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Policy

Life Goes On, Sans Multicast

2/20/2005 7:00 PM Eastern

Washington — With multicast must-carry dead at the Federal Communications Commission, broadcasters are mulling options to get even with cable operators and find new ways to exploit their digital spectrum:

  • On Capitol Hill, broadcasters are lobbying Congress to overturn the FCC decision, but it’s unclear whether stations will need to surrendered their analog spectrum on a specific date in order obtain expanded cable carriage rights.

  • USDTV Inc. repeated last week it is about 30 days away from announcing that major TV station groups plan to take control of the company, which pools DTV spectrum in a market to provide a low-cost, bare-bones wireless cable service for $19.95 a month.

  • Paxson Communications Corp. is considering asking the FCC to permit TV stations to use another modulation besides 8 VSB (vestigial sideband) in order to use excess capacity for new, nonvideo services.

RATTLED CAGE

The FCC rattled broadcasters two weeks ago when it voted 4-1 that cable was required to carry just one video service per broadcaster once stations turn off their analog signals. The National Association of Broadcasters urged the FCC to require carriage of every programming stream that the bandwidth can accommodate — currently five or six channels.

Some broadcasters wanted the FCC to postpone the vote because chairman Michael Powell was just weeks away from leaving the agency and Congress was showing interest in bringing the DTV transition to a close and settling unresolved policy disputes.

“Michael Powell put a finger in our eye, as did [former FCC chairman] Bill Kennard, on his way out the door,” NAB president Edward Fritts said last week. In 2001, the FCC rejected must-carry for the first time in the last days of Kennard’s tenure.

Broadcasters are now considering court action on the must-carry decision. While the litigation percolates, the NAB is working with Congress to determine whether lawmakers will enshrine must-carry into law and deny any discretion to the FCC.

“I think the entire DTV issue, including multicasting, including localism — which is greatly enhanced by multicasting — will be resolved in the rewrite of the telecom act next year,” Fritts predicted.

Some station groups, not willing to await relief from the courts and Congress, are making new business plans for their digital spectrum.

Fritts attributed broadcasters’ interest in pay-TV ventures to the multicast defeat.

The “loss at the FCC significantly changed the business plan of broadcasters,” he said.

Since late 2003, USDTV has been using digital spectrum to provide a low-cost pay-TV service in Las Vegas, Salt Lake City and Albuquerque, N.M. Thus far, it has attracted some 10,000 subscribers. Customers get access to all their local TV stations, including HDTV service, and a smattering of cable networks, such as ESPN and Fox News Channel.

Now, USDTV appears to be on the verge of becoming a significant player.

“We’re within 30 days of closing on a major round from what we think are the leading broadcast groups in the United States, who are going to fund USDTV and take controlling ownership in the company,” said CEO Steve Lindsley.

Lindsley, who will remain CEO, declined to name the new broadcast investors. “I can tell you that they are among the most respected broadcasters in the industry and among the leaders of the industry,” he said.

The FCC’s rejection of must-carry wasn’t a factor in attracting new broadcasters to his venture, Lindsley said. “Our thought for years now is that spectrum would be widely available with or without a mandate from the FCC.”

Emmis Communications Corp. CEO Jeff Smulyan, who is trying to develop his own USDTV-type venture, has yet to reach a deal with the pay-TV service.

“It’s safe to assume that we will extend a hand of fellowship to Emmis to invite him to join our initiative, but right now he is not a part of the funding broadcast groups,” Lindsley said.

Last April, Smulyan unveiled his wireless-cable proposal at the NAB convention in Las Vegas, claiming that a national system could be put in place for $700 million. He said the plunging cost of digital-video-recorder technology would allow TV stations to provide nonlinear programming downloads that consumers could access at their leisure, perhaps for a fee.

Last week, Smulyan indicated that his plan needed more time to get up and running.

“We’ve had a lot of progress on the wireless thing, and we think we’re getting close. Until it’s done, it’s not done,” he said.

Attracting major affiliates hasn’t been easy because those station owners want to see participation from the corporate parents of ABC, CBS, NBC and Fox.

“Most of the station groups that love it wanted network leadership. So we’ve been working on that aspect,” Smulyan said.

Broadcaster entry into the pay-TV distribution market is critical, Smulyan said, because TV stations require a second revenue stream that they are not getting from cable.

“I’ve always felt that merely creating product and having the cable guys forced to carry it and not pay us anything doesn’t help us any,” he said.

At a House hearing last Thursday, Insight Communications Co. CEO Michael Willner reiterated cable’s opposition to paying for local TV signals.

“We do not want our customers to have to pay for programming that the broadcaster provides free of charge over the air, so that one neighbor pays for it and the other neighbor doesn’t,” Willner said.

Meanwhile, Paxson chairman and CEO Lowell Paxson said he’s not interested in a partnership with USDTV or Smulyan.

“The economics don’t support it,” he said.

PAXSON MODULATES

Paxson was a leading advocate of multicast must-carry, arguing that access to cable’s mass audience was the only way multiple services could survive. Paxson declined to comment when asked if he would go to court to reverse the FCC.

Paxson disclosed that he is considering asking the FCC for a rule change that would permit TV stations to transmit in modulations other than 8 VSB, the DTV standard for transmission of video programming.

Modulation flexibility, Paxson said, would allow TV stations to use excess digital spectrum — available now because multicasting appears dead — to provide non-broadcast services. He declined to identify particular services.

“It’s under consideration at the present time. We’ve had it under study for about two weeks,” Paxson said.

Earlier in the month, Philip Lombardo, CEO of Citadel Communications Co. and Joint Board chairman of the NAB, indicated that TV station might consider wireless phone service.

“I can’t speak for the NAB,” Paxson said. “I don’t know the position of NAB.”

September