PBS stations explore revenue-generating potential of DTV service

Heller Report on Educational Technology Markets, August, 2000

The Public Broadcasting Stations in 28 major markets reaching nearly 50 percent of U.S. television households have formed the CSRG Digital LLC to explore the revenue opportunities presented by the digital television spectrum they control. Convergence Services, Inc. (Alexandria, VA) has been contracted to develop business opportunities and explore potential partnerships.

John Lawson, president of Convergence Services told ETM that the firm conducted a number of in-depth discussions with organizations such as Microsoft and IBM, but they never came to closure because their business objectives were different in most cases. In spring 2000, Lawson suggested that CSRG develop their own business plan focused on the for-profit education and training sector. The solution Lawson is proposing will package a unique service to deliver rich-media content to desktops in homes, offices and schools. He believes that the combination of branding, content and bandwidth that the PBS stations control could be the basis for the first national scale e-learning company.

Lawson and the CSRG say that DTV is really a wireless "last mile" data distribution system that is completely scaleable on a metropolitan area basis. DTV is not limited by line-of-site and it delivers streaming video and other IP content at 19.4 MBPS without the congestion or latency of the Internet. With strategic partners such as ISPs and third party content providers, CSRG could deliver a PTV-branded service to fill the IT and other training and education needs of the nation.

Revenue will be generated by licensing, subscriptions, pay-per-view and e-commerce as well as carriage fees from third party content providers.

Strategic Partnerships

In terms of moving forward, Lawson notes that venture funding would be an option, but the more he looks at it the more he believes the real opportunity lies with strategic partnerships. Lawson believes that one of the major incumbent school publishers looking for a new media platform would be an ideal partner -- not just financially but also in terms of providing sales channels into K-12 and higher ed which would be very difficult for CSRG to establish on their own.

Content partners beyond the textbook industry are also a possibility. While some content can be found in existing PTV archives, everyone realizes that at the K-12 level it will be necessary to reversion that content to reference state education standards. Lawson anticipates that there would be a large reversioning effort as well as a big production effort to develop new content.

There might also be a technology partner, possibly someone in the PC industry who realizes that DTV, either through the PC or the set-top box, would really drive the penetration of the technology in the school home markets. This partner could offer a subscription that would bundle content with the reception equipment.

Another major partnership area not yet explored is the universe of ISPs who would like to offer some value-added services to differentiate themselves from the competition. An ISP could bundle dial up Internet access with this rich-media, fast data service coming in over the antenna. The customer's existing phone line becomes the back channel for traditional interactions, such as e-commerce.

The Market

Lawson's premise is that the bandwidth made available by the e-rate will create the demand for more bandwidth in the schools. As kids are exposed to rich-media learning experiences at school, 56K at home isn't going to be very interesting. So DTV and enhanced television programming become a way to foster the parent to school interaction that everyone believes is central to improving education. Parents can have access to the same rich-media content that was part of their child's curriculum during the day. And since PBS and PTV have one of the best-regarded brands in the country in terms of family-safe content, a public television service has a unique advantage.

A public-television branded DTV solution also helps overcome the digital divide by providing rich-media content on an appliance that is widely available and familiar to everyone -- the TV set. Lawson believes that the PC industry, which has always embraced education, has a lot to teach the broadcast industry and vice versa. PTV understands story and the concept of "always available" and knows how to reach people through simple-to-use appliances.

Lawson emphasizes that he is bullish about the potential. Broadcasters are sitting on a lot of spectrum and someone is going to figure out some business models that make sense here. For the commercial sector it may be ecommerce. For PTV, it makes sense to look at a further iteration of their core mission and how to support it financially. It's a concept now but it's a powerful one that resonates with a lot of people.

The Broadcast Spectrum

In 1997, the Federal Communications Commission granted both public and commercial broadcasters major blocks of the UHF spectrum for the transition to DTV. All commercial stations must be digital-ready by May 2002; all PBS member stations must be digital-ready by May 2003. The complete industry switch-over to digital-only programming is scheduled to occur in 2006, unless DTV consumer penetration does not reach 85% in a given market. The portion of the broadcast spectrum now used for analog will be returned to the FCC for auction.