Weighing NextGen TV’s Business Case

There isn’t much of a business case for deploying ATSC 3.0 now. Since it’s IP-based, it is not backward compatible with the current ATSC 1.0 standard. That means the switch requires the purchase of additional equipment along with finding a way to simulcast all programming in ATSC 1.0 for an indefinite period of time.

Typically, that simulcast plan involves negotiating with local competitors to determine which station or stations will buy the equipment and host all the 3.0 signals in the market and, in return, which will simulcast their competitors’ 1.0 signals. In many markets, spare digital broadcasting capacity is finite or even nonexistent; it’s already being used for multicast channels.

On top of that, capacity that could be dedicated to new NextGen TV products, for which there are no real proven use cases, will probably not be available in the near term. Offerings like targeted advertising require bandwidth that will likely be taken by other participating market stations’ simulcasts.

A Little History

It was just 13 years ago that all television broadcasters completed the transition from analog to digital transmissions. In that case, it wasn’t a choice; it was a mandate. Analog distribution had been the standard for the first 50 years of broadcast TV.

In 2005, Congress passed the Digital Transition and Public Safety Act. The Act required all broadcast television stations to transition to digital (ATSC 1.0) by February 2009. To receive over-the-air (OTA) signals, consumers had to either switch to an MVPD (multichannel video programming distributor) or trade in their analog antenna (so-called “rabbit ears” or a roof-top unit) for a digital one. Most consumer antenna purchases were subsidized by a DTV coupon paid for by the U.S. government.

Despite the standard having been published in 1995 and codified by Congress 10 years later, the transition felt hasty and ill-planned. All of a sudden, those low-numbered channels in the VHF band went from being an advantage to a liability; the amount of power needed to deliver the signal to a designated market area (DMA) varied based on the station’s channel position. On top of that, other countries adopted different standards for their own digital transitions. Why do we want to go through that again, and so soon?

At the end of last year, Deloitte released an ATSC 3.0 white paper headlined “ATSC 3.0 ensures an immediate solution to America’s demand for high-speed internet.” Despite the positive forecast for the standard and its new business opportunities, the paper’s authors admit that there are challenges and many necessary actions to make their vision a reality.

Nevertheless, ATSC 3.0 has already been deployed in markets representing about 50% of U.S. television households and is forecast to reach 75% as early as the end of the second quarter of 2022. To find out why, I spoke with two people, one an ATSC 3.0 cheerleader from the very beginning and the second a C-level technical expert from a PBS station group.

The Way Off The Plateau

Jerald Fritz is EVP for strategic and legal affairs at ONE Media 3.0. When I asked him why television broadcasters should spend money now to support a standard that isn’t federally mandated, typically requires cooperation among competitors and whose capabilities they won’t be able to fully utilize until some unspecified time in the future, his blunt answer was, “It’s the only way off the plateau.”

In Fritz’s opinion, television broadcasting is a mature business. It is facing competition from streaming and satellite. The only way it can grow is by adding technical capabilities.

Under the ATSC 3.0 standard, broadcasters’ unique selling proposition is its one-to-many distribution system. As an IP service, it can provide cost-effective content delivery and can be segmented to target devices or locations with specific characteristics. In addition, ATSC 3.0 is a better solution for high-density locations because it can penetrate deep into buildings. Finally, there are already agreements with most major television manufacturers to include the standard in new models; these are marked as being ready for NextGen TV. (Fritz also mentioned that other countries including India, Europe, Japan and China are considering adopting ATSC 3.0 when they upgrade to next generation digital signals.)

Christian Siebeneck, chief technology officer for TPT (Twin Cities PBS), was in the process of preparing an analysis of ATSC 3.0 and what it might mean for his market when I reached out to him. Given PBS’ mission, he isn’t very interested in most of the new applications that Fritz touts. Targeted advertising solutions aren’t very compelling in a world of underwritten content. To him, “ATSC 3.0 is blue sky, the Wild, Wild West.” He’s looking forward to seeing “how we as an organization can use it to fill the needs of the people of the Twin Cities of Minnesota.”

One of the things Siebeneck mentioned really struck me. He sees that continued inflation will eat into consumer budgets and could increase cord cutting. That, particularly when combined with a new broadcasting standard which enables improved picture and sound quality, could make free OTA television very attractive.

Also consider what a station’s move to the newest standard says to consumers. Siebeneck asks whether stations that don’t adopt it will be seen as falling behind.

There is one final point that Siebeneck feels worthy of consideration when preparing the business case. That is missing out, at least in the short term. As he sees it, there are “only so many seats on the ATSC lighthouse.” With stations having to broadcast in both ATSC 1.0 and ATSC 3.0, there won’t be room for everyone, initially. Those that get there first will have first-mover advantages including the opportunities to capture those OTA customers deep in buildings, offer better sound and pictures, and to participate in the experimentation.

As I see it, there is no way to prepare a reasonable breakeven scenario for ATSC 3.0 deployment. Such analysis would be filled with a number of assumptions, any one of which may or may not be able to withstand scrutiny. That being said, broadcasters need to set aside their spreadsheets and make the investment in their future now. Those who don’t risk being left behind.

Former president and CEO of the Media Financial Management Association and its BCCA subsidiary, Mary M. Collins is a change agent, entrepreneur and senior management executive. She can be reached at [email protected].