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The New Television 2: Digital Television, HDTV and the Future of Digital Video Networks

This reportís objective is to provide a status report and outlook of digital TV (DTV) in the U.S, Canada, Europe, and the Pacific Rim. It examines the driving forces behind digital TV and the implications of DTV for broadcasters, cable TV, DBS, wireless cable, the computer industry, and others.

History and Overview of New Television

In December 1996, the Federal Communications Commission (FCC) issued its DTV standard, after a nine year struggle to develop and create an advanced television standard for the U.S. The FCC had appointed an Advisory Committee to provide the necessary guidance on technical and policy issues. The role of the Advisory Committee (ACATS) was to analyze the technical improvement in television and create a new standard for broadcasting to replace the NTSC standard. The ACATS had to answer the question of what to do with the existing NTSC equipment and whether to allocate more spectrum to the broadcast industry. Also it had to decide how the government would handle the possible transition between the new and old systems.

ACATS created a race where the winner would be recommended to the FCC as the new advanced TV standard. The winning selection was a consortium of all remaining entrees to the race, which called its entry the "Grand Alliance." The FCC then adopted several different rules and procedures to implement this standard.

Many U.S. cable TV manufacturers became involved in the race for HDTV as a result of work on video compression. This was motivated by a desire to significantly increase the number of channels at cable operators' disposal. General Instrument was the first company to successfully demonstrate the compression of a digital terrestrial broadcast signal. GIís success at digitizing and compressing digital signals is what led the U.S. Advisory Committee to insist on a digital standard for HDTV. However, HDTV was never really a goal of cable TV as it was for the broadcast industry.

The computer industry was not in the race for DTV until 1991. The industry saw digital TV as yet another forum for the PC and computer applications. However, if it was to be able to market to a digital TV audience, the DTV standard could not remain interlaced. Thus, the computer manufacturers created its digital TV team. This team sought to marry what it called the best of TV with the best attributes of PCs.

Developments Outside the U.S.

In 1986, the European Union (EU) created its advanced television technology strategy in order to strengthen the competitive stance of the European consumer electronics industry. The EU hoped to forestall existing Japanese and American efforts to impose a global ATV transmission standard.

Japan created the first HDTV system in the 1980s under the leadership of NHK and the Japan Broadcasting Corporation. In March 1991, Japan adopted Hi-Vision/MUSE as the national HDTV standard. Delivery of MUSE by satellite was an opportunity to diversify programming options without taking away spectrum from existing broadcast services. Japan now airs over 17 hours of HDTV each day using MUSE.

Critical Technologies and Innovations for New Television

MPEG is established as the standard for digital compression for DTV and other forms of digital video. There are four MPEG standards, but MPEG-1 and MPEG-2 are in regular use. In September 1993, to handle the requirements of multimedia, MPEG began work on a third standard, MPEG-4. MPEG-3 was created for HDTV but was dropped after modifications were made to the MPEG-2 standard to allow it to work with HDTV.

There are also currently three standards for DTV: the U.S. ATSC standard, the European Digital Video Broadcasting (DVB) group of standards, and the Japanese MUSE/High-Vision and Clear-Vision standards. There is considerable competition in throughout the world. between the U.S. ATSC format and the European DVB format.

New Television Products

Telephone and cable companies are upgrading their networks for video in several different ways. In the terrestrial arena, phone companies are exploring different xDSL technologies to attack this marketplace, while cable companies are racing to rollout advanced cable HFC infrastructure. The manufacture, ownership, and distribution of settops is a crucial component in the implementation of digital TV. In the U.S., settops will allow owners of NTSC TV receivers to use their older incompatible analog equipment even after the U.S. has turned off the NTSC signal. Settops are also essential for viewing digital cable or DBS programming.

Broadband wireless systems have developed as a broadcast response to the high capacity offered by cable systems. Broadband wireless is very similar to wired cable in the type of services it can support, including video. The difference is the delivery mechanism used. There are three types of broadband wireless systems: Multichannel Multipoint Distribution Systems (MMDS), Local Multipoint Distribution Systems (LMDS), and Microwave Video Distribution Systems (MVDS). Each operates in a different part of the radio spectrum. MVDS has been allocated spectrum in Europe, but not in the U.S.

Market Conditions for the New Television

The United States: Although the U.S. has adopted a DTV standard, a couple of regulatory decisions still remain undecided regarding the start-up of digital TV. Primarily the FCC must issue a decision on the "must carry" format rules for cable.

CBS and PBS have pledged to offer HDTV programming in the 1080I format, while ABC will likely offer HDTV in the 720P format. NBC is also considering 720P, but is concerned about the availability of progressive scan equipment to support the format.

Many cable operators are in the process of completing the upgrades to their networks necessary to offer all types of digital video. The rollout of digital video will likely range from two to three years for companies like Cox Communications, U S West Media Group, and Comcast; four to five years for Time Warner and Cablevision Systems; and five to seven years for the remaining companies. Some cable operators have already rolled out digital cable in a few towns and have received rave reviews. TCI, one of the largest operator of cable systems in the U.S. and whose leadership is followed by most other operators, chose progressive scanning and the various formats of high definition TV (HD0, HD1, HD2) for its cable systems. The choice of HDTV standard by TCI and its partners in the digital TV teamís HDTV standard, may force the broadcasters to back away from interlaced scanning sooner than they had planned.

In December 1997, DirecTV announced plans to transmit some programs, most notably movies and sports, in HDTV viewers by fall 1998. As a result, there will now be a national provider of HDTV signal in 1998, alongside the 10 network stations that have promised to transmit some programs in HDTV.

Canada: The Canadian government and the broadcasting and cable industries have decided to wait until the U.S. begins its first HDTV broadcasts before deciding on the proper approach that Canada should take. The government believes that a slow approach to DTV is warranted since it holds that there will be few DTV subscribers until large flat panel liquid crystal displays are affordable.

Europe: The main regulatory issues confronting the European marketplace are those surrounding competition in the cable, terrestrial, and satellite marketplace. In particular , the main sticking point involves deciding who controls the information and content; especially issues involved with conditional access, electronic programming guides, transmission and network access requirements and fees, and programming issues.

Japan: In Japan, three study groups have already met and submitted reports on the best way of migrating from an analog system to a digital system. The goal of these study groups is to have a working version of a digital format by the year 2000, although there is now talk that this transformation will not occur until 2006. However, before digital satellite TV can be launched, the Japanese Government must first launch a new high powered satellite, BS-4b.

It is also unlikely that any of the Japanese terrestrial broadcasters will migrate to digital TV by the year 2000. NHK has spent billions of yen over the past ten years in developing analog HDTV and does not want to abandon its investment.

A General description of this report, its Table of Contents, and Chapter One are also available online.

A full executive summary is available for $250. To order a copy please contact Robert Nolan at 617-923-7611 or rob@cir-inc.com.

Publication Date: June 1998
Price: $4000
To Order: Please contact Robert Nolan at 617-923-7611 or rob@cir-inc.com.