IP: Broadcasters and computer firms are fighting for dominance

[Dave Farber <farber () central cis upenn edu>]

Barron's, July 15 1990, p29-34.


Couch-Potato War


Broadcasters and computer firms are fighting for dominance of America's
family rooms. Why high-definition TV matters.


Jim McTague




Imagine a TV picture so detailed that when a quarterback passes the
football downfield, you can make out the stitching as it spirals through
the air.


Scientists at Polaroid Corp. have invented a camera just that good,
leapfrogging the Japanese manufacturers who have long dominated the
business of TV technology. Sony Corp. officials had predicted that a
breakthrough like Polaroid's wouldn't come along for at least 10 years. Yet
this past April, there it was for all to see.






What's particularly intriguing about the Polaroid camera is that its
pictures can be easily displayed on a computer screen. That, of course,
opens up the possibility that high-tech companies like Apple Computer,
Intel and Microsoft could one day become powerful players in the world of
interactive entertainment, getting a healthy slice of profits from
America's couch-potato population.


But don't count on finding Polaroid's wizardry at your favorite electronics
store anytime soon. Its use has been effectively blocked by the nation's
1,600 television broadcasters, large and small, working in league with
foreign TV manufacturers. These folks simply have tons of money invested in
traditional technologies. The last thing they want is to have a gang of new
high-tech contenders charging into the entertainment field.


Their solution? To get the Federal Communications Commission to adopt
restrictive rules. On the surface, the new rules appear flexible toward new
technologies, but in reality, they are stringent enough to forestall the
convergence of computers and boob tubes for years to come. And that's good
news for the likes of General Electric's NBC, Westinghouse Electric's CBS
and Walt Disney's ABC, not to mention television makers like Sony and
Philips Electronics.


Gripes Stuart Spitzer, Polaroid's director of image-sensor technology,
``The manufacturers have warehouses filled with goods, and they want to
sell those goods.''


``Microsoft and other firms have committed hundreds of millions of dollars
to research and develop products and services that combine computers and
TVs, but these products may never reach the stores, at least not at
affordable prices, if overly detailed and restrictive regulatory
requirements obstruct full compatibility, product development and
competition,'' Microsoft's Craig Mundie told the Senate Committee on
Commerce, Science and Transportation last month.






Polaroid's Stuart Spitzer is excited about his company's
new high-definition TV camera, middle. Will broadcasters
keep its crystal-clear pictures from the viewing public?




The broadcasters and TV manufacturers are likely to succeed in having their
standards adopted late this year or early next year despite very vocal
objections from FCC Chairman Reed Hundt, who feels the broadcasters are
trying to use the government to maintain an unfair advantage.


The FCC's other three commissioners, however, appear to be snugly in the
broadcasters' hip pocket, and they are expected to outvote Hundt on the
issue. It's almost as if Hundt is viewed as an odd duck for not caving in
to the broadcasters.


``He is not a cheerleader for this effort, and it's really a shame,''
laments Robert Graves, chairman of the Advanced Television Systems
Committee, an advisory group to the FCC that is run by broadcasting
interests. ``If we had the kind of support that we've had from other
chairmen, this would be done.''


But Hundt stands firm. ``The broadcasters want the government to dictate a
mandatory standard that is unchanging,'' he says. ``They are advocating one
of the most complex industrial policies in peacetime American history.''


The computer companies, with the exception of Apple, are partially to blame
for their current predicament. In 1987, when the call first went up for a
more advanced television system, the computer firms pretty much ignored it.
``Computer makers have just come to realize over the last two years that
they are communications companies,'' says Hundt. ``They had been loath to
come to Washington because they like the freedom of an unregulated world
and they feel they are in dangerous, unfamiliar territory here in the
District of Columbia.''


It's easy to see why the computer firms were so passive. Nine years ago,
much of the computer technology we now take for granted was still on the
drawing board. The Internet was a backwater used mainly by students and
scientists. CD-ROM drives were not yet hot products, and engineers hadn't
figured out how to digitize TV signals.


