to go."

In the past few weeks, FCC Mass Media Bureau Chief Ken Ferree has briefed some members of Congress, their staffs, and industry officials. Industry trade groups, such as the National Association of Broadcasters and the Association for Maximum Service Television, have been told details but declined to comment. The National Cable & Telecommunications Association has long stated it would accept a mandate to carry a single downconverted channel but opposes an obligation to carry multicast channels.

One government source gave the plan a "less than 50% chance" of Congressional approval; the risk of cutting service to free-TV viewers is just too great. Sure, Powell could conceivably implement his vision without Congress, but he would need the approval of two other FCC commissioners. Sans an informal OK from lawmakers, his efforts are probably doomed.

In theory, the government has penciled in a target date of Dec. 31, 2006, for taking back analog spectrum. In reality, because of the slow sales of digital sets, that date may be delayed a decade or more.

Powell's counterattack? Changing how the government tallies the number of homes served by digital. For now, only viewers who buy digital TV sets capable of receiving a broadcaster's signal directly or via cable or satellite count toward the 85% that triggers an analog takeback. Inverting that premise, Powell says viewers also should count when stations' DTV broadcasts have been "downconverted" by cable or satellite companies and delivered in the old analog format.

As a result, the vast majority of Americans who have not yet bought DTV sets would be counted as digital viewers, even though they won't be equipped to watch the beautiful HD pictures or multiple and interactive programs for which digital was created. That means most U.S. markets are at or near the level where an analog takeback would happen. Pay-TV penetration generally stands at about 85% nationwide. Consequently, the 30 million-plus Americans who don't get cable or satellite forfeit a picture unless they fork over hundreds apiece for digital converters—or the government steps in to subsidize the equipment.

Many homes are still completely reliant on broadcast for TV. Cut off the analog signals, and 6.8 million homes won't get any TV at all. Compounding the dilemma, cable subscribers have countless extra sets in kids' bedrooms or basements still reliant on rabbit ears. Problem markets include New York (663,380 broadcast-only homes), Cleveland (238,000), San Francisco (299,000), and Seattle (237,000).

In a handful of markets, Powell's plan might accomplish nothing. Geographically flat areas with strong broadcast reception, such as Salt Lake City and Chicago, or areas with lots of Latin immigrants, such as Los Angeles and Dallas, remain substantially below 85% pay-TV penetration.

To sell broadcasters, Powell says they would one day be entitled to mandatory cable carriage for the multiple channels that digital allows them to deliver. When that right kicks in is uncertain. In addition, he believes broadcasters will save the exorbitant energy bills generated by transmitting both analog and digital.

The savings would be substantial. Bob Lee, general manager of WDBJ Roanoke, Va., told Congress that offering two transmissions adds $72,000 to his annual electric bill. But he and his colleagues say a single channel shouldn't be forced on them until nearly all viewers can get the full benefits of DTV.

Why is Powell floating such an explosive plan?

As FCC head, he is under intense pressure to find room for the new communications services expected to drive economic growth. Also, in the wake of 9/11, Congress wants more spectrums for police, rescue, and other public-safety communications. Also, TV occupies the prime beachfront of the communications spectrum. Transmissions travel better through the frequencies TV straddles, and, in many markets, a number of channels reserved exclusively for TV are unused.

Moreover, broadcast rivals have called on Congress to let satellite-TV companies import more network HDTV signals from distant cities into local markets. "There is no evidence that the percentage of American homes with compliant sets exceeds even the single digits," says EchoStar general counsel David Moskowitz. "The 15% loophole ensures that broadcasters will squat on both the analog and digital spectrum for years, if not decades, to come."

When broadcasters do return their analog channels, digital channels will be compacted to a much smaller spectrum plot—from today's 70 channels to 50 or fewer. The reclaimed channels will be sold to the highest bidder, and hundreds of billions could flow into Treasury coffers.

Powell is encouraging Congress to consider a subsidy similar to one in Berlin, where the government helped pay for converters for those who couldn't afford DTV sets. A congressional source, though, predicts that the budget crunch makes a subsidy of digital boxes dead on arrival.

Of course, no politician wants the blame for depriving TV to hundreds of thousands of voters. If Congress isn't willing to spend a portion of the spectrum-auction profits on digital-to-analog converters for homes without pay-TV, Powell's plan is a goner.

That's the message concerned broadcasters are sending.

Additional reporting by John Higgins and Ken Kerschbaumer

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