With ATSC 3.0, TV broadcasters might try to steal some wireless business after FCC's incentive auction

IoT market (Pixabay)

Mike Dano

What are the nation's TV broadcasters going to do after they give up some of their spectrum to wireless carriers in the FCC's upcoming incentive auction? Why, they might compete directly with those very same carriers, of course.

At least, that's how the market may shake out if the nation's TV broadcasters adopt the new ATSC 3.0 transmission standard in the coming years.

The ATSC 3.0 standard -- which is currently in testing in Washington, Baltimore and Cleveland -- is designed to bring TV broadcasters into the IP world. It will potentially allow them to transmit video to smartphones, or new ads to billboards, or emergency alerts to homes, cars and other devices -- all services that the nation's wireless carriers are currently working to make money from.

With ATSC 3.0, "there's a whole slew of businesses that TV broadcasters can now get into," explained Jerald Fritz, One Media's EVP for strategic and legal affairs. One Media is a joint venture between embedded systems vendor Coherent Logix and Sinclair Broadcast Group -- the nation's largest TV broadcaster that operates around 160 TV stations across the country -- created to push the ATSC 3.0 standard. One Media's R&D budget in the third quarter reached $5 million. One Media's stated goal is to build a "next generation broadcast platform" that can provide "premium video anytime, anywhere without a data cap."

It's that mention of video and the "data cap" by One Media that is noteworthy, because today's wireless carriers have based their business almost exclusively around getting subscribers to buy larger and larger buckets of data, primarily in order to watch more video. The TV industry is hoping their ATSC 3.0 standard will give them a slice of that business by taking it away from wireless carriers. (And the irony here is that the TV industry's forthcoming ATSC 3.0 standard is largely based on the OFDM technology that wireless carriers largely pioneered in their 4G networks.)

But there's one major hitch in this scenario: The FCC's upcoming incentive auction of TV broadcasters' 600 MHz spectrum. The agency is hoping to convince TV broadcasters to give up their unwanted spectrum in a "reverse" auction where the FCC will pay broadcasters for their spectrum. Then wireless carriers and other auction participants will try to buy that spectrum in a traditional "forward" auction that is scheduled to start in March.

Will the allure of the new business opportunities created by ATSC 3.0 prevent TV broadcasters from giving up their spectrum to wireless carriers?

The short answer is: probably not.

"The commission isn't even going to be looking at this [ATSC 3.0] standard until after the close of the auction," One Media's Fritz explained.

Sinclair, the TV broadcaster, has long been a proponent of the ATSC 3.0 standard. However, during the company's third-quarter earnings conference call, Sinclair executives reiterated that the company could score up to $2 billion if it sells some of its spectrum in the incentive auction -- and that the company could still pursue ATSC 3.0 services in addition to selling some spectrum in the auction.

"We have an auction team running 24/7 right now talking to multiple parties on channel shares so we can optimize our outcome," Sinclair CFO Christopher Ripley said during the call, according to a Seeking Alpha transcript. "We are in place to participate and optimize our spectrum portfolio versus our future ATSC 3.0 data opportunities."

"We are supportive of the auction," said Anne Schelle, managing director of Pearl TV. Pearl is a consortium of 170 TV stations that is promoting the ATSC 3.0 standard. Pearl members include Cox Media Group, the E.W. Scripps Company, Gannett, Media General, Meredith Local Media Group, Raycom Media and others -- Pearl includes basically all of the TV industry's biggest broadcasters except for Sinclair.

Schelle explained that, ideally, the ATSC 3.0 standard would be adopted by the TV industry after the incentive auction. Some TV broadcasters will need to have their spectrum "repacked" after the auction, which basically means their spectrum will be moved around so it doesn't interfere with the operations of wireless carriers. Schelle said the repacking process presents a perfect opportunity for TV broadcasters to begin rolling out ATSC 3.0 services.

This isn't the first time the TV broadcasting industry and the wireless industry have run into each other. Developed almost 20 years ago, the ATSC 1.0 standard was created in order to move the TV industry from analog broadcasting and into the digital era; it was also that technological transition that freed up the 700 MHz spectrum that wireless carriers bought at the FCC's 2008 spectrum auction. Today, the TV industry is hoping to move to the new 3.0 version of the ATSC standard in order to offer more efficient and flexible services.

