Can ATSC 3.0 Revive The Datacasting Dream?

Undaunted by the bursting of the dot-com bubble 10 months earlier, iBlast exhibited at the 2001 NATPE conference in Las Vegas looking to raise its voice above the hype and hoopla of the program syndicators — no easy task.

Less than two years old, the company was in search of excess broadcast spectrum that it could aggregate and turn into a national broadband pipeline for delivering games, music and other digital content to consumers.

Just prior to the show, it announced that it had leased spectrum from four more broadcasters, stretching its coverage to 154 markets and 93% of U.S. TV homes.

“With the addition of these premier local broadcast partners, we now have an unparalleled reach and are closer to bringing the vision of cost-effective, mutually beneficial broadband data transmission to reality,” said David  Ferrara, iBlast VP of network distribution.

But rather than a stepping stone on the road to success, NATPE marked a high point for iBlast. Although it soldiered on for several more years, it never fulfilled its vision, it never found much of a market for its broadcast-based datacasting service.

And neither did several competitors that emerged around the same time as TV stations began moving from analog to digital broadcasting.

Despite investment of tens of millions of dollars, virtually all of the datacasting ventures of the era — including iBlast, Geocast Networks, Wavexpress, DTV Plus and PBS’s National Datacast — went belly up.

Today, proponents of the next-generation digital broadcast standard, ATSC 3.0, have again raised the prospect of riches from datacasting. With the new standard, they say, datacasting will become another lucrative revenue stream or, at the very least, a help in defraying the considerable cost of implementing the standard.

But the datacasting pioneers of yore say broadcasters should be skeptical of such claims.

“A lot of the proponents of datacasting today with ATSC 3.0 are saying exactly the same things that were being said in the late 1990s and early part of the last decade, that there are many datacasting opportunities out there,” says John Abel, former VP for Geocast, one of the major datacasting wannabes.

“Well, maybe, but it has not been obvious yet what those opportunities are in terms of a profit-and-loss statement or even of what the actual service/applications might be,” adds Abel, who is now managing partner of Team Lightbulb, a conference and event consultant.

Veteran datacasters also say that investors were badly burned 15 years ago and could be slow to forget the datacasting industry’s past failures.

“Given the early history of datacasting, it’s going to be difficult to attract the same kind of investment we saw with iBlast and Geocast, because so much money was lost,” says Mark O’Brien, president of SpectraRep, a unit of of the BIA/Kelsey research and investment firm and the only datacaster known to be operating currently.

Despite that history, proponents of ATSC 3.0 insist that this time it will be different. The new standard will be much more robust than today’s first-generation digital standard, allowing data delivery not just to fixed digital sets with simple indoor antennas, but also to the proliferating millions of smartphones and tablets.

What’s more, the proponents say, the market for a high-speed, one-to-many broadband pipe is big and growing. The pipe could be used for a variety of business-to-business and business-to-consumer services, including, for instance, sending real-time traffic information, GPS upgrades and entertainment directly to speeding automobiles.

And excess data capacity could be leased to wireless companies, they add.

“The fact is, our cost of distributing data can be significantly less than the cost of distributing data through a traditional mobile broadband or wireless carrier operator, as long as it’s one way,” says Mark Aitken, Sinclair Broadcast Group VP of technology.

The first-generation datacasters failed despite deep pockets. iBlast, which was founded in 1999, raised $45 million, had more than 60 employees and the backing of Tribune, Gannett (now Tegna) and Cox Enterprises — in addition to enough other broadcasters to reach more than 90% of the nation’s TV households, according to Ken Solomon, who was president of iBlast and is now CEO of the Tennis Channel.

Geocast raised $85 million, mostly in venture capital, and had almost 200 employees during its fleeting heyday, before collapsing in February 2001. Among its industry backers were group broadcasters Hearst and Belo (now a part of Tegna).

Geocast, which was hoping to include a satellite distribution component in its service, was the first of the two to wither, and it never got far enough along to pitch prospective station affiliates, Abel says. “iBlast and Geocast and all of the other datacasters … died because none of us ever landed on a real business model of how this could work as a business.“

Adding to Geocast’s woes was the opposition of the broadcast networks to affiliates sharing spectrum capacity, says Abel, who was previously EVP at the National Association of Broadcasters.

And Geocast’s pockets were simply not deep enough, Abel says. At one point, the company calculated that it would need an additional $1 billion to make a go of it. “I remember sitting at my desk on March 13, 2000, when the market took a big crash, and I said: ‘This is the end of this road.’ ”

iBlast failed largely because content owners felt burned by Napster, a music file-sharing service, and feared that they would lose control of other forms of content if they agreed to allow iBlast to distribute it digitally, says Solomon, who left the company shortly after the 2001 NATPE conference to launch the Fine Living Network for Scripps Networks.

