Digital radio hailed by broadcasters but faces challenges

Sunday, October 20th 2002, 12:00 am

By: News On 6

Broadcasters were delighted by the government's decision this month to allow clear-sounding digital radio in the United States, comparing its impact to the monumental shift from black-and-white television to color.

But digital radio's path toward popularity doesn't figure to be as easy.

The technology faces heavy competition in an increasingly crowded field of digital entertainment. And new digital receivers will cost $75 or $100 more than traditional radios at first, making it uncertain whether many people beyond audiophiles and high-end car companies will be interested.

If it does catch on in a major way, the biggest financial winner will be one company _ iBiquity Digital Corp., a Maryland-based consortium of big broadcasters, media companies and researchers that spent $100 million developing the technology.

The Federal Communications Commission's Oct. 10 approval essentially gives iBiquity the exclusive right to license the technology to equipment manufacturers, application developers _ anyone that wants to sell just about anything related to digital radio.

``At the end of the day this is what puts us in business,'' said Patrick Walsh, iBiquity's chief financial officer.

Walsh reeled off the key numbers for iBiquity: There are 70 million old-style analog radios sold in the United States every year, and 800 million are sitting in homes and cars. Eventually, he said, digital radios should replace nearly all of them.

Unlike satellite radio, a subscription service, digital radio is an enhancement to regular radio. It doesn't increase a station's range or allow for more stations on the FM and AM bands. But it does eliminate static and lets broadcasters transmit textual information _ such as news updates, weather alerts, information about songs and call-in numbers for commercials _ with the audio signal.

Future versions could let listeners set their radios to record programs days and months ahead of time, or while they are listening to other stations.

Listeners will be able to continue using their current radios, while those who buy new digital-ready radios will be able to take advantage of the additional information streams.

Those new digital receivers are expected to hit the market early next year, and iBiquity is trying to persuade auto manufacturers to make digital radios standard in new cars. That step figures to be helped by the fact that Ford Motor Co. and its parts spinoff Visteon Corp. are among iBiquity's investors, along with broadcasters such as ABC, Clear Channel and Viacom. There's nothing to prevent consumer electronics companies, by the way, from integrating both digital satellite and terrestrial tuners into a single receiver.

In some ways, digital radio here won't even catch up to what listeners have been enjoying for several years in Canada, Europe and Asia.

That system, known as Eureka 147 or DAB, uses an entirely new set of frequencies rather than traditional AM and FM bands. It gives broadcasters the power to transmit more information, including pictures and video, along with news and CD-quality music.

The new frequencies also created room for a huge range of new stations and music genres, said Mandy Green, a spokeswoman for the Digital Radio Development Bureau, which promotes the technology in the United Kingdom.

Eureka 147 transmitters also use less power than analog systems.

``Our experience in the U.K. tells us that choice of stations, and expanded content within that choice, is what listeners want from new technology,'' Green said. ``They don't want more of the same.''

Not surprisingly, the National Association of Broadcasters originally supported the development of a Eureka 147 system in the United States. But the frequencies it uses are not available here because they are reserved by the military.

So iBiquity developed a hybrid approach, in which a digital stream of audio and other data is transmitted alongside traditional analog signals on the same AM and FM frequencies.

Walsh said he would love to for iBiquity to be able to offer the additional data services made possible by Eureka 147. But he believes consumers will be far better served overall by having digital radio on the FM and AM bands they're already familiar with, and said that is much less expensive to roll out.

At first, digitally enhanced broadcasts will be available mainly in six markets _ Chicago, Los Angeles, Miami, New York, San Francisco and Seattle, then gradually hit the rest of the country throughout 2003 and 2004, as more and more broadcasters upgrade to digital transmission technology.

IBiquity says upgrading will cost an average of $75,000 per station.

For consumers, digital receivers that can record programs, like their TV counterparts TiVo and ReplayTV, are expected in 2004. IBiquity also is developing text delivery software for news and has a research and development agreement with content providers including The Associated Press.

Perhaps the biggest challenge for digital radio in the United States is that it will have to compete with a dizzying number of new entertainment offerings over the Internet, cable TV, cell phones _ and satellite radio, though Walsh believes that will always remain a niche product.

Ryan Jones, a media and entertainment analyst for The Yankee Group, a Boston-based technology research firm, said recording capability will be ``one of the most critical features'' digital radio can deliver because that kind of freedom is ``increasingly appealing to today's consumers.''

But P.J. McNealy, research director with Gartner G2 in San Jose, Calif., is not convinced a recording function would be readily accepted.

``I don't think it will be wildly popular, meaning every household will be doing it,'' McNealy said. ``Keep in mind, it's going to require a hard drive. Not only are you going to have to get a tuner, but you'll have to buy one with a hard drive. How do you educate people to use that?''