How to Navigate Multiple DTV Streams

The switch from analog to digital compares to the change from black-and-white to color. Just as momentous is broadcasters’ escape from the straitjacket of one channel to multicasting.

For the first time, stations can broadcast multiple programming streams simultaneously and receive multiple revenue streams, including from non-broadcast services.

So far, relatively few subchannels are being programmed. That should change as the analog cut-off date of Feb. 17, 2009, approaches and the old one-channel era ends.

This column highlights some of the legal basics of subchannels, including leasing them to outside programmers.

A wide range of uses

TV broadcasters have enormous flexibility in how they use their digital subchannels, but they must comply with two bedrock FCC requirements and be prepared to pay 5 percent of their revenue from some types of services.

The two bedrocks:

1. All operating digital television stations (whether they have construction permits, licenses or STAs) must transmit at least one over-the-air video program signal at no direct charge to viewers over their DTV channel. This is the main programming stream. Until a station goes all-digital, it must simulcast its analog program signal.

2. All uses of subchannels must be consistent with the public interest, convenience and necessity, which applies to everything that a broadcaster does.

If those requirements are met, digital subchannels may be used now for a wide range of video and non-video purposes, including broadcast, point-to-point or point-to-multipoint.

In terms of video, stations can use subchannels to time-shift their main channel, offer programming related to the main channel or air totally different programming. The programming can be free for all to see, or encrypted for viewing only by paying subscribers.

Stations may also offer “services of any nature.” Examples in the FCC rule are computer software distribution, data transmissions, teletext, interactive materials, aural messages, paging services and audio signals. The rule does not preclude other, newer applications.

Broadcasters also have the option of leasing subchannels to third parties for either free or pay services.

The 5 percent “ancillary and supplementary” fee

This is familiar because all television stations already must file FCC Form 317 each Dec. 1 to indicate whether they provided any “feeable ancillary and supplementary services” during the previous year ending Sept. 30. If yes, they must calculate and pay the fee, 5 percent of gross revenues derived by the station from operation of the subchannel.

No fee is required for all-video subchannels that viewers receive for free. For subscription video and most other non-video services, the fee is generally owed.

“Ancillary and supplementary” includes all services provided on a portion of the station’s digital spectrum capacity that is not needed to provide the required one free over-the-air video broadcast signal to viewers.

But by FCC definition, any video broadcast signal provided on a subchannel at no direct charge (subscription, pay-per-view or other) to viewers is not “ancillary and supplementary,” and the fee does not apply.

Subscription video service is “ancillary and supplementary” and with certain exceptions its revenues are feeable. Broadcasters paying fees must retain records of their calculations for three years and are subject to FCC audit.

Children’s programming obligations

A digital station providing only one, main stream of free digital video programming is expected to air three hours per week of “core” educational programming for children. Additional free video programming on subchannels increases the station’s core obligation by one-half hour for every one to 28 hours of subchannel programming, up to a maximum of three hours per week per subchannel. Let me do the math: a 24/7 free video subchannel raises the station’s core obligation by three hours.

The extra children’s programming may be run on the main channel, on the subchannel that generated the additional obligation or divided between the two.

If there is more than one free video subchannel, all the extra core children’s programs may run on one subchannel or be distributed across them as the broadcaster sees fit, as long as the programs run on channels that have cable and satellite carriage equivalent to the subchannel that generated the extra requirement. If no subchannel has carriage, they are equivalent.

Subchannel leases

For broadcasters, the key point about subchannel leases is that they involve spectrum licensed by the FCC to the broadcaster just like the main program stream. The fact that a different channel is involved does not lessen the broadcaster’s FCC and other obligations. No matter what use is made of the subchannel, the station’s obligation to operate in the public interest applies.

Lease of a digital subchannel to a video programmer is akin to a time brokerage agreement (TBA) but with digital nuances. Each lease must vary to fit the business agreement between the parties, the type of programming and other facts. Each set of facts may implicate some regulatory compliance issues more than others. But all leases involving video programming should reflect the factors discussed above.

Some of the additional factors to be addressed from the station standpoint include:

• Assure that no transfer of control from the licensee over the subchannel (or main stream) is contemplated or able to happen. Station management must maintain control over programming, personnel and finances of the main channel and ultimate and supervisory control over leased subchannels, and the lease must establish that.
• Specify that the lease is subject to FCC and other applicable law and that the parties will comply.
• Define the channel and amount of spectrum the programmer has.
• Assert the station’s right to reject, replace or cancel any program that the licensee believes to be against the public interest or station policies, and to substitute programs of greater importance to the public.
• Provide for station pre-screening and approval of the initial proposed program schedule, and any proposed changes in the lineup.
• Continue, and be able to document, ongoing oversight and approval/disapproval over subchannel programming.
• Require the programmer to comply with station identification, political time, advertising restrictions and all other applicable regulation. In some instances the station may want to require the programmer to allow the station to take the steps necessary to comply.
• Apply the station’s payola/plugola compliance system to the programmer and its personnel.
• Require adherence to technical standards; maintain control over facilities and equipment; specify exactly how the programming will be supplied for insertion and airing.

Conclusion

The digital transition has required years of effort, engineering and legal, by industry and government. The finish line is in sight, and the new dawn includes the opportunities and challenges of subchannel activation, expansion of service and revenue. The legal framework is in place to facilitate stations becoming multichannel providers.