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The real digital TV transition begins

Is this what viewers will see on Feb. 18, 2009, with their old NTSC receivers?

If you are a broadcaster who has spent millions upgrading your transmission facility for DTV broadcasts, a DBS service spending billions to launch new satellites to support the expanded availability of local HDTV broadcasts, or a cable multi-system operator attempting to migrate your subscribers to digital tiers and cable modems, you might believe that the television industry is approaching the completion of a long migration path to its digital future.

Despite billions in investment in new digital technologies by the distributors of television content, a new reality began to emerge as 2005 drew to a close. The future of digital television has little to do with the digitized version of television to which viewers became addicted during the past half-century. It would be more accurate to assert that the era of analog television may finally be drawing to a close, paving the way for the real digital transition to begin.

In 2005, we began to see some signs that huge media conglomerates are ready to let go of the past and move into new forms of digital content distribution, even if it means established institutions, including local television broadcasters, may become irrelevant. Consumers around the world are now addicted to their daily media fix. The real digital transition is now beginning; the ability to consume any media, anywhere, at any time is the emerging digital television reality. What remains to be determined, however, is whether consumers will support the approaching digital tsunami at any price.

A new DTV deadline?

Dec. 31, 2006, was to be an important date in the history of free-to-air television broadcasts in the United States. On April 3, 1997, the FCC adopted the Fifth Report and Order in its proceedings on a DTV broadcast service (which began in 1987). The new service, authorized by Congress as part of an extensive overhaul of telecommunications law with the 1996 Telecommunications Act, was intended to allow OTA broadcasters to remain competitive as the television industry moved to digital technologies that would allow the delivery of higher-quality TV images and sound and/or more programs in a given amount of bandwidth.

As part of the Fifth Report and Order on DTV, the FCC established a timetable for existing broadcasters to build out their DTV facilities and a period of NTSC and DTV simulcasts to allow consumers to migrate to new digital receivers. At the end of the simulcast period, the NTSC channels would be recovered, with portions of the recovered spectrum to be used for emergency communications services and the rest to be auctioned for new applications. The FCC timetable set Dec. 31, 2006, as the final day for NTSC broadcasts.

By 1997, broadcasters were beginning to accept the reality that they would be required to begin the transition to digital broadcasts. The timetable, requiring the return of their analog channels, was an unexpected outcome of the DTV process — an unacceptable outcome.

Within six months, broadcasters used their considerable influence over Congress to render the FCC order meaningless. An amendment to the 1997 Budget Act established a series of market-based tests that had to be met before broadcasters in a market would be required to return their analog channels. The amendment requires that 85 percent of the homes in a market must have the ability to receive all local DTV broadcasts before the analog channels would have to be returned. Today, less than a year before the FCC deadline would have taken effect, the percentage of homes that meets these market tests remains less than 10 percent.

Congress is once again threatening to impose a hard deadline for the DTV transition. As 2005 drew to a close, both the House and Senate passed bills that called for the end of NTSC broadcasts in 2009. The bills were attached to a budget reconciliation package that nearly passed, as Congress rushed to complete work before recessing for the holidays. A conference version of the bills cleared the House, but the Senate made a few changes that require House approval; the House is expected to approve these changes this month.

The legislation sets a new deadline for the end of NTSC broadcasts: February 18, 2009. A portion of the spectrum that is to be vacated — channels 52 to 69 — will be reallocated for emergency communications services. The remainder will be auctioned for new services beginning January 28, 2008.

The bill creates a $1.5 billion fund to help consumers pay for D/A converters to extend the life of their analog NTSC receivers. Coupons worth $40 toward the purchase of these converters will be issued by the government beginning in January of 2008; each household will be able to request two coupons. It does not appear that the coupons can be used to purchase integrated digital TV receivers or the more sophisticated HD-capable set-top boxes needed for HDTV-capable monitors.

Eliminated from the House version was an energy pre-emption provision intended to override state laws that impose strict energy consumption guidelines on set-top receivers for DTV broadcasts. Regulations in New York and California limit the power a DTV receiver can consume to 8W while operating and 1W in standby. It should be noted that these states do not impose the same limits on set-top boxes for cable and DBS multichannel services.

Because of the need to support HDTV formats and complex equalizers in the ATSC receiver, existing DTV receiver designs require considerably more than 8W operating power. It is unclear whether set-top receivers that meet these power limits can be manufactured. Meanwhile, more than 30 states are considering similar power limits on DTV receivers.

Also eliminated from the legislation was a provision giving the cable industry the right to downconvert a broadcaster's DTV signal for presentation on the analog tier of a cable system. This was removed because of Congressional rules limiting the scope of legislation that can be attached to a budget bill. It is expected that a separate bill related to the broadcast DTV transition will be required during the 2006 legislative session.

