[opendtv] Re: DTT in the US

  • From: Craig Birkmaier <craig@xxxxxxxxx>
  • To: opendtv@xxxxxxxxxxxxx
  • Date: Sat, 7 Jan 2006 09:40:57 -0500

At 5:15 PM -0500 1/6/06, Manfredi, Albert E wrote:
>The discussion was about CE manufacturers being
>perfectly willing to meet various global standards in
>their products, such as those I had listed and Bob
>replied to, but not ATSC. Mobility was not the topic
>we were discussing. Check back. You weren't in on that
>thread. So you got confused on what the subject was.

I am growing very tired of your attempts to make points by changing 
the subject.

YOU started this thread by posting an EETimes story about new LG and 
Samsung  phones that support various mobile TV standards. In that 
message you said:

>I think this article shows just how much of a hindrance
>physical layer differences can be -- or not be. If CE
>manufacturers put their mind to it, that is.

The implication I got from your statement is that CE manufacturers 
can easily support multiple standards (including ATSC) if they set 
their mind to it. The topic of the EETimes article was about mobile 
reception of TV. As I am not a mind reader, I failed to make the 
connection that these new phones demonstrate that CE manufacturers 
can easily support ATSC if they want to.

obviously they can support anything they set their minds to. That is 
not the issue here. Bob responded that the manufacturers seem to have 
an aversion to ATSC, and you then took the thread off in a new 
direction, talking about Freeview and your ability to receive 13 DTV 

You asked what the manufacturers have an aversion to and I responded. 
That response was specifically targeted at the subject of the 
original thread - mobile reception. The rest of my response was to 
your diversion into Freeview and the misguided notion that it is 
possible with the current channel allocations to offer a Freeview 
like service.

Mobility is a non starter for ATSC, despite your wildest dreams. Get over it.

The rest of my response was about the reasons that you will not see a 
Freeview like service from U.S. broadcasters. It is worth noting that 
you changed the subject when you replied, turning the discussion to 
the overall U.S. DTT situation - Re: DTT in the US

>  > In the latest round of bidding, completed in November,
>>  Channel 4 - a U.K. terrestrial broadcast service - bid
>>  in excess of 10 million pounds for the right to
>>  program a channel on Freeview.
>>  Contrast this with U.S. broadcasters who are looking
>>  for subscriber fees from cable and DBS for BOTH their
>>  analog and DTV channels. How is it that broadcasters in
>>  the UK can make enough money on their Fre-to-air
>>  service, to pay the bills and then pay more than 15=20
>>  million each year to get the same content on Freeview?
>You can adopt either business model. Either the
>distribution service can be compensated for carriage, and
>the content creator gets all the ad revenues, or the
>distribution service gets the revenues (ads and potential
>subscription fees) and the content creator is compensated
>by the distribution service. I have no reason to believe
>that one scheme is inherently better than the other.

Once again you miss the point entirely.

This is NOT a question of business models.

IN EVERY CASE, content creators are compensated for the content that 
we view, regardless of the channel(s) of distribution. The 
differences are related to the ways in which distributors generate 
the revenue to pay for the content (even if they own the company from 
which they are buying the content). You are correct that there are 
multiple business models at work here:

1. Direct payment - this includes VOD and premium subscription 
services such as HBO and Showtime.

2. Advertiser supported - the distributor buys the programming, 
inserting ads to generate the revenues to pay for it, hopefully 
making a profit (note that On Digital failed because they could not 
pay for a rights package that they had negotiated.

3. Advertiser supported with subscription fees - the distributor buys 
the programming, inserting ads to generate the revenues to pay for 
it. In addition they collect subscriber fees from downstream 
distribution "partners" who deliver the same content via a separate 
distribution network.

My question to you - which you blew off - is how can Channel 4 afford 
to pay ~$15 million annually for secondary distribution via Freeview? 
I contrasted this question with the situation in the U.S., where 
broadcast stations would expect to be compensated for their signals, 
rather than paying for secondary distribution.

Let me make this perfectly clear. The situation in the U.S. is NOT 
market driven. Broadcasters are able to extort additional revenues 
from secondary distributors. Clearly the secondary distribution 
networks benefit from the ability to carry desirable content. And it 
is equally clear that the broadcasters benefit by the ability to 
reach the lion's share of their audience, including many fringe 
markets, where it is difficult to receive their Free-to-Air 

Somehow, broadcasters in the U.K are able to generate sufficient 
revenues from advertising that they can pay for secondary 
distribution and still make a profit. To some extent they can recover 
these distribution costs by reaching a larger audience, which in turn 
allows them to charge more for the ads.

The SAME is true here in the U.S. If broadcasters could only charge 
advertisers for the home they reach via the Free-to-air service the 
ad rates would by necessity be MUCH lower, as approximately 80% of 
the audience is accessing this content via secondary distribution. 
But U.S. broadcasters not only charge advertisers for these 
additional eyeballs, they also are trying to get those eyeballs to 
kick in a direct payment every month as well.

It is not a question of profitability. U.S. broadcasters generate 
more than $15 billion in ad revenues each year, and this is in 
addition to the more than $15 billion in ad revenues collected by the 
networks with which they are affiliated. U.S. broadcasters are among 
the most profitable businesses in the world, many with operating 
profit margins above 25%.

A brief aside: The U.S. broadcast system was originally conceived so 
as to keep content and distribution separate. The networks 
compensated their affiliates for carriage, in much the same way that 
Channel 4 in the U.K. is paying Freeview for distribution. Affiliate 
compensation is now mostly history, as the media conglomerates are 
putting the squeeze on their distribution partners.

