Is America
Ready for Digital Terrestrial Pay TV?
USDTV is doing a
"stealth launch" to prove the business case before a
national rollout of the service to 30 cities by the end
of 2004.
by Ken Freed,
"America Watch" columnist in
Euromedia.
Taking
advantage of the excess capacity in local digital
terrestrial broadcast signals, USDTV has launched a new
pay TV service featuring HDTV broadcasts. Is America
ready for an alternative to cable and satellite
subscription services?
Created by Steve
Lindsley, founder of the now-defunct WOW-TV interactive
TV venture, the Utah company is doing a "stealth launch"
to prove the business case in Salt Lake City before a
national rollout of the service to 30 cities by the end
of 2004.
USDTV CEO Lindsley
said in an interview that he's not yet ready to announce
the target markets, "but they will be among the top 50
urban population centers in the country." Salt Lake City
is ranked 35th in population.
The initial "early
bird" offering at USD $19.95 per month has attracted
about 300 local subscribers to receive 30 channels
over-the-air on a set-top box purchased retail at USD
$99.00, which can be returned (with a penalty fee) before
the one-year service contract expires.
The channel package
features feeds from the local affiliates of the national
broadcast channels ABC, CBS, NBC, PBS, Fox, UPN, WB, and
Pax. USDTV negotiated carriage agreements with such cable
channels as ESPN, Discovery, Disney, Lifetime, HGTV, and
the Food Network. Further, five of the local broadcasters
are providing their HDTV content to the new pay TV
service.
IN THE
BOX
The set-top boxes
are being manufactured by Hisense Company, Ltd of China.
The actual production cost is USD $150 per box, and
Hisense is underwriting the first 100,000 boxes with an
investment of USD $15 million. Without specifying the
duration of the contract, Hisense announced at the CES
show this month that the company has agreed to deliver
400,000 USDTV boxes every year.
The boxes are being
distributed retail in Salt Lake City by a regional
consumer electronic chain, R.C. Willey, and by Wal-Mart,
the largest retailer in the United States. Hisense
reported at CES that Wal-Mart has agreed to be a retail
outlet for USDTV boxes in all target markets.
Lindsley said USDTV
is now in talks with "all of the major consumer
electronic manufacturers" to incorporate USDTV's
proprietary DTV reception and conditional access
technology into future models of their widescreen digital
television receiver sets. He declined to name specific
companies at this time.
USDTV chief
operating officer Richard Johnson described the
architecture of the box now being built by Hisense. He
stressed that the equipment fully conforms to ATSC
specifications to receive all 18 formats of standard
digital television (SDTV) and high-definition digital
television (HDTV).
Relying on a RF
antenna input port for VHF, UHF and DTV signal reception,
Johnson said the "plug and play" box has component,
composite and S-video outlets for compatibility with any
receiver, including the 275 million analogue TV receivers
now used in the United States.
USDTV subscribers
will not need to buy an expensive new digital TV monitor
to view digital broadcast content on older analogue sets.
The USDTV set-top will automatically display widescreen
ATSC content in a letterbox format on NTSC sets.
"The box was
designed to support our service," he said, " and the
object was to reduce the cost of the box as much as
possible.
The key element
inside the box, he reported, is a digital broadcast
signal tuner from ALPS Electric in Tokyo, Japan. The
single-chip microprocessor demod and MPEG decoder in the
box come from ATI Technologies in Ontario, Canada. USDTV
had space in the ATI booth at CES.
The conditional
access (CA) system in the box is proprietary, Johnson
said. He declined to disclose the technology partner that
developed the CA system under USDTV direction. He did
report, however, that because there is no CA
specification within ATSC, the CA system created for
USDTV is based on the CA spec within DVB, akin to that
used by EchoStar to secure its DVB satellite
broadcasts.
The box soon will
support a simple electronic program guide, he said, but
would not provide any details beyond saying that the
USDTV guide does require them to negotiate patent rights
with Gemstar TV Guide.
Lindsley said that
the guide and the rest of the USDTV offering will not
feature advanced interactivity like the WOW-TV service,
which he said failed in 2000 when the bottom dropped out
of the Internet and interactive TV industry. "We do not
yet see a viable business model for interactive
services," he said, "so we're going with the services we
feel confident can attract customers today."
Lindsley resisted
comparisons of USDTV to the OnDigital service in the UK.
"The only similarity is our over-the-air technology for
the delivery of digital terrestrial broadcast
channels."
Unlike OnDigital
that relied on interactive advertising as it's primary
revenue source, he said USDTV is being solely supported
by subscription revenues, at least initially.
REVENUE SOURCES
Advertising may be
added later, he said, but only if a business model can be
found that does not simply shift limited advertiser
dollars among content distributors. The challenge would
be fairly sharing revenues with the local broadcasters
offering their excess digital capacity to transmit the
USDTV service. "We've not crossed that road yet," he
said, "but we're not ruling it out."
Part of the issue
is that broadcasters must pay a 5 percent surcharge to
the FCC for any income derived from use of the spectrum
granted to them for free under the 1996
Telecommunications Act. The lure Lindsley said, is that
advertising-supported broadcaster are eager to explore
new revenue sources "that were never available to them in
the past."
The ideal behind
USDTV, he added, it marry the best of breed from the pay
TV and free-to-air business models. "We want to blend
them both to provide a variety of revenue
streams."
The real question
is whether American television viewers are ready to pay
for broadcast content that they traditionally have
received for free. They subscribe to digital cable and
satellite services, so why not a digital terrestrial
broadcast service?
Lindsay is betting
that enough consumer are ready for a service like USDTV.
Without the interactive bells and whistles that bogged
down WOW-TV, he's convinced that this time his venture
will fly. 
.