Because the new DTV deadline was created as part of the annual budget reconciliation process, it is unclear whether this deadline is any more meaningful than those that have come and gone since 1997. The budget reconciliation process is an exercise that Congress must go through each year in an attempt to identify sources of revenue and spending levels for the next five years. Any deadline legislated this year can be rendered meaningless in subsequent years — as was the case with the 2006 FCC deadline and several Congressional deadlines for auctioning blocks of spectrum currently occupied by TV broadcasters.

This could be a critical year for TV broadcasters. As always, it is difficult to predict what will happen in Congress, especially during an election year when members of the House and a third of the Senate will be focused on raising hundreds of millions of dollars to fund their re-election campaigns.

Eliminating the middleman

One thing is becoming clear: Broadcasters can no longer rely upon political gerrymandering to protect their lucrative franchise. The transition to new forms of digital distribution is accelerating, but local TV broadcasters remain focused on protecting a business model that is becoming increasingly irrelevant.

The deadline for broadcasters to focus their considerable resources on the development of DTV as a viable replacement for the NTSC service has already passed. More than half of the homes in the United States now subscribe to a digital multichannel TV service. The telcos are deploying IPTV services to compete with cable and DBS. And with improved broadband connections, the Internet is becoming a viable channel for the distribution of video programming direct to consumers, without the commercials that are the life-blood of TV broadcasting.

À la carte or all you can eat

Perhaps the most important lesson learned during the first decade of the DTV transition is that the disruptive nature of digital technologies is helping consumers to take control of their media experiences. Digital technologies are making it possible to provide greater programming choices, while simultaneously empowering consumers to find content of interest and to consume it when they want, where they want.

Time and place shifting are no longer sci-fi visions supported by computer-generated special effects. The terms DVR, PVR and TiVo are now part of the language. They define a new way for consumers to acquire and control the TV programming they view, just as Apple's iTunes and iPod have redefined the ways in which consumers can manage and use their personal music collections. But this just scratches the surface of the changes that are taking place with digital distribution.

The New Oxford American Dictionary declared the term podcast as the word of the year. The term is defined as “a digital recording of a radio broadcast or similar program, made available on the Internet for downloading to a personal audio player.” The word is derived from a combination of iPod and broadcasting. It will be added to the online version of the dictionary during the next update in early 2006.

Unfortunately, the definition above is already outdated. Video podcasting burst onto the scene at the end of 2005, and it represents far more than a new way for the media conglomerates to distribute their high-value content. Now anyone can distribute video content with little more than a camera, computer and a broadband connection.

As reported in November 2005, Apple's newest iPod plays video, and the iTunes music store is now selling music videos and episodes of top-rated TV shows from ABC, NBC, The Sci-Fi Channel and USA Network. TiVo has announced the ability to transfer programs recorded on its PVRs to the video iPod and Sony PSP. And Apple may up the ante again this month with a Mac Mini featuring an Intel processor, PVR functions and possibly a service to stream movies to this in-home media center.

The Internet is threatening the way television programs are packaged and sold. This threat is causing the media conglomerates and their distribution partners to rethink the entire model for content distribution.

For decades, broadcast and multichannel TV services have offered content on an all you can eat basis. Broadcast TV stations aggregate content that is paid for with advertising; consume all that you like.

Cable expanded the menu, providing the means to collect subscriber and license fees in addition to advertising revenues. Today, about a third of the monthly cost of expanded basic cable is paid to the media conglomerates filling that tier with programming. The DBS services are riding the same bandwagon.

But pressure is building to provide an alternative to tiering, which forces most consumers to pay for channels they do not want. Under the guise of imposing decency standards on non-broadcast networks, the FCC and consumer groups have gained a concession from the cable industry.

Testifying at a Senate Commerce Committee hearing on Dec. 12, 2005, the National Cable and Telecommunications Association President Kyle McSlarrow outlined preliminary plans for a number of cable operators to voluntarily start selling family-friendly tiers. Shortly thereafter, Time Warner and Comcast announced new family tiers, but cable critics quickly characterized them as being inadequate, increasing their calls for the ability to choose cable channels on an à la carte basis.

Content protection

While consumers are beginning to enjoy the benefits of time and place shifting, the media conglomerates view the transition to digital technologies as an opportunity to impose tighter restrictions on when and where their content can be consumed. Last year, a U.S. District Court of Appeals threw out the broadcast flag regulations ordered by the FCC to control redistribution of TV content.

The courts said that the FCC does not have legislative authority to impose such regulations on downstream devices. Congress plans a number of hearings in 2006 to deal with content management and copyright issues.

So the stage is set for an interesting year in Washington. TV broadcasters would be well served to ignore the politics and focus their resources on the development of a viable business model for the emerging digital world.

Fortunately, whatever happens in Washington, broadcasters will benefit in the short term, as they receive the lion's share of the money that the politicians raise to fund the 2006 elections.

Craig Birkmaier is a technology consultant at Pcube Labs, and he hosts and moderates the OpenDTV forum.

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