Monday, September 1, 2014

Canada's "OTA Day" Is Now More Important Than Ever

An Editorial from Your Average Joe

As today is Canada’s “OTA Day” (the anniversary of the Canadian TV broadcast industry’s conversion from analog to digital), I decided to break from my traditional reviews and chime on the “state of the union” for Over-The-Air (i.e. antenna) television in Canada.

I’ve always liked OTA TV. It's always seemed so natural to me, just like the radio stations I listen to for free in the car when dropping the kids off at school. I love it for the most basic of all opportunities it offers consumers without prejudice: buy a TV, buy an antenna and voila, you have TV. I find it is an important part of the TV industry. But lately it seems to be the most misinterpreted part of the TV industry.
When we hear “experts” talk about OTA TV, they always seem to refer to it as a product for Canadians who cannot afford “real TV”. It seems outdated, expensive to broadcast and no one is watching anyways. But is this really the case?  

The CRTC is now well progressed in its crusade to reinvent Canadian TV through its TalkTV initiative. The outcome of TalkTV will be used to reshape the television landscape in Canada forever. Well, guess what popped back up on the CRTC’s radar:
Should local stations be permitted to shut down over-the-air (OTA) transmitters? Local stations would continue to be available on cable or satellite; just not OTA. Cost savings could be redirected to local content production. Do you agree? Why? How would this affect your TV viewing habits?

This is an interesting question to be posed by the CRTC, which is supposed to be acting in the interest of all Canadians. Apparently Canada wants to be the first industrialized country with a completely optional and potentially non-existent TV broadcast system. This, no less, while broadcast TV powerhouses like Afghanistan have successfully launched and operate digital over-the-air broadcasting systems in their countries.
The key phrase that caught my attention with the CRTC’s question is “cost savings could be redirected”. Exactly what cost savings? Thousands? Billions? How badly is OTA TV losing money? What are our other options to render it profitable again? Also what is meant by “could”? I "could" win the lottery tomorrow. My guess is the undisclosed amount of cost-savings money would most likely be directed to some wealthy company’s bottom line, not to foster local programming or to lower overall TV costs.

To answer this question, we need to get our facts straight. So what exactly is the current state of Canadian OTA? Let’s take a look at some of the statements I’ve heard being kicked around these days:

“OTA TV is dying out. Viewership is in decline and it will be gone in a few years”

First I’d like to address the technological aspect of this statement. The truth? OTA DTV as a product is only getting better. ATSC standard 3.0 is currently in the works and will bring several upgrades on compression and image quality. The first 4K OTA broadcast in North America took place at CES in Las Vegas earlier this year. Can someone please explain to me why “experts” think this is a dying medium?
The ATSC standard that drives DTV in North America is constantly improving and evolving.

As for viewership, a report submitted to the CRTC in 2006 showed a steep decline in Canadian OTA viewers. The report ended with the last data point in early 2006 showing that a severe decrease in OTA viewership was evident over the last 10 years. In reading the report, it was interesting to note the absence of one major item: technological context. Perhaps it was not the mandate, but it has to be considered.
This report complied by CMRI in 2006 shows a grim picture for OTA TV. But does it capture all the necessary data?

At the time, there was a revolution in TV watching. In the very late 1990's and early 2000's affordable flatscreen TVs hit the market and were all the rage. A new “High Definition” programming option gained momentum, and a strange new box called the “DVR” sent the VHS recorder packing. But here’s the catch: yes, the report correctly shows a decline - however the decline is the consumer demand for analog TV programming.

There were no HD OTA signals in Canada until 2011 (I mean official programming - I’m not counting the various test signals before that). At the time the data was collected, HD programming came from one place only: your digital pay TV provider.  So as Canadians bought new TVs over that time period, how many do you think would stick around waiting an unknown number of years watching a snowy mess of an OTA signal? (I remember those years well - having even a crisp analog signal was painful to watch on a flat panel TV)

On top of that, DVR boxes for OTA TV simply did not exist in Canada at that time. It was the time of TiVo, and then proprietary boxes from cable providers shortly followed. Canada was not turning off from OTA TV, it was simply moving to the digital TV age and OTA unfortunately had nothing to offer.

