The analogy is to AM/FM radio

A recent interview with U.S. Federal Communications Commission (FCC) Chairman Alfred Sikes clarified the grander scheme behind some of the FCC’s decisions and recommendations regarding high-definition television (HDTV).

The FCC’s decision in late 1991 to reserve the HDTV spectrum only for existing broadcasters seemed certain to stifle innovation in a budding industry — it seemed logical that entrepreneurs would be more willing and likely to invest in both brand-new HD broadcasting and production equipment as well as innovative new HD programming (see Digital Media, Vol 1., No. 6, p. 7).

But Sikes believes that granting HD spectrum to already existing broadcasters is the only way to give HD a leg up.

His analogy for the present situation with HD is to the days of FM radio back in the 1960s. FM’s quality was obviously better than AM’S, but it was slow to catch on. It required new and expensive equipment, which created the familiar chicken-and-egg scenario for potential consumers.

NO STATIONS, NO RECEIVERS, NO LISTENERS

Since there were no FM stations to listen to, at least not to speak of, there was no reason for listeners to buy an FM receiver. If customers didn’t buy FM receivers, then there was no reason for new licensees to put programming on the FM band. If there was no programming on the FM band . . . around she goes.

But by granting existing AM broadcasters licenses for the FM band, the FCC provided AM operators with incentive not only to create programming for the new, superior technology, but also gave radio manufacturers the opportunity to build a new radio — which could receive both AM and FM signals.

As you’ll note by looking at any radio today, most of which still include both AM and FM tuners, this was quite a successful strategy for shoehorning a new technology into the market.

THE COROLLARY FOR HD

The way Sikes has engineered the corollary deal for NTSC television broadcasters is that after a certain grace period, during which time they have the opportunity to broadcast in both the NTSC and HD spectrums, they have to choose which they want to give up.

If they give up on HD, there’s a slot open for a new HD broadcaster. If they give up NTSC, there’s a new slot for an NTSC broadcaster. In other words, the licensing restrictions are only temporary.

Sikes believes this scenario gives everyone, including the royalty-sharing HD hardware makers, a good reason both to build double tuners—HD and NTSC—into TV sets, and to start producing HD programming at a price that’s encouraging to consumers. Though a standard has yet to be selected, he says, hardware manufacturers are already designing double-tuner TV sets.

Though under any circumstances the shift to HD will be slow, Sikes believes the only way to give the new technology a leg up is to let existing broadcasters keep their legs firmly on both sides of the fence for a limited time. It’s a kind of self-subsidy. Providing the security blanket of old, familiar NTSC to broadcasters via the licensing procedure is a more certain way to acceptance of HD into the living rooms of America.

However, it is vital that Sikes keep competition alive by assuring that existing broadcasters will indeed be forced to relinquish one or the other. Encouraging media monopolies is not a healthy way to run a technology-dependent democracy, and the FCC seems to have (unwarranted) faith that it can control abuses by these giant, powerful companies.

COMPETITORS AGREE TO SHARE ROYALTIES

The other half of the equation is finding a way to lessen the risk for equipment manufacturers. Of the four remaining contestants in the race for an HDTV transmission standard, two have decided that it would be in their best interests if they agreed before a decision was made to share in the other’s royalties on the technology. In addition, they would cooperate on fine-tuning, so to speak, the winning proposal (assuming it is one or the other of them) before releasing it to their customers.

The two groups, AT&T-Zenith and General Instruments-Massachusetts Institute of Technology, have thus significantly reduced their risk in participating in the selection process, overseen by the FCC, which will select the “winning” standard.

Healthy prelude to competition. Still in the works, the deal would likely be engineered to provide higher royalties to the winner. While insuring competition, the agreement would offer both alliances a share in what the FCC predicts will be a multibillion dollar business by the late 1990s. Sikes has been urging competitors to create unions amongst themselves since the competition began. It’s fascinating to see people begin to accept appropriate collaboration as a healthy prelude to competition.

Denise Caruso