TOOLS OF THE TRADENew FCC Rules Speed Up The Transition

The FCC certainly has the industry's attention. Caught between large and small market operators, and pressured to demonstrate the progress of the digital transition, its recently delivered responsive rulings are sure to draw mixed reviews. In a Memorandum Opinion And Order Of Reconsideration issued by the agency on November 8, it clearly has made what it calls "modifications to the DTV transition rules that will enable more broadcasters to get on the air with a digital signal and help speed up the transition."

The FCC certainly has the industry's attention. Caught between large and small market operators, and pressured to demonstrate the progress of the digital transition, its recently delivered responsive rulings are sure to draw mixed reviews. In a Memorandum Opinion And Order Of Reconsideration issued by the agency on November 8, it clearly has made what it calls "modifications to the DTV transition rules that will enable more broadcasters to get on the air with a digital signal and help speed up the transition."

With many broadcasters outside the top 100 markets still hoping to dodge the May 2002 DTV bullet, the FCC has just offered relief, but no promise that the gun won't still be fired. To get a handle on what the commission rules involve, here's a summary of the rulings and manufacturers' reactions to them: What Did It Change?

First, the FCC temporarily deferred its requirement that commercial broadcasters replicate their entire Grade B NTSC analog service area with DTV signals by December 31, 2004 (December 31, 2005 for non-commercial broadcasters) or lose interference protection to the unreplicated areas.

Instead, stations now can initially build and operate facilities that deliver DTV services to at least their community of license. It says this will allow broadcasters to go on the air with lower-powered, and less expensive RF facilities. This would allow the stations opting for this DTV path to expand their coverage to their entire existing service area as the DTV transition progresses. Apparently, transition progress infers that progress will be based on consumer TV set market penetration.

The commission also "temporarily" deferred its requirement that stations granted construction permits for maximized facilities construct those facilities by the initial build- out date in order to retain interference protection from the fully authorized facilities. We'll need to find out more on how it defines "temporary."

Pick Your Channel

The FCC also temporarily deferred its requirement that commercial stations with both analog and digital channel assignments within the DTV core (channels 2 to 51) elect by December 31, 2003 which channel they will use for their post-transition digital channel. The commission says this would be a more graduated approach, giving stations more time to increase power and to gain experience at these higher power levels before choosing the channel that would deliver optimal DTV service.

It also stated that it will set new dates for replication, maximizing, and channel selection in its next "periodic review." The new deadlines will be no later than 2006, or the date "by which 85 percent of the television households in a licensee's market are capable of receiving DTV signals.

Meanwhile, the FCC also said that television stations may operate digitally at a reduced schedule by "providing, at a minimum, a DTV signal during primetime hours." But this does not affect a DTV licensee's simulcast obligations. Here's an excerpt from that statement:

"Thus, starting on April 1, 2003, a DTV station must provide a digital signal at least 50 percent of the time it transmits an analog signal; on April 1, 2004, 75 percent; and on April 1, 2005, 100 percent."

Other Rulings

The commission declined to modify its deadlines for stations to meet the increased city- grade signal strength requirements imposed in the periodic review order (December 31,

2004 for commercial stations and 2005 for non-commercial stations). It also declined to issue a blanket extension of remaining DTV construction deadlines. It said "there is substantial evidence that the conversion is progressing" and that "one survey indicated that more than two-thirds of the commercial stations will meet the 2002 deadline, and that modified build-out requirements being adopted in today's Order will allow many stations that did not anticipate meeting the deadlines to now be able to do so."

It also ruled that financial hardship will be considered grounds for extending the applicable construction deadline, in addition to previously stated grounds. Stations seeking an extension of time to construct DTV facilities on this basis "must provide detailed evidence that the cost of meeting the minimum build-out requirements exceeds the station's financial resources."

A brief turndown in the economy or advertising revenues will not be considered a sufficient showing of hardship. Instead, the FCC says the hardship "must reflect the station's financial status over an economically significant period of time." Reaction From Manufacturers

At Thales Broadcast & Multimedia, Vice President of Sales Dick Fiore said that the rulings will take time to digest, because "you need to remember these are legal statements written for lawyers." Fiore expects the rulings to boost low and medium power transmitter sales and push the transition ahead, but he warns, "the language is nebulous in some of its statements. For example, we'll have to see how it explains their use of the word 'temporarily.' And, how it defines financial hardships."