That is what is missing in the CRMI's report; this is the main blindspot in the data the BDUs are hoping nobody notices. There is not one question about technology in the entire survey: no questions about picture quality, HD service or the ability to use on-screen guides and PVR functionalities. Are we expected to believe Canadians suddenly flocked to pay TV in droves because they liked long term contracts, arbitrary fees, diluted programming choices and incredible customer service?

The CRMI report that fed the CRTC asked Canadians about their gambling and drinking habits, not about differences in picture quality and TV viewing experience that may have led people in the early 2000's from analog broadcast to a digital TV provider. How can we conclude the pendulum won’t swing back now that the playing field is level?

But maybe the CRMI data is right. Maybe OTA will decline. But the fact is we don’t have enough data points to make that call now, today. Canada’s broadcast system is still in its DTV infancy. The CRTC never promoted the digital transition as an upgrade. It simply confused Canadians with talk of an “analog shutdown” and presented applying for pay TV as one option to mitigate this transition. In that aspect, almost 10% market penetration for a medium that is essentially promoted by basic word-of-mouth is impressive. The main question we need to ask is: what do Canadians know about OTA TV – today?
In 2011 the first suggestion made to the Canadian public to deal with the digital transition was to subscribe to a pay service. This contributed to the general lack of understanding that we see today of what OTA TV can provide. Maybe the CRTC should start promoting the benefits of OTA DTV to help our beleaguered broadcasters restore their audience? (Bell Media advertisement from 2011)

Do Canadians today really know that a simple antenna setup in major urban markets can bring in 20+ digital channels, most in HD, which is equivalent to a basic cable programming package? Do they know images are now crystal clear? That OTA antenna PVRs exist that can rival most providers’ units? That an antenna can hook into a home WiFi system for OTA viewing on a tablet, PC or mobile device? Why is the North American market being flooded with new TV antenna models every 3 months? Why are Canadians buying these items and how many more will buy them in the years to come? Where is this study? Where are the data points?
How many Canadians know they can stream from their OTA antenna to their tablet via WiFi?

To make a rash decision on the future of OTA TV at this moment would be irrational. We need to stay the course, collect data and ensure that Canadians are aware of what the current broadcast system has to offer. If not, we may tragically end a viable Canadian consumer option just when a whole new generation is on the verge of breathing new life into it. 

“No one is watching so the business case to sell advertising on OTA is falling apart”

The latest statistics of advertising market penetration do in fact show that OTA TV is firmly last in the TV market. But the important thing to notice is that the market is definitely not zero and is still ahead of other mediums of advertising in terms of its penetration. In fact, almost 1 in 10 TV viewers still watch OTA, and this is not counting OTA TVs set up in commercial or industrial buildings (i.e. breakrooms, lobbies) nor does it count people who subscribe to pay TV but use an antenna on secondary TVs (kitchen, bedroom).  So the argument is not that OTA brings in zero revenue, but just that it is currently bringing in less.
Advertising penetration rates. Data courtesy of the Television Bureau of Canada, August 2014

On top of that, when analyzing OTA viewership information from 2006, OTA viewers in certain provinces topped 14% of the TV market. Over 12% of Canadians had antennas connected to at least one TV in their house. How can claims be made then that no one is watching? It’s easy to say current viewership is not enough, but what then is the critical mass of viewers needed?

Antenna use varies by province. Data courtesy of the CMRI (BBM), 2006

The argument to close transmitters because they aren’t profitable essentially does not hold water. It’s like saying all local diners should close because they will never be as profitable as McDonald’s. Well the fact is there are still loyal customers in these diners. Over 1 million of them. And guess what? Not everyone likes McDonalds. Perhaps the focus should stop being on trying to convert those diner customers over to McDonald’s and should instead focus on putting the effort into rendering the diner more profitable.
What I do agree with is that the business case for OTA TV is completely dependent on the audience. If the audience were to increase the clamor for shutting down transmitters would dissipate. Imagine if 25% of Canadians used some form of OTA TV either as primary or secondary TV? So while OTA enthusiasts can blame the CRTC for many things, this is one area where the people have the power to make a difference. Cancel your pay TV when you feel you are being extorted or receive bad service. Increase OTA viewership, spread the word and get antennas back on the roofs in your neighbourhood.

