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Building a Better Model for Ibiquity

It's like we're all watching a troubled sci-fi movie: "The Day the IBOC World Stood Still." Digital audio broadcasting for radio is being counted on heavily for the industry's survival in this all-digital electronic era. But the only developments I hear regarding Ibiquity's proposed rollout of IBOC nowadays are from broadcasters, and they are not too positive.

It’s like we’re all watching a troubled sci-fi movie: “The Day the IBOC World Stood Still.” Digital audio broadcasting for radio is being counted on heavily for the industry’s survival in this all-digital electronic era. But the only developments I hear regarding Ibiquity’s proposed rollout of IBOC nowadays are from broadcasters, and they are not too positive.

Double-whammy wake-up

The double whammy I alluded to in my previous column on this subject seems to have put IBOC deployment into pause mode: first, the hard wake-up reminder that broadcasters will pay big bucks to implement it; second, the prospect that AM IBOC may not work very well at night during the hybrid transition and will not be endorsed by the NRSC until more testing and data are evaluated.

Ibiquity is now arranging for nighttime testing of AM IBOC to assess the real-world behavior of digital noise and interference on existing AM stations. That could take another six months or longer.

FM IBOC is ready to launch, as soon as the FCC decides to decide how that will best be done. But the commission is likely to wait until the AM nighttime issue is resolved and the NRSC makes one final recommendation for fulltime digital AM service. New rules will be needed to define the parameters and limits for the new digital modulation schemes. How will they be controlled and monitored for compliance to prevent interference? Will all AM stations be required to limit frequency response to 5 kHz?

Taking risks, charging others

I am still very much an IBOC proponent, in favor of using Ibiquity’s technology to get digital radio off the ground. The company has accomplished what many thought was impossible, given the restricted bandwidth allocated to broadcasters in this country. This technology is still the only card we have to play. It’s not perfect but it will get us out of the gate and improve as time goes on. Digital radio’s time is now.

But here we are, facing the challenge of implementing and paying for this introductory technology with a controversial licensing model. It’s a scheme that takes most of the financial risk off the table for its developers and places it squarely on the backs of broadcasters and equipment manufacturers. And it keeps all future development and improvements within its own exclusive domain.

Talk to any broadcaster and you’ll quickly learn he or she is not happy with the proposed Ibiquity licensing fees. Talk to any equipment manufacturer involved with IBOC hardware, and they’ll tell you nobody has placed any contingent orders for anything. It’s all about “wait and see what happens.” You’ve got to figure the Ibiquity management team is getting a little worried.

Will the Ibiquity partners that own radio stations pony up the bucks for converting their stations to IBOC quickly, or will they wait?

Less than 25 percent of U.S. radio stations are owned by Ibiquity investors. Certainly owners who are not invested are unlikely to jump in early and spend the money for conversion.

Many stations see this as déjà vu all over again. They fear it could be another experience like the AM stereo fiasco of the 1980s.

Not worth the price just yet

With most markets still struggling with the effects of the recession and a soft economy, budget allocations that may have been earmarked for IBOC deployment may have been put on hold or decreased. Most stations have no IBOC equipment budgets at all for 2002.

With tighter capital, even larger groups that are Ibiquity partners are still trying to decide which stations are worthy of early IBOC conversion and which are not.

Owners and managers in all markets want to be more certain who will be the early IBOC adopters, how soon receivers will be available on a widespread basis, and what effect the satellite carriers are having on the business of radio before they pay for converting. Most figure that because the vast majority of the listening audience will continue to use existing analog radios for at least the next five years, there is little to be gained from early conversion to IBOC.

It’s probable that many stations will bypass the hybrid analog/digital mode altogether and switch to all-digital if and when the technology becomes accepted and established.

Doing the math, again

Let’s consider the larger problem of Ibiquity’s proposal for licensing fees and why broadcasters don’t like it.

The costs of adding the hardware alone are significant for stations of all sizes. Ask any general manager and chief engineer how hard it is to get capital funds allocated for anything big nowadays. It’s like pulling teeth.

Hidden in the cost of the IBOC exciter will be the license fee paid by its manufacturer to Ibiquity. Add to that the station’s licensing fee, based on the FCC license renewal fee.

After adding up all those figures, you recall that receiver manufacturers also will get charged an Ibiquity royalty with every IBOC receiver sold. That cost is, of course, passed on to the consumer – eventually many millions of consumers.

You begin to sense that Ibiquity is in this game strictly for the money and that its management has left no stone unturned to get a rapid return on its investment. Even subcarrier use will get surcharged.

