The year is 2012. You finish up a day of work at your home-desk terminal, where you've spent eight or nine hours supervising the manufacture of widgets (or vidgets, or didgets, or something) at your company's factory in Abu Dhabi via a digital satellite link. You say good night to your co-workers in Manitoba and Vienna, and you head downstairs to the living room.
You plop down on the sofa, still the same old comfortable one you got as a hand-me-down from your aunt (your spouse and kids are lobbying for one of the new models with programmable cushion configurations for each member of the household, but you're holding out). You're facing a big blank screen in the middle of your home entertainment system. You pick up the handheld appliance operator (also a little dated, but you haven't had the patience to mess with the voice recognition settings), and you turn on...what?
The television set, right? Well, yes. But what exactly will that mean in 10 years? What will you watch? Where will it come from? How will it get into your home? And what will come along with it?
Television has evolved tremendously in the half-century since it became standard American household equipment. Its technology, content, and role in the culture have mutated, multiplied and morphed (to use one of many new words we wouldn't have without TV) year by year and decade by decade. And, the occasional "Kill Your Television" bumper sticker notwithstanding, it is here to stay in one form or another.
But predicting that form, or much of anything else about television, is a tricky proposition. "It's almost like going back to somebody 10 years ago and saying, 'OK, tell us about the future of the Internet,'" says John Pennington, creative services director for Knoxville's ABC affiliate WATE. "You would have had a lot of people saying, 'What?'" But whether the changes in the TV universe are fast or slow, in expected or unexpected shapes, everyone involved in the industry agrees they're coming. And they're trying to position themselves as well as possible to survive.
One Box For All
From a purely technological standpoint, most local observers agree television and telecommunications as a whole are headed for an e pluribus unum convergence. Whatever you turn on in your living room is likely to be more than "just" a TV set. If you have cable television, and most of you will, the same box that translates your TV signal will also likely carry your telephone service (your land line, at least), your Internet connection, your digital radio feeds, your video games, and any other media combinations that may arise.
"Customers like one-stop shopping," says Russell Byrd, manager of government and public affairs for the Knoxville office of Comcast, the dominant local cable company. "They like going to superstores where they can buy clothes or appliances and a few aisles over they can get their groceries."
Similarly, he suggests, communications companies that can offer all-in-one service through a single box on a single monthly bill will be best positioned to dominate the market. Comcast has already taken its first steps toward such hegemony in Knoxville. Since the mid-'90s, the company has been installing a new network of fiber optic lines throughout the area, replacing the old cables with a system that can carry many times as much data. The superconductive bundles of thin fiber optic lines also carry a signal farther with less amplification, which makes the network more flexible. The loss of any single amplifier in the network, Byrd says, will now affect a much smaller number of subscribers.
The expanded capacity of the system creates the possibility—and therefore the inevitability—of two-way interactive cable. You will be able to send signals back through the same wires that bring the TV and radio signals to you. Some of the potential applications are easy to imagine: the long-awaited videophone, for example (some versions of which are already available to people with high-speed Internet connections); the almost equally long-awaited "video-on-demand," in which customers could simply select a film or even a particular TV program from a menu and watch it whenever they wanted; and a host of other viewer/user options that cable companies will use to attract subscribers.
"Cable companies" itself is too restrictive a phrase. The looming competitors in the market of transmission and distribution include not just the existing cable systems, but also telephone companies, Internet service providers, satellite and wireless communication companies. Many of them are already offering "broadband" service, a catch-all phrase for high-speed transmission—along either cable or phone-based digital subscriber lines (DSL)—of multimedia content. Comcast, for example, offers high-speed Internet service, as does BellSouth.
"I think consumers are ready for it," Byrd says of the convergence of services. "The more we can do and the more we can offer. They want it quick."
The Big Get Bigger
Of course, Comcast has reason to welcome the future. At the moment, it is the third-largest cable provider in the U.S., with about eight million subscribers. And under a proposed $72 billion merger with AT&T Broadband, the nation's largest cable company, the two companies would become AT&T Comcast Corporation. Pending federal approval, the combined company would have 22 million subscribers and a significant presence in 17 of the country's 20 largest markets—including five million digital video subscribers, 2.2 million high-speed Internet customers, and one million "video telephony" customers. They announced the deal in December after six months of wrangling.
Things would appear less bright for smaller competitors. In the Knoxville area, the only alternative to Comcast is the relatively small player Knology, a Georgia-based broadband provider that debuted here last year. Knology's president and CEO, Roger Johnson, says he's optimistic.
