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Another flavor of must-carry

Wed, 05/31/2000 - 8:00pm
Jeffrey Krauss, Datacasting Dervish and President of Telecommunications and Technology Policy
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By Jeffrey Krauss, Datacasting dervish and President of Telecommunications and Technology Policy

You are all familiar with the must-carry dispute between broadcasters and cable operators—broadcasters want cable operators to carry their digital signals in their entirety. And cable operators don't want to. But here's a new flavor of must-carry—TV networks want their local broadcast affiliates to carry the digital network feeds in their entirety, and the broadcast stations don't want to! How ironic. Datacasting is the source of this dispute. (Datacasting means broadcasting non-video programming like sports and stock market data, weather radar images, text, computer programs, Internet Web pages, etc.)

The network-affiliate relationship

It might seem like the business relationship between a broadcast network and a broadcast station affiliate would be similar to the relationship between a basic cable network and a cable operator. But there are significant differences. A basic cable network sells its programming service to the cable operator, who pays the network on a per-subscriber basis. A TV station, on the other hand, sells air time to the broadcast network. So the network pays the station, exactly the opposite of the cable deal. Part of the reason for this difference, of course, is that cable systems get revenue from monthly subscription fees, while broadcast stations do not. And TV networks gather huge revenues from advertising, while advertising is a much smaller part of cable revenues.

There are other differences, of course. In each city, a broadcast network has only one affiliate, which has exclusive rights to the network programming. But for satellite-delivered cable programming, there is no exclusivity, and all competing cable and MMDS networks have the right to carry it. Conversely, a TV station carries only one network's programming, while a cable system carries programs from dozens of networks. Moreover, cable network programming comes in 24-hours-a-day, seven days a week, while broadcast network programming covers a smaller part of the day (but it does cover virtually all of the time that most people watch).

Over the years, there have been predictions that the broadcast model will evolve toward the cable model. Indeed, Fox unilaterally cut its payments to its affiliates a few years ago to make up for the huge costs that it paid for NFL football games. Fox argued that the TV stations could make up the difference from new local sports programming that would benefit from the network's NFL contract. There have been increasing tensions in the broadcast network-affiliate relationship in recent years, and it will get worse.

The datacasting issue

A digital broadcast signal has a payload of about 19 Mbps. Under FCC rules, the broadcaster must use the broadcast signal to deliver at least one free program, which might or might not be HDTV, but the remainder of the 19 Mbps can be used for other video programs, or it can be used for datacasting.

The latest development in datacasting technology is that the ATSC is about to adopt a standard. The latest development in datacasting business is that there are at least three or four organizations that have entered into contracts with TV stations to lease a portion of the 19 Mbps for datacasting. They are Geocast, iBlast, BIA Data Management and the Broadcaster's Digital Cooperative. For example, iBlast has signed up stations in more than 100 markets that will kick in 7 Mbps for iBlast's datacasting. The founding partners of iBlast are Tribune, Gannett, Cox, Post-Newsweek and other major newspaper publishers that also own TV stations. Geocast's partners include Hearst-Argyle TV, Belo Corp. and Granite Broadcasting. The idea is to aggregate spectrum from broadcasters across the country so that a datacasting program supplier can reach a sufficiently large market. Geocast and iBlast plan to produce and distribute their own data programming, just like a TV network does with video, while BIA Data Management will sell aggregated capacity directly to program suppliers, somewhat like the way an unaffiliated station gets syndicated programming today directly from Warner Brothers or Universal.

And so the question arises, if the station sells off 7 Mbps and the network delivers a full payload of 19 Mbps, what happens? If the network delivers a multiplex that consists of (say) a sports program, ancillary data associated with the sports program like player statistics and schedules, a news program, etc., the local broadcaster could conceivably strip out some of the network's programming to insert iBlast or Geocast programming. But that isn't practical if the entire 19 Mbps is taken up with a single HDTV program.

The broadcast stations say "don't worry"—they have sufficient flexibility to handle all the options. The networks say they definitely plan to be in the datacasting business. But it is clear that this will make future negotiations between broadcast networks and their affiliates much more complicated. It seems to me that they are headed for a big fight.

But they do have one benefit compared to the case of cable must-carry and retransmission consent policies. They at least have the comfort of knowing that they can negotiate their business deals in private, without government regulation. At least, for now.

jkrauss@cpcug.org

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