“They [iBlast] saw the big idea wasn’t going to happen and tried to figure out other applications,” he says. “By then, I was long gone.”

SpectraRep, the surviving first-generation datacaster, was founded in 2000, with the idea of aggregating broadcast spectrum bits to resell to third-party data providers, O’Brien says. “We quickly learned that this was a technology in search of a need and set out to better define that need.”

Now, SpectraRep is using spectrum of public TV stations in several markets — including Las Vegas, Chicago, Houston, Washington, Boston and Norfolk, Va. — to provide backup datacasting channels for first responders, O’Brien says.

One of the key limits to SpectraRep’s current business model, according to O’Brien, is that first responders can receive the transmissions only when they’re stationary.

“Our model is to get to police cars outside when they’re not moving, and that’s a huge limitation that will be corrected with ATSC 3.0,” he says.

O’Brien concedes that it isn’t a great business: “We are not consistently profitable. We have had good years and bad years, but we are committed to continuing to support our current customers and growing the business. We are here for the long haul and see significant opportunities opening up as a result of ATSC 3.0.”

Indeed, ATSC 3.0 proponents say the new standard — assuming it is eventually adopted — will improve datacasting’s prospects because it will be better than ATSC 1.0 when it comes to getting signals into buildings and to automobiles, smartphones and other portable and mobile devices.

“I don’t know if there’s a single killer app,” says Sinclair’s Aitken, whose employer is a leading ATSC 3.0 proponent. “But what we’re absolutely certain of is that in an environment of hybrid services where a device is capable of receiving its bits across multiple platforms there is a value equation for broadcast bits that will be attractive to multiple providers.

“Three to five years into that transition [to ATSC 3.0], we view an opportunity to perhaps double revenue opportunities for the company.”

When asked about datacasting’s potential, other 3.0 proponents hedge a bit. “There is an opportunity there [datacasting], but I can’t say how big it is. That would be premature,” says Anne Schelle, executive director of Pearl, a consortium of nine major broadcast groups that is working with Sinclair and Samsung to develop business models for 3.0.

Sam Matheny, CTO of the NAB, says the prospects for IP delivery of content have improved greatly in the last 15 years. “The idea that broadcasters could soon play a major role with a nationwide, high-tower IP network is exciting.”

Matheny was previously VP-GM of DTV Plus, Capitol Broadcasting’s short-lived datacasting venture that shut down in 2002. “We saw that the adoption of datacast-capable DTV tuner cards for personal computers was not going to ramp up the way our business required.”

Mark Richer, president of the Advanced Television Systems Committee, which is overseeing the development of ATSC 3.0, says it will “make lots of things possible … but we can’t guarantee any specific business outcome. Standards organizations just don’t do that.”

The pioneer datacasters are unpersuaded that time and better technology have materially improved the chances for datacasting success.

O’Brien and Abel agree that the particular business models of iBlast and Geocast — that is, using spare station spectrum to send content directly to computers in consumer homes — is no longer a realistic one for broadcasters, because the cable TV and wireless industries have stolen the march on the business.

Abel says that broadcasting is not well positioned for datacasting because many stations have been relying on cable retransmissions to reach viewers over the years instead of building out their over-the-air capabilities.

“Broadcasters have never been in the data business,” he says. “They don’t understand how telecommunications works as a business.”

In addition, Abel says that as soon as any broadcasters start profiting from datacasting businesses, the telecom and cable companies are likely to butt in and offer similar services of higher quality and at a lower price.

“Telecom companies cross-subsidize all kinds of things just to steal business,” he adds.

Another potential stumbling block for broadcasters, according to Abel, is that the FCC’s rules require broadcasters to pay the agency 5% of the gross revenues they get from data or other similar pay services.

However, Abel says there might be potential in aggregating spare broadcast capacity and leasing it to wireless companies to allay congestion or to provide for new sorts of broadcast-like services.

O’Brien says a game changer could be the wireless carriers’ phasing out of unlimited data plans. Broadcasters might be able to play a role in getting movies and other content to consumers who want to stream audio and video, but don’t want to pay the stiff bills that come when they exceed their data caps.

And the one-time president of iBlast believes that the next-generation of datacasters might be able exploit a couple of powerful trends.

Says Solomon: “The good news is the need for bandwidth continues to be insatiable, and the idea of big one-way downloads is what’s happening.”