 “Canada cannot follow the US DTV model because our population is a fraction of theirs”

For this statement I can agree to a certain extent. I’m not saying that we should fire up the old rural transmitters to only broadcast one channel to a sparsely populated countryside. There are more efficient ways to deliver TV programming in those areas (for example free-to-air satellite and such).
But the fact of the matter is that out of Canada’s 42 TV markets, the top 10 markets represent 74% of the country’s total population.  How can the case be made that it is not cost effective to operate an OTA transmitter when a dozen strategically placed transmitters can serve over three-quarters of the entire population of Canada?

The top TV markets in North America. There should absolutely be no question that OTA coverage is viable in a market like Toronto. Data courtesy of the Television Bureau of Canada, August 2014

What the CRTC won’t advertise is that Toronto is North America’s 5th largest TV market (with Montreal and Vancouver not far behind) and is ahead of US cities such as Boston and Atlanta. When compared to a US TV market of roughly the same size, a city like Philadelphia is able to support 20 independent OTA stations; even more when counting their subchannels. So the question we really should be asking ourselves in TalkTV is what are Canadian broadcasters doing wrong? Are they merely incompetent and cannot ensure the business viability of the OTA presence in these large lucrative markets; basically unable to shoot the fish crammed into the barrel? Or are they pulling the wool over our eyes and crying wolf to the CRTC to help shoehorn Canadians into paying for channels that normally would be viably broadcast free-of-charge in an urban area of appropriate population density?

“It is too expensive to operate OTA transmitters”

To my knowledge, there has not been a detailed report that clearly separates revenue and expenses linked to OTA broadcasting on a nationwide scale. As a result, there has been even less study done in what can be done to reduce costs rather than simply shutting down transmitters.
For example, DTV technology enables multi-casting (the ability to split an OTA’s bandwidth between multiple channels of programming) which would effectively allow two or more channels to transmit from the same antenna. This is common practice in the US and helps conventional network broadcasters (a) reduce operating expenses by teaming up on one transmitter and (b) provides more revenue streams by adding syndicated sub-channels to complement the prime feed (ad revenue from multiple channels rather than only one). It can even be done with two HD feeds.

Multicasting uses digital technology to split and share bandwidth in a DTV signal, making OTA broadcasting more efficient and profitable. Courtesy of HowStuffWorks

What’s odd is the timing of this “cost-cutting” discovery. Networks in Canada recently spent millions to upgrade their transmitters to the latest technology in 2011. These transmitters and their accompanying infrastructure consume less power and certain stations also took the opportunity of the transition to move their channel allocation to frequencies where they could optimize emitted power and coverage.

GatesAir, an expert in US TV transmitter technology estimates the operational cost savings of a digital transmitter compared to an equivalent analog transmitter is almost 38%, mostly due to technological improvements such as efficient digital circuitry and new liquid-cooling techniques. (More about GatesAir)
At the time of the DTV transition, nobody really complained that it was too expensive. The CBC and SRC could have easily shared one transmitter and broadcast both feeds in 720p if they felt the costs were prohibitive. Others could have used another advantage of DTV technology: broadcasting using clusters of smaller, low power transmitters rather than one main flamethrower of a tower.

So what changed over these past 3 years? OTA viewership didn’t fall off a cliff. What would be the reason to shut-down and scrap millions of dollars of hardware after such an investment in state-of-the art technology? Also, what other options are or were being explored to reduce cost before concluding pulling the plug is the only option to reduce cost?
Without this information, I cannot see how the CRTC could in all honesty allow the shutdown of transmitters and say that has acted in the best interests of Canadians.

 “We need to protect our broadcasters from Aereo-like services”
Insiders I talked to brought another point up about the reasoning behind the CRTC’s look at OTA transmitters. Sure there is the opportunity of spectrum auctions, and yes OTA TV is standing on prime real estate in that aspect; but at the time as the CRTC was planning its next phase of TalkTV, a storm by the name of Aereo was raging in the US broadcast industry.

Broadcasters in Canada were nervous. What would happen if Aereo or a similar service came to Canada? What if Aereo won their court case in the US Federal court? As a result a clause allowing networks to pull their OTA signals off the air didn’t seem like a bad idea. They would only use it just-in-case, right?
Well, the fact is now that Aereo and its business model are on life support and on the verge of being pronounced dead. The jurisprudence has been set in the US and the laws can be easily applied in Canada if need be. Canadian courts can easily strike down any such service without the need for broadcasters to go to war. Therefore, there is absolutely no need for this type of "broadcasting escape clause" that can be misused so freely and to the detriment of regular Canadians.

