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Cable Ops: DTV Delay a Nuisance

2/07/2009 2:00 AM Eastern

For many cable operators, the government’s four-month extension before analog-TV broadcasts must go dark is mainly an inconvenience that could simply prolong a process they’ve been working on for more than a year.

The change moves the deadline for full-power TV stations to go all-digital to June 12 but allows them to convert at any time, and many broadcasters are expected to pull the analog plug on the original Feb. 17 date.

“All the things that were set in place for the Feb. 17 transition are kind of squishy now,” Insight Communications CEO Michael Willner said.

Several broadcasters in Insight’s largest market, Louisville, Ky., had been planning to make the shift on the original date, but Willner said the stations don’t want to commit until they know for sure that all their competitors will do so at the same time.

“Certainly not knowing [when the broadcasters will go all-digital] is very complicating,” he said. “You’ll have some stations that are saying they’re converting, some that aren’t, some markets that are converting and some that aren’t.”

According to Federal Communications Commission guidelines for analog-TV termination released last week, stations must notify the agency by Feb. 9 if they planned to move ahead with the Feb. 17 date. In addition, broadcasters must “communicate directly and immediately with their MVPDs [multichannel video programming distributors] regarding their plans for termination of their analog signal in light of the statutory change in the transition deadline,” the FCC said.

The FCC said, “We also recommend that stations continuing to broadcast an analog signal after Feb. 17 so inform the relevant MVPDs.”

Bob Gessner, president of Massillon Cable TV in northeast Ohio, said the DTV transition “should be a nonevent for us regardless of the date” given the preparation the company has done so far.

“It certainly frustrates any marketing efforts to attract over-the-air users to cable, but it is just a delay. Those who procrastinate will still be prospects in the future,” Gessner said.

There could be a storm brewing for some operators, though, given that retransmission negotiations between cable providers and TV stations may have been put on hold leading up to Feb. 17 to avoid ugly retrans fights near the DTV cutover. Analysts have suggested that some agreements set to expire at the end of 2008 were extended until the February date (see “Ops, Broadcasters Give Peace a Chance,” Jan. 12, 2009, page 6).

On a national level, the National Cable & Telecommunications Association does not anticipate running any public-service announcements about the DTV transition past Feb. 17, NCTA vice president of communications Brian Dietz said. The cable industry has bought or donated TV airtime worth $250 million over the past two years to educate consumers about the transition, he noted.

“The research shows that 95% of consumers are aware of the transition,” Dietz said. The industry “will continue to do our part to make sure that is a success.”

By and large, the fallout for MSOs from the DTV transition date-change should be minimal.

“At worst, we believe the delay is a small negative for the cable companies such as Comcast, Time Warner Cable and Cablevision [Systems], which are likely to pick up some low-end subscribers from the transition,” JRPG Investment Research director of research Gerard Hallaren wrote in a note last week.

The DTV transition will give cable and satellite operators in the U.S. roughly 1.7 million new subscribers, according to Barclays Capital analyst Alan Miles, although his analysis assumed the original Feb. 17 date. Cable would pick up around 1 million of those, with the rest going to satellite TV.

Miles, speaking on a panel at the International Consumer Electronics Show last month in Las Vegas, pointed out that any new subscribers MSO acquire are likely to sign up for nothing more than lifeline cable. As such, he said, “these [subs] are not worth a lot of money.”

At least one loser from the DTV-transition postponement appears to be Qualcomm. The company has been eager to get its hands on the slices of 700-MHz spectrum it acquired on the East and West coasts in the FCC auction last year. That additional capacity will allow it to offer its MediaFLO mobile TV service in certain major markets, including Boston, Houston and San Francisco. The live TV service is resold by Verizon Communications and AT&T.

“We are disappointed with the passage of legislation extending the DTV transition date to June 12,” Qualcomm said in a statement. “In light of the fact that the legislation, as amended and finally passed by Congress, allows TV stations to transition voluntarily between now and June 12, we cannot determine the specific impact of the final bill’s passage on our MediaFLO business.”

Still, Hallaren said, in the near term “we believe that this service, even if more widely available, will have minimal impact” on Qualcomm’s total revenue.

Kent Gibbons contributed to this report.

September