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Broadcasters Are Embracing DTV Datacasting Options

1/29/2001 02:00:00 AM Eastern

At last year's CES, Geocast Network Systems and Thomson Consumer Electronics introduced a new product category: a peripheral device that would capture data sent through the digital television airwaves, store it and display it on a PC. The $299 prototype "GeoBox" included multiple 8-VSB tuners, so as to receive several stations in a market simultaneously, and a large amount of disk storage to cache multimedia content.

Since then, many broadcasters and technology firms have become interested in using part of the DTV spectrum to deliver data alongside high-definition or standard-definition video programming. Several ventures have been formed to pool digital broadcast spectrum to deliver new DTV datacasting services, which will primarily be aimed at personal computers equipped with DTV receiver cards and small indoor antennas.

Some policymakers have grown concerned over the implications of such ventures in light of HDTV's slow rollout. Last July members of Congress took broadcasters to task over the concept of leasing part of their DTV spectrum for data services, even though the FCC has already said that broadcasters will have to give the government 5 percent of any new revenues generated by subscription services on their DTV spectrum.

"What is not part of the deal will be for broadcasters to lease or sell off part of that spectrum," warned House Telecommunications subcommittee chairman Billy Tauzin in the Congressional hearing. And Commerce Committee chairman Thomas Bliley urged broadcasters to focus on HDTV and suggested they could buy their non-HDTV spectrum at prices comparable to what other industries would pay at auction.

"You asked that Congress provide you with an opportunity to offer HDTV," said Bliley in a written statement. "We did that. Now some of you are getting cold feet."

Nonetheless, most broadcasters believe datacasting's upside outweighs its political risk. With the demand for Internet access and multimedia content growing at an explosive rate, stations see DTV as a way to compete with cable operators, phone companies and direct-broadcast satellite (DBS) in the broadband race. Datacasting would allow broadcasters to deliver some of the most popular content on the Web, particularly streaming media events that gobble up a lot of bandwidth and need to reach a mass audience.

"The shortage is connectivity to the people," said Ken Solomon, president of datacasting firm iBlast Networks. "You've got a big empty hard drive sitting there, and we have a way to get people more stuff."

Los Angeles-based iBlast is one of the more aggressive datacasting players. The company was formed in March 2000 by 12 major station groups, with each partner station committing a daily average of 7MBps of its DTV bandwidth. It thinks it can generate significant revenues by providing a transport service to content providers looking to distribute rich data.

The company plans to create a national infrastructure for delivering multimedia content to stations, using a combination of fiber-optic lines and satellite capacity. It will build a network operations center and origination facility in Los Angeles and provide member stations with equipment to receive Internet Protocol (IP) data, store it, and insert it in local DTV broadcasts. Revenues will come solely from charging for the transport service-iBlast plans to let content providers collect their own advertising and/or subscription fees.

iBlast will rely on standard DTV receiver cards and the hard-drive storage within the PC itself, although it may sell a stand-alone receiver device that links to the PC through a USB connection.

The cost to make a PC "iBlast-enabled" must be under $100 to the consumer, Solomon said. The company is currently talking to PCI card manufacturers and PC vendors about retail strategies.

"Our approach is to be open and work with any vendor," said Solomon, a former president of Universal Television and network distribution VP for Fox.

In July 2000, iBlast signed deals with seven more station groups, increasing its reach to 225 stations and 90 percent coverage of U.S. TV households, with 89 of the top 100 markets. It plans to begin service in 2001, with full nationwide coverage slated for 2002.

While Solomon said there has been tremendous demand for the service from content companies, iBlast has yet to announce a firm content deal.

Another datacasting consortium is the Broadcasters' Digital Cooperative (BDC), formed in March 2000 by 12 small- to mid-sized station groups. Since then, several small groups have come on board, while two original partners defected to iBlast. The groups pledged a daily average of 4MBps out of each station's 19.4MBps DTV bandwidth to the BDC, which represents 196 stations in 130 markets reaching 85 percent of U.S. households.

The BDC's corporate structure is much less defined than iBlast, which signed long-term exclusive deals with its member groups. Its aim is simply to aggregate spectrum into a national footprint and shop it to third parties who are willing to develop applications for the spectrum and pay to access it. Each group will receive an equity stake commensurate with its stations' coverage.

