broadcasters finally meet IP
august 1, 2009
By Tom Wheeler
When local broadcasters switched to digital transmission on June 12th the heat shield that had insulated them from the IP (Internet Protocol) revolution fell away. Analog televisions weren’t the only things made fuzzy by the digital conversion; the future of the local television broadcasting business also blurred.
History is unequivocal: nothing touched by IP remains the same. For a quarter century local television stations have avoided the wrenching upheaval IP has forced on so many other businesses. Oh sure, they faced new competition for their advertising dollars from Web-based services, but that was an inconvenience, not a transformation.
The holiday from IP threats has now come to an end. The challenge for DTV spectrum licensees is how to maintain their relevance in a digital world. The new digital broadcasting reality isn’t just zeros and ones carrying what used to be on an analog waveform. DTV won’t play itself out in the “just more capacity” manner that was originally expected.
The broadcasters began asking Congress to give them spectrum for digital services long before IP’s transformational impact was fully appreciated. Back then the assumption was that digital meant additional capacity to show more channels. By the time the conversion finally occurred, however, digital meant far more than just capacity for a local weather channel or a rerun of Law and Order. When everything – voice, video and data – all become IP the question becomes what is the highest and best use of the spectrum assigned to the broadcasters?
Getting the future of broadcasting into better focus means forgetting a lifetime of experience as to what television is and refocusing on new realities.
What is the purpose of continuing the local TV broadcasting model when between 85 and 90 percent of American homes are connected to cable or satellite services? Many broadcasters don’t even risk the potential signal degradation from cable picking up the signal over-the-air; they use fiber to feed their transmissions directly to the cable system’s headend and bypass the airwaves altogether. Broadcasting’s only intrinsic service is to a small number of homes that rely on over-the-air and second and third sets not hooked up to a service provider. Those audiences can’t be disenfranchised, but there has to be a better solution - an awful lot of scarce spectrum is being allocated to a very small audience.
Video has already been transformed by IP and the impact will only increase. A recent study by Cisco forecast that by 2013 video will constitute over 90 percent of global consumer IP traffic. Interestingly, it was the broadcast networks, whose principal asset is content not airwaves, that felt the IP bite first. Because IP meant content could be captured on a computer and redistributed, the networks were forced to respond. After a few stumbles, several networks coalesced around Hulu.com and demonstrated the transformational impact of IP. Recent projections place Hulu’s revenue at $1 billion in two years.
Yes, broadcast spectrum should carry IP video, but it also could do so much more. DTV spectrum is simply high speed wireless capacity and should be thought of that way. The model of local broadcasters pumping out network programming augmented by local news is an anachronistic legacy of analog.
One non-traditional application of the broadcast spectrum has been the Open Mobile Video Coalition’s (OMVC) advocacy of using digital spectrum for delivery to mobile devices. John Lawson, Executive Vice president of Ion Networks, recently called mobile DTV, “the biggest financial upside for the television broadcasting industry since the invention of the 30-second spot.” The advent of mobile broadcasting to cellphones, netbooks and similar devices is a step toward the future of digital broadcast spectrum. Multiple new channels, data feeds powering widgets within those channels, and the ability to offer subscription-based digital content to an individual consumer are all hints of how the DTV spectrum could change the broadcast business.
Interestingly, mobile DTV raises a series of issues that lead directly to wireless carriers. Think, for instance, how the mobile DTV experience could be changed by a return path enabling on-demand capability. Or consider the challenge a broadcaster faces with retail distribution or a billing relationship with the subscriber. Then there is always the matter of math: there are somewhere around 100 million TV households, but there are three times that number of video-capable mobile devices.
The value in IP is how it drives iterative and compounding applications. In the analog world TV broadcasting was delivery of a TV program, period. In the IP world transactional services, data analytics and the long tail are all simply the application of zeros and ones.
Every other technology touched by IP has been forever changed and broadcasting has no reason to expect being an exception. Oh sure, there are some pesky policy issues rooted in the analog world such as must carry, retransmission consent and the public interest standard, but these are artifacts. It’s hard to believe a government anxious for innovation and investment couldn’t figure out how to deal with these issues.
Broadcast spectrum licensees are now in the business of “IP delivery” rather than “broadcast television.” Interestingly, wireless carriers are also in that business as well. Let the games begin!
Tom Wheeler is Managing Director of Core Capital Partners, a venture capital firm specializing in early stage companies, including next generation wireless services. For almost a dozen years prior to joining Core Capital he was the president of the Cellular Telecommunications & Internet Association.