Monday, July 28, 2008

Seven Months and Counting: What's Changed?

Once again, the 17th has come and gone, and it's now less than seven months until the current "hard" date (2/17/09) on which analog broadcasting is currently scheduled to cease. This is the 28th of 35 planned monthly recaps of developments affecting the various players in this story. Despite the name of this blog I do cover some stories (like the growth of HD) that are not directly transition-related (but strike me as being of interest to transition-watchers). That said, here's some of what happened (or was commented on) between 6/18 and 7/17. As is usual, major news sources for this update include Multichannel News, Engadget HD, TV Week, TWICE, Broadcasting & Cable and TVPredictions.com.

THE PUBLIC - It's now less than two months until noon on September 8th, when the first market (the Wilmington, N.C. area) to conduct a full test of the digital transition (well, five out of seven stations, anyway) drops analog broadcasting, five months ahead of everyone else. There was a brief flurry of news when this was first announced in May, but since then, not a whole lot has happened, other than a couple of FCC visits (including an appearance by FCC Chairman Kevin Martin). Right now the local media doesn't seem to be paying a whole lot of attention. Meanwhile, a more modest test (though involving more stations) has already taken place, with 12 stations in Orlando conducting a co-ordinated 60-second test (including ten seconds of dead air for those watching an analog signal). Those conducting the test seem pleased at the low number (as a percentage of the total viewership) of people calling the 800 number they were given to call if they encountered dead air, but I have to wonder if the results would be the same with something a bit more noticeable (in other words, longer than a minute).

Another way to try to get a feeling for public opinion is surveys, and more evidence of continuing public confusion comes from this one from Best Buy (one little tidbit - 31% of TV owners don't know whether their set is analog or digital). Consumer confusion is cited by The Leadership Conference on Civil Rights in their call for more government action. Now I'm not sure that this is what they had in mind, but I should note here that FCC officials (like Chairman Martin) will soon be appearing in a new series of transition PSAs that will supplement all those commercials produced by stations and networks that most of you are probably pretty familiar with by now. Just in the last week, I also noticed the first billboard I've seen on the subject. Of course, some people are against the change and will just resist taking action as long as possible, creating a possible last-minute rush that could result in box shortages (among other things).

GOVERNMENT Last time, I mentioned this page that gives updated stats on the biggest government transition-related effort, the digital converter box program. As of 07/23, about 4.1 million of the roughly 19.9 million coupons issued as of that date (or just over 20%) have expired (compared to the almost 6.7 million that have actually been used). So why do people go to the effort of getting coupons, only to let them expire? Just speculating here, but perhaps there's a bit of upselling going on at retail. If you want to know retailers' feelings about the converter boxes, consider the fact that there has been no mention of the boxes in the last few week's Sunday circulars from Best Buy and Circuit City just had the first mention of one in the same period. This seems like rather unusual treatment for a product that millions and millions of people are going to need. Guess they're not a high-margin item.

So perhaps people should have a specific idea of what they want before heading out on that shopping trip. Recent comparative reviews from Sound and Vision and Consumer Reports may be useful in that regard. This Boston Globe piece by Hiawatha Bray also looks at a few boxes, and goes into something that some analog TV owners will find out about DTV once they plug that box in- their snowy analog reception will either be replaced with rock-solid digital or nothing at all, thanks to DTV's less-forgiving ways when faced with a weak signal.

On the subject of individual boxes, Dish's $59.99 DTVPal (available via Web, phone or Sears) is finally out, but please note (as a commenter points out in the linked post) that this is not the $40 (therefore free with coupon) box that they have been promising (that should be out later in the summer).

No new developments on the issue of reissuing coupons or extending expiration dates, as far as I know.

In other government news, there are new developments in the struggle over "dual must-carry" (the FCC requirement that cable systems carry both digital and analog versions of must-carry broadcast stations for three years after the transition, unless the provider eliminates analog completely). As you might guess, many cable networks aren't too fond of the rule, believing that the extra bandwidth required will make it that much harder to get carriage for their HD channels. This is why a group of networks sued the FCC back in February. Now the broadcasters (who, of course, are all in favor of the requirements), have submitted a brief in favor of the FCC position, asserting that the networks have no basis to claim that their 1st Amendment rights are being restricted by not getting carriage, and the whole thing is moot since the cable systems were volunteering to do this anyway, requirement or no requirement. The FCC agrees, stating that the cable networks have no legal standing in the matter since the rule applies to providers, not networks. The U.S. Court of Appeals for the D.C. Circuit will make the call. One FCC position that I agree with is their stand in favor of net neutrality (the philosophy of equal and open access to networks, regardless of how big a user you are and what you're using the access for), and their willingness to take big providers like Comcast to task over it.