The BDC has reached an agreement with investment banking firm Salomon Smith Barney to represent the datacasting consortium in deals with wireless data companies.

Menlo Park, Calif.-based Geocast aims to create a national multimedia service, distributed by satellite to local markets and retransmitted by local DTV stations, that will encompass national content, such as financial information and music videos, as well as local news. The company will place equipment and personnel at the local station to receive the national service, integrate local content, and turn it around for local broadcast.

Geocast hopes to generate advertising revenue and will pursue transactional revenue by relying on a consumer's existing ISP as a backchannel for e-commerce. For example, Geocast might download an electronic copy of the J. Crew catalog to a consumer in return for a cut of any orders that consumer may place with the retailer. The company also thinks it can download software programs for a fee.

Geocast has raised $85 million in funding, mostly from venture capital firms, and constructed a satellite uplink facility in California to beam its service across the country. It has struck distribution deals with major broadcast station groups Hearst-Argyle, A.H. Belo and Allbritton Communications, and content deals with cable programming powerhouse Liberty Digital and game developer Electronic Arts.

Each station group has pledged part of their DTV spectrum-a daily average of 6MBps, with a minimum contribution of 2.5MBps-to the venture. The deals give Geocast coverage of 37 percent of the country. The company is currently conducting field trials in Washington, Sacramento, San Francisco, Portland and San Jose, and plans to launch a terrestrial DTV service in third-quarter 2001.

However, Geocast broadened its focus beyond DTV in October by striking a distribution deal with DBS operator EchoStar for national coverage directly to consumers. Geocast gets 12MBps of EchoStar's spectrum to distribute rich content, which will be received by a standard EchoStar DISH system and pumped to a GeoBox with a 40GB hard drive.

While industry analysts saw the EchoStar deal as a reaction to uncertainty over the U.S. digital television standard, Geocast chairman/CEO Joe Horowitz denied that the EchoStar agreement represented a change in direction and said Geocast is still committed to broadcast DTV.

"Our original business plan was to provide the consumer with multiple paths of delivery," said Horowitz.

SpectraRep, a new company formed by longtime broadcast consulting firm BIA Financial Network, wants to help broadcasters broker their digital spectrum. The Chantilly, Va.-based firm is asking stations to contribute 3MBps of their DTV spectrum, which SpectraRep will then shop to potential clients such as Internet content providers. Broadcasters will share in revenues and an equity stake in the venture.

SpectraRep has signed a deal with satellite capacity provider The Spaceconnection, giving it a means to distribute data nationwide to local partner stations.

Mountain View, Calif.-based Dotcast aims to distribute data through both the analog NTSC and DTV spectrum. The company said its proprietary RF software can fit 4.5MBps of data into the analog spectrum and 9MBps in the DTV spectrum. Dotcast aims to build a proprietary receiver, the DotBox, that will include its own hard-disk storage and connect to a PC for display.

The company hopes its technology will eventually migrate to mobile devices as well. Its business plan is to provide a transport service on a fee-per-usage basis to content providers.

Dotcast aims to build a national data network for $40 million, and has already raised $80 million in funding from investors, including The Walt Disney Co., GE Equity, Intel Capital and disk-drive manufacturer Quantum Corp. The company has agreements to use the existing broadcast towers of more than 300 PBS member stations and plans to launch its service by late 2001.

"We can spin a little gold out of straw," said Dotcast president Richard Selvage, who noted that corporate training could be a huge market for Dotcast.

A datacasting technology firm to watch is New York-based Wavexpress, a collaborative venture of Sarnoff Corp., Wave Systems and The Fantastic Corp. Wavexpress supplies "hardware encryption" technology that allows DTV stations to deliver multimedia content, such as streaming video, on a transactional basis to personal computers equipped with special add-on cards.

The company has trial agreements with several station groups and has secured satellite space with GE Americom. It hopes to launch a limited service this year, with a wider rollout in 2002.

"We're focused entirely on the PC base, working with card manufacturers like Hauppauge and Broadlogic," said Wavexpress president/CEO Cliff Jenks. "We'll continue to work with both of those companies to refine the chipsets and reception capability through the digital tuner card."

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