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 AJR  Columns :    THE ECONOMICS OF TELEVISION    

From AJR,   December 1998  issue

U.S. Waits To Tune In, Turn On Digital TV   

A new system offers better picture and sound--and a radical change in what we’ll be able to see.


By Douglas Gomery
Douglas Gomery is the author of nine books on the economics and history of the media     

Last month, a revolution in television commenced. And almost nobody was watching.

Only a handful of the new digital TV sets were flickering in U.S. homes when the official DTV-Day arrived November 1, bringing with it the potential for clearer, crisper images and CD-like sounds. But, though there were few witnesses at its start, the new technology is destined to change how we all look at television.

Digital TV differs from the current analog system not only in delivering improved pictures and sound--a data bit can contain at least twice as much information as the radio-wave, its analog equivalent--but in taking up less precious space in the broadcasting spectrum. That frees up more space, which will be returned to the government for information services and communications (including public safety operations).

In 1996, the Federal Communications Commission granted to broadcasters the licenses and extra broadcast spectrum for digital television. Until 2006, the FCC will allow broadcasters to hold licenses for both digital and analog systems (they'll eventually be expected to relinquish the latter)--with the understanding that broadcasters will handle the burden of innovation in start-up and programming.

And burden it may be. New transmission towers, cameras and other equipment will cost each station an estimated $10 million and will take years to install or implement. Meanwhile, the stations also will pay to broadcast in analog, which requires a separate license and equipment. The FCC schedule calls for network affiliates in the nation's 10 largest markets to have DTV by May 1999 (a handful already were on board November 1), with the entire country scheduled for access by 2002. Eventually, all 1,576 commercial and public TV stations will convert from analog, I believe.

The cost to consumers is heavy, too. Digital TV costs at least $5,000 for a new set and decoder box, so manufacturers expect to sell only 150,000 sets industrywide through 1999 (they peddle 25 million standard sets a year). Prices probably will decline, though it better be well under $1,000 if digital TV is to become a mass medium. (During the transition period, consumers can continue receiving analog service, but they won't see DTV broadcasts without the special converter.)

And what do we get for the price? Aside from better resolution, digital TV provides a wide screen to fully accommodate films. So, for the digital premiere, we might have expected broadcasters to offer top movies. But only ABC obliged, offering the live-action remake of "101 Dalmations" that first Sunday. No other networks wanted to go to the expense of airing a first-run movie that few viewers could fully appreciate; along with the digital broadcast, an analog signal would be necessary to reach the broadest audience. I predict NBC, holding the rights to broadcast "Men in Black" in 1999 and "Titanic" in 2000, will herald these as its DTV movie premieres.

As for regular programming, only NFL football games and PBS documentaries are being broadcast digitally; NBC expects to add a high-definition broadcast of "The Tonight Show With Jay Leno" in early 1999.

So, what's in it for broadcasters besides increased cost? With DTV, they have the chance to reclaim some of their dwindling audience. Last year alone, the Wall Street Journal reports, about 1.4 million households stopped watching the Big Four networks. But now an individual station can use its spectrum space for a single high-definition broadcast or simultaneously offer a few programs--even pay TV--in the current "standard definition," so long as viewers have at least one free option. For instance, a station owned by the Dispatch Broadcast Group of Columbus, Ohio, plans to offer select Ohio State football games. Innovative programming could reverse falling ratings.

While broadcasters sort out how to proceed, cable companies--which fall under local jurisdictions--and satellite operators are gearing up. Satellite-delivered DIRECTV, the largest of the direct-to-home small dish operators, has prom-ised to start two digital HDTV channels next spring. Cable's HBO swears it will be on board soon after.

Options likely will increase as programmers and viewers become more committed to digital TV. But there doesn't seem to be any urgency from a consumer standpoint. Paul Kagan Associates of Carmel, California, predicts only one in 40 of the nation's 100 million households will have a digital TV by 2001; almost a quarter will have one by 2005. Half will still be watching "old-fashioned TV" in 2009.

But momentum probably will take over. We're all guinea pigs in one of the most important technology and public policy experiments heading into the 21st century.