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Broadcasters Squeezed by Convergence Push

As broadcasters continue to wage the turf war to keep their claim on broadcast spectrum, the FCC—with its push to get high-speed broadband to every home in the U.S.—appears to be the toughest opponent.

Broadcasters are hoping to maintain their status as an over-the-air medium. The FCC, however, sees the future of TV moving to broadband video delivered via set-top box, and last week the commission opened an inquiry into the matter.

For months, broadcasters have been making their case for why the government should not be so quick to move the TV model online. Among those reasons: the recent conversion to digital over-the-air service, with a separate $1.5 billion spent to ensure that over-the-air viewers with analog TVs could still get their signals.

The recent defense comes in response to FCC broadband advisor Blair Levin's conversations with broadcasters and Wall Street about how they might give up some of their spectrum holdings, and scale back service, to the benefit of wireless broadband.

Nexstar President Perry Sook believes broadcasters should take the FCC's push for spectrum very seriously, and suggests that the FCC should back off. Broadcasters, he says, are “less than six months past the biggest transition in the history of television,” with the stations and viewers “still getting used to it.” The FCC, Sook says, should give them time to develop new services with that just-allocated digital spectrum.

Sook adds that the government and broadcasters have invested a lot in the DTV transition—in Nexstar's case, some $80 million—with no guarantee of return for the stations making the government-mandated switch.

A veteran broadcast-group head who asked not to be identified says he thinks the FCC is overstepping its authority with the contemplated take-back, and that the agency is putting its finger on the scale in favor of broadband over broadcastinterests.

One of the arguments that National Association of Broadcasters executives have made in meetings at the FCC is that the value of over-the-air HD signals to viewers is what will allow broadcasters to get retrans leverage at the bargaining table with cable operators. The NAB execs say they need this revenue stream to help offset the decline in ad revenues and the rise of alternative video competitors.

The NAB has even been pitching the FCC on using broadcasters' spectrum for broadband, but in a way that allows them to retain control. One of the FCC's arguments for converting broadcast spectrum to wired use is that health and energy applications will be part of the broadband “ecosystem,” a term gaining currency in the Obama administration as applied to the Web.

In a filing about Smart Grid Technology, the NAB argued that FM subcarrier frequencies could be used for monitoring and controlling energy demand. This, according to the NAB, “would not require the allocation of new spectrum,” a process the FCC concedes could take almost a decade.

And the urgency of the broadcasters' defense got an exclamation point with the release of the FCC's request for comment on just how that broadcast spectrum allocation might be reduced, coverage “diminished” and some of that spectrum turned over to wireless companies.

Set-top boxes go online

In addition, the commission last week opened an inquiry into how to make it easier to turn TVs into broadband video players by creating a market for set-top boxes that deliver both cable-telco video and Internet video to a TV set.

That follows up on statements by FCC Media Bureau Chief Bill Lake at the commission's last broadband update that he thinks the days of separate TV and Internet are ending, and that merging the two could help drive broadband adoption. Lake pointed out that 99% of homes have TVs while only 75% have computers. The marketplace, he says, is now looking for a better way to connect the two. The FCC prefaced its inquiry request with a pitch on how “tremendously popular” Internet video viewing has become.

One industry source skeptical of the convergence pitch suggested the death of traditional video viewing was overrated: “We have been hearing about the convergence of broadcasting and computers since 1975, and I don't know too many people who have Microsoft Web TV products [a convergence effort that fizzled] in their home. It may happen someday, but it is a dangerous game to predict the future of technology.”

Nielsen figures released last week show why the government wants to use the TV set to create broadband video converts, but suggests there could be a long way to go. In the third quarter of 2009, according to Nielsen, 99% of video viewing still involved traditional TV, with 31 hours and 19 minutes per week of TV watching. This compared to only 22 minutes of Internet video, and a blink-and-you-missed-it 3 minutes of mobile video.

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