Switching to over-the-air digital will cost broadcasters $424 million: CRTC report

An independent consultant’s report commissioned by the CRTC puts the cost of converting over-the-air (OTA) transmitters to digital at more than $424 million, a figure likely to raise the ire of broadcasters who have long argued that OTA conversion is too expensive and not justified since most Canadians receive their TV via cable and satellite. The report, titled Cost Estimate for Digital Television Conversion for Canada, was completed at the end of March, and released this month by the CRTC. It was prepared by Spectrum Expert Inc., a Montreal-based engineering consulting firm specializing in broadcast and telecommunications. It summarizes three studies on the implementation of analog to digital conversion and offers cost estimates. The three implementation scenarios are: complete service replication, limited service replication, and practical service replication. According to the report, complete service replication is the most realistic possibility for digital conversion because it addresses the digital cliff effect and the existing state of reception equipment for digital. Digital cliff effect occurs when the digital transmission of video or audio cuts off suddenly, a phenomenon not found in analog, where the deterioration of a transmission signal occurs gradually. The other possibility for analog to digital conversion is limited service replication, which the report says is favoured by Industry Canada and the U.S. Federal Communications Commission for populations of less than 300,000. However, it has shortcomings in the form of signal loss for communities in remote areas. Practical service replication is similar to limited service replication, in that it reproduces analog service but mainly applies to VHF stations—TV channels 2-23. Broadcasters, who have for long argued that costs of converting OTA to digital are prohibitive and not justified—only one in 10 Canadians receive TV services via OTA—are likely to find relief in some of the report’s findings. For instance the report says converting analog stations in areas with small populations—those with less than 300,000—is likely to be the most expensive, with estimates ranging from $73 million to $208 million. However, the high cost is closely tied to the number of stations serving populations with less than 300,000, of which there are 386 compared to 95 for populations larger than 300,000. The report also provides variances in costs for digital conversion per station. Costs for stations in areas with a population of less than 300,000—like Oshawa—are slightly above $200,000. But digital conversion of stations in large population areas could cost up to $4 million. Some of the expensive stations to convert are CBHT, Winnipeg, CBHT, Halifax, CFRN, Edmonton, and CFCN in Calgary, according to the report. There are currently 738 analog stations in Canada and about 1291 analog transmitters. The report says by July 2008, only 28 digital transmitters had been registered with the CRTC. Last July, CRTC chair Konrad von Finckenstein sharply criticized broadcasters for dragging their feet on digital transition. The deadline set by the CRTC is Aug. 31, 2011. In statements made before the House of Commons Heritage Committee this week, where MPs are examining the financial woes of the broadcast industry, broadcasters reiterated their reservations on digital conversion. Ivan Fecan, president and CEO of CTVglobemedia, said the mandated transition is not driven by consumer demand but by bilateral ties between the U.S. and Canada. “We cannot justify an investment of several hundred million dollars to reach 9% of the marketplace, particularly when this investment produces no additional revenue in a business that is already teetering on the edge,” he said, adding that CTVglobemedia will soon be proposing a hybrid solution to the CRTC, which will see OTA existing in large markets and a cable or satellite solution in smaller markets. Yves Mayrand, VP, corporate affairs, Cogeco Cable Inc. told the committee that the transition to digital is “based on thin air,” stressing that the industry lacks the capital and technology to implement it wholly. In response to a question from Bloc Heritage critic Carole Lavalée, Mayrand said the switch to digital is not “realistic” given that only a small section of the population receives services on OTA.

Switching to over-the-air digital will cost broadcasters $424 million: CRTC report

News | 04/24/2009 6:04 pm EDT

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