iBiquity would like ubiquity for digital radio

Future is sounding sweet at Columbia company

October 13, 2002|By TaNoah Morgan | TaNoah Morgan,SUN STAFF

The road to digital radio begins in Columbia.

Last week's decision by the Federal Communications Commission giving the go-ahead for the new technology developed by iBiquity Digital Corp. could change the future of the medium.

Within weeks, 50 radio stations in six major markets will begin broadcasting their signals digitally, using software made by Columbia-based iBiquity.

For consumers, digital radio promises far better sound on AM and FM stations, and signals so smooth that bridges and electrical lines won't interfere with them.

Stations in Chicago, Los Angeles, Miami, New York, San Francisco and Seattle are expected to begin broadcasting digitally this fall, and iBiquity officials say broadcasters from several other cities are anxious to begin.

"I've had stations around the country that say, `I want to be first,'" said David Salemi, the company's vice president of marketing.

"What we're doing for broadcasters is bringing them into the digital world. They're the last technology to go digital."

For broadcasters, digital radio promises the ability to provide additional services to customers and the opportunity for new revenue.

Perhaps more important, the technology could give broadcasters a chance to compete with satellite radio, an ability some industry observers say is necessary.

For digital radio - and iBiquity - to succeed, the software company must carefully navigate its roll-out, create demand across the country among consumers and broadcasters, and balance the economics of production with the products' final cost.

Digital radios, which will be available next year, will cost consumers an additional $100 to $300.

Possible pitfalls

The technology will have to avoid the pitfalls of predecessors such as high-definition television, which has taken years to get to market and still needs the FCC's help because of lack of demand and the reluctance of broadcasters to produce and convert to digital programming.

Ultimately, iBiquity's fate will lie in the hands of consumers, who will decide which digital technology is worth their entertainment dollars - satellite television, gaming systems or digital radios that, at the outset, might offer better sound but few other inducements, said Ryan Jones, media and entertainment analyst with the Boston-based Yankee Group.

"The number of other technology choices makes it a very crowded market," he said. "The question is, can iBiquity put the right price [on the product] so that it stays in consumers' minds when there is all this other digital choice."

iBiqiuty has a lot going for it. The 2-year-old, 110-employee company is the result of a merger between former competitors USA Digital Radio Inc., a research and development spin-off of Westinghouse Electric Corp., and Lucent Digital Radio, a unit of Lucent Technologies Inc.

IBiquity has agreements with the nation's largest manufacturers of broadcasting equipment and consumer radios - companies such as Harris Corp., Crutchfield Corp., Kenwood Corp. - to use its technology.

Several of the largest broadcasters in the country - Clear Channel Communications Inc., Viacom Inc. and Cox Radio Inc. among them - are key investors.

Auto equipment supplier Visteon Corp.; automaker Ford Motor Co.; venture capitalists JP Morgan Partners and DB Capital Partners, both of New York; and Grotech Capital Group of Timonium are also among iBiquity's investors.

Because of the strong support for the technology within the industry, FCC commissioners were effusive last week in their compliments about the technology, some of them saying they were eager to purchase a new radio.

`It really is exciting'

"I look forward to the commencement of interim [digital radio] operations," said Commissioner Michael J. Copps. "It really is exciting. I can't wait to get hold to some of it."

Their decision made the technology from iBiquity, the nation's only manufacturer of digital AM and FM broadcast technology, the standard for digital radio in the United States.

With no competition, the company sells its software to every manufacturer and consumer in the radio business. Even satellite radio companies, which compete against local stations, license iBiquity's audio compression software. iBiquity's agreements with consumer electronics manufacturers also allow it to profit from each radio the companies make.

But first, iBiquity and the industry have to sell consumers on digital radios, which, when they are introduced to the market early next year, are expected to cost $100 to $300 more than regular radios.

"With any new consumer electronic, the cost has always become the biggest barrier," said Sean Badding, senior analyst for the Carmel Group in California. "The value ... for consumers is really low today, because, let's face it, what do consumers know about digital radios?"

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