Larcan President Jim Adamson agrees, saying that different people will read different things into the rulings. But, he adds, "There's no doubt a lot more attention will be paid now to low power solutions in the lower markets. In fact, it could also motivate some stations in the medium markets." He added that he is surprised and concerned that the startup and build-out dates weren't relaxed.

At Axcera (formerly ADC), Rich Schwartz, director of Marketing, said he was surprised the deadlines weren't set back across the board. "What is obviously missing," he noted, "is the lack of language that addresses what will happen to stations that don't comply. "Overall, it's encouraging that they're trying to speed up the transition and that they're taking the broadcaster's needs into consideration. However, there is concern that with a downturn in the economy, some stations may not qualify for a loan to purchase the equipment needed."

Dale Mowry, vice president of Transmission Systems at Harris Broadcast, says that the commission has generally been prudent and responsive to the broadcaster's needs. "You now see more reasonable timing and a path that is less burdensome for the broadcasters, but make no mistake about it, the FCC is saying stations now have more options, but they will put a DTV signal on the air."

No doubt, the commission was walking a fine line in making these rulings. There were (and are) stations already on the air with full power DTV, living up to the FCC mandates. It's unlikely they would appreciate others being granted open-ended turn-on dates. On the other hand, stations in the smaller markets insist that the timing should be changed because of the financial burden DTV represents to their already marginally profitable operations.

Following The Money

The consensus is that these rulings will boost low and medium power transmitter sales. At EMCEE, Regional Sales Manager Jim Zaroda points out that transitioning from low to medium to high power has guided their product developments and marketing since 1997. "From the beginning," said Zaroda, "we've kept in mind how to accommodate stations with packages that make long-term economic and transmission sense."

Transmitter companies like Acrodyne, Axcera, EMCEE, Harris, Itelco, LARCAN, and Thales have low power packages designed basically to get stations on the air, with the low power transmitter being used later as a high power transmitter driver.

At K Tech, the company offers a low power transmitter for about $70,000, and it can be used later to drive their 3 kW transmitter. Similar approaches are being taken by Armstrong, Bext, and Rohde & Schwarz, as well. Even Dielectric is offering a full low power transmission package that's priced to fit into a station's operations budget.

Harris Broadcast's Mowry insists that stations could get on the air for somewhere between $100,000 and $200,000 and meet the FCC's deadlines. Harris' transmitters are, like most others, designed in a modular configuration. This means that today, virtually any manufacturer can help a station seamlessly ramp up from low power to full power.

"The point to remember," said Mowry, is "you don't want to invest in equipment that will become obsolete when you move to full power. That would be hard to explain."

Tom Newman, director of Sales and Marketing at Itelco said, "It's important that low power startups won't be penalized, but keep in mind that not all modular designs can be upgraded with financial ease. Equally important, stations will benefit from the final channel choice extension. Because of this, they may discover that UHF is a good choice after all."

While Nat Ostroff, chairman of the Board and acting CEO at Acrodyne, sees these "mid- course corrections" as having a positive effect on sales and nudging the DTV transition ahead, he feels there is one dangerous side effect.

"It's possible the message [of the rulings] may be read by TV set manufacturers as saying that they don't need to be concerned about TV set designs to accommodate over-the-air signals. The message to them may be interpreted such that they shift their attention to cable-ready designs."

The Effect On Sales

No doubt, as a result of the recent rulings, low and medium power transmitters sales will leap forward. Despite this, high power transmitters continue to roll off the loading docks. In fact, even analog transmitter sales are steady as we close out the year 2001.

However, these rulings will be followed by other "course corrections." Meanwhile, the vague wording of these rulings leaves the FCC and broadcasters with some wiggle room. Nevertheless, the transition to DTV will continue to move forward, and the FCC is still adamant that all stations will eventually get their DTV signals on the air.