U.S. FCC to set fee on broadcasters for digital TV
Reuters Story - November 18, 1998 20:27
By Aaron Pressman
WASHINGTON, Nov 18 (Reuters) - Broadcasters will find out on Thursday how big a fee the government plans to levy on companies that use new digital technology to send pay-per-view or other subscription services over the airwaves.
The industry hopes the Federal Communications Commission will assess a fee of two percent of revenues generated from new digital premium channels or computer data offerings, but public interest groups favor a fee of 10 percent or more.
With very few consumers buying digital television sets, currently priced at $7,000 or more, the audience for new services will be tiny for several years, analysts said.
"Short-term, they're just trying to get digital rolled out," said Larry Gerbrandt, senior analyst at the market research firm Paul Kagan Associates.
And even over the next 10 years, pay services will account for only about five to 10 percent of local broadcaster revenues, according to Josh Bernoff, analyst at Forrester Research.
"This is a pretty theoretical revenue stream that the FCC is attempting to assess fees on," Bernoff said.
The fee plan arose after Congress agreed to give each broadcast station an extra channel for free -- instead of for sale at an auction -- to use during the ten year or longer transition to digital television.
But in the 1996 Telecommunications Act, lawmakers required that the FCC assess fees if broadcasters began using the second channel to generate revenues other than through traditional advertiser sponsorship.
With the second channel, broadcasters can continue to air current analog programming while they phase in the new technology, which brings crystal clear high-definition pictures or compresses as many as six channels into the space of one analog channel.
The added capacity and scrambling capabilities of digital will allow some broadcasters to begin offering entertainment or computer data services that viewers will have to pay extra to receive.
Forrester's Bernoff expects most broadcasters will offer data services backed by advertising revenue and therefore exempt from the new fees.
"That is something broadcasters know and are more comfortable with and more likely to exploit," he said.
The broadcast industry asked the FCC to assess a flat two percent fee on all revenues generated by subscription services aired digitally. The industry also asked the FCC not to start charging the fees for two years as stations experiment with a variety of digital services and formats.
Public interest groups would like to see higher fees, noting that the extra channels given to the broadcasters for 10 years or longer could have raised $70 billion at an auction.
FCC officials have not said where they expect the commission to come out, but industry participants said fees of six to eight percent of gross revenues were being discussed.
More than 40 stations around the country began their first digital broadcasts this month, including a professional football game, the movie "101 Dalmatians," and the launch of the space shuttle carrying John Glenn.
In the top 30 U.S. markets, affiliates of General Electric's NBC, Walt Disney Co.'s ABC, News Corp.'s Fox and CBS Corp. in the top 30 markets are to go digital by November, 1999.
All commercial stations must offer digital by May 1, 2002, with public television stations following a year later. Analog broadcasts are scheduled to end in 2006 unless most consumers are still unable to receive digital programs
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