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Technology Stocks : C-Cube
CUBE 36.90-0.9%10:26 AM EST

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To: Tim McCormick who wrote (25622)11/24/1997 7:37:00 AM
From: Bill DeMarco  Read Replies (1) of 50808
 
Tim's Article.....

November 24, 1997

Local TV Stations Look to a Digital Future

By JOEL BRINKLEY

DALLAS - Flip back eight months, and listen to the broadcast television industry as it tried to persuade the government to accept its slow, lazy schedule for making the transition to digital
"It's unrealistic to expect ABC to begin broadcasting HDTV in a one-year time frame," Preston Davis, president of broadcast operations at the network, complained in March - echoing the view of most broadcasters then.

What a difference a few months makes. Right now in Dallas, as in many cities across the United States, stations are scrambling to be the first to put digital, high-definition programming on the air.

"I'm really excited," said Douglas Adams, general manager of KXAS, Channel 5, the NBC Dallas affiliate. "By putting a superior picture into people's living rooms, we can build on our audience. And
there's a real advantage to being first."

Across town at WFAA, the ABC affiliate that is KXAS'
most important competitor, Ward Huey Jr., an executive
with the company that owns the station, insists that his
station will take the lead.

"High-definition is undeniably attractive," Huey said,
"and we want to be there first. I cannot imagine how we
can be advantaged by being late to the party."

Like many stations, these two are racing - but running
in place. Each wants to go on the air right now. But they
are hamstrung. They are waiting for manufacturers to
finish work on new digital transmitters, recorders and
the like; engineers to finish creating new pieces of digital
equipment that had to be designed from scratch - and
consumers to buy the new digital televisions to get the
high-definition programming they are so eager to put on
the air.

"I really want to get under way," said George Csahanin,
director of engineering for KXAS. "It's frustrating to me
that I can't."

Last spring, the broadcast-television industry finally
buckled under to pressure from the government, and 26
network-owned stations in the nation's 10 largest cities
promised to begin broadcasting on their new, digital
channels by Nov. 1, 1998. Hundreds more stations
agreed to follow over the next year.

Now, with the first digital broadcasts less than a year
away, Washington lobbying battles have given way to
local-market competitive forces. Nobody, it seems, wants to be seen as a technological laggard.

"They all want to be first," observed Mark Richer, general manager of Comark Digital Services, which is helping numerous television stations across the country, including KXAS, make the transition to digital broadcasting.

In Honolulu, for example, KITV, the ABC affiliate, surprised its competitors by announcing in August that it had already completed a costly digital upgrade and would begin digital broadcasting as soon as the last pieces of equipment arrive and the network begins providing high-definition programming.

"Channel 4 will be the first to achieve digital transmission in Hawaii and among the first to do so in the United States," Bob Marbut, chairman of Argyle Television Inc., which owns KITV, boasted.

In Dallas, each station is urging manufacturers to hurry deliveries of digital equipment. "We're going to take delivery of our new transmitter in January and our antenna in February," promises Beaven Els, WFAA's engineering director.

"I know what they're doing over at WFAA," confides Csahanin of KXAS. "We will be first; we will!"

Of course, not every one of the nation's 1,600 television stations is so enthusiastic. Some, particularly in small markets, complain that they cannot afford to make the upgrade.

It costs at least $1 million and potentially much more to equip a station so it can pass on a digital, high-definition signal it receives from a network.

And to begin producing its own high-definition programming a station will have to spend at least $8 million to $10 million for new cameras, monitors, control boards, studio sets, routers, switchers and recorders as well as a digital transmitter (roughly $700,000) and antenna (up to $500,000) - and maybe even a new tower ($1 million or more).

As a result, industry analysts report, a few owners are trying to sell their stations and get out of the television business altogether rather than pay for the costly upgrade.

"A lot of stations are hoping to get a reprieve," Csahanin quipped. "You know, they're hoping the governor calls."

KXAS is owned by Lin Television Corp., WFAA by A.H. Belo Corp. Lin currently owns seven stations; an acquisition deal is pending. Belo owns or operates 21 stations. Both companies began
planning the transition for their stations at least three years ago.

"Here at Belo, we started talking about this in 1993," said Bob Turner, manager of engineering services for the corporation's broadcast division.

Still, for all their enthusiasm, executives at both WFAA and KXAS acknowledge that they face numerous challenges before they can put digital programming on the air.

To begin with, both KXAS and WFAA find themselves held back by their own networks. Neither NBC, a unit of General Electric Co., nor ABC, which is part of Capital Cities/ABC Inc., has told its
affiliates precisely what kind of signal they will be sending out. Both have promised to broadcast high-definition programming at least part of the time, but neither has specified the format for that signal or what will be used the rest of the time.

"It's kind of frustrating," Adams of KXAS said. "These are obviously critical decisions for us."

Both stations dismiss the idea of using digital technology to broadcast several channels of lower resolution programming in place of one high-definition show. And neither is sure what it will do if its network chooses that option part of the time.

What's more, much of the equipment needed for digital
broadcasting is still being designed. As an example, no one has yet
begun selling a device allowing seamless insertion of a station's
local commercials and promotional spots into a network's compressed, digital signal.

"We don't yet have the ability to make a smooth transition from one to the other," Csahanin said.

In addition, station executives worry about how their conventional square-screen programming will look on wide-screen digital sets. Will viewers object to the broad black bars that will appear on the left and right sides of the screen when conventional programming is shown?

"That's a huge problem," Adams said. Half joking, he suggested placing potted plants on either side of the screen. "You know," he added, "as you peel these things back, you find even more problems."

As a result, in the early days viewers tuning into the digital stations are likely to see a cruder production than usual. They will quickly realize "this isn't the network any more," as Csahanin put it. "It'll be kind of like 1950s television. But I'd really like to get under way."

In the meantime, his rivals over at WFAA found a way to get under way, in a manner of speaking. Last April, they decided to stage a big HDTV demonstration at the Texas State Fair in September.

"We wanted to be identified with high-definition so that when viewers see high-definition, they think of WFAA," Belo's Turner said.

By August, planning had swung into high gear - when suddenly WFAA heard that, in New York, Preston Padden, president of ABC, had announced that the network would probably abandon the idea of broadcasting high-definition programming and offering multiple channels of pay-TV programming.

"To say that we were furious understates it," Els of WFAA said. Huey, president of Belo's broadcast division, stopped by to see Padden while in New York a few days later and told him exactly how bad
an idea he thought ABC's plan really was.

Over at KXAS, Adams was gloating. "Great! Terrific!" he said he thought at the time.

A few weeks later, Padden backed down, under pressure from Congress, and promised to broadcast some high-definition programming. And a short time after that, KXAS' gloating turned to consternation,
as the station's leaders heard of WFAA's State Fair demonstration.

"It set off a mad dash here, trying to round up vendors so we could put on our own demonstration," Csahanin recalled. "But it didn't work."

At the fair, meanwhile, the show was a hit. Even KXAS' Csahanin acknowledged that "the response was phenomenal; everybody was talking about that damned thing."

"We had 150,000 people go through to see it," Turner said.

Now KXAS is planning a high-definition demonstration of its own. "We've seen what they did," Adams acknowledged. "And when you don't do something first, you have to do it significantly better."
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