Television, for its part, remains a child of 1930s technology. To begin
with, it relies on analog transmission of pictorial information through
``channels'' that are six megahertz wide. These analog transmissions take
up a lot of bandwidth because at least six megahertz on either side of them
must be left blank to avoid interference from other stations.


Analog transmissions are also slow. This created a problem in the early
days of television because lines at the top of the picture tube would fade
before new lines at the bottom could come in, making for a distracting
flicker effect. TV pioneers got around this sluggishness by transmitting
the odd-numbered picture lines in a given frame in the first 1/30th of each
second and then transmitting the even-numbered lines in the next 1/30th of
a second. The two transmissions were then reassembled or ``interlaced''
right in the TV set, making for a clear picture. The cycle occurs 60 times
a second, far too fast for the human eye to notice.






FCC Chairman Reed Hundt is
likely to be outvoted by his fellow
commissioners. A loss for viewers?




But the process does result in a slight blurring of the picture. That's why
a live TV broadcast lacks the kind of detail you see in the movies, which
are made with a faster, cleaner technique called a progressive scan. The
new Polaroid camera, for example, uses a progressive scan.


Back in the 1970s, computer makers like Commodore International followed in
the footsteps of the TV pioneers and used the interlace technique. But the
computer industry abandoned interlace monitors in the 1980s because they
had severe shortcomings when it came to displaying text. People who were
doing word processing on interlace monitors complained of headaches and
tired eyes after a few hours in front of the flickering screens. From that
point on, computer makers and TV makers headed down different paths. When
they will converge again is what the big fight is all about.


The entire issue of high-definition TV might have remained dormant for many
more years if it weren't for a group of companies that provide wireless
telephone and beeper services. In 1987, these outfits asked the FCC to give
them more room on the airwaves for their booming businesses. What they
wanted to use were several of the low-power channels on the
ultra-high-frequency band, which since the 1960s had been allocated to the
television broadcasting industry.


The broadcasters, as you might imagine, did not relish the prospect of this
poaching. Bandwidth is a valuable, finite commodity, and the broadcasters,
who paid big bucks for their licenses, had no intention of giving anything
up, even if they weren't using the bandwidth in question. They told
Congress they needed the low-power UHF channels to usher in the greatest
improvement in television since the introduction of color, something called
high-definition television.


High-definition TV would allow broadcasters to transmit pictures with more
than 1,000 vertical lines of information, more than double the existing
standard, creating a sharper image, especially noticeable on sets with
screens that measured 37 inches or more. It would still be interlaced,
however, because even in 1987, the advent of progressive scanning of TV
signals seemed as remote as flying cars. As allies, the broadcasters signed
up TV manufacturers, who were eager to sell the American public home
theaters that would take advantage of the new technology.


CONGRESS GETS WOWED BY HIGH DEFINITION


The broadcasters successfully argued that they needed the UHF channels
because it might not be possible to squeeze high-definition TV
transmissions into the mere six megahertz of bandwidth they had on their
regular channels. And even if the broadcasters did manage to do that
squeezing, they would still need enough bandwidth to transmit shows
simultaneously in the old and new formats until all viewers replaced their
current TV sets with high-definition equipment, a changeover that could
take 15 or 20 years.






FCC Commissioner James Quello, a
former broadcasting executive, feels
Chairman Hundt is out of touch.




When the broadcasters demonstrated a high-definition TV system for Congress
in 1987, the lawmakers loved it. The broadcasters were told they could
continue to have the UHF bandwidth free as long as they used it to provide
the public with high-definition TV pictures and sound. This was clearly a
coup for the broadcasters. True, they had to commit to equipping some
studios for HDTV at a cost of $3 million or $4 million per studio. But by
so doing, the broadcasters effectively monopolized an entertainment
delivery system that was collectively worth billions of dollars.