"We are ecstatically happy with our progress in Knoxville," he says. "We've already built past our first 5,000 homes and are working on our second 5,000 homes...It's probably the best market we've encountered as far as early-stage penetration." Knology does not release exact subscriber numbers.
As for the consolidation within the industry, Johnson says, "That trend seems to be under way, and I think we'll probably see more of that. We don't characterize ourselves as a cable company. We characterize ourselves as a competitive broadband provider."
But so, seemingly, will every other communications company within the near future. Small or even mid-sized Internet service providers look to be similarly at risk. Last week, the increasingly pro-deregulation Federal Communications Commission discussed a rules change that would exempt local phone companies from having to carry competitors' digital subscription line (DSL) services over their phone lines—in effect, opening the way for a DSL monopoly in any given market. The House of Representatives is scheduled to take up a similar measure next week.
All of this merging hasn't gone without protest. Many consumer activist groups, most prominently Consumers Union (the publisher of Consumer Reports), have warned the FCC and Congress that more consolidation could be bad for customers. On Feb. 8, the sixth anniversary of the 1996 Telecommunications Act, Consumers Union issued a stern report on the state of competition in the cable and telecommunications industries. The 1996 law loosened restrictions on the number of markets any cable company could control and other ownership regulations, with the promise that competition would result in increased choices of cable and phone service and lower rates. The theory was that major players in the industries would enter and compete in each other's markets. Instead, a Consumers Union study found, they opted for a series of mergers that have cut the number of local phone service providers in half—from eight to four—and raised cable TV rates by 36 percent, nearly three times the rate of inflation. And 95 percent of American households with cable access have only one available provider.
The study concludes, "Unless the Bush Administration and Congress are willing to clean up this mess, consumers are likely to continue to see higher bills, find scarce competition, and experience customer service problems."
Keep It Local
As above, the saying goes, so below. Like the national and international communications companies, local broadcast TV stations are facing a matrix of technological and competitive pressures. But their reactions to those trends vary depending on their place in the market.
Sitting around a conference table in the elegant Greystone mansion that houses Channel 6 WATE, John Pennington and the station's chief engineer Bob Williams sound less than thrilled with pending changes. Last year, the FCC—under the leadership of Bush-appointed Chairman Michael Powell (son of Colin Powell)—proposed drastic loosening of long-standing restrictions on media cross-ownership. With some exceptions, the FCC traditionally forbade the same company to own a dominant newspaper and TV station in the same market. But Powell said he saw no reason to continue the ban and proposed lifting it. The comment period on the proposed change ended last week, and the FCC board will likely issue new rules later this year.
Most cities in the U.S. have only one daily newspaper, and industry analysts expect to see many of them buying or being bought by local TV stations to create market-dominating media conglomerates. And since most newspapers and TV stations are themselves owned by larger national corporations, mergers of entire companies are possible.
Pennington knows very well that the most likely partnership in Knoxville would be between the E.W. Scripps-owned News-Sentinel and the Gannett-owned WBIR Channel 10. WBIR has long been the top local news station in town, and it already has a strong relationship with the News-Sentinel. The prospect of second-place WATE having to compete for advertising dollars with a combined newspaper/TV giant is clearly not a pleasant one.
"As far as I'm concerned, that's probably the sinister thing as far as the local outlets go," Pennington says. "More than technology [changes] or anything else, that's the cloud on my horizon—a world where there's Gannett, there's Hearst-Argyle, and nothing else."
He believes deregulated cross-ownership will create the same environment for local TV stations that the introduction of television did for newspapers—markets that can only support one or at most two local news operations. And, in the relentless calculus of market economics, those companies in turn could be bought by the same company that owns the cable/phone/Internet networks.
"The thing that would scare me about one major deliverer of all your channels is you know you're not going to have more than one local news provider," Pennington says. "That's very scary to anyone who's ever been to any kind of journalism school. That's the beginning of George Orwell stuff."
But just a mile or so north of Greystone, in the less elegant but considerably more optimistic offices of Channel 10, WBIR general manager Jeff Lee sees things differently—somewhat.
"The ones sitting on the outside would not like it, no matter who it is," Lee acknowledges genially. And he doesn't dispute the likelihood of the newspaper/TV merger. He says he and News-Sentinel publisher Bruce Hartmann have joked about who will buy whom when the time comes. But he doesn't believe it will drive all competitors out of the market.
"I don't think it'll get down to one," he says, "but some of the marginal players might not stay with it." He notes Channel 6 has already positioned itself defensively by taking over the local news operation of Fox affiliate WTNZ (Channel 43).
