Richard Green

President, CableLabs

Part 3

HDTV Newsletter: Did you see the statements from Bob Wright of NBC saying broadcasters must continue to deliver the best services, inclusive of HDTV?

Dr. Green: I saw him at the NAB saying that they needed flexibility (for standard definition digital) as well. I think this is a spectrum statement. I don't think with this Congress they are going to just give away spectrum.

HDTV Newsletter: Is the cable industry ready, then to do HDTV?

Dr. Green: The cable industry has been working on HDTV longer than anyone else. Craig Tanner, here at the labs, has been working on HDTV for nearly eleven years. I was the guy who did the very first production of HDTV. We have spent over $5 million dollars supporting the FCC Advisory Committee doing those test, the modulation test, working with the Grand Alliance proponents, etc. We are not like the ATTC because we are a laboratory. We can really learn from it. We have done things like developing a circuit that will either receive VSB or QAM. Mathematically they are very similar. We can do technology transfer here which is not the advantage that the ATTC has.

The reason that the cable industry is so supportive of HDTV is because it is a new service and we need to be able to provide new services. If we had stuck with the old paradigm of delivering broadcasting we would have never grown. We have grown our own programming and we are going to grow our own services and high definition television is one of them.

HDTV Newsletter: As far as we can detect that is not the case with DBS satellite operators.

Dr. Green: Satellite is positioned about as we are. We will have to offer HDTV as a satellite service as well as a cable service. When it becomes a service our experience will permit us to advise our members on all the details of it from production to distribution. We have the guys in the cable industry who really want to lead in this.

HDTV Newsletter: The manufacturers have questioned whether cable is strong enough to introduce something as sweeping as the next generation of television. They say they need the broadcasters in play to assure the public that this is a something real. They do say that the cable and DBS people are the ones to chase the broadcasters into it.

Dr. Green: I think that the DBS service was done without any broadcaster involvement. Certainly a counter example to what you say is the introduction to a totally new standard with digital compression. This is probably the most significant advance in the last 50 years and the broadcasters had zero to do with it. If I were a betting man I would sure bet against that position.

I certainly agree that the consumer manufacturers have to be a part of this. You can't ask anyone to enter into a business where they are going to lose money. So, you have to solve their economic problem they will be there with bells on. The trick is, how do you do that? These things are always chicken and egg. In careful analysis you have to look around to see who has the best tool kit to solve the chicken and egg problem. The tool kit means technological capability, access to investment capital, business entrepreneurial drive. You have to look around to see who can break the damn and really get it started. Once you have the chicken and egg cycle started, it resolves itself. What the consumer people are saying is, well, the cable people don't have the credibility to do it. John Malone and Jerry Levin have talked about this. Maybe in answer they are going to put up competitive services. Or, they may put up one consolidated channel with each programming a part of it. Knowing them both, I believe it will be competitive services. It won't be six months before others come in as well.

Going back to who has the best tool kit. Cable can do it for many reason more easily and more competitively than anyone else. We don't have the investment of a transmitter. We can introduce this on an existing cable system. The modulation will work fine. There is some headend cost. There is some encoding cost. But the satellite distribution system we have in place now (which is) going right to the home There is no reason why we shouldn't use medium power or high powered satellite to carry the services. It is so synergistic with the other digital services that it is easy to integrate them. If you had a high definition receiver and a standard we could transmit to it. We thought about buying sets with our own standards in it and then replace (them) with a card when the FCC standard comes together. But the demodulator and the decoding is something we don't know about yet. That is obviously a barrier. But, we can introduce it incrementally at lower cost to us, so we don't have to have as strong a revenue stream back from it as other people do. We don't have to amortize the cost of putting up a transmitter, the operation of the transmitter, the sighting of a transmitter.... its all very expensive. We have it all over broadcasting.

Compared to satellite broadcasting... well, the problem with satellite transponder space is that it is quantized-it comes in clumps. So it is not a leaner renewable resource. If you want to put up high definition you really have to take off five channels that you need for revenue to amortize the cost of that satellite. The problem with the satellite business is that it is extremely expensive until you get your subscriber base up into the black. The DBS people have all kinds of numbers for that. You hear three million to eight million. They are well below that, so they are bleeding bad right now. Then you come to a board meeting and say, oh, by the way, take off five of those movies in order to do high definition. That is not a good argument when the board is asking to cut the red ink. The economics do eventually come after your break even (point).

Then you look at another tough nut decision. In order to get the capacity to carry these new services you have to buy a whole transponder. You can't go out and lease just little pieces of one. So, the economics are not as favorable in satellite. It is not that it can't be done. It is a viable competitor in HDTV. But I just think it is a harder sell with more difficult economics and makes it less likely.

Our whole positioning in cable is to be able to introduce new services at low cost capital increments. We can add high-definition at a lower cost increment than anybody else. I have not looked at wireless cable, but I think you do not have a lot of excess capacity in wireless either. You need that capacity to generate revenue. W don't have a lot of excess capacity either, but we are building on an existing business. That new service is supported and paid for by the existing service. So, it is an easier incremental increase for us compared to anyone else. The cable system can do it. What holds us back right now is the lack of a standard.

HDTV Newsletter: We have posited in these pages that interactive and other aberrations of television would pale in comparison to the huge potential of HDTV. How do you see it?

Dr. Green: My personal view is that HDTV will inevitably replace standard television. It is just a matter of time. I think that former Chairman of the FCC, Al Skies, clearly saw that. He was in a position where he needed to call it, and said, "well, 15 years." It is a tectonic plate. There is no getting off it. It is going to happen. Obviously from business and public policy points of view you need to work out a transition that leaves everyone as whole as possible. High definition television is going to make standard television a different service. High def will be used most likely to carry movies with surround sound, sporting events, performance programs, etc. Perhaps the news and talk shows may be the fare for standard television. Standard TV guys don't want to hear this, but I think that is the way things are headed.

My gut tells me that television is really in its infancy. For a long time we only had three spigots and everyone had to conform to those three spigots, both technically and programatically. We are only beginning to break out of that paradigm with multiple channels, which I think has brought to us a lot of quality of life advantages. I think this is going to grow more and more. I think education has really suffered because the three, now four, spigots and the educational mission couldn't bloom due to channel capacity. I don't doubt that there will be channels with nothing but math on them. High definition has huge advantages for performance, movies and live events. Perhaps the local news will be in standard definition. But take something like the launch of space shuttle, or even the landing on mars relayed back to earth in high-definition. That is going to be something. One of the things NBC did for color was to have a daytime program called Matinee Theater. It was an hour long and was laboratory on a sound stage and we learned how to do color. We did it with big heavy, ugly cameras and bright lights, and all the difficulties we had with color television. But someone bit the bullet and we did it. The same thing will happen with high definition. HDTV will be a slow and developing business.

HDTV Newsletter:

Thank you Dick.

Editorial Desk

Copyright 1996

The Millennium Project