One problem: The only high-definition TV system at the time was made in
Japan, and Congress insisted on a home-grown version. The lawmakers, it
seems, had a Sputnik mentality engendered by Japan's dominance of the
consumer-electronics business. They feared the U.S. would fall behind
technologically if government policy failed to endorse some kind of
high-definition TV system.


Subsequently, nine competing systems emerged. Distrustful that the markets
could pick a winner, the FCC appointed a 34-member committee to evaluate
the systems. The committee, dominated by broadcasters, whittled the systems
down to their favorite four, and then combined various features from each
to come up with the standard they are now proposing to the FCC.


In 1990 General Instrument, a member of the broadcasting and manufacturers'
alliance, muddied the waters by announcing a scientific breakthrough. The
company had figured out how to digitize a television signal. This innovaton
was significant because a digital signal is cleaner than its analog
counterpart, and it uses far less power. That allows engineers to compress
the signals, raising the possibility that a digital TV signal can be
transmitted using only a portion of a channel's six megahertz of bandwidth.


The implications were huge. Broadcasters suddenly had hope of competing
more effectively with cable operators by simultaneously sending different
programs over one channel. Viewers could choose from kids' programming,
sports and news, plus the usual network shows, all available at the same
time. If the new rules go through as expected, experiments with such
multiple offerings could begin within a few years.


This prospect thrills broadcasters because studies have shown that
programming is what American viewers cherish most. More is better, whether
it be from the fast-food joint or the tube. Hughes Electronics' DirecTV,
which provides digital satellite services to subscribers, found out long
ago that their improved picture quality is of secondary importance to the
fact that they deliver hundreds of channels.


To justify their continued use of the UHF channels, the broadcasters began
talking about making multiple simultaneous broadcast offerings during the
day and perhaps one spectrum-hogging HDTV broadcast every evening. That
would satisfy Congress's initial mandate to bring sharper pictures to the
American public.


Scientists saw an additional possibility. Use the extra room freed up by
digital signals to abandon the outmoded interlace system and go to a
progressive scan, bringing viewers a sharper TV picture.


The broadcasters were not interested. They argued that interlace is better
for TV viewers and remains the most efficient way to transmit picture data.
Of course, sticking with interlace effectively keeps the computer firms out
of the competition, too. Lynn Claudy, senior vice president for science and
technology at the National Association of Broadcasters, says interlace
offers viewers a better spatial rendition of life, while progressive offers
superior motion shots: ``Do you want to see the beads of sweat on the
quarterback's face or the stitches on the ball as it hurtles through the
air?'' Claudy would rather see the quarterback's perspiration.


In Washington, interlace has pretty much dominated the discussion, in part
because the computer industry, which uses the progressive-scan approach,
had not gotten actively involved until recently. What's more, TV
manufacturers, who also make the camera equipment used by broadcasters, had
a disincentive for embracing the newer technology. They hold most of the
patents on interlace technology, which gives them a competitive edge.


So, when the broadcasters and manufacturers were helping the government
craft new rules in recent years, they maintained that the industry needed
to stick with interlace as an interim step. Sure, they said, in the long
run TV would make the transition to a progressive system, but not for 20 or
30 years.


But MIT professor emeritus William F. Schreiber, among others, worries that
the broadcasters' backing of interlace will drive out progressive scan
forever. ``Once you begin selling expensive interlace receivers to the
public, it won't be possible to switch to progressive without making them
obsolete,'' he says. And make no mistake, interlace will have the upper
hand. Schreiber's colleague, Branko Gerovac, associate director of the
research project for communications at MIT, points out that if broadcasters
sent out their transmissions in interlace format, viewers would get no
benefit from watching them on a progressive display.