And Lee thinks any adverse effects of consolidation will be offset by a greater dedication of local affiliates to local programming. Because however many channels or sources people can turn to for national news and entertainment, they will still have to rely on the local stations for news about their own city and region.
"I think the future is to figure out a way to be more local," Lee says. "That's what the viewers tell us they want more and more." For example, WBIR is adding another hour of local news and entertainment (modeled on its popular Live at Five show) between 4 and 5 p.m. on weekdays. It will fill the slot previously occupied by Oprah, which is moving to WATE. Successful local programming also helps the bottom line, because the stations own the content and don't have to share the advertising revenue with national networks.
The networks themselves pose another looming problem for affiliates. Although networks currently pay affiliates to run their programming, there is some fear that arrangement could change. There is theoretically nothing that would stop networks from selling their prime-time programs directly to cable or satellite systems, bypassing the broadcast affiliates completely. The biggest reason not to do that at the moment is the size of the audience—cable still only reaches about two-thirds of U.S. households. And even if cable were universally available through phone lines, it wouldn't necessarily be universally affordable.
Still, networks have started driving harder bargains. In a much-publicized case last year, NBC tried to pressure its longtime San Francisco affiliate, KRON, to start paying to carry the network's programming. (NBC had wanted to buy the station itself, and when KRON was purchased instead by Young Broadcasting—the same company that owns Knoxville's WATE—the relationship turned frosty.) When KRON balked, NBC dropped its affiliation with the station and instead bought a much smaller, lower-signal station in San Jose. As a result, more than 100,000 Bay Area residents who don't have cable or satellite cannot currently see NBC programming.
"[The networks] could just put up their affiliation for bid," Lee says. "That's one side of it. The other side of it is they know the combination of local and national is what people like...Without each other, we'd all be less."
One of the most discussed but least understood changes on the TV horizon has nothing to do with who owns or broadcasts the material, but with the technical form of the content itself. Television is in the midst of a government-mandated conversion to digital programming, often (and inaccurately) referred to as HDTV.
Digital television, or DTV, is not the same as high-definition television (HDTV). DTV merely means the material is being broadcast in a digital format, as opposed to traditional analog broadcasting. (This is similar to the difference between a digital camera, which stores pictures as bits and bytes of information, and videotape, which records magnetic images on a physical surface.) Digital broadcasting allows for greater compression of material, so it uses considerably less space in the broadcast spectrum. A station can broadcast several different digital signals in the same amount of spectrum it currently uses for one analog signal.
Among other things, that makes it possible to broadcast in a high-definition digital format, which carries a greater amount of visual information than analog broadcasting and therefore provides higher resolution in the picture. Where analog broadcast pictures in the U.S. have 525 scan lines per image, a digital picture can have either 720 or 1,080 depending on the format used. There are other technical details that affect the quality of the final picture, including how often the picture is refreshed (every 1/60th of a second in HDTV vs. every 1/30th of a second in standard format), but the bottom line is that digital HDTV pictures look sharper. You can compare for yourself at any electronics store, which these days have entire showrooms devoted to HDTV sets.
Various forms of HDTV have been around since the 1960s, originally in analog versions. In the early 1990s, the U.S. Congress started talking about mandating an HDTV format for all American broadcasters. However, what ultimately got approved by Congress and the FCC was simply a conversion to digital broadcasting; broadcasters themselves can decide whether to use their new spectrum flexibility to broadcast in HDTV or add more channels in lower-resolution formats or some combination. WATE engineer Bob Williams says it's understood in the industry that Congress' real interest is not so much in providing better quality pictures to the public (or in protecting their wallets—you'll have to buy either a new TV set or an expensive converter to receive digital signals), but in getting hold of whole sections of the broadcast spectrum that will now be opened up. The anticipated multi-billion dollar auction of that spectrum was a part of the projected federal budget surplus through 2010.
"It's all political," Williams says.
The original deadline Congress set was for all broadcasters to be transmitting digital signals by May of this year. They can continue using their analog broadcast channel through 2006 (after which the government will reclaim the old spectrum space and sell it for law enforcement and commercial use). Lawmakers backed off a little last year, telling stations they could initially use lower-power digital transmissions that would reach only a part of their market. Williams, who says many stations simply won't meet the deadline, expects them to back off more.
