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Battle brews for spectrum

Look out: Those datacasting deals signed by station groups could be the first shots in a technological turf war between networks and affiliates in the next round of affiliate negotiations.

The networks, which have still not announced their plans for datacasting, are nonetheless making it clear that they view carriage of their data services as important as carriage of video services. But at least 27 major broadcast groups already locked into their own datacasting arrangements with Geocast, iBlast and the Broadcaster' s Digital Cooperative, sidestepping the networks with which most are affiliated.

As affiliates renew their network deals, many believe that someday they'll essentially get an offer they might not be able to refuse: Carry our data services, or else.

"As an FCC matter, the primary signal has the right to the digital spectrum,"says Brandon Burgess, NBC chief financial officer. "The way we view it is that there' s an understanding that the primary signal plus any content-related enhancements will be carried and will, frankly, benefit both affiliates and viewers."

Bob Seidel, CBS vice president of engineering, offers a similar view. "In the past there has been a partnership between the network and the stations, and that same partnership will carry over to data services," he explains.

But a possible complication could be the datacasting agreements signed by group owners with third-party datacasters. By committing as much as 7 Mbps of their digital spectrum to third-party datacasting services, station groups may find themselves bandwidth-challenged to carry network HDTV content and datacasting services, according to Seidel.

"Some of these agreements that station groups have signed will preclude them from carrying HDTV," he says. "The deals require anywhere from 3.7 to 7 Mb/s for data and you just can' t do decent HDTV in the remaining spectrum. If you have rapid moving sports you just can' t do it."

The upshot? "They may have locked themselves out of doing major events like the Super Bowl in HDTV,' ' Seidel adds. But others dismiss that possibility.

"We' ve all got a lot to do to make sure that in a multichannel universe our channels are chosen," notes Alan Bell, president of Freedom Broadcasting. "A priority for me is not having a civil war with the networks, and I hope it' s a priority for them."

Partnership does appear to be the goal. In what looked like a soft volley, Leslie Moonves, CBS Television president and CEO, last week sent a letter to CBS affiliates explaining that the network wants to talk about digital plans at its May affiliate meeting in Las Vegas.

Moonves said the network's "natural preference is to partner with CBS affiliates to establish a national digital footprint that, in addition to the television network, can exploit [ancillary] profitable opportunities for affiliates and CBS within our available digital spectrum."

A CBS source says, "There's absolutely no question we intend to be in the digital-spectrum business"; Mel Karmazin, CBS Inc. president, has the network studying various multicasting scenarios.

"Nothing they [affiliates] do should preclude them from joining us in perpetuity," said the source. The source said iBlast was of particular concern because its model uses more spectrum than others and may conflict with CBS' future multiplexing plans and possibly even its HDTV plans.

"We want them to work with us and we don' t want them to go off the reservation."

CBS will also try to negotiate specific rights with regard to affiliate spectrum space in affiliate contracts as they come up for renewal. "There' s no single formula," says a network source familiar with the situation. "It' s definitely a point of negotiation," the source continues, likening it to the way its position on network compensation payments evolved over the years.

"A couple of years ago, all the networks said comp wouldn' t go up. Then they said it would go down. Then we said we didn't believe in it and they might even pay us."

NBC's plans are also being sharpened, according to Burgess. "We're trying to take as comprehensive a view of datacasting as possible, and we've been moving slowly, deliberately. But in the next couple of months, we'll develop our vision. We' re wrestling with a fair bit of complexity.' '

One question is how much spectrum datacasters can use without harming enhanced television programming. Mike McCarthy, executive vice president and general counsel of A.H. Belo, an investor in Geocast, feels comfortable that the Belo stations have reserved enough spectrum to pass HDTV content onto viewers. "We haven' t committed such a large portion of our spectrum that we won't have flexibility," he says.

Adds Bob Marbut, Hearst-Argyle chairman and co-CEO, "There will be certain times when the bandwidth required by Geocast will be very small and we could do HD. All of us want to protect core product lines, and HDTV is part of that mix."

Claims by both sides will be part of what could be an interesting new chapter to affiliate negotiations. "I think it' s fair to say that the complexity level of DTV is an order of magnitude greater than it was before and, by definition, things get trickier in terms of negotiations,' ' says Marbut. "The question will be: Are there good business reasons for both sides to talk and work something out?"

John Greene, Capitol Broadcasting vice president, says his company has investigated a number of datacasting options, and also has its own datacasting venture, DTVPlus. One thing is certain: the station groups will have tight control over their digital spectrum. "The stations are going to guard their data stream carefully," he says. "We would like to retain at least some of the bandwidth for local data, because we think there will be some opportunities there and we'll be reluctant to give that up."

Some affiliate agreements have already involved datacasting, albeit vaguely. Burgess adds that recent agreements have been firm in terms of network carriage but include language of good-faith partnering for future business models.

It's this impact on today's affiliate negotiations that makes Paul Karpowicz, head of the CBS TV affiliate board of governors, urge groups to open a dialogue with networks on the issue. "It' s going to be important for all the affiliate organizations to get with their networks to try and figure out exactly what plans are being made and to start negotiations," he says. "We need to know if the stations and networks are going to be together on this, or are the stations going to go off on their own."

Alan Frank, Post-Newsweek president and chairman of the NBC affiliate board of governors, is confident of a solution. "I don' t know why we couldn' t work something out," he says. "We haven' t seen network plans, but our goal is to broadcast the main signal and the enhancements that come with that."