WE INTERRUPT THIS PROGRAM FOR A WORD FROM BOB DOLE


The broadcasters' progress was stopped for a time earlier this year when
three powerful Republicans began asking questions. Sens. Bob Dole, John
McCain and Larry Pressler wanted to know why the FCC was planning to give
the UHF bands to the broadcasters when they could be sold for perhaps $10
billion.


The FCC was flabbergasted. The broadcast TV industry, at the FCC's urging,
had spent an estimated $300 million over eight years to develop the new
high-definition TV rules, and here were three amigos from the Senate
threatening to toss it all away. FCC Commissioner James Quello, a Democrat
and former broadcaster who has served in his current capacity since the
Nixon Administration, couldn't believe the senators would cross the
broadcasters in an election year. There are 1,600 broadcasters, with
influence in every voting district in the country.


In a recent interview, Quello exclaimed: ``Dole's a presidential candidate
and a pretty decent guy. What kind of advice is he getting? He is ticking
off an industry that would have a tendency to support him. I don't get it.
If I were a political adviser to Dole, I'd try to talk him out of it.''


Well, it looks as if someone did just that. Congress last month threw up
its hands and threw in the towel. The lawmakers told the FCC to move ahead
with its rulemaking and leave them out of it. It was no coincidence that
this happened after Dole left the Senate to concentrate on his presidential
bid. His successor as majority leader, Mississippi's Trent Lott, is known
as ``Mr. Broadcast'' over at the FCC. Lott was instrumental in allowing the
FCC to move ahead, and he got House Speaker Newt Gingrich, another friend
of the broadcasters, to back him up. Recall that a publishing company owned
by Fox Network's Rupert Murdoch purchased the right to publish one of
Gingrich's books. Mr. Murdoch is also a member of the advisory group that
wrote the proposed broadcast standards.


The computer industry is now pressing the commission to scotch the proposed
standard and let the market decide which television system should succeed.
And last week, in a surprise move, the cable TV industry broke away from
the broadcasters and opposed the new standard.


But with the exception of Hundt, who sounds more like a conservative
Republican than the Clinton appointee he is, the FCC seems to have no faith
in the free market. Says Commissioner Susan Ness, a Democrat: ``There is
theory, and there is reality. In real life, investment decisions have to be
made. Investors need certainty that there will be a critical mass of
viewers before they will commit their dollars. Manufacturers need certainty
before they can begin producing advanced television receivers. Without a
mandated standard, investment and manufacturing decisions could be stalled,
thwarting the ability to convert rapidly and smoothly to digital
broadcasting. Consumers need certainty, too. They need to know that the
television set they buy in Louisville will work when they move to Lincoln
or Little Rock or Lubbock.''


A GOP appointee to the FCC, Rachelle Chong, believes it would be unfair to
abandon the standard favored by broadcasters because so much time and
effort have gone into its formulation. Though the new standards are
certainly not a triumph of pure science, they are a marvel of political
science, especially given the agreement of so many factions within the
televison industry itself. ``The broadcasters and manufacturers spent
millions of dollars and cooperated together fabulously, and altering their
proposed standard now would be like changing horses in midstream,'' Chong
says.


Hundt disagrees, saying, ``When Hughes and Hubbard launched their DirectTV
digital satellite services, they had no guarantees that anyone would
purchase the $1,000, 18-inch dish receiver. They launched anyway, and they
began selling dishes like pizzas!'' Hundt says that entrepreneurs must be
willing to take similar plunges, but that the broadcasters in this case
want the government to give them protection, protection that Hundt feels is
unwarranted.


YOU CAN BET COMPUTERS WILL GET INTO THE DEN


In Quello's opinion, Hundt doesn't know what he's talking about. ``I'm the
only one with practical experience in broadcasting. He's very bright in
technology, but in other ways I have problems with him. I was vice
president of Capital Cities for years. I ran a 50,000-watt clear-channel
station in Detroit. I also played an important part in applying for a TV
station years ago. I understand the practical impact of some of the things
we're doing. As a broadcaster, I'd see myself faced with years of
simulcasting, without any income coming in from it. The big ones can handle
it. For the small ones, HDTV will cost them $10 million to $12 million up
front, and they're not making that kind of money.''


