The DTV process has begun Ã¢â‚¬â€ where are cable operators?(2)
The FCC has announced the conclusion of its fifth report and order regarding digital television (DTV). This exercise is intended to be the catalyst for broadcasters to enter the competitive digital world while maintaining "free" programming to the public. The Commission has effectively pushed many of the complicated technical and marketing issues back to the broadcasters. The Commission has also started the implementation clock, which runs through the year 2006, when analog NTSC broadcast delivery is ended. While the implications for the broadcasting industry are staggering, the implications for the cable television industry go well beyond yet another multi-channel competitive threat. The time to consider the effects is now, so that the industry can position itself favorably during the implementation process. Very little in the Report and Order appears set in stone, and substantial change along the way is inevitable. This article is intended to provide a brief overview of the DTV process and to raise a few key issues for the cable television industry to ponder. A brief overview of the DTV process The Commission will provide established broadcasters one six-megahertz broadcast channel for digital programming, in addition to the current analog NTSC channel. Each broadcaster will decide whether to provide one high-definition television (HDTV) signal, or multiple digital program streams. One of the digital program streams must be "free," but does not have to be a simulcast of the analog programming. In a strange twist, Chairman Reed Hundt, in his April 3, 1997 statement1, referred to a "reverse simulcast" requirement of the digital programming on the analog channel for the last few years of the transition. This leads to the question: Which digital channel gets simulcast, assuming multiple programs? The real loser here appears to be HDTV, which was the original impetus for this whole process. By creating the incentive to develop new revenue streams through multiple programming, the broadcasters have little to gain by pursuing a single HDTV program strategy. Remember the "one free digital channel" requirement? The technical standard, known as the ATSC-DTV Standard (Advanced Television Standards Committee Ã¢â‚¬â€ Digital Television), includes both high-definition and standard-definition formats. Presumably, it will be possible to move from single HDTV to multiple DTV programming without separate encoding, decoding, editing and server platforms. The cable industry was barely mentioned in the Fourth Report and Order, except to note that "cable interests" consistently argued against mandatory transmission standards. The broadcasters and equipment manufacturers effectively argued that "only a Commission-adopted standard will provide the certainty needed by all parties to undertake the transition to DTV"2. This says much about competitive positioning and market adaptation realities, and it also reflects the historical philosophical differences between the cable and broadcast industries. It appears from Chairman Hundt's comments that the Committee was lobbied hard by strong factions of the broadcast, film, consumer electronics and computer industries regarding video format. Microsoft Corp. was specifically mentioned as being especially helpful in pointing out the benefits of progressive scanning and square pixels. As a result, the FCC, in its Fourth Report and Order for DTV, specifies the ATSC-DTV standard for all layers except video format. Issues such as program aspect ratio and interlaced vs. progressive scanning will be decided in the marketplace. The official justification for providing broadcasters free spectrum for digital broadcast involves the concept of "spectrum recovery," which is similar, one supposes, to the IRS referring to our taxes as federal government income. This, in essence, means that the broadcasters will give back the analog spectrum at the end of the 10-year transition period. Through careful allotment, the Commission says it will recover a net 138 MHz (60 MHz immediately and 78 MHz in 10 years). Channels 2 through 51 will be utilized for core DTV spectrum during the transition. The Commission stated in its news release that at the end of the transition period, either Channels 2 through 47, or Channels 7 through 51 would be specified for DTV. Net spectrum recovery is accomplished by limiting channel assignments above Channel 59. Fewer channels are needed as a result of the propagation and interference characteristics of the new digital transmission plan. The recovered bandwidth, according to Hundt, will provide enormous benefit for the public through assignment or auction. It is important to note that for this plan to work Ã¢â‚¬â€ and the program justification to be valid Ã¢â‚¬â€ analog NTSC broadcast must die. Impact on cable television Reactions from the cable industry have generally focused on the competitive ramifications of the multi-channel programming scenario. Given the many complexities associated with the new opportunities and existing competition facing the industry, it is not difficult to understand the somewhat muted interest in the DTV process. However, this is a process that is as prime for exploitation as it is generating threat. One must first consider the world in the year 2006 and believe that the major tenets of the Commission's plan remain intact. While this might be the least likely outcome, it represents a defined starting point where many large interests are currently focused. The death of analog NTSC broadcast television and the emergence of multi-channel broadcast programming portend several interesting items regarding video entertainment in general, and cable television in particular: Digital television sets or consumer-purchased convertors will be universal. No relevance between traditional station ID (channel number) and broadcast frequency. No technical reason to deliver any analog NTSC to the