 “An OTA shutdown would have almost no impact on the majority of Canadians”

Most people may think that if broadcasters shut off their transmitters, the effect would be minimal. Sure, a few (call it over a million in fact) people would have to sign up for cable… big deal, right? Wrong.
Broadcast TV keeps the pay TV operators honest. Think of conventional broadcast TV as essentially an “open-source” service. It belongs to everyone. It allows people to pick and choose how they want to want to watch TV, as you have a default option (OTA) coupled with the ability to pay a provider for access to greater content if you so desire (cable, satellite, streaming). Changing this model to force pay TV as the only option plainly stinks for all Canadians.

Bell subscribers can only use Bell hardware and Bell apps to watch their TV.  It's a big investment in hardware and a monthly programming bill to boot. What happens if a competitor decides to pull their programming from Bell? What if there are disputes with the source providers? Looking at the US, this past year it has happened before and again and is even happening up here in Canada now. And guess what? It’s only going to get worse. Unfortunately, the only loser as pay TV / content owners gouge each other is the person who is blacked out from their favorite shows and has to foot the bill in the end – and that's the poor sucker paying for the so-called service. As some people now say, "buy an antenna, avoid the drama".
Streaming was popular a few years ago but just like the bubble, it seems poised to burst as well. As a minimum, it is no longer the safehaven it once was. Pay TV providers have entered the market, the CRTC is mulling over increased regulation of this industry as well, Netflix has raised it prices and more services are starting to lock up exclusive content. Want to watch House of Cards, Sleepy Hollow and WWE wresting? Oops you’ll have to sign up for three streaming services to do that. As multiple services will be required, pretty soon the cost of streaming will be more than the current cost of cable. Oh yeah and you have to pay an internet provider on top of that too.

So in the end, OTA TV gives you that leverage to fall back on something. It's your home, always there to take you back. Bad service from your provider?  Cancel and watch OTA while you shop around for a better deal. Don’t watch enough TV to justify the cost? Grab an antenna and watch what is essentially a “basic TV package” in most markets.  Don’t feel like you need to buy another receiver for that bedroom or kitchen TV? Keep your cable in the living room and add an antenna instead to watch the news in the morning or Fallon at night. Want to choose your own apps and programs to be able to watch and record on your tablet or PC? Buy an antenna and shop around; there are plenty of ATSC tuner cards, apps and Ethernet boxes that won’t shoehorn you in like the proprietary stuff being sold by the pay TV giants.

So what can we do now?

In the end, that’s what I think. But it doesn’t matter what I think. I’m just some average Joe, typing away and ranting on the internet. What matters is what you think. If you love OTA TV, are simply beginning to (re)discover it, or just like having it around as an option then please get involved. Now is the time, before it's too late.

Here’s how:

Post your comments on the CRTC’s website while you still can. Public hearings start September 8th 2014:

Contact your local stations and voice your concern. You can usually contact them by phone, email, Facebook and other social media.

You can contact your local federal member of parliament to voice your concerns. This may not go far but hey, at least you tried.

Spread the word. Encourage your friends to try OTA TV and let people know that it’s still around. If you can get them to chime in to the CRTC as well, even better.

Support OTA Day. The anniversary of Canada's digital transition on Sept 1st is a great chance to put OTA TV in the spotlight at least once a year. There is some great buzz happening today on social media to promote OTA Day in Canada. Want to help OTA? Then spread the word and join the fun. Contact your local OTA stations to thank them for the job they do, their picture quality, their on-screen guide info. Check out the latest new OTA products coming out and take advantage of special promotions on OTA gear. My top three picks to participate in this year are contests from two US antenna manufacturers Antennas Direct (edit: updated link) and HD Frequency , as well Canada's very own OTA+streaming DVR box TabloTV. There are also sales at various other local and online retailers. Shop around and do your research on these other products, and always buy safely!
Hopefully a year from today we’ll be once again talking about OTA Day with pride … rather than planning its wake.  

Happy OTA Day, Canada.