Whither iBlast?

The sputtering economy and slow transition to digital television have been rough for most companies serving the broadcast business, especially those in datacasting. Just ask Michael Lambert, chairman and CEO of iBlast Networks.

Aside from his role at Los Angeles-based iBlast, Lambert owns two TV stations (WNAB-TV Nashville and WSLI-TV Chattanooga, Tenn.) and is a general partner in Partner Stations Network, a broadcaster-owned programming alliance of 117 stations, so he understands the pressures the industry faces. "What we need to do is find some additional revenue streams, because advertisers are not going to pay us any more money to run their commercials in high definition than they will in standard definition," he says. "We have to mine whatever profits we can out of our digital spectrum."

In 1999, Lambert, Chief Technology Officer Oliver Luckett and then-President Ken Solomon founded iBlast, aiming to send personalized rich-media files and applications via high-speed connection directly to PCs, game consoles, personal video recorders and other receiving devices. Since then, the company has faced a number of challenges: Consumer demand for data services is virtually nonexistent; Ken Solomon left the company in February to run Scripps Networks' Fine Living network and interactive Web-based service; and the company recently laid off about 20 of its 65 employees.

"We did an alpha test, and we had an operations staff that was running the live datacasting test in five cities," Lambert explains. "We expect to hire some [laid-off workers] back when we begin full commercial service [in spring 2002]. It's really part of the ebb and flow of the business."

The stations involved in the iBlast field test are KTLA-DT Los Angeles; KICU-DT San Jose, Calif.; KGTV-DT San Diego; KPNX-DT Phoenix; and WOFL-DT, Orlando, Fla.

By most accounts, the field tests were successful, although there were some technical glitches in Orlando. Apparently, the multiplexing equipment, which embeds the data into the broadcast signal, was located too far away (1,000 feet) from the server, and data streams were lost. Signal repeaters were able to solve the problem, according to Lambert.

To be successful, iBlast needed spectrum to reach the entire country, so it persuaded a number of terrestrial broadcasters to allow it to use a portion of their over-the-air digital spectrum during certain dayparts. Even though CBS and other networks urged their affiliates to hold onto the spectrum, nearly 250 stations potentially covering 93% of the country have signed 10-year contracts, agreeing to share in the revenue generated by iBlast's services.

Besides the recent downshift in the U.S. economy, an apparent lack of consumer demand for data services has caused competitor Geocast Networks to go out of business and others to rethink their business strategies. Having invested approximately $40 million already, Lambert remains committed to his original vision of using the broadcast spectrum to reach the largest number of people with a high-speed connection. The key is finding the "killer app" to make the service attractive when it is officially launched next year.

The issue of consumer demand is a subject with which Lambert and others in datacasting struggle every day. He's looking to markets other than entertainment—such as distance learning and military training—for potential revenue.

"That's a challenge for us," Lambert says. "We're pushing on two ends. One is on content companies that we want to understand the capabilities of our TV stations and how valuable this fat pipe is. The other is to find out what the consumer wants."

Lambert is quick to point out that he's not trying to be a content distributor. "Our interest here, since we own TV stations, is in monetizing the investment that we made in digital spectrum. To really take advantage of this huge infrastructure that covers the whole country, we think that the best use of it is to try to reach millions of people, not thousands. That's why we're looking at consumer applications."

The sluggish economy has "slowed us down a little bit," and having Geocast go out of business didn't help with the perception of datacasting's potential, but Lambert believes that iBlast can make it work.

"We're owned by very deep-pocketed broadcasters who are committed to the enterprise," he points out. "We weren't happy when Geocast went out because we like the idea that there are several players in this space. We come at this as station owners, and, now that the FCC has said to get on with the transition to DTV, we have an urgency to make this work."

With about 45 on staff and "money in the bank to operate for more than a year," Lambert is raising about $25 million in investment capital in anticipation of the commercial launch; he says he has $17 million committed already.

"I think we're in good shape with regard to staying in business," he says. "The question is, what are the applications and who are the guys who are going to step up first and turn [datacasting] into an exciting thing that consumers might want in their home."