It might not rival "Navigator vs. Explorer" as a headline grabber, but the TV industry is being torn by its own browser war.
Broadcasters, cable systems and equipment makers are battling each other in the marketplace, the courts and the FCC for control over the nascent market for on-screen electronic program guides-the point-and-click services that will transport TV viewers from show to show in the 500-channel digital era.
The biggest players in the market are bickering over patent fees and carriage rights for a market that some predict will one day generate more than $3 billion a year in revenue for the program-guide designers and their partners.
The players in the market are roughly aligned along the age-old broadcaster-vs.-cable rivalry, as Gemstar International tries to establish itself with TV stations that transmit its programming information, as well as with TV and VCR manufacturers that incorporate the company's Gemstar Plus+ technology into their products. Gemstar's technology is also the primary guide for satellite providers.
The cable industry is trying to establish its own program-guide service with technology installed in Scientific-Atlanta and General Instrument set-top boxes.
The rivalry has long been a bitter one, as Gemstar, which holds a basket load of patents for program-guide technology, has aggressively pursued court remedies to defend its rights. Thanks to legal victories, it has received $18 million from General Instrument as compensation for license infringements.
Several analysts predict that more back payments are on the way. A similar attack is being waged against Scientific-Atlanta. In total, Gemstar has 12 patent suits pending, half against S-A.
The latest battle pits Gemstar against Time Warner Inc., which has ordered cable systems in California, Maine and North Carolina to strip Gemstar's program-guide data from local broadcasters'signals. No surprise, Time Warner systems in those states are offering their own program-guide service, which is available to subscribers for a fee. Time Warner and other cable companies are expected to widen the prohibition as their electronic program guides (EPGs) proliferate.
Gemstar has petitioned the FCC to stop Time Warner from blocking the broadcasters'competing guide, which is supported by advertising and offered free to viewers.
The desperate efforts are more than a spat over who gets to be the leading TV grid. Many see this as a fight for control over what will one day be an e-commerce vehicle rivaling personal computers.
"Anybody who believes in first- screen control is interested in EPGs," says Scott Cleland, of Legg Mason's Precursor Group.
In fact, some predict TV advertisers will one day prefer program-guide ads over spots during the shows themselves, especially when EPGs start offering full-motion video. "This will be the most valuable real estate on the television set," says Alan Gould, analyst with Gerard Klauer Mattison. "As channels proliferate, each will be viewed less and less and guides more and more."
Most EPG ads today plug TV shows, but non-broadcasters are getting in on the action too, including America Online, Blockbuster Video, Domino's, RCA, 1-800-Flowers and Ford.
There are other fronts in the EPG war. General Instrument and the cable industry have taken the FCC to court over rules banning cable systems from selling set-top boxes that incorporate both channel-surfing and security functions, starting in 2005. The rules were implemented to boost competition in the market for set-top boxes, because the commission assumed that consumers would never bother to buy from retailers if they could get all they needed from their cable company. A federal appeals court is expected to decide the provision's fate in early summer.
Lawmakers have also fretted about Gemstar's pending acquisition of TV Guide Inc., which makes an EPG for the cable industry. The Justice Department is currently reviewing the deal. Leaders of the Senate Antitrust Subcommittee have asked Justice and the FCC to "carefully scrutinize" the purchase pact out of concern that a monopoly on EPGs is in the works.
Buried in broadcasters' VBI
Gemstar's fight with Time Warner, however, is likely to have the biggest impact on determining which companies gain an early foothold in the market. Gemstar Plus+ reaches viewers via signals buried in the vertical blanking interval (VBI) portion of broadcasters'analog transmissions, the same part used to provide data for closed captioning and V-chip functions. The company aims to strike carriage deals with at least two TV stations in every market.
Thanks to Gemstar technology in more than 2 million TV sets and VCRs, viewers receive nightly guide updates regardless of whether their sets are on. The signals can be received over the air, unless a set is programmed for cable.
Program-guide information takes up a miniscule two lines of the roughly 1,488 vacant lines available on most cable systems.
Digital TV signals have no VBI portion, but Gemstar says EPG data will account for less than 1% of a broadcaster's 6 MHz bit stream. Eventually, Gemstar hopes to transmit EPG via wireless paging transmissions as well, reducing its need for cable carriage in the future.
By then, though, millions of VBI-reliant sets will be on the market, making cable carriage a necessity for a big chunk of viewers, the company says.
The cable industry has fiercely resisted Gemstar's arguments, which are supported by broadcasters, that carriage of EPG signals is required by laws forcing cable systems to carry all "program-related" portions of local station transmissions.
"There is no legal support for Gemstar's outlandish position," Time Warner officials told the FCC. The cable company points out that it has offered to carry Gemstar's product for a fee and accused the company of playing chicken with the cable industry by putting its technology on the market without striking deals with cable companies. "If consumers discover that these sets do not work as expected, that is the result of Gemstar's irresponsible conduct and cannot be laid at Time Warner's doorstep."
But broadcasters insist that they have every right to strike deals with Gemstar, and cable systems have no choice but to carry the EPG data. "Time Warner is using its gatekeeper power to unlawfully degrade the broadcast signals," says Art Harding, attorney for several broadcast groups transmitting Gemstar information.
"We made a deal with the people who have legal control over distribution of the broadcast signal. It's not cable," adds Steve Weiswasser, Gemstar general counsel.
Consumer electronics manufacturers say the cable industry's intransigence will thwart the government in its attempts to create a retail market for channel-surfing equipment.
"Unless checked by the commission at this early stage, cable's anticompetitive blocking ... will enable cable to monopolize EPG services now and far into the future," says David Arland, government relations manager with Thomson Consumer Electronics. "Manufacturers will not have an incentive to produce equipment incorporating built-in EPGs."
But FCC officials say appeals to broad public-policy interests may not carry much weight. Instead, they probably will decide simply whether cable carriage laws extend to the EPG signals. "We will look at it solely on the basis of statute and what's required of must-carry, not whether it's good or bad," one agency source explains.
But is it program-related?
Gemstar and the broadcasters may have a difficult case to make, because they are relying on a broad interpretation of what qualifies as "program-related" information. But "what could be more program-related than information for viewers about program descriptions and characters and how to find, tune and search for programs?" the NAB asks, rhetorically, in its comments to the FCC.
But National Cable Television Association General Counsel Daniel Brenner argues that the law requires mandated carriage for secondary information only if the data is related to the single program being aired. Plus, Brenner notes, Gemstar's signals don't need to accompany any single program and are often stored for later viewing. "This is an attempted regulatory gimmick to try to influence the bargaining position of one of the parties to a commercial negotiation."
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