As IBOC gets closer to being a reality, radio stations are starting
to see the light ahead. This light is not just the promise of an
improved service, but also the realization that nothing in life is
Ibiquity, from the start, has been a technology developer with a
goal of licensing its technology when it is used. Developing the
technology to transmit digital radio is no small feat, and it has
already taken 10 years to get us to where we are now. During this time,
Ibiquity and it predecessors, USA Digital Radio and Lucent Digital
Radio, were working on the entire system. It was not simply writing
some code and passing it on for others to figure out the implementation
and use. Ibiquity has been acting as a research and development arm for
transmitter manufacturers and receiver manufacturers. In this capacity,
there are costs to be covered. Ibiquity has decided that everyone
involved will share these costs.
This is not appealing to any one segment. Broadcasters would rather
have the transmitter and receiver manufacturers pay for it. As it is,
transmitter manufacturers are paying a licensing fee, which will be
passed through to the broadcaster anyway, so it doesn't really matter
where the fee is assessed. Radio stations will pay no matter what.
Ibiquity has kept the amount of manufacturer's fees under wraps. Some
of the cost is for the development of the technology. There is also an
ongoing cost for each unit manufactured.
In previous issues, BE Radio reported that stations can
expect to pay for new hardware starting at about $30,000. For some
stations, it will cost significantly more. In addition, licensing fees
will added. The question is, “how much will it cost?”
The licensing fee is based on the current FCC regulatory fees. These
FCC fees are based on the type of service (AM or FM) and the population
that a stations serves. The fees range from $250 to $4,550. Ibiquity
wants to charge you 15 times the FCC fee for a one-time licensing
payment — a license payment range of $3,750 to $68,250.
If a lump sum payment is not possible, Ibiquity is also offering a
10-year payment plan, which is evaluated at 2.8 times the FCC
regulatory fee every year for 10 years. This results in a payment of
$700 to $12,740 every year for a grand total payment of $7,000 to
$127,400. It is cheaper to pay it all at once. Because each station is
signing a contract, there may be opportunities for other payment plans
to be made.
Non-commercial FM stations, while exempt from FCC regulatory fees,
are not exempt from the Ibiquity licensing fee. These stations will pay
based on the minimum rate for FM stations of $250. This yields a
licensing fee of $3,750 one time or an annual fee of $1,260 over 10
The fees don't end there. Any station revenue from data services
will also be subject to a royalty. Right now this stands at three
percent of the revenue. This amount will be calculated quarterly by the
station and continue in perpetuity. An option exists in the current
contract to discuss this for the long term, so it may change in the
It has been expected that there would be costs involved in licensing
the Ibiquity technology. This is not really a new concept. Now that the
initial market roll-out efforts have begun, this point has moved into
the spotlight and many broadcasters are not happy about it.
In the end, this is yet another financial obstacle for IBOC. I have
heard the demonstrations and I am impressed with the audio quality it
provides. Like you, I am not the average listener. Will a listener
realize the improvements of the new system? Not initially and maybe not
in the long term. Will stations voluntarily pay the costs to upgrade
their systems and cover the royalties? Without an FCC mandate to
implement the service — which I don't see happening — I
don't think many stations will. The marketing engine must convince the
listeners that this is what they need.
Chriss will moderate the session called Why Buying Now Will Save
You Later on Monday April 8 at 10:30 a.m. at NAB2002. See the
session guide at the show for the location.
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