Sinclair Broadcast sees opportunity in 'Next Generation' broadcast standard

Sinclair Broadcast sees opportunity in Next Generation standard that will usher in mobile TV.

Broadcast television is poised to transform the way it reaches viewers under advances in technology long backed by Hunt Valley-based Sinclair Broadcast Group.

Broadcasters see a planned shift to a new transmission standard, which would provide over-the-air, high-definition broadcasts to mobile devices, as key to their survival. Making the transition is a priority for Sinclair, one of the country's largest owners of TV stations.

The proposed standard, known as Next Generation TV, could go before federal regulators for final approval as early as this summer.

For Sinclair, which played a key role in inventing and testing the system, the shift is expected to pave the way for growth, enabling a broader and more customized reach for viewers and advertisers, said Christopher Ripley, who became Sinclair's CEO on Jan 1.

He described the 3.0 version of the industry's current 1.0 standard as mobile-first and mobile-friendly. Viewers would be able to access unlimited live local and national news, sports and entertainment shows in ultra high definition on tablets, laptops and smartphones without having to use cellular data services.

The new Internet Protocol-based system, unlike the current one, would work seamlessly with the web. It would allow for Netflix-style, subscription-based models. And it would increase broadcasters' capacity.

"We're not just here to distribute a channel to a TV on the wall," said Ripley, formerly Sinclair's chief financial officer. "There's so much more that can be done as a TV broadcaster."

Instead of a single station delivering three or four channels, the same station would be able to deliver as many as 20, meaning more program choices for consumers and advertisers, and benefiting Sinclair as it continues a strategy of creating and launching new networks and programs. The upgrade would have big implications for the delivery of video, which would be transmitted via an over-the-air spectrum instead of the internet and to mass audiences instead of single viewers.

Advocates say the system not only would improve broadcast signal reception and offer features such as ultra high-definition pictures and interactive programming, but enable an advanced emergency alert system that could wake up sleeping devices to warn users of emergencies on a block-by-block basis.

The upgrades are the most significant since the industry's transition from analog to digital and high- definition TV, said Dennis Wharton, a spokesman for the National Association of Broadcasters, and would help broadcasters compete with cable.

"The vast majority of broadcasters are on board with this and excited about its potential," including companies such as Hearst, Scripps, Media General, Raycom Media and broadcast networks, Wharton said. "It's an acknowledgment that you always have to be moving forward. You can't be static when your competitors are IP-based and moving [in that direction], and Netflix is offering ultra HD programming. Ultimately, broadcasters have to be competitive."

Broadcasters are counting on advertisers paying more for the targeted advertising the new standard would allow. Fully deployed, the standard could generate an extra $20 billion a year in revenue for the industry, according to a 2015 study by FTI Consulting on behalf of a consortium of TV station groups.

Some consumer advocates argue that any new standard should protect consumers' right to choose technology.

"It should be left in the consumers' hands as to how they want to adopt technology," said Andrew Langer, president of the Institute for Liberty. "In the past when mandates came down, it has required consumers to purchase additional technology, and when consumers aren't able to pick and choose the technologies that exist in TVs or what have you, they're forced to spend more on things they don't want or need."

The broadcasters association says the new standard will be part of viewers' cable TV delivery, but the 20 percent of people who rely on antennas would need to purchase a "gateway" tuner expected to cost about $100.

But Langer argued that the costs could be hundreds of dollars more, whatever a new TV set costs plus a digital router that would allow access to all the new features.

Earlier this month, FCC Chairman Ajit Pai, President Donald J. Trump's pick for the top FCC post and a former FCC commissioner, issued a notice of proposed rulemaking that would allow broadcasters to use the Next Gen standard on a voluntary, market-driven basis while still delivering the current standard.

The move came in response to a petition last year by the broadcasters association and other stakeholders asking for permission for stations and TV receiver makers to voluntarily adopt the new standard.

It "is being developed by broadcasters with the intent of merging the capabilities of over the air broadcasting with the broadband viewing and information delivery methods of the Internet," the FCC document says. "With today's action, we aim to facilitate private sector innovation and promote American leadership in the global broadcast industry."

Langer said his organization will be carefully watching the outcome and expects to submit comments urging the FCC to make consumers' adoption of the technology voluntary.

"The biggest thing that we get concerned about is when you have a mandate from government that benefits one or a very limited number of actors in the marketplace," or when businesses use regulatory processes to gain a competitive advantage, he said. "Mandating a standard that forces people to buy a product, we think that's troubling. The government should not be in the business of telling people to buy something."

He also has raised concerns about potential costs to taxpayers, noting that the first nationwide TV upgrade, a shift from analog to digital in 2009, cost the federal government $1.3 billion in equipment vouchers for low-income families.

In its proposed rule, the FCC said it hopes to minimize the effect on and costs to consumers by making the new transmission voluntary and requiring "local simulcasting" so broadcasters that deploy Next Gen transmission also would provide the existing standard.

Sinclair, producer of local news programs around the country and owner of the Tennis Channel, American Sports Network and Comet TV, is testing business ideas that involve transmitting data other than news or entertainment. The company ran a trial with an automaker in Michigan showing how it could send updated three-dimensional maps to self-driving cars.

Sinclair's work on a new standard stretches back about 10 years. Under the tenure of former CEO David D. Smith, whose father founded the company and who led it for more than 20 years, the company had become known for taking the industry lead in developing new sources of revenue.

Smith, who has an engineering background, stepped aside Jan. 1 to become executive chairman and focus in part on the new broadcast platform. The company spent years pushing the industry to agree on a standard and has invested of millions of dollars in creating the intellectual property behind the new system, Ripley said.

"We have always had a core belief that the standard we were using was the wrong one and not optimized for the industry," Ripley said. "Much to David's credit, we realized that we were sitting on a tremendous asset in terms of this spectrum the government gave us, but it was being underutilized. It wasn't mobile and it wasn't IP."

Appearing on a panel in New York with other broadcast executives in November, Smith said the new standard needs to reach the market as fast as possible for the broadcast industry to survive, FierceCable reported. He said 70 percent of all advertising is expected to be mobile, and TV broadcasters need that capability to compete.

Ultimately, Next Generation is expected to become a global standard. It has been adopted in South Korea, which is planing a full deployment before the 2018 Winter Olympics in Pyeongchang.

Sinclair, which will be testing the broadcast standard in some markets this summer, expects to start rolling it out market by market toward the end of 2018, Ripley said. Meanwhile, companies such as LG and Samsung already have built the necessary TV receiver chips and others are developing them. The chips are expected to then make their way to tablets and "gateway" devices.

"Eventually, we see this being in every cellphone," Ripley said. "As the environment has changed, the realization that broadcasters need to change with it has hit everyone. The heavy lifting has been done in terms of changing people's thinking, and the technical work has been done too. Now we need to execute."

lorraine.mirabella@baltsun.com

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