Protecting the franchise

When digital radio transmission was being investigated and developed by USA Digital Radio throughout the1990s, the driving force behind it was composed of broadcasters. Gannett, CBS and Westinghouse formed USADR using some of the best of their own engineers to develop a successful digital transmission solution that would replace analog and assure a digital future for radio.

Protecting and preserving the industry in the face of other competing digital media was a much larger and more important priority than making a profit on the venture.

USADR’s attempts with digital radio in the mid-1990s with FM1 and FM2 did not succeed well enough to replace analog. More brainpower was needed from companies doing digital communications research for the military and the telecom industry to push the development of digital radio for broadcasting to the next level.

The formation of Ibiquity did that, but also brought along other business influences that were not native to broadcasting.

Only a software company

Soon after USADR and Lucent merged, a new tone seemed to emerge from the management of the new corporation called Ibiquity. They began telling us that it is basically a software company that has developed the IBOC digital radio solution on a computer-based platform. They will continue to develop and improve the software that runs the hardware that transmits and receives digital radio.

And like any other large software company, they will levy charges and fees for all that use the software. IBM and Microsoft established and perfected the paradigm and many have followed it with considerable success.

We now appear to have a privately held corporation that has converted itself from an R&D technology company to a software company. It proposes to control and profit from every aspect of the OS it has invented for an entire industry that is charged by Congress to serve the public welfare and necessity.

That is a bit of a departure from the model that compels even Microsoft to compete against many other software companies that use computers for all kinds of commercial and industrial applications.

Inventions that have improved radio technology over the years have been patented. Some of the inventors were rewarded, others were not. But never has one new invention attempted to become the exclusive and controlling basis for how all future transmission and reception over the public airwaves will be carried out.

Broadcasters are understandably unnerved and suspicious.

Forging a better model

My IBOC sparring partner Skip Pizzi has been critical of Ibiquity’s proposed fees and licensing model. He says the comparison to that of software companies like Microsoft, his full-time employer, doesn’t apply.

In his last return salvo regarding IBOC, Skip suggests that a more appropriate model for Ibiquity might be the one followed by digital audio processing companies and other firms that invent and sell computer-based hardware to the industry. They build the cost of the software and future improvements into the initial price of the hardware or charge a nominal fee for software upgrades. All stations pay the same prices no matter the market size.

It’s not quite that simple, nor is that model appropriate for Ibiquity. It is not a hardware manufacturer and never will be, any more than Microsoft would ever build or sell computer hardware beyond incidental devices. It has developed a platform that, by all indications, has proven worthy of launching the radio broadcasting industry into the digital age. By the time it deploys, perhaps $150 million will have been spent on that effort.

Even though the hardware engine and associated software that runs the IBOC exciters and receivers are now proprietary, it doesn’t have to stay that way. IBiquity has partnered with Impulse Radio, developing a universal open standard for IBOC data. Why not extend that concept for the entire bit stream, to all interested parties?

Inviting other players

The management of Ibiquity needs to consider that their invention would stand a much better chance of succeeding long-term if it were “opened up” for others to be able to add features and perfect system performance in the future.

Broadcasters are uncomfortable with the idea that one company, whether private or public, completely controls the technology that transmits and receives their product.

Certainly Ibiquity deserves to be rewarded with some form of royalty structure for what it has developed thus far. But it must also realize that most commercial systems that are developed as proprietary and stay that way have a much steeper hill to climb before the mass market accepts them, if they’re accepted at all.

I have allowed my supportive position on IBOC to remain flexible. I have always felt that stations will pay enough of the IBOC price tag with the purchase and installation of the required hardware. While a modest one-time or ongoing licensing fee for transmitting IBOC is justified, it needs to be deferred for at least a year after installation. The big long-term payoff for Ibiquity will come from the receiver royalties.

I am now thinking that a much better model for assuring the success of Ibiquity’s invention would be an open standard. OK, Skip, I’ll give you that one: a standard established and maintained by the IEEE, so that any software company involved with digital audio and RF development could participate and be rewarded for any future improvements they would bring to the technology.

Counting on Bob

That kind of structure would go a long way to placate the apprehensions of broadcasters as well as all hardware and receiver manufacturers who are not happy with the current state of affairs – especially those who have no vested interest in this venture.

Maybe it’s the proper role of the FCC or the Congress to step in and protect the interests of the public and the industry before the Justice Department creates another Microsoft-like antitrust boondoggle.

It’s up to Ibiquity CEO Bob Struble and his brain trust to reconsider their proposal seriously. Don’t be so greedy out of the box, Bob. We don’t need your new digital radio engine going into a stall and spinning out of control into oblivion.

The entire radio industry is counting on your best judgment to make appropriate revisions to your proposal so that digital radio has a better chance to evolve and prosper for many years to come.