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Digital TV Finds It Hard to be Free

Broadcasters have spent billions on the technology–but is free over-the-air digital TV a viable alternative to cable and satellite?
October 14, 2004

FCC chairman Michael Powell’s once-in-a-blue-moon halftime appearance on ABC’s Monday Night Football was a bid to publicize the commission’s new website promoting digital television. But Powell’s cameo was also notable for capturing the dilemma of broadcast DTV. The push for digital TV originated with broadcasters as a quest for a marketing edgea way to endow over-the-air offerings with features like multicasting and on-demand programming and thus better compete with cable and satellite. But with the decreasing importance of the networks and their local affiliates, broadcast digital TV remains a multibillion-dollar venture in search of an audience.

Take Monday Night Football. ABC broadcasts the popular show in high-definition. But most of the high-definition viewers caught Powell’s appearance on the October 4 broadcast over cable or satellite. A mere four million of the nation’s 110 million television sets are equipped with the HDTV tuners that can receive digital broadcasts over the terrestrial airwaves, says Gerry Kaufhold, an analyst who covers converging markets and technologies for In-Stat/MDR in Scottsdale, AZ. Those sets are HDTV models equipped with built-in receivers, or TV sets connected to set-top boxes that are either standalone models capable of tuning in local over-the-air broadcast HDTV, or boxes sold by satellite operators that include an antenna input to pick up local HDTV.

To broadcasters, who Kaufhold estimates have spent $10 billion to build out digital infrastructures that will transmit their programming signals in bits, four million is a puny audience. The tiny number of viewers capable of receiving the sharp sound and crisp picture of broadcasters’ swank new digital offerings helps explain why broadcasters are reluctant to abandon their analog programming–and the analog channel over which they broadcast it.

Critics say the broadcasters’ efforts to delay the handover are creating a spectrum logjam that prevents public-safety communications and wireless carriers from acquiring much needed additional bandwidth. Overshadowed in the policy debate and digital TV’s slow start is the question of broadcasters’ relevance. With 90 percent of households now subscribing to cable or satellite service, many question whether broadcasters still play the essential role that was conferred on them long before shopping for a TV required being able to sift through aspect ratios and nuances of the ATSC standard.

From any point of view, broadcasters have a sweet deal. They are considered trustees of the public airwaves, and so–unlike broadband carriers–they don’t pay for the vast amounts of spectrum they use. Nor do they pay for the additional channel, or 6 megahertz of spectrum, that the FCC loaned each station for use while it completes its transition from analog to digital programming.

In recent weeks the broadcasters’ position has clashed with the Federal Communications Commission, the Senate Commerce Committee, and even the 9/11 Commission. The FCC is anxious to recover the loaned spectrum so it can divvy up the channels. The commission plans to parcel some to public-safety networks – an imperative seconded by the 9/11 Commission Report – and auction off the rest to wireless broadband carriers in a bid to both spur new technologies and bring much needed revenue to federal coffers. Auctioning off the publicly owned analog spectrum could reap $30 billion to $40 billion, according to the New America Foundation, a Washington think tank.

Legislation filed last month by Sen. John McCain (R-AZ) sought to set a 2008 end-date for the digital handover–that is, the point at which conventional analog TV sets would go dark. To ensure that no analog TV owners were left behind, McCain’s bill reserves a portion of the resulting auction proceeds as a subsidy toward the purchase of conversion devices. Broadcast lobbyists diluted the bill with an amendment that voids the end date if too much “consumer disruption” will ensue a loophole big enough to push a 52-inch TV set through. The FCC still hopes to see the handover occur Dec. 31, 2006, the date set by the Balanced Budget Act of 1997.

But for all the billions of dollars that broadcasters have spent and the controversy over their copious use of public airwavesformer FCC chairman William Kennard referred to it as “spectrum squatting”theres still doubt about whether broadcast digital television has a viable future. Skeptics say that the dominance of cable and satellite TV services makes the fuss over broadcast DTV moot. They point out that subscribers already receive digital signals, though the picture-quality benefits are diminished when viewed on sets without digital or HDTV tuners.

Believers in broadcast DTV think there is room for a free, or at least inexpensive, alternative to cable and satellite. Already 1,315 broadcast stations are offering digital programming, according to the National Association of Broadcasters. Broadcasters are especially interested in multicasting, which uses data compression technology to transmit several programs over a single digital channel, and on-demand programming. “In some cases, they’re already experimenting with local cable companies,” says Phillip Swann, publisher of “NBC is doing on-demand experimentation with Comcast in certain cities.” But at this point, says Swann, it’s too early for the networks and their local stations to develop and launch a full-fledged DTV business, and it might preempt partnerships with cable.

Finding new revenue models beyond advertising is also a challenge for broadcasters. But digital TV’s two-way and clickable channels will entice new targeted advertising beyond the traditional one-to-many style, says Jeffrey Hart, a professor of political science at Indiana University and author of Technology, Television and Competition: The Politics of Digital TV.

Will broadcasters consider a subscription model for some of their enhanced digital terrestrial TV services? Swann says the combination of the networks’ television libraries along with the digital format’s versatility puts broadcasters in a position to do just that. NBC, for example, could package access to its inventory of shows, letting viewers choose to watch, say, the first episode of the “Tonight Show” and then the 1988 summer Olympics in Seoul. “There’s potentially a huge amount of revenue that could be generated from that one digital feed,” says Swann. “Local broadcasters are more relevant than they every have been. And in ways more powerful because they have more feeds and more influence” through the strength of the broadcast lobby.

Hart notes that both money and democracy will always leave room for broadcast DTV. “Local TV broadcasting, to the extent it remains an important part of U.S. life, will continue, but the economic models will have to change a bit, he says, adding that the idea of free local TV is part of the fabric of U.S. communications policy. “The issue of democratic citizenship is always there. We know people get political information from TV. It may not always be high quality, but it’s there. So there is an argument to be made on a democratic basis that free has to be made accessible.”

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