Mark Richer, president of the ATSC standards group, said the ATSC 3.0 standard will likely be finished in 2017. He said South Korea and China are already considering adopting the standard for TV broadcasts there. And Sinclair executives said recently the company will conduct a "full-blown" ATSC 3.0 demonstration at the CES show in January "as well as even a larger demonstration in Las Vegas at the NAB [show] in April next year."

ABI Research analyst Sam Rosen said the ATSC 3.0 standard offers a range of advancements for the TV broadcasting industry: "In addition to physical layer specification differences (which would enable larger bitrates for 4K video as well as higher efficiency, more resiliency, and adaptability to provide different resolutions for mobile devices over fixed, for example), there are a lot of logical / packet layer changes," he said. "This would make ATSC more suitable for transmission of IP data, which could include any distribution of content. It has flexibility coming out of the DASH protocol, which is also in the European interactive TV specifications (HbbTV). This flexibility could be used for dynamic channel provisioning (i.e. going from 2 UltraHD channels at gametime to 6-8 HD channels at other times of day), broadcast data distribution used in collaboration with other networks (i.e. software updates), or other general applications. In addition, like LTE Broadcast, there are a number of features in ATSC 3.0 which support the development of broadcast TV to mobile devices."

It's the mobile broadcasting capability in ATSC 3.0 that appears to have generated the most interest among TV broadcasters. With ATSC 3.0, mobile video "is now free" to smartphone users, said One Media's Fritz.

Fritz predicted that wireless carriers and TV broadcasters might enter into partnerships in the future so that wireless carriers could offload video traffic from their cellular networks onto ATSC 3.0 networks. "I expect there would some partnerships" between TV broadcasters and wireless carriers, Fritz said.

If this sounds familiar to you, you're not alone. Qualcomm's MediaFlo launched almost 10 years ago with exactly that same model: AT&T and Verizon both offered MediaFlo-capable mobile TV phones, charging roughly $10 a month for access to around a dozen channels like Comedy Central, Fox News Channel, MTV Mobile, Disney Channel and Nickelodeon. That service failed to generate interest and Qualcomm announced it would shut it down in 2010.

More recently, Pearl helped launch Dyle mobile TV across several dozen markets using the ATSC M/H standard, again offering a handful of channels to mobile users with suitable receivers (MetroPCS announced a Dyle-capable phone before T-Mobile acquired the company). But earlier this year Dyle posted this to its now-shuttered website: "As of May 22, 2015, Dyle mobile TV is no longer in service, and Dyle-enabled devices and their apps will no longer be supported."

So why would an ATSC 3.0 mobile TV service work where so many other, similar offerings have failed? "This is an enhancement to the core platform," explained Pearl's Schelle when I asked her that question. She said that ATSC 3.0 would be able to broadcast to any mobile device with a receiver, including smartphones and tablets, and that the broadcasts could include HDR and other high-resolution display technologies, as well as interactive elements.

Now, to be clear, I've been covering the mobile TV industry since its inception more than a dozen years ago. And I can say with confidence that Pearl's Schelle has the least compelling argument I've heard in support of a dedicated mobile TV service. The truth is that the only way any kind of ATSC 3.0 mobile TV service will be successful is if ATSC 3.0 receivers are embedded directly into smartphones and tablets and the service is completely free to users -- the only reason anyone would choose to watch local TV broadcasts over cable TV or Netflix is because local TV broadcasts are free. Of course, wireless carriers have no incentive to encourage their smartphone suppliers to embed ATSC 3.0 receivers into smartphones because doing so could deprive operators of the revenues they get from delivering video over their own networks.

Yes, a wireless carrier like T-Mobile or a smartphone vendor like Apple might break ranks and support ATSC 3.0, but they won't do that anytime soon. And by the time the ATSC 3.0 is standardized and rolled out, I suspect Apple will be offering its own TV service and T-Mobile's network will be buttressed by LTE-U and the beginnings of 5G, thus removing the need for it to offload video traffic.

"ATSC 3.0 would provide some benefits to help these [local TV broadcasting] affiliates remain more competitive in terms of service mix with cable and telco broadcasters, and the national networks' OTT services, if you look to the 2018-2022 timeframe," ABI's Rosen said. "Ultimately, it all comes down to if you believe there is a role for broadcast television networks with minimal capabilities to expand to unicast and on-demand."

It's true that ATSC 3.0 could allow TV broadcasters to eventually offer some interesting services, but it will take years for that to get off the ground. And the nation's wireless carriers have far more pressing challenges to contend with as wireless growth slows and cable operators like Comcast begin to play in the wireless industry. --Mike | @mikeddano