Another follow-up; the chairman of the Senate Judiciary Committee's antitrust panel (Sen. Herb Kohl, D-Wis.) is backing the position taken recently by the National Association of Independent Networks against the practice by cable networks of channel bundling (demanding providers carry their less-popular channels in order to get their must-haves). As I mentioned last time, this seems like an argument in favor of "a la carte" channel offerings, which I'm not convinced would really be to the benefit of new TV brands struggling to generate consumer demand.

BROADCASTING - We have something of a lull in this area this time. There are a few more local newsrooms converting to HD, and two scheduled to go in San Diego over the next couple of months. On the national front, seems the late June/early July timeframe I gave for the CBS Evening News was a bit optimistic - July 28 was the actual date. On the subject of new HD, I've been telling you recently about various operations moving to an all-HD schedule - this seems to be causing some strain on the production end. And one of the rare holdouts among scripted network shows is going HD - Scrubs will make the change when it switches to its new network ABC this September.

I wasn't sure exactly where to put this next item, since it could apply equally to over-the-air and cable, but I thought it would be good to remind people that digital broadcasting gives networks abilities that we hope they don't use on a regular basis, such as denying us the ability to time-shift our viewing by triggering what's referred to as "the broadcast flag". It seems that this was recently triggered inadvertently during an ABC Family broadcast of The Middleman, but caused problems only when recording to Media Center PCs, not cableco DVRs (see the comments section for this link). So apparently Microsoft software is more responsive to the flag than regular DVRs - interesting!

One small followup on the retransmission-consent front - LIN TV has followed up earlier agreements with Charter and several other companies by signing a retransmission agreement with Comcast.

PROGRAM PROVIDERS - Last time I reported that the pace of channel additions had moderated a bit (only one addition of more than 10 channels). Well, things are back in full swing this time. In last month's HD NETWORKS section, I mentioned the many, many HD feeds that HBO has for its family of channels, but only a couple of which are carried by any provider. However, Dish is about to change that, as five additional HBO channels (as well as two West Coast feeds) will be part of the 17 channels Dish will be launching August 1st, a feat which they claim will bring them up to their "100 channel by year's end" goal five months early. Providers with double-digit additions between 6/18 and 7/17 include Time Warner, Cablevision, Cox, RCN, Hargray, Surewest and Verizon (there were also too many smaller additions to list here, most of which would have been big news only a few months ago). Certainly not the least of the double-digit crowd is Verizon, who are not only spreading large numbers of new channels throughout their footprint, but are also proclaiming their intention to carry 150 HD channels by the end of this year (will there be that many by then?). That number may turn out to be a bit softer than originally planned, however, at least it seems that way from reading this interview with Verizon's Terry Denson.

Denson does say that fiber's capabilities mean that capacity is not as much of an issue for them as it is for satellite or cable. But capacity certainly is an issue everywhere else, especially as cable tries to stay competitive with satellite in the wake of the successful launch of Dish's Echostar XI and additional testing leading up the activation of the DirecTV 11 satellite in September. After the last several months, the strategies of some of the big players are becoming clear. We know that Time Warner (TWC) is leaning heavily on Switched Digital Video (SDV), which only sends channels that are actually in use, causing third-party devices like TiVo to depend on add-on adapters (two of which were just certified by CableLabs) in order to continue tuning those channels. Comcast's long-term plans appear to be focussing on analog elimination via the Digital Terminal Adapter (DTA), a small box (hopefully small and simple enough to overcome the resistance of the anti-box set) that will provide a low-priced digital simulation of the analog cable experience (in other words, no VOD or other "digital cable" features). They are ordering six million devices this year (planned to cover 20% of their footprint) and another 12 million next year (which would seem to work out to an additional 40%, for a total of 60% by the end of '09). In the covered systems, this will give them another 250Mz of capacity to play with, which means enough room for 82 to 125 more HD channels (depending on whether they assign two or three channels to each 6Mz stream). They will be using three manufacturing partners. And check Comcast CEO Steve Burke's comments at the end of the linked article - seems to me like he's acknowledging that their focus on "choices" over channels wasn't such a great strategy after all. Perhaps he saw the latest Gartner survey showing that less than one-quarter of respondents purchased PPV or VOD content in the last year.