Williams and Lee both say they expect to have their digital signals ready to go, at least within a limited coverage area, on or near the May deadline. The FCC has already assigned broadcast stations new UHF channels for their digital signals. In Knoxville: Channel 6 will broadcast on Channel 26, Channel 8 on Channel 30, Channel 10 on Channel 31, Channel 15 on Channel 17, and Channel 43 on Channel 34. But unless you're one of the few Knoxvillians with a digital TV set or converter, you won't be able to receive the signals. Theoretically, the stations will broadcast on both their current channels and their digital channels until the end of 2006. But broadcasters say they expect the overlap period will be much longer, because the government will probably not force the complete conversion until a majority of Americans have digital-capable TV sets. One study estimated it will take until at least 2011.
"I think it's going to be a much more gradual expansion than people realize," Williams says.
One sector that has been particularly affected by the mandate is public television. Jim Tindell, general manager of WSJK/WKOP in Knoxville, says it will ultimately cost the stations about $8 million to convert both their signals to digital. "But of course, we're not going to do all that right now, because we don't have $8 million," he says. "We're well on the way to getting the Knoxville station [WKOP] on." WSJK, which serves upper East Tennessee, will take longer. (Non-commercial stations have an extra year to make the transition.)
TV stations aren't the only ones put off by the expense of going digital. Although digital and HDTV sets have been on the market for several years, they haven't made much of a dent. According to one report, of 25 million TV sets sold in the U.S. in 2000, only 3 percent were digital. If you make that trip to the electronics store, you'll see why: prices on digital sets start off near $1,000 and go all the way up to $5,000 for giant widescreen home theaters. But with only a portion of TV programming currently broadcast digitally, those expensive sets aren't likely to make enough of a difference to most viewers. How much is a somewhat better picture really worth?
"Right now, there isn't a lot of digital programming out there," Pennington says. "Nobody's producing it, because nobody's buying the sets. And nobody's going to buy the sets until there's programming for it."
Broadcasters and producers have another concern about the digital format: as the music site Napster demonstrated with pirated songs and CDs, making things digital makes them easy to replicate and redistribute. As local web operations manager Michael Haynes notes, "Once something is digitized it becomes very difficult to control its distribution." Once Friends can be copied and posted on someone's web site, and then downloaded (without commercials) by anyone in the world, who's going to bother with "Must See TV" anymore?
New digital recorders like TiVo and ReplayTV are already pushing this boundary—much more flexible and with greater capacity than VCRs (TiVo can record up to 30 hours of programming), they allow viewers to watch whatever they want whenever they want. ReplayTV even has a feature that purports to eliminate up to 95 percent of commercials in the recording, so you don't even have to fast-forward through them. Since free broadcasting is supported solely by advertising and almost all cable channels also rely heavily on ad revenue, the user-friendly properties of digital TV might work against the media companies.
"It always concerns us and our customers if [viewers] zap through the commercials," WBIR's Lee says. "If there's no commercials, you're going to have to pay for it in some manner."
From the standpoint of people who actually make the shows you watch on your TV, all of the wrangling over ownership and technology is more interesting than threatening. Whatever form it takes, entertainment is entertainment.
"From a content standpoint, I think the basic three-act structure has been around for a long time," says Geoff Proud, vice president of Knoxville-based Jupiter Entertainment, which produces programs for cable stations like A&E and the History Channel. "I don't think there's going to be that kind of interactive make-your-own-movie stuff. I think there's a place for storytelling."
He says it's possible programming will be more integrated with advertising to dodge the ad-zappers, whether it takes the form of ever more insidious product placement or old-fashioned program sponsorship or the increasingly common "crawls" along the bottom of the screen.
Corporate consolidation has also affected independent producers like Jupiter, Proud says. "If 10 years ago we had 20 or 30 different people we could sell to, now it's about five," he says. And the growing tendency toward vertical integration, with media companies wanting to own both the content and distribution networks of their material, could mean a company like Jupiter will eventually be absorbed by one or another of the giants.
Proud also doesn't discount the eventual need for some sort of "interactivity" in the programming itself. But he's not looking to jump on any bandwagons too quickly. "The Internet thing, everybody's got a bad taste in their mouths now about that," he says. "Two years ago, we all thought, we're going to have to do something on the Internet. And now we're glad we didn't spend any money."
Likewise, Proud—who previously worked in commercial broadcasting—thinks everything from cable convergence to digital TV may be overhyped. "Video-on-demand—that was 'imminent' 10 years ago, and it still hasn't really happened," he says.
"Getting the American public to get up off the couch and put a new box in is very, very difficult," Proud continues. "They have to have a really good reason."