HDTV: The Next Opportunity For Satellite Growth?

By Roger Rusch

Every economic cycle ends with the disposal of ineffective businesses. After funding ends for weak enterprises, new investment can be channeled to the development of promising new initiatives. Usually the next expansion is signaled by remarkable technologies that capture the imagination of consumers. In the early 1980s, we saw the introduction of personal computers and video tape recorders. In the last growth cycle, the key developments were personal telephones, the Internet, and direct broadcast satellite (DBS) service.

There already are clues about which grand opportunity might be next. The current media sensation is an exploding market for digital video recorders (DVDs). The digital recordings of motion pictures provide relatively high resolution images with superb sound quality. Many consumers are purchasing large screen or plasma displays to watch DVDs. In the United States, over half of the new television set purchases are big screen models that are high-definition television (HDTV) ready.

Entertainment sells!

When viewers watch standard definition television on high-definition receivers, the image quality contrasts dramatically with the clarity of DVD recordings. Sports events in HDTV provide a viewing experience that cannot be matched by any available alternative. Many viewers are eager to receive HDTV broadcasts.

Congress has dictated that all broadcasting stations convert from analog to digital television (DTV) by the end of 2006. The law does not require HDTV, but the Federal Communications Commission (FCC) expects it to be HDTV.

Steve Baruch, an attorney in the Washington office of Leventhal, Senter and Lerman, said, “In the same bandwidth in which a broadcaster provides one analog programming channel, a broadcaster may offer a super sharp ‘high definition’ program or multiple ‘standard definition’ DTV programs simultaneously. Providing several program streams on one broadcast channel is called ‘multicasting.’ The number of programs a station can send on one digital channel depends on the level of picture detail (also known as ‘resolution’) desired in each programming stream. A broadcaster also can use DTV to provide interactivity and data services that were not possible with analog technology.”

Eventually, U.S. television viewers must either buy new television receivers or purchase a relatively inexpensive digital-to-analog converter. The FCC could extend the conversion date in individual markets until most homes (85 percent) are able to watch the DTV programming.

Already, there are over 70 premium HDTV channels carried on multi-channel services in the United States. We anticipate that 90 percent of U.S. television stations will be delivering HDTV by 2014. As of Sept. 10, 550 U.S. TV stations offered digital signals. That means about 37 percent of the U.S. TV stations have begun offering digital service. Similar developments are underway in Japan, Australia, and parts of Asia.

There are reports that European media companies are moving a little more slowly. Nonetheless, these companies realize that standard definition today will be considered sub- standard in a few years, and it will be difficult to sell program material to other parts of the world.

HDTV will substantially increase the demand for satellite transmission services. Using equivalent technology, HDTV requires six times the data rate of standard television. However, several improvements will reduce the bandwidth requirements. Satellite transmission can use higher-order modulation, improved coding, and better compression to reduce bandwidth requirements. We estimate that HDTV transmission using fixed satellite service (FSS) will need three times more bandwidth than standard television initially and two times more bandwidth within 10 years. DBS systems may be able to use new technology to convert from standard to HDTV using currently available frequency allocations.

The technology for a related industry, digital cinema, is already highly developed. Cameras and projection equipment are readily available, and the prices are falling rapidly. Media material for both television and cinema will grow together. There are several companies that are advocating television broadcasting of cinema to movie theaters. This would create additional demand for satellite broadcasting services.

In the past year the mood in the satellite industry has brightened as we have begun to understand future prospects more clearly. Everyone in the satellite industry now can begin to refine the infrastructure to enhance transmission of HDTV. This is becoming an obvious opportunity. Carpe diem!

Roger Rusch is the president of TelAstra. You can contact him at 310/373-1925 or via e-mail at [email protected].