There are other ways to do it, of course. Last time I mentioned the advanced compression system MPEG-4, but cautioned that a lot of equipment would have to be replaced for it to be implemented. Now Evolution Digital has a packaged solution aimed at small providers that they claim can get 400 HD channels out of as little as 550Mz of spectrum. Ironically, this could put small, bandwidth-strapped operators ahead of the big guns in terms of HD capacity.

As far as legal matters go, only one story to update this time - the dispute between Comcast and the NFL over carriage of the Big Ten Network is headed to mediation.

With all the streamlining of franchise regulations these days, it was inevitable that there would be some pushback from local governments and incumbent franchise holders. That's not going so well, though - an appeals court has ruled in favor of FCC regulations requiring swift action from local governments on competitive (in practice, mostly telco) franchise requests. While I'm not shedding too many tears for the incumbents, some of the concerns local governments have had appear to have some basis in fact - according to a new survey, states with statewide franchising have seen basic cable rates actually go up, and support for public access has gone down. In other franchising news, Verizon has won final approval for a city-wide franchise in New York City - FiOS service should begin within weeks.

Let's turn to some stories affecting individual providers. DirecTV has officially introduced its VOD service, although not everyone will be able to get it. Time Warner is introducing its "Start Over" service designed to let you see the beginning of a show whose beginning you missed. Dish Network will be offering a service much desired by HD purists by introducing HD-only channel packages starting August 1st. And if you've ever been curious about how Comcast readies its products for systemwide deployment, this article on their Downington, PA test facility might be of interest.

Let's not forget that digital technology has allowed the definition of provider to expand as different kinds of businesses can now compete for the opportunity to provide us with our video entertainment. Among them is Sony, who just launched a video-download service for the PS3 (although HD downloads will be rental-only). This is designed to compete with Microsoft's Xbox Live Marketplace (which does allow HD purchases). Xbox Live will be widening its offerings in the late fall with the addition of 10,000 movies and TV shows from Netflix. Given that the existing Xbox Live service supports HD, it'll be interesting to see if Netflix selections also include HD, and if so whether that will spur Netflix's existing partner Roku to add HD support as well. Speaking of Roku, this article looks at Roku's pros (ease of use and setup) and cons (limited selection, lack of HD, and the possibility that the kind of downloading this might inspire may in turn inspire providers to go toward metered-use pricing). Another service that currently lacks HD (but has a very wide selection range) is Amazon's currently-in-beta VOD Store (the planned replacement for their Unbox service). This is mostly a computer service for now, unless you have a Sony device that will stream content to Bravia TVs (good to have, since over 90% of viewers still prefer watching video on their TVs). Note that the new service will, unlike Unbox, be Mac-friendly, which is good news in my book.There's even a download/hardware service for the high-end customer; VideoGiants distributes files several times the size of those found on Blu-ray discs, for people whose 100-inch screens might show the limitations of Blu-ray.

One more note on Internet-based providers - the U.S. Copyright Office doesn't think they should be allowed to have the same rights to stream local TV signals that cable and satellite providers enjoy.

HD NETWORKS - Two months ago I speculated that the new DirecTV satellite might inspire another wave of channel launches (as they and now Verizon begin to speak of 150-channel capacity). With that satellite going active in September, it looks like a fair amount of that capacity might lie unused for awhile. There were no new channel launches in the period of 6/18 and 7/17, and only one announcement - Comcast will create three new HD channels in December by replacing its combined Versus/Golf channel with separate full-time channels, and also launch E! Entertainment Television in HD (the latter was also mentioned last time). While many recent additions to HD lineups have been established brands that have not done all that much to capitalize on HD's potential, perhaps the need to fill up that spare capacity will create opportunity for new channels that do, as seemed to happen when the World Fishing Network was added to Dish recently.