home. Cable, satellite and pre-recordings may be the primary source for HDTV. Broadcast stations will either compete individually with 6 MHz or collectively through a third party. If DTV, cable and the consumer electronics standards are in sync, the cable and broadcast digital set-top becomes extinct over time. Assuming that cable operators and program companies have the appropriate level of access control, moving the digital decoding, memory storage and RF demodulation functions into the DTV set should be positive for everyone. The degree of good cheer will largely depend on how the DTV and cable's digital video standards develop. While the initial cable digital video platform and the ATSC DTV standard share certain aspects of the MPEG-2 video standard, they are by no means identical. For example, the data transport and physical (RF modulation) layers are different. The DTV standard contains latitude for market-driven definition of video format, but is very tight in other areas. The long-term view for cable must include full compatibility with consumer electronics while maintaining viable controlled access by the customer. Anything less is a potential disaster for the cable industry. Remember how "addressable basic" was received by owners of cable-ready television sets in the 1980s? In January 1997, the NCTA and the Consumer Electronics Manufacturers Association (CEMA) announcedÃ¢â‚¬â€following years of intense debateÃ¢â‚¬â€definition of an advanced interface which provides consumers with access to the inherent features of their equipment while maintaining the cable operator's secure delivery. The announcement indicated that this solution will extend to the "digital environment, future cable services and other media transmissions"3. It is not apparent that this effort is tied into the ATSC DTV process in any way, but at least there is some positive dialogue between all the parties regarding issues of compatibility. If digital video through cable is not compatible with future DTV sets, the cable industry service will suffer the same kind of cost and consumer "unfriendliness" problems in the future that the DBS industry is faced with today. It is possible that the DBS industry (particularly Primestar, which will require a "cold start" upgrade at some point) will adapt to the DTV standard if there are cost advantages. It must be emphasized that cable compatibility with consumer equipment is a long-term requirement. Consumer acceptance of digital receiver equipment will take time. Early deployment of digital video services for the cable industry can, and should, proceed as quickly as the market dictates. However, if the cable operators do not pay attention to ATSC DTV and participate at some level in the process, the convergence with cable television's digital platform will not occur. In the end, the cable operators may need the same regulatory leverage that the broadcasters have exercised to ensure interoperability and a level playing field. Proactive work in the early years will reduce the scope of regulatory involvement considerably, maybe even eliminate the need. There will be areas where the cable industry will wish to depart from the current DTV standard. The digital modulation format, for example, should be optimized for maximum bits/Hertz, given cable's closed network as opposed to the broadcast environment. How do we keep the option for high bit-rate digital modulation techniques, such as 256 QAM, and not require an external demodulator in the DTV set of 2006? This is not just an issue of customer friendliness. The major competitive variable for digital entertainment delivery will be overall cost. The cable industry enjoys a significant advantage in terms of one key cost element: bandwidth. The industry must work to insure that it does not give up any of this advantage through its predilection toward closed, proprietary transport systems. The HFC architecture For the past few years, cable television has been trying to "justify the wire." New, interactive applications are in their infancy, along with broadcast digital video services. All of these services attempt to take advantage of the enormous bandwidth inherent in hybrid fiber/coax (HFC) systems. The struggle today is one between tangible (and larger than expected) investment vs. unconfirmed, but promising, cash flow. Looking at the current cost issues facing cable operators, several areas appear to be of universal concern: Sub-low return path ingress (cost of tightening plant and keeping it working) Cost of application hardware (e.g., digital set-tops, modems, etc.) Back room and related support not required in traditional cable service Bandwidth upgrade (traditional, on top of everything else). If one believes in the Commission's year 2006 vision, there is much in the way of good news relative to these 1997 issues. The elimination of broadcast analog NTSC shouldÃ¢â‚¬â€presuming satisfactory resolution of the standards issueÃ¢â‚¬â€enable cable operators to engage in a little "spectrum recovery" of their own. This process can be balanced with market-driven opportunities, such as providing some analog delivery for the analog television sets not yet retired. Cable operators will utilize more advanced digital modulation techniques and statistical multiplexing to provide even more digital bandwidth than the current ratio expected today of six digital programs for each analog NTSC program. With bandwidth abundance and no logical reason to worry about where Channel 2 begins, the industry can attack the sub-low return issues. Defining a more symmetrical forward/return split will solve many, but not all, of the difficult ingress problems experienced in the sub-low split. Today's return path hybrid amplifier typically provides 5 MHz to 200 MHz capacity, and the return path bandwidth is defined by the cross over filtering. Now is the time to define a future alternative return path split. If it is done right, systems going in today can be designed for future upgrades