TV Firms Push Digital Spectrum As High-Speed Network

14-Apr-00

Granite Broadcasting and other US broadcasters will meet next week to discuss plans to auction part of their digital TV spectrum.These local TV station owners aim to lease part of their spectrum to the highest bidder. The spectrum is valuable because it can deliver large amounts of high-quality video, audio and text to a computer, TV set or other device. TV broadcasters are looking to recoup some of the millions of dollars they've spent to get their stations ready to broadcast digital TV by 2002. With that government-mandated deadline less than two years away, the industry still has a number of legal and technical issues to resolve before digital TV becomes a commercial reality. In the meantime, broadcasters such as Granite say they need to find a way to start profiting from their investment. ""We are looking for the highest (price) and best use for the spectrum,"" said Stuart Beck, Granite's President and Co-Founder. ""The only way to do that is to put it up for bid, so Microsoft and AT&T will come to you and tell you what it's worth."" Leasing to the highest bidder means that at least part of the spectrum isn't likely to be used for what it was originally intended to support: high-definition broadcast television, which offers crystal-clear pictures and sound. Other uses of the spectrum include delivering telephone service, games, music, movies and various data services. By 2006, TV broadcasters are required to switch from traditional analog TV broadcasts, which has been the US standard for decades, to digital, which transmits pictures and sound as data so that it's quality isn't diminished through the transmission process. The equipment needed to receive digital TV, though, is still too expensive for the average consumer. In addition, consumers lack an incentive to invest in the equipment because there's so little programming in digital format. The slow progress of digital TV has prompted many local broadcast groups to form ventures designed to find ways to generate revenue from the spectrum. Beck believes the best way to fund the transition to digital is to put part of the spectrum on the auction block. To that end, Granite, along with Clear Channel Communications and others, last month formed the Broadcasters Digital Cooperative. Beck said the cooperative already has received interest from potential bidders. He declined to be more specific. The group will meet Tuesday to discuss auction plans and form an executive committee, Stewart Park, who oversees digital TV development at Granite, said earlier this week at the National Association of Broadcasters conference in Las Vegas. Park said the meeting is open to any broadcasters interested in joining. ""It's time for all TV broadcasters to think about the interests of themselves, their shareholders and their employees,"" Park said. Granite is an example of how vulnerable local station owners are in today's changing economic environment. The company's stock has fallen 58 percent since it announced an agreement to pay General Electric's NBC $362 million over ten years to become the network's new affiliate in the San Francisco area. The pact underscored how the networks' relationship with their affiliates is changing. Traditionally, the major networks have paid their station affiliates for airing network programming. Today, that's changing as networks are asking affiliates to help pay for the escalating cost of programming. In addition, many local TV broadcasters, including Granite, are contending with declining ad revenue. Such pressures are prompting local stations to venture out on their own, separate from the networks, to find ways to profit from their digital spectrum. These moves are controversial. In addition to potentially causing more strife in the already strained relations between networks and local stations, Congress has expressed concern over attempts to use the spectrum for anything other than high-quality TV broadcasts, known as high definition television, or HDTV. Most analysts and executives agree, though, that even with government deadlines, HDTV is unlikely to become widespread anytime soon. ""Moving to a full (programming) schedule of HDTV is a very, very long way off,"" said Sandra Kresch, partner at PricewaterhouseCoopers' media and entertainment group. Source: Bloomberg News