That said, most of the news in this area concerns existing HD channels. The big event coming up is the Olympics, and this one will have more HD coverage than ever before, spread over seven of NBC Universal's networks. In addition, Mojo has already started airing a 10-part series of athlete profiles. The big events after that are the Democratic and Republican conventions, and HDNet has plans to differentiate itself from the broadcast competition by replacing its past gavel-to-gavel coverage with themed editions of Dan Rather Reports. Two networks that have been faulted for skimpy HD content are making moves to rectify that - Bravo just launched its first HD original series, and Biography Channel (which doesn't air a huge number of biographies these days) is adding four (plus converting an existing series). They've also made a pledge to shoot all new content in HD. Two months ago I noted that Showtime would be losing access to content from several major studios in two years' time (its going to an as-yet-unnamed new premium network). They've now begun to replace that content by striking a seven-year deal with The Weinstein Co. Two domestic networks have upped their international exposure - Discovery HD can now be seen in Australia, and National Geographic HD will now be available to operators across the Asia Pacific region as well the Middle East and Africa. Representatives of two other networks recently spoke with Multichannel News to discuss their present and future HD plans - here's what HBO's Bob Zitter and Smithsonian's David Royal and Tom Hayden have to say.

MANUFACTURERS - With the furor of the HDM (High-def Media) Format War fading in the distance, this is mostly a time of waiting in the new struggle between Blu-ray and standard DVD. What exactly is it I'm waiting for? I'm waiting for a meaningful drop in Blu-ray player prices from current levels, rather than just better players for that same price. I'm waiting for a large-scale expansion in the number of available titles, (although it's true that July is the biggest Blu month to date - still much to do). I'm waiting to see a large, sustainable increase in Blu-ray market share (the latest Neilsen figure of 12% is also the best yet, but the article suggests that it's mostly due to Batman Begins). I'm waiting to see if Toshiba's to-be-demoed-in-August super-duper upconverter has anything in it that can slow Blu-ray's momentum. And I'm waiting for the upcoming holiday season so we can put some hard numbers to all this speculation.

Moving on to other hardware news, there are lots of developments in the display area. It looks like everyone wants in on the OLED game. First we have a Japanese cooperative (Sony, Toshiba and Matsushita) being formed with the backing of the Japanese government, for the purpose of developing "mass-producible large-sized OLED panels". We also have Panasonic working on a 37-inch OLED TV scheduled to be launched within three years, and LG increasing capital spending in that area (no specific product or timetable given). Perhaps this is why DisplaySearch is predicting huge year-over-year growth in the sector straight through to 2015 (by which time it might even be affordable). Another technology that will probably start off on the high-priced side (but partly because there won't be any small sets) is Mitsubishi's LaserVue, with 65 and 75-inch (10 inches thick) sets due this fall. Still another technology making some progress is FED (Field Emission Display), from Sony spin-off Field Emission Technologies, now negotiating with Pioneer over mass production of 60-inch displays (again, no date given). Still in its crib is the highly-interesting concept of wireless HDTV, with various technologies competing and an estimated date of 2012 for the first million installations.

And just think, all these new technologies are designed merely to get a bit more oomph out of the HD picture we already know. According to DisplaySearch, maintaining growth in the HD sector past 2011 will require the adoption of all kinds of new broadband and interactive capabilities. Compared to all that, these new LG sets with built-in DVRs seem old-hat already.

Speaking of old-hat, one of the better ways to maintain interest in current technology is to price it more attractively. Seemingly unaffected for now by allegations (covered last month) that they haven't been paying their technology licensing fees, Vizio continues their price-lowering ways, now working in the realm of 1080P sets with 120Hz frame rate (42 inches for $1499, 47 inches for $1899), plus a 50-inch plasma with 30,000:1 contrast ratio for $1699. And smaller versions of that plasma are also quite attractively-priced (32 inches for $599, 42 inches for $799). But not everyone wins at that game - Syntax/Brillian (makers of the bargain brand Olevia) are filing Chapter 11 (although it does seem that the brand will live on).

A couple of non-display hardware notes, and we're done. One of the ways people have been thinking about repurposing the old analog TV spectrum is to use existing "white space" in the spectrum to deliver high-speed broadband, a concept touted by the members (Microsoft, Google, Dell, HP, Intel, Phillips, Earthlink and Samsung Electro-Mechanics) of the White Spaces Coalition. Well, it's back to the drawing board for that one, as FCC testing shows that "white space" devices cause unacceptable levels of interference with DTV transmissions. Finally, it looks like Apple TV will have a new competitor in September, as that's the month Kodak plans to bring out the Kodak Theatre HD player.

That's all for now!

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