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TV industry getting serious about "datacasting"

Today's television broadcasters are trying to turn themselves into tomorrow's Internet service providers. Why? Because they have no choice.

Today's television broadcasters are trying to turn themselves into tomorrow's Internet service providers.

Faced with declining viewers and increased operating costs, television broadcasters are thinking less about digital television (DTV) as a medium for sitcoms and game shows and more about using it for beaming Web content.

Today, for instance, 12 broadcasting heavyweights said they will line up with little-known start-up iBlast to provide fast, wireless Net services to PCs. The iBlast service--when it goes live in 2001 in select markets--will let consumers receive software, video and information services on their PCs via airwaves reserved for the transmission of DTV.

Demand for high-speed Net connections among PC users is growing faster than supply, so broadcasters see a huge opportunity in DTV by "datacasting."

"With wireless Internet service, broadcasters are talking about a whole new audience," said Sid Shumate, senior appraiser with BIA Research, a media industry consulting firm.

The service will work by sending data wirelessly at blazingly fast speeds to the PC. Users will still need a regular Net connection to send outgoing messages. Still, they will be able to download information at speeds around 200 times faster than a dial-up modem.

Already, iBlast says it has agreements with 12 broadcasters--including the Tribune Company, Gannett, Cox, Post-Newsweek Stations and the E.W. Scripps Company--which reach more than 80 percent of U.S. homes. Each of the broadcasters will contribute a portion of their DTV signal, marketing resources, and a cash investment in iBlast in exchange for equity ownership in the new venture.

But will it be too little, too late for the old guard of the TV industry?

"Broadcasters are going to die out anyway because of the popularity of cable and satellite as a means of getting a high-quality signal," said one industry insider, who asked to remain unnamed. Datacasting is the only real alternative they have to remain competitive, he said, and judging by recent activity in this market, the area is gaining significant attention.

Broadcasters will also

Web content is transmitted on the same spectrum as digital TV signals but requires an independent Web connection to upload data.
participate in an ongoing revenue sharing arrangement that splits either advertising revenues or service fees, depending on how the companies decide to offer the package.

Television broadcasters have been losing viewers to other cable and satellite video providers as well as the Net. At the same time they are having to spend millions to upgrade their stations to send out DTV signals. And they're having trouble paying for these upgrades because there are very few digital televisions in U.S. homes, thus the move toward datacasting.

Broadcasters have a variety of options with the move to DTV: They could send out one high-definition TV program over an allotted channel, multiple programs at a somewhat lower picture quality or send both programs and data in that same slice of the airwave. The notion of sending multiple programs out would help broadcasters compete with the variety of programming that cable operators offer, but Shumate thinks this isn't a particularly good option, as broadcasters are just splitting up advertising revenue into ever thinner slices instead of gaining new revenue sources.

Geocast, another company with plans to offer datacasting services through over-the-air broadcast partners, said yesterday it closed a second round of funding totaling $74 million and has secured Allbritton Communications as its newest broadcast partner. Geocast said its service will be able to reach 35 percent of all U.S. households with Allbritton now joining the ranks of A.H. Belo and Hearst-Argyle Television, among others.

In comparison to iBlast, Geocast would appear to have a slight lead in actually starting the service. Geocast has already secured two manufacturing partners, Thomson and Philips, who will make the special receivers that are attached to a PC, and is testing the service in the San Francisco Bay Area on a trial basis. Full-scale trials are expected by the end of the year.

A third company, WaveXpress, is also poised to offer datacasting services. The company, a joint venture between Wave Systems and Sarnoff, also intends to offer service in 2000, although it has not announced any distribution partnerships of yet.