Proponents of the new rules claim that they are still broad enough to allow
broadcasters to adopt a progressive format if, indeed, it turns out to be
the best one. The computer manufacturers claim the new standards are 200
pages of technical specifications that are stacked against them. They also
complain that any innovative changes to the rules will have to be approved
by the FCC. This ``mother, may I?'' approach would allow politically savvy
competitors to tie up the innovators for years.


Silicon Valley isn't the only place that's upset about the new rules.
Hollywood complains that it, too, will be a loser because the new rules
pretty much insure a continuation of interlace transmissions, and that
means films won't translate to the TV screen under the new system any
better than they do today. Rob Hummel, who helps run the animation
operation at Steven Spielberg's DreamWorks, complains that it's like
displaying Leonardo da Vinci's painting of The Last Supper and lopping off
two apostles at either end of the table.


``People are trying to justify interlace as being superior just because
they invested $300 million in research. It's a spurious argument,'' says
Hummel. ``Hollywood's investment in Cinemascope alone is at least $15
billion. The entertainment industry is the growing one. As for TV
manufacturers, none of them is home- grown.''


To get high-definition pictures on a TV or computer, consumers would have
to buy a new set, costing perhaps $1,500. That price point would probably
be about the same whether the broadcasters or the computer firms win the
fight over setting new standards.


Don't be surprised if the alliance between the manufacturers and the
broadcasters breaks down. Besides offering superior pictures, a progressive
system would enable broadcasters to send text and other data more easily to
a viewer's home. ABC-TV surprised the industry last month when it announced
it was leaning heavily toward a progressive system.


The die-hard interlacers aren't standing still. NBC, whose parent, General
Electric, has business ties to European TV manufacturer Thomson, is
constructing a $6 million high-definition TV station at its affiliate in
Washington, and it will use interlace technology, not progressive scan.


To fend off any incursion on the equipment front, manufacturers of
interlace cameras are slashing prices. Polaroid's new progressive-scan
camera is priced at $500,000. Japanese interlace cameras, by contrast, are
down to about $250,000 and falling.


``The Polaroid camera has them scared to death,'' says Jim Berger, Apple's
chief lobbyist in Washington. ``They're holding a fire sale. They'll be
willing to give the stuff away.''


If interlace prices keep falling, progressive scan might be limited for a
while to specialized areas, like medicine, where it's possible for a
physician in, say, Los Angeles to examine a patient in New York because of
the remarkably detailed pictures.


But scientific advances, like water, tend to find their own level. The
Vatican was unable to retain an outmoded picture of the cosmos merely by
censuring Galileo. The broadcasters are unlikely to keep Bill Gates and his
crew out of your living room for more than a few years by hiding behind the
skirts of the FCC. As the phone companies connect more and more homes with
fiber optics, Gates and his computer colleagues will have a pipeline to
provide sophisticated computer entertainment, high-definition pictures and
information services to America's computer monitors. Never against working
both sides of the street, Gates is right now readying MSNBC, a cable TV and
interactive computer network that he's cooking up in partnership with NBC.


Stuart Alsop, a high-tech venture capitalist with New Enterprise Associates
and author of a highly regarded computer column in InfoWorld magazine,
says, ``I believe the computer will end up setting the technological terms
for television.'' His reasoning: Most of the innovations for entertainment
are emanating from Silicon Valley, not from the broadcasters.


Let's face it, the denizens of Silicon Valley are likely to figure out a
way to get inside your TV, whether by nudging Congress to rethink its
position on the new rules or by going through phone or cable lines. The
convergence of TV and computers may be slowed by Washington's rule-making,
but it won't be stopped. And broadcasters, who still conceive of their
audience as passive couch potatoes, may once again pay the price for having
failed to embrace the newest technology.




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