U.S. Government Should Stop Delaying the Broadcast Digital Transition

by: Bruce Bahlmann

The recent Senate passage of a delay for the broadcast digital transition brought the message that the Obama administration was all about slowing things down. Never mind the fact that Feb 17, 2009 was set many moons ago. While proponents all voice the 6.5mm homes unprepared, the bill unrecognized the community effort already invested.

I spent a long weekend several months back reading all the entries around DTV converters in the AVS Forum and was astounded at the level of detail in various contributions. Problem was, it was all spread out and unless you had 20 hours to spend reading it like I did, you wouldn't likely find answers to your questions that easily. So, I wrote a review on various boxes and have seen between 80,000 and 100,000 hits per month on that review since. The last two months have been the highest. All that traffic is just consumers trying to do last minute fixes.

However, the most interesting part, is that broadcasters have long been prepared for this date. Note, most are experiencing winter right now so, their antennas and transmitters have long been in place – you won't see any broadcaster's climbing poles in February.

There are 1,613 local broadcasting stations in the US and each of them must purchase at least 1 digital transmitter (some are purchasing 2 plus a digital antenna) which happened Q3 and Q4 of last year (2008) if not much earlier like in the late 90s when the technology first rolled out. Digital transmitters (even for smaller stations) run about $1mm each and broadcast high power antennas are several thousand dollars. While many broadcasters have been broadcasting on digital equipment for years, most of these stations were doing so using only a single digital transmitter (alongside their analog broadcasts). By February 17, 2009 most broadcast stations will have installed two digital transmitters (one primary and one standby) to ensure an uninterrupted digital broadcast signal.

There are a number of companies who sell digital transmitters including: Harris Corporation (NYSE:HRS), Larcan (private), NEC (OTC:NIPNF), and Thomson/GrassValley (NYSE:TMS). HRS is in the best position to help many of the smaller television stations as its equipment is on the short list of most broadcast stations still shopping for their digital transmitter(s). System integrators like ADC Telecommunications (ADCT) also seeing an uptick in supporting larger build-outs of digital services for broadcasters as well as assisting Cable operators with building out DOCSIS 3.0.

While it is hard to observe what impact HRS buy back, tax credit, or backlog of orders reported in prior quarters will have on its 2009 results, I would expect to see significant interest in their products and integration services through the end of the year as well as an uptick in service agreements on all this new equipment.

I also believe an interesting secondary play for the digital conversation is Avid Technology (NASDAQ:AVID). A platinum sponsor at a recent DTV conference in Iowa, AVID showed off its Sundance product line of control room automation software. With broadcasters spending upwards of $3mm to go all-digital in 2008, I would expect to see this spending mutating into a cash flow problem for many smaller broadcasters in 2009. One of the best (proven) ways for these stations to get control of their outflows is to invest into control room automation which goes for around $10k per channel initially plus yearly support. Control room automation software (like that from AVID) can help small stations cut between 3-5 jobs in their control room while at the same time improve the efficiency and reliability of their broadcast. For small cash strapped stations, such automation software may well be part of (or budged into) the digital equipment transition purchases. AVID customers confirmed the benefits of using this software – some of which have been long time users of the Sundance platform. Now AVID is making post production creative works flow easily into the Sundance platform whereby streamlining the task of bringing completed stories into the system.

Hopefully this is the last we will see of efforts to further delay the broadcast digital transition for at long last Feb 17, 2009 is near, and while that day will not be without some pain (all transitions are never seemless), a monster effort (and funds) have gone into this already. Government needs to let it run its course and not try to fix it - nothing needs fixing.

Disclosure: no positions