[opendtv] Re: Why aren't there more converter boxes?

At 12:50 PM -0800 1/29/07, Dale Kelly wrote:

Regardless of what you may think, many broadcasters bring a significant
number of cable viewers to the table, which is often illustrated by the
customer uproar each time one of these stations is removed from a cable
system.
I don't think we are disagreeing here. Clearly viewers want at least some of the content being offered by broadcasters. If you were to re-visit the market dynamics of cable in the late '70s and early '80s, you could easily build the case that cable got its start ENTIERLY on the backs of broadcasters. The problem with this analysis, however, is that CATV systems extended the reach of broadcast signals, adding to the potential audience. Broadcasters were not clamoring for compensation for their signals in those days because they were being compensated by the cable companies via the increased audience that they could sell to advertisers.
The notion that everyone (not just broadcasters) deserves compensation for their programming was born out of competition for the attention of the viewers that they brought to the table. With an alternative distribution infrastructure in place, cable began to compete with content of their own, and they charged customers additional subscriber fees to help with the start-up costs of these new networks.
When cable began to eat into the broadcast audience, broadcasters used their lobbying clout in Washington to control the new beast, and eventually to cash in on its ability to extract payments directly from the viewer.
So now we are in the undesirable position of paying twice for virtually everything we watch. The small missing piece in this discussion is the way in which the content conglomerates were able to use the first round of retransmission consent negotiations in the '90s to rebuild their empire. How much did your station group benefit from this? It seems to me that the networks are the real monsters here. They used a law intended to protect you, to rebuild their empire, even as they started to demand a larger piece of the ad revenue pie from affiliates.
I can tell you this - I do not subscribe to cable because of the content offered by broadcasters. IF this was all I wanted (like Bert) I would just use an antenna. I subscribe to cable to access content that is NOT offered by broadcasters. I ALSO expect the content from broadcasters, since, as you say, I am paying for it. Now I guess i will just have to pay more... 




 Do they charge a fee for local stations as do the DBS companies?


As I recall, cable companies are required to offer a Basic program tier made
up of the local broadcast programs. They generally do not advertise it's
availability but when pressed, they must provide it - for a price. It is
difficult to quantify it's actual value to cable but it is a fact that they
built their businesses on the back of the broadcast signals.
In theory, the basic tier is offered at or near cost for those who cannot afford to spend upwards of $40/mo for cable. It is rather interesting that it is a requirement for this tier that all local broadcast stations be included - It is also fair to point out that most cable systems include some non-broadcast channels that help them generate additional revenue (we have two shopping networks in the basic tier, and a third often fills up the public access channel during overnight hours).
In any case, the argument is now moot, as consumers are now being forced to pay subscription fees for broadcast channels. 


 Much of what we pay for each month in our cable bills is to
 > pay for this infrastructure.

Yes, and Cable passed their cost on to the customer, with a markup. There is
an ROI for that construction, unlike the broadcaster, who's investment to
construct the DTV system was government mandated and simply allowed them to
stay in business. The ROI for the broadcaster DTV system investment accrued
to the CE manufacturers.
I cannot buy your argument here. You could not be in the broadcast business without that transmission infrastructure. You pass the cost along to your customers via the cost of advertising as opposed to direct compensation. You cannot gain the protection of Must Carry or Retrans consent without the transmitter(s). WTBS in Atlanta has a small low powered transmitter on the Turner networks lot. It is there because if the main transmitter goes off the air they would have to pull TBS from every cable system in the U.S.
And I am rather amused at the casual way that you use the term government mandate. Did the government mandate that the NAB petition the FCC for an additional channel to deliver HDTV?
I will agree that there were many broadcasters who did not expect or plan on going HD. Most though that this would be an "elective option." Many were surprised that the FCC turned this into a "mandate." From here it just looks like a cost of doing business. I would be much more sympathetic if broadcasters had to pay for their spectrum as do those who seek to use it. 


Please refer to my posting yesterday on this subject. There simply can be no
apples to apples comparison with the UK model.
Freeview uses exiting infrastructure with little or no capital investment on
their part.
Once again I will repeat, there is nothing to prevent broadcasters from pooling their spectrum to create a Freeview business model in the U.S. At 2:15 PM -0800 1/29/07, Dale Kelly wrote: 


Craig, I should also add that Cable in not simply a benign enabler for
broadcasting; they compete in the local and national advertising markets
directly against the broadcaster who's signals they carry. As you are likely
aware, cable also imports significant amounts of advertiser supported
programming and they also sell advertising in local markets to insert into
that programming - and, they also charge the customer for the tier
containing that programming.
I covered this earlier. Clearly cable now competes for the attention of subscribers.
Please understand that I do not blame broadcasters for seeking retransmission consent payments. You play by the rules of the game, and for now the rules say that if consumers want to subscribe to a multi-channel service, there's a long line of government and private entities that expect to share in the money you send each month.
What I am saying is that this is only possible because of government gerrymandering with the marketplace. To put this a slightly different way, consider what would happen because of market forces if these industries were deregulated:
1. It is likely that broadcasters would make significant investments in infrastructure to provide a reliable multi-channel service for fixed, portable and mobile receivers. And it is likely that there would be a FREE extended basic tier.
2. Subscriber fees would all but disappear because networks would not risk the possibility that consumers would choose not to subscribe to them. In other words, we would move closer to the Freeview business model, or if you prefer, move back to the original broadcast business model, where advertising paid for the content. 

Bottom line, you keep milking the cow until it goes dry.

Regards
Craig





Additionally, they also charge a hefty fee for their HDTV tiers, which often
contains local station HDTV programming.



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