2004 Annual Report - Local TV News Investment

One investment affecting all stations is a mandate from the Federal Communications Commission that every station must broadcast by digital signal by 2006. Digital broadcasting is like traditional, or analog, broadcasting in the sense that it is delivered using over-the-air frequencies. But the digital technology uses a different portion of on the electromagnetic spectrum that allows for higher-quality transmissions and/or multiple transmission streams using the same amount of bandwidth as analog stations.⁸

Using this digital bandwidth requires new equipment, including new broadcast towers and technology to reformat analog programming. According to a survey done in April 2003 for RTNDA, most stations expect to spend at least $1 million in order to make this transition to digital. The survey said that this expenditure could be particularly hard on low-revenue stations in small, rural markets, many of which already face special challenges when it comes to transmitting over large geographic areas.⁹

When the FCC originally granted television station licenses, starting in the 1930s, it was usually in return for a nominal fee and an agreement to serve the local interest. The FCC established a different requirement in the 1980s when it began regulating cell phone technology and held auctions for the spectrum for those phones to work. Many argued that, in return for getting a higher-quality section of spectrum, local television stations should be required to pay for it. In the end, howeve, the FCC declined to do so, with the tacit support of Congress and then-President Bill Clinton. The press described the decision at the time as a significant victory for the broadcasting lobby.¹⁰

In return for this grant of spectrum, television stations were given a mandate to begin broadcasting solely in digital by 2006 (provided a certain percentage of televisions in their market are capable of receiving digital television), at which time the FCC would reclaim their analog spectrum. (The FCC intends to auction the analog spectrum once broadcasters have surrendered it; given prices paid for the cell phone spectrum, it is expected to fetch tens of billions of dollars.¹¹) If the FCC pursues its stated plans, all TV sets with over-the-air analog reception-roughly 20% of all TVs in the United States-will be obsolete. While the FCC is reluctant to shift the 2006 deadline for fear of stalling the digital transition, the question of what to do about the possibility that 20% of consumers might lose access to TV has, according to press reports, bedeviled policymakers.¹²

Any analog television sets linked to digital cable systems will be able to receive digital broadcasts, but the exact manner in which this will happen is a matter of debate. In the digital world a single station will be able to broadcast many channels and there is a fight brewing over whether cable companies will carry them all.

Aside from the squeeze on newsroom expenses due to the cost of building new equipment, at this point it is hard to identify any direct effects on local television news from the digital transition. In the future, there are several possibilities worth watching. Some stations are setting up 24-hour local news channels using a portion of their spectrum, and this trend may spread.¹³ Stations may customize their channels for different geographical or demographic areas of the market. For example, in the Washington, D.C., market, where stations broadcast to Maryland, Northern Virginia and the District of Columbia, a station could customize programming and news across three channels, one for each geographic area. The ABC affiliate in Washington city already has a local cable news channel, NewsChannel 8, that does zoning, or customized news and advertising for cable providers in different areas.¹⁴

According to a study done in 2002 by the General Accounting Office, an arm of Congress, 40 percent of Americans are totally unaware of the planned digital-television transition while 43 percent are only somewhat aware.¹⁵ It is unknown if there is a tipping point when consumers will realize the benefits of digital television and start purchasing new sets. Meanwhile, broadcasters are grumpy about the whole issue because they see themselves as the only party that has had to bear any financial burden.