The bottom line question remains the same. Why are viewers in the 
U.S. being screwed, having to watch more commercials that at any time 
in the history of the television industry, and then having to pay an 
additional $15-20 per month in subscriber fees for advertiser 
supported networks, if they choose to subscribe to cable or DBS?

The answer is obvious: Because they can!

And the reason they can is because the politicians have carefully 
crafted the regulations in a manner that allows the conglomerates and 
the OTA broadcasters to operate without the influence of market 

>Note: the discussion was about CE vendors, not broadcasters.
>Why CE vendors aren't providing good quality ATSC products
>in large numbers. You again introduced broadcasters in your
>answer, and so be it.

The original discussion was about CE vendor support for mobile TV.

You change the subject, expanding the discussion to DTV in general.

So be it. CE vendors are not providing good quality ATSC products - 
according to you - in large numbers. But according to you, the 
Acurian receiver you just purchased seems to be a good quality 
product. So I guess the issue is numbers, not quality.

The reason for the low numbers is obvious. They are not many people 
like you left in the United States; the majority have abandoned the 
OTA service and have no compelling reason to support this ridiculous 
effort to prop up a dying service.

>If broadcasters are resonable business people, they will
>not ignore the fact that a huge percentage of their
>audience is using the OTA medium. If that's 22 percent of
>households that rely only on OTA, it's more like 1 out of 3
>viewers of broadcast channels is using the OTA medium. Or
>more than that, according to the figures we've seen. Some
>35 to 39 percent.

If this is true, why should broadcasters even care about secondary 
distribution via cable or DBS? If they really believe in their 
business model, why not cut the secondary distributors off and make 
viewers buy DTV receivers if they want to access this content?

Why not compete with cable and DBS?

>What's more to the point, we were talking about CE vendors.
>Why is there a resistance to producing ATSC STBs and
>recorders, when this large audience will migrate to ATSC?
>The most likely *true* answer is that CE manufacturers don't
>see any urgency yet, since the cutoff date is still years
>away, and since they will be building in the DTT receivers
>in all sets and recorders starting next year anyway.

They will not be building ATSC receivers into all sets and recorders 
this year , or next, or the year after. HD capable monitors are still 
outselling integrated receivers. This is NOT likely to change. The 
reality is that the MARKETPLACE is not supporting the ATSC transition 

The politicians can continue to prop up the OTTA service, but they 
cannot force the public to support it.

>This seems completely false, from figures we keep seeing
>year after year after year.

It all depends on whose figures you like. The FCC annual reports on 
video competition have shown a steady decline in OTA viewers for more 
than a decade. But this still misses the point.

In reality broadcasters could have a GROWING share of the 
distribution market, as is the case in the UK and Germany. But this 
would mean that they would need to let go of the political teet from 
which they are sucking, and actually develop a competitive service. 
And that is NOT happening.

>>  Get real Bert. I'm not talking about the sub channel crap.
>>  I am talking about the content that is of interest to a
>>  significant audience.
>That's what the subchannels are supposed to be for. As I
>said, the multicasts are now different from different
>broadcast stations. WB 54 in Balt and WB 50 in Washington,
>for instance, transmit different multicasts. Broadcasters
>can create any multiplex they want, to attract eyeballs.
>The possibilities are endless. As far as I can tell,
>broadcasters have yet to figure out what to do with all
>this real estate, but my hope is that they'll use it
>wisely. No reason why they can't offer content that cable
>and DBS don't offer. Especially in markets like this, or
>other major cities.

The problem is NOT the content that cable and DBS DON'T OFFER. The 
problem is that broadcasters DO NOT offer the content that cable and 
DBS DO offer. The stuff that makes up more that 60% of ALL television 

The possibilities are limited, not endless. Because of the way in 
which the broadcast spectrum is being utilized, the variety of 
content that can be delivered is severely constrained relative to 
cable and DBS. Broadcasters will always operate at a disadvantage in 
term of the sheer amount of bandwidth available. Thus they have two 

1. Change the business model, use their spectrum as efficiently as 
possible, and compete with a service that offers a greatly improved 
value proposition.

2. Continue to rely on secondary distribution to generate additional 
revenues from subscriber fees, operating the OTA service as a 
crippled service that is propped up by the politicians...until it 
finally dies.

>I guess my fundamental disagreement is that I don't see why
>the existing structure needs to collapse first. I don't
>think it does. But certainly, if there are anticompetitive
>practices going on, such as residuals from subscription
>services going to CE vendors, as was alleged on here, then
>certainly that needs to be stopped. Ending must-carry would
>not hurt the huge congloms you dislike so much, or their
>affiliated stations, so I can't believe that solves
>anything. It would just put the smaller stations in a bind,

Smaller stations rely on Must Carry, not Re-transmission consent. 
Only the stations with popular content franchises (mostly sports) are 
able to extort subscriber fees.

The reason that the existing model must collapse first is that the 
U.S. broadcasts service was conceived with scarcity in mind. The 
number of available channels in any market is constrained so as to 
protect the franchisees. It is a throw-back to an era when we only 
had 4-6 program choices per market.

For terrestrial broadcasting to thrive once again, it will be 
necessary to re-engineer the transmission infrastructure to maximize 
spectral efficiency while simultaneously enabling new mobile and 
portable applications for the delivery of bits to the masses. 
Remember, this is a WIRELESS service. And it will be necessary to 
operate this service as a distribution marketplace, where every 
content provider pays for the distribution services they use, 
including a cut for the politicians.

And by the way, there is nothing anti-competitive about cable or DBS 
paying CE retailers to promote their service. That is what happens in 
a REAL marketplace. The question you should be asking is WHY 
broadcasters are not paying CE retailers to promote their service? 
And WHY they are not promoting the new service themselves, using one 
of the most powerful promotional tools in the history of mass 


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