that are modest in cost and as unobtrusive as possible. The cost implications for HFC plant extend well beyond the return path issues. Bandwidth upgrades have always been driven by NTSC carrier load and relative performance specifications. Operators are now beginning to implement digital modulation, where carriers have more consistent power over its bandwidth, but are limited in overall amplitude to 6 dB below the analog video carrier. Data recovery from QAM will require much less in carrier-to-noise (C/N) ratio and distortion performance than analog NTSC (e.g., C/N 30Ã¢â‚¬â€œ36 dB, depending on bit constellation, vs. C/N 48Ã¢â‚¬â€œ50 dB for analog video). The design implications for an all-digital, more symmetrical return path HFC design will be important. We can assume that by relaxing traditional analog performance specifications there will be a positive impact on overall cost. However, it is likely that some of these savings will go toward plant hardening costs, connectors, drop systems and other little things in large numbers. New elements, particularly back room support systems, will require investment to move beyond traditional cable service. How all of this shakes out for both the technical and business models will depend on what we know and how we apply that knowledge over the next 10 years. Summary Regardless of what the DTV vision becomes (and it will likely be much different than what has been proposed), the process has begun. The cable industry must participate aggressively for both defensive and offensive reasons. Using the Commission's current plan to justify and obtain the right to carry the DTV signal at any frequency on the HFC plant, utilizing any modulation format, is one area of immediate concern. There will be other, thornier issues, such as DTV "must-carry" and consumer equipment interoperability, which will ultimately define cable's strategic direction and success. The Commission has put a great deal of its process rationalization on private sector market forces. It has also put a great deal of process justification on spectrum recovery and the end of analog NTSC broadcast. In that milieu, both opportunity and disaster lurk. The process has started. Author Information About the author Andy Paff is president and CEO of Integration Technologies, based in Englewood, Colo. References 1. Federal Communications Commission, "Separate Statement of Chairman Reed E. Hundt RE: Adaptation of Digital Television Allotment and Service Rules Reports and Orders," 4/3/97. 2. Federal Communications Commission, FCC 96-493, "Fourth Report and Order," Section III, 12/14/96. 3. Consumer Electronics Manufacturers Association, press release, "CEMA & NCTA Solve Cable Compatibility Dilemma for Consumers," 1/15/97. Ã‚Â Canadian cable reaction to U.S. DTV standard "What, me worry?" This seems to sum up the attitude of many in the Canadian cable industry when asked about the FCC's new DTV standard. There are three reasons for the indifference noted by CED. First off, "We just got the go-ahead to go into local telephone competition," says Sylvie Powell, a communications consultant representing the Canadian Cable Television Association. Although this represents a major opportunity for cable, it comes with a price Ã¢â‚¬â€ namely the end to the industry's monopoly on video distribution. Starting next January, competitors such as the much-feared telephone companies are going to be allowed onto cable's turf; compared to this threat, DTV is definitely "small potatoes." Second, the DTV process currently underway in Canada Ã¢â‚¬â€ spearheaded by the joint industry-government Digital Television Task Force Ã¢â‚¬â€ is one that includes cable in its ranks. What makes this significant is that Canadians like to get everyone onside before they set new standards; whatever happens, cable isn't likely to be left out in the cold. By the way, the reason that Canadians are so cooperative "is because the market is much smaller, and the geography is much more daunting," says Task Force Chairman Michael McEwen. Certainly, awareness of this fact has been the hallmark of Canada's transition to digital radio, which is beginning commercial service this fall using the European-designed Eureka-147 system. The selection of Eureka as the Canadian standard came from seven years of close cooperation between government, public and private broadcasters through a task force that mirrored McEwen's, with more harmony among the players than one sees in most families. Finally, what may well be keeping Canadian cable calmÃ¢â‚¬â€ in addition to the fact that they've got other more immediate dangers like the telcos to worry aboutÃ¢â‚¬â€is the knowledge that over-the-air DTV will probably be no more threatening to the industry than analog. This is because Canada relies heavily on the U.S. for much of its programming, with signals either having to be captured using high-gain terrestrial antennas or via satellite. Hence, most Canadians will still have to rely on cable Ã¢â‚¬â€ or some other distribution system Ã¢â‚¬â€ for access to U.S. DTV programming. This reality, combined with the fact that off-air DTV is an expensive proposition for broadcasters, has people like Shaw Communications COO/President Jim Shaw Jr. seeing the new medium as an opportunity, rather than a threat. "We're already moving to digital," says Shaw, "so we're looking for more digital product." In fact, he suggests that broadcasters might be wise to start out by feeding digital signals to cable first, holding off on over-the-air transmissions until enough people own DTVs to justify the expense. Whatever the reality, one thing is clear: Canada will follow America's lead on DTV. "I think the trick is looking at the technology and looking at their production and roll-out issues, and then tailoring them to our specific geography, marketplace and cultural needs," says McEwen. However, Canada's emphasis on cooperation may well shield Canadian MSOs from any potential threat DTV poses to U.S. cable.