ADS MAY SOON STALK YOU ON TV

FCC poised to pass Next Gen TV stan­dards at Thurs­day meet­ing; Lu­cra­tive abil­ity to track view­ing raises pri­vacy ques­tions

Financial Chronicle - - FRONT PAGE - TODD SHIELDS & GERRY SMITH

FCC is poised to ap­prove a new broad­cast stan­dard that will let broad­cast­ers har­vest data about what you watch so ad­ver­tis­ers can cus­tomise pitches.

TAR­GETED ads that seem to fol­low you ev­ery­where on­line may soon be do­ing the same on your TV. The Fed­eral Com­mu­ni­ca­tions Com­mis­sion is poised to ap­prove a new broad­cast stan­dard that will let broad­cast­ers do some­thing ca­ble TV com­pa­nies al­ready do: har­vest data about what you watch so ad­ver­tis­ers can cus­tomise pitches.

The prospect alarms pri­vacy ad­vo­cates, who say there are no rules set­ting bound­aries for how broad­cast­ers han­dle per­sonal in­for­ma­tion. The FCC doesn’t men­tion pri­vacy in the 109-page pro­posed rule that is sched­uled for a vote by com­mis­sion­ers on Thurs­day.

“If the new stan­dard al­lows broad­cast­ers to col­lect data in a way they haven’t be­fore, I think con­sumers should know about that,” Jonathan Sch­wantes, se­nior pol­icy coun­sel for Con­sumers Union, said in an in­ter­view. “What pri­vacy pro­tec­tions will ap­ply to that data, and what se­cu­rity pro­tec­tions?"

For broad­cast­ers, Next Gen TV rep­re­sents an ad­vance into the dig­i­tal world that for decades has been si­phon­ing view­ers away to the likes of Face­book Inc, Net­flix Inc, Google’s YouTube and Ama­zon.com Inc.’s Prime video ser­vice.

Sin­clair Broad­cast Group Inc. and other TV sta­tion own­ers say the new stan­dard, known as Next Gen TV, will pro­vide sharper pic­tures and video on de­mand. It will also al­low them to track view­ers of their pro­gram­ming on tablets and other plat­forms.

This could prove lu­cra­tive for ad sales. For decades, TV sta­tions sold com­mer­cials based on broad de­mo­graph­ics, like how many 18-to-49-yearold women watched “Law and Order.” Data col­lected via Next Gen TV can help them up their game, much as ca­ble providers use data from set-top boxes, and web­sites rely on brows­ing his­tory to tar­get ads.

Be­cause the new stan­dard is de­signed to be com­pat­i­ble with tablets and mo­bile phones, broad­cast­ers ex­pect to reach view­ers away from their home TV sets – and learn their habits.

“We’ll know where you are, who you are, and what you’re do­ing -- just like you do now, just like everybody does now, the in­ter­net does, or Google, or a Face­book,” Sin­clair Ex­ec­u­tive Chair­man David Smith told in­vestors at the Wells Fargo Tech­nol­ogy, Me­dia & Tele­com Con­fer­ence on Novem­ber 8. “We will have per­fect data all the time.”

Ca­ble com­pa­nies have le­gal obli­ga­tions to safe­guard sub­scriber in­for­ma­tion, such as names and ad­dresses, from unau­tho­rised dis­clo­sure. Next Gen TV should have the same rules, Con­sumers Union and other groups said in a fil­ing, and con­sumers also should be given a choice in how in­for­ma­tion about their view­ing is used.

FCC Chair­man Ajit Pai, who pro­posed al­low­ing the new broad­cast stan­dard a month af­ter be­ing nom­i­nated by Pres­i­dent Don­ald Trump, told law­mak­ers at a Nov. 1 hear­ing that the FCC is “look­ing just at the tech­ni­cal stan­dard” and may look at pri­vacy con­cerns later. In a speech last week, Pai likened crit­ics of Next Gen TV to op­po­nents of the au­to­mo­bile more than a cen­tury ago, say­ing they dwell on chal­lenges in­stead of em­brac­ing the ben­e­fits of in­no­va­tion.

“They want to im­pose ex­ten­sive gov­ern­ment reg­u­la­tion that could stran­gle Next Gen TV in its in­fancy,” Pai said, adding that crit­ics are rooted in “fear and op­por­tunism, not free­dom and op­por­tu­nity.”

Sin­clair will have 233 sta­tions if its merger with Tri­bune Me­dia Co is ap­proved by an­titrust reg­u­la­tors. It also has formed a part­ner­ship to share air­waves with Nexs­tar Me­dia Group Inc.’s 170 sta­tions. Pri­vate-eq­uity owned Span­ish-lan­guage broad­caster Univi­sion Hold­ings Inc also has joined the al­liance, which Sin­clair says cov­ers 92 per cent of the coun­try.

The Mary­land-based broad­caster also holds po­ten­tially lu­cra­tive patents on the tech­nol­ogy and is still as­sess­ing the rev­enue. Ca­ble providers, TV man­u­fac­tur­ers and broad­cast­ers us­ing the sys­tem may have to pay Sin­clair roy­al­ties.

