Cablers lobbed a volley

Jul 9, 2001  •  Post A Comment

Cable operators may soon be presented with a potentially controversial new digital-only must-carry proposal from broadcasters.
Here’s what could be the contentious part: Cable operators would have to pay for and ensure the digital conversion of lingering analog TV signals during the next several years as broadcasters wend their way toward a mandated 2006 deadline.
The must-carry proposal would mandate that carriage on cable systems include broadcasters’ converted core analog TV signals plus any new multiplex, video and datacasting services that would fill the broadcasters’ allotted 6 MHz, or 19.4 megabits, of digital spectrum.
“This throws the grenade back at cable,” said one leading broadcast executive familiar with the plan. “This proposal would change the entire debate. It is no longer a cable capacity issue. It puts broadcasters on the offensive, instead of on the defensive.”
In recent months, broadcasters have found their pursuit of dual analog and digital signal carriage has been foiled by the cable industry at every turn.
So members of the National Association of Broadcasters’ television board and its digital technology task force are working on a plan
requiring cable operators to carry broadcasters’ full digital spectrum without insistence on carriage of mainstay analog signals. The board and task force could present their plan to the full NAB board as early as this month. If adopted, federal regulators would have to be convinced to implement the proposal.
As more TV stations, TV set manufacturers and cable TV subscribers convert to digital, carriage of broadcasters’ analog signals is expected to become more of a moot point.
Current law requires cable operators to carry at least one broadcast signal. Broadcasters have been stymied for more than a year in their efforts to gain carriage agreements for both their analog and digital signals from cable operators, who claim they do not have enough capacity. The recent request by lower-power TV stations seeking equal carriage on cable systems has only exacerbated the capacity issue, sources said.
Sources say the digital-only must-carry proposal, while still being researched and formulated, is the leading alternative broadcasters have been able to come up with during recent meetings on the subject. National Cable & Telecommunications Association President and CEO Robert Sachs could not be reached for comment on such an arrangement.
Some cable operators, commenting privately about the proposal being developed, say such an arrangement would not be onerous.
“I think it could be a very good thing for us because digital uses one-sixth of the spectrum of an analog channel,” said a leading cable executive. “Whatever the costs to [digitize] remaining analog signals and transmit them in the process [are] more than offset by the overall savings,” the cable executive said. “The real value in our business is the channel. Such a move would free up capacity for more services.”
However, another leading cable executive said such a plan could inadvertently threaten broadcasters’ guaranteed household reach to advertisers because, in the initial stages, broadcasters’ digital reach would be limited to the far fewer U.S. homes equipped with digital cable set-top boxes or TV sets with digital receivers.
“Broadcasters would not be able to assure advertisers the same reach they have now. It could completely change their economics,” the cable executive said.
Broadcasters counter, saying that if cable operators are obliged to equip the maximum number of TV homes with advanced digital set-top boxes, then the new services will be provided to as many homes as possible. In the meantime, broadcasters say, they still will be transmitting their core analog station signals over the air.
One cable executive reacted to a digital-only must-carry proposal as “a preposterous play” to move digital must-carry off the backs of broadcasters and onto the backs of cable operators.
“The NAB’s official position continues to be pushing for dual must-carry, but that’s not to say that we’re not having a lot of discussion about alternatives,” said Paul Karpowicz, vice president of television for LIN Television and newly elected chairman of the NAB’s television board.
Still, the television board and its digital technology task force in recent weeks decided to focus on a digital-only proposal in the belief that something has to be donr to get the all-important must-carry issue off the mark. “If we’re going to move off of a long-standing position on must-carry, we’re going to have to maximize our position,” one key broadcast executive said.
“We talk about high-definition television signals while cable operators talk about multiple channels and services taking up capacity. We’re on different planes,” the broadcast executive said.
Some cable executives say the technology is in place at their system headends to convert into digital the signals of TV broadcasters that continue to be in analog during a transition period. The broadcaster’s digital signals would continue to be provided to consumers free of charge but supported by advertising under the new proposal.
The FCC, which has been asking for additional comments on dual carriage, has told broadcasters their carriage rights are confined to only a single programming channel. Broadcasters argue they are entitled to the entire 6 MHz channel bitstream.
The NCTA also has argued that broadcasters’ digital signal is their primary video signal and not all of a station’s digital video program or data streams. The NCTA has said that being forced to carry broadcasters’ multiple digital streams would raise “serious First Amendment concerns.”
To date, digital must-carry has been accomplished piecemeal as broadcast network companies such as ABC, NBC, CBS and Fox cut retransmission deals with cable operators for their core network or popular cable network signals (such as ESPN, Disney Channel or MSNBC) in exchange for carriage of their developing digital services.
“Large broadcast companies are using their leverage to get what they want out of the digital spectrum. Digital must-carry is an issue for medium and small broadcasters who don’t have that clout,” said one leading cable executive.
Mike McCarthy, a Belo executive vice president and chairman of the NAB’s digital technology task force, said broadcasters have not changed their position on digital must-carry. “We’re just exploring other ways to go at it,” he added.
However, broadcast executives familiar with the preliminary proposal concede they are concerned about losing the momentum built so far with the television set manufacturers to incorporate digital transmitters in order to build marketplace support for broadcasters’ new digital services. There also is growing concern that the current economic lull will make it difficult for smaller, struggling broadcasters to stick to the mandated digital conversion timetable.
“Everyone is a little bit anxious about where the digital payback is,” said one leading broadcast executive. “But one of the things we have to do is to be careful not to disenfranchise a whole group of consumers. We don’t want a war without a winner.”
With the mandated conversion deadlines just five years away, broadcasters are straining to close the gap on both ends-with cable operators and with consumers. Broadcasters now face the same yawning gap as cable operators between heavily investing in digital conversion and realizing returns from new digital services.
Only 160 of some 1,600 broadcast TV stations today transmit digital signals, and less than 1 percent of all U.S. homes receive digital signals, broadcast executives say.
“This has to be the most-discussed issue that goes nowhere,” said Lara Warner, analyst at Lehman Brothers. “Broadcasters still are going to need regulators to intervene to mandate digital must-carry. Economically, there has to be a reason to change, and there will be increasing reasons,” she said. “But I don’t think these companies want the government telling them how to use their spect
rum. That’s dangerous.”