COLUMNISTS

Digital TV Limps To The Starting Line

The only problem is, it's all a pile of hooey.

As the FCC ponders its final actions on the allocation of spectrum for digital broadcasters, a world turned upside down treats us to the political theater of free-market advocate Rep. Newt Gingrich (R-Ga.) pushing for government-mandated digital TV standards and budget-busting spectrum handouts while closet socialist Rep. Barney Frank (D-Mass.) rallies around the cause of open markets and fiscal responsibility. And as the National Association of Broadcasters (NAB) issues d ark warnings that failure to fork over free digital spectrum could mean the end of free TV, reluctant station owners worry about getting suckered into investing in a new technology that might deliver them to financial ruin.

Lighting the Fire As I pointed out two years ago when spectrum auctions were first getting under way ("Cyberurban Redevelopment," October 1, 1994, page 39), the vast tracts of UHF bandwidth held hostage by the broadcast industry were bound to attract the eye of revenue-conscious legislators. Politicians' born-again ardor for marketplace spectrum management solutions is exceeded only by their desire to keep the pork pipeline flowing without having to raise taxes. This put Congress on a collision course with the moguls that run ABC, NBC and CBS, determined to defend their ancestral rights even as the foundations of their broadcasting empires are being eaten away by cable and satellite TV.

The 400 MHz of precious real estate given in trust to the broadcasting industry in 1934 has been successfully attacked only once, when emerging cellular and Specialized Mobile Radio (SMR) interests pried loose 14 unused UHF channels in 1974. After a further decade of regulatory wrangling, this spectrum became the foundation for a multibillion dollar industry serving more than 40 million consumers. During this time, the remaining 56 channels of UHF spectrum--more than 300 MHz--remained thinly populated, as the broadcasters' share of television viewers continued its long and irrevocable decline.

The obvious solution to this dilemma would be to allow broadcasters to sell their excess spectrum and use the money to diversify into new businesses. Unfortunately, they don't own the spectrum so they can't sell it; it's public property that is merely zoned for exclusive broadcast use. So how do these precious frequencies ever get put into service?

Coming to a Slow Boil Pressure began building in the early 1980s when Japan Inc.'s run at developing high-definition television (HDTV) scared the pa nts off U.S. consumer electronics executives. It was, and still is, believed that a wide-screen, high-resolution home theater will be the natural successor to the color television technology developed by RCA in the 1950s and blessed as the National Television Systems Committee (NTSC) standard.

The problem is that though better technology has been available for years, no one can figure out how to get it into the market. The U.S. broadcasting industry has always stood on three pillars: government standards, free spectrum and advertiser-supported programming. Shielded by rigid regulations from the merciless pace of innovation, the NTSC standard became a stupendous inertial force. For all of its shortcomings, the greatest merit of NTSC (which some wags claim stands for Never Twice the Same Color) was that it provided backward compatibility with black-and-white sets. This allowed a seamless introduction of color programming in the late '50s and early '60s. Unfortunately, no such technical solution exists for HDTV. A separate, second channel is required, catering to an initially nonexistent audience.

Although buying an HDTV set is a classic consumer decision, broadcasters must bear the cost of upgrading studio and transmission facilities. Unlike cable and satellite providers, who can charge premium prices for high-end services, the "free" TV industry has no way to recoup these costs from consumers. Somehow, advertisers have to be convinced to pay the freight. But advertisers pay by the eyeball--the more eyeballs, the more money--and asking them to pay extra to advertise on a second channel that has no viewers seems a dubious proposition.

Egged on by government industrial planners, Japanese manufacturers launched an analog HDTV standard into their home market about a decade ago. This initiative has been a $2 billion exercise in futility. Fewer than 100,000 sets have been sold to date, even to the gadget-crazy Japanese. As a result, HDTV died on the vine. Only regulatory gridlock prevented U.S. companies from ra cing the Japanese off the same cliff.