Pai’s pro­posed rules for the ser­vice are likely to be ap­proved be­cause he leads the FCC’s Repub­li­can ma­jor­ity, and con­trols the agency’s agenda. The rules would al­low – and not re­quire – sta­tions to use the new stan­dard.

Ap­proval by the FCC would come as the agency also de­cides whether to loosen re­stric­tions on own­ing mul­ti­ple TV sta­tions in a lo­cal mar­ket – a long­sought goal of broad­cast­ers.

“This is a land­mark de­vel­op­ment for our in­dus­try,” Sin­clair CEO Chris Ri­p­ley told in­vestors. “Re­form­ing the own­er­ship rules and al­low­ing for tech­no­log­i­cal in­no­va­tion are both nec­es­sary for the fu­ture of over-the-air broad­cast­ing.”

Pri­vacy Ques­tions

The pri­vacy im­pli­ca­tions need more study, Rep­re­sen­ta­tive Debbie Din­gell, a Michi­gan Demo­crat, said in a Nov. 8 let­ter to the FCC’s Pai.

Din­gell ac­knowl­edged “sig­nif­i­cant ben­e­fits” of the new tech­nol­ogy. But, she added, the prospect of tar­geted ad­ver­tise­ments “raises ques­tions about how ad­ver­tis­ers and broad­cast­ers will gather the de­mo­graphic in­for­ma­tion from con­sumers” and “what pri­vacy pro­tec­tions will be in place.”

“It’s a mat­ter of giv­ing broad­cast­ers ca­pa­bil­i­ties oth­ers al­ready have,” said Dave Ar­land, a spokesman for the Ad­vanced Tele­vi­sion Sys­tems Com­mit­tee that’s de­vel­op­ing the new stan­dard. “Broad­cast­ers see the op­por­tu­nity to have new ways of mea­sur­ing who’s watch­ing what.”

Un­der the new stan­dard, TV sta­tions will be trans­mit­ting in a dif­fer­ent for­mat than they do now. Those who rely on an­ten­nas for over-the-air re­cep­tion will need to buy a new set or a gad­get to con­vert the Next Gen sig­nals. About 12 mil­lion TV house­holds re­lied ex­clu­sively on over-the-air re­cep­tion in 2015, ac­cord­ing to the most re­cent statis­tics from the FCC.

New TV Needed?

Ca­ble providers would need new equip­ment, from the head-ends where they re­ceive broad­cast sig­nals through to con­sumers’ set top boxes in order to pass Next Gen TV sig­nals through to view­ers, the NCTA-the In­ter­net and Tele­vi­sion As­so­ci­a­tion, rep­re­sent­ing the big­gest op­er­a­tors, said in a May 9 fil­ing.

It will be a “mas­sive and very ex­pen­sive” prospect that could bring higher rates for con­sumers, ac­cord­ing to the fil­ing. The trade group’s mem­bers are top ca­ble providers Com­cast Corp and Char­ter Com­mu­ni­ca­tions Inc. The as­so­ci­a­tion said en­gi­neers are still work­ing out how to con­vert the new stan­dard for cur­rent TVs and didn’t say if cus­tomers will be charged for new set-top boxes.

Un­der the FCC’s pro­posed rules broad­cast­ers us­ing Next Gen TV also need to keep send­ing today’s sig­nals, and to of­fer the same pro­gram­ming on both streams for five years. Af­ter that, TV sta­tions would be free to shift pop­u­lar shows to the Next Gen stream only – es­sen­tially strand­ing older TV sets with lesser pro­gram­ming.

“It’s a tax on ev­ery house­hold with a tele­vi­sion,” said Jes­sica Rosen­wor­cel, a Demo­cratic mem­ber of the FCC, said in a speech at the New Amer­ica pol­icy group in Wash­ing­ton. “Ev­ery one of us will need to re­place ex­ist­ing tele­vi­sion sets or buy new equip­ment.”

Con­sumer Con­se­quences

“The agency is about to rush this stan­dard to mar­ket with an ugly dis­re­gard for the con­sumer con­se­quences,” Rosen­wor­cel said.

Sin­clair holds “es­sen­tial patents” for the new sys­tem, and “we bet­ter un­der­stand how these rights hold­ers will not take ad­van­tage of the special sta­tus con­ferred upon them by the FCC,” she said.

The ca­ble group has asked the FCC to en­sure that patent hold­ers charge only rea­son­able fees for use of their Next Gen TV tech­nol­ogy, and in a Novem­ber 6 fil­ing ex­pressed ap­pre­hen­sion that Sin­clair may charge high fees.

“Broad­cast­ers are seek­ing per­mis­sion to in­vest their own cap­i­tal to of­fer a bet­ter ser­vice to view­ers,” Patrick McFad­den, as­so­ciate gen­eral coun­sel of the Na­tional As­so­ci­a­tion of Broad­cast­ers, a trade group, said. “It’s ob­vi­ous why this might con­cern Pay-TV com­peti­tors.”

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