Digital TV Squabbles Could Derail 3G

Television's business model used to be simple: Broadcast shows that people want to watch and that will attract advertisers. But with cable and satellite television siphoning off broadcasters' ad revenue as they prepare to invest heavily in expensive digital television (DTV), many broadcasters have begun eyeing the wireless-data market. More importantly, that quest for new revenues also threatens to delay wireless-service providers' move into the 700MHz band, currently home to TV channels 60 to 69.

At issue is ATSC, the DTV standard adopted by the broadcast industry. The FCC rejected a petition by more than 400 stations seeking an expedited ruling to allow them to transmit DTV using COFDM modulation. One petitioner, Sinclair Broadcasting Group, argued that ATSC's 8-VSB modulation scheme does a poor job of penetrating buildings. Not only would COFDM allow broadcasters to offer DTV to urban dwellers, it's essential if broadcasters are to compete in the wireless-data market, Sinclair said.

"With the ability to deliver 1s and 0s, I can broadcast anything," said Mark Hyman, Sinclair vice president, corporate relations. "It can be DTV. It can be multipicture standard-definition (TV). It could be data-casting, which can be virtually anything, or it could be mix-and-match. I can be broadcasting 'Monday Night Football' on DTV and still have enough bandwidth left to deliver data to mobile receivers."

Revamping the standard this late in the game likely would delay both DTV's implementation and broadcasters' ability to vacate channels 60 to 69 by 2006, when wireless-service providers are supposed to move in and begin offering 3G services.

"For the service to succeed, we must fix the flaws," Nat Ostroff, Sinclair vice president, new technology, told BusinessWeek in January. "The folks who want to bid on that spectrum have to realize that unless DTV is a success, they may never get the use of that spectrum. If DTV fails, that spectrum can't be vacated."

The ability to offer wireless data also would allow broadcasters to offer a sort of e-commerce mall. Considering that PC penetration has peaked at 55% of American households while television — and eventually DTV — is virtually omnipresent, e-commerce and perhaps mobile e-commerce ultimately could belong to broadcasters, said Bill Kleinebecker, Technology Futures senior consultant. Sinclair's strategy, for example, can be seen in its recent investments in e-commerce companies such as BeautyBrands.com, as well as its recent acquisitions of a major Web developer, Kleinebecker said.

The FCC hasn't ruled out adding COFDM modulation and will revisit the issue this month. The FCC doesn't appear convinced, however, that the problem lies with 8-VSB but rather with the chips installed inside the 10,000 first-generation DTV receivers sold since November 1998. The FCC Office of Engineering and Technology's (OET's) recent comparison of 8-VSB and COFDM ended in a draw.

"We're certainly not closed-minded at looking at the performance and how things are going in the transition and the modulation standards that are used," said Bob Calaff, FCC OET assistant chief. "It's just at this point, to do what Sinclair had asked on balance would have been harmful in terms of delaying the DTV transition for manufacturers and consumers."

Sinclair's critics contend that the petition is just an attempt to delay investing heavily in DTV equipment. The Consumer Electronics Association (CEA), for example, has opposed Sinclair's request to add COFDM.

"I hope this ruling will close the door on this issue," said Gary Shapiro, CEA president & CEO.