NIST GCR 03-859
Economic Impact of the Advanced Technology Program's HDTV Joint Venture

3. Analysis Framework for Evaluating the HDTV Joint Venture Project

This section provides a framework with which the economic benefits of the joint venture (JV) project can be measured. The methodology approaches the project’s technology outcomes from the counterfactual perspective of how digital television (DTV) broadcast operations would be configured had the project not occurred compared with the real-world scenario with the technologies. The incremental benefit that represents the difference between the two scenarios is the total benefit of the project.

Before presenting the approach that underlies our evaluation of the high-definition television (HDTV) JV project, it is important to note that this analysis captures and evaluates both public and private benefits and costs. The concept of public versus private costs and benefits is best explained by answering the question of who pays for and who benefits from a technology’s development.

Public costs are those costs borne by society for a technology’s development; in this analysis, public costs would be the Advanced Technology Program’s (ATP’s) award to the JV for developing the technologies presented in Section 2. Private costs are those costs that are incurred by private entities. In this instance, private costs consist of the industry cost share; JV members provided 52 percent of the total JV budget.

To accurately compare total JV costs, both public and private, with benefits, it is necessary to collect public and private benefits. Public benefits are known as increases in consumer surplus: those benefits that accrue to society due to incremental price or cost reductions in products and services. As will be described later in this section, the JV economic analysis quantifies the cost savings JV technology adopters accrue relative to those for adopting alternative technologies. These cost savings are the JV’s public benefits.

Private benefits are those incremental returns that accrue to the innovating firms, as a result of setting prices above their total average costs. Profit maximizing-companies will only be willing to innovate if they anticipate, ex ante, that they will be able to make a return that compensates them for expenditures on research and development and for acceptance of technical and economic risks. For innovating firms in highly competitive markets, however, their ex-post realization of profits may be small or even nonexistent. This is most likely if their rivals can quickly imitate their innovations and drive prices down to zero-profit, equilibrium levels. Available evidence strongly suggests that this result occurred for the two major products that emerged from the JVdeveloped technologies: digital adaptive precorrection (DAP) and the AgileVision system.

Total benefits of the project will be the sum of the incremental past and future benefits accruing to consumers from adopting JVdeveloped technologies (i.e., public benefits) and the past and expected future profits for producers (i.e., private benefits). Measures of economic return will compare the costs incurred to the combined public and private benefits created.

To quantify the economic benefit of the HDTV JV project, the analysis will compare the actual situation of producers and users of project technologies to a hypothetical scenario in which the project did not exist. In the absence of the project’s AgileVision and DAP, this analysis will argue that public television (PTV) licensees would adopt more costly studio installations and all DTV stations would use less efficient digital transmitters. This section develops the counterfactual world, describes the conditions that would arise, and presents evidence supporting the counterfactual. Specifying the counterfactual scenario is essential to determining the information that will be needed to estimate the public benefits of the JV.

Admittedly, the construction of a counterfactual scenario is a synthetic exercise; it is difficult or impossible to fully describe with a high degree of confidence a situation that does not exist. Nevertheless, with the large amount of data that we will collect and by using sound economic theory and logic, we can assemble a hypothetical scenario that should seem reasonable and credible to most observers. The use of counterfactual analysis, pioneered by Robert Fogel and once extensively debated, has become well accepted over the past 20 years (Fogel, 1979).

Section 2 identified two commercial products that had been introduced based on technology developed during the JV: AgileVision and digital transmitters with DAP. Because the analyses of these two innovations differ in both their scope and impacted populations, the counterfactual for each is presented separately. However, the same economic framework will be used for evaluating benefits.

AgileVision embodies several of the JV’s technology outcomes. In particular, the system integrates the JV’s compressed processing, encoding, and file server innovations into one successful commercialization effort.⁽¹⁾ Sarnoff and Leitch provided comments on the system’s application and market to accurately gauge AgileVision’s impact. This information permitted the creation of a counterfactual against which the benefits of AgileVision may be compared.

AgileVision is now the name of Leitch’s product line that incorporates JV technologies. AgileVision is hypothesized to have a significant impact on PTV stations’ costs for converting their studio operations to digital broadcasting. As will be discussed at length in this section, PTV stations are the market for the AgileVision system because the system’s capabilities match the Public Broadcasting Service’s (PBS) content distribution model. By installing AgileVision, adopting stations avoid purchasing an array of studio equipment that would otherwise be needed to match AgileVision’s capabilities. Furthermore, AgileVision permits stations to continue using existing equipment that would otherwise be replaced. The counterfactual to AgileVision therefore consists of a more costly alternative studio system implementation for DTV broadcasting.

AgileVision is an integrated DTV broadcasting solution housed in one piece of equipment that simplifies the delivery of either a fourchannel standard definition (SDTV) feed or a one-channel HDTV feed. AgileVision is currently focused on the PTV member station market but intends to expand into the commercial station market in the future. The system is not viable in the commercial station market today because commercial stations originate a significant portion of their content. Commercial and some PTV studio operations require full-scale digital studio equipment implementations that permit sophisticated generation and manipulation of television signals. Examples of such content would be local news and entertainment programming. Since these studios invest in equipment that permits this more sophisticated content management and generation, it would not make sense to purchase AgileVision, a system designed to pass through network feed.

Apart from differences in content management and origination, three additional factors orient AgileVision to the PTV market:

1. PBS is motivated by its mission to promote education and disseminate information, whereas commercial stations are motivated by profit. These goals represent very different impetus and motivators. According to Leitch representatives, DTV is a boon to public broadcasters because it allows them to deliver multiple programming packages to targeted audiences in the community. AgileVision’s four-channel SDTV output capability supports this.
   Commercial stations have focused on HDTV. According to individuals interviewed for this analysis, most commercial stations believe that multichannel SDTV would fractionalize their audience, which would in turn have negative influences on revenue streams. Commercial stations “sell eyeballs to advertising” and HDTV concentrates the audience on one channel.
2. PBS member stations treated the May 1, 2003, digital conversion deadline very seriously and planned and invested to ensure they adhered as closely as possible to the deadline. The PBS network held conferences and maintains task forces to facilitate member stations’ DTV rollout. AgileVision is a stand-alone tool that allows adopting PTV stations to install and begin operations quickly and inexpensively.
   Commercial stations, which had an earlier deadline, in large part opted to program and process signals in conventional analog technology and then encode their signals to digital for transmission. Because most commercial stations will be making extensive and expensive equipment purchases, they are focusing on digital technologies that deliver signals to homes rather than those that actually generate and edit the content in digital. When coupled with the fact that these stations will have to eventually purchase equipment that will make AgileVision redundant, it is more unlikely that commercial stations will adopt it under current conditions.
3. PBS uses a multiprogram transport stream to deliver content to member stations. That transport stream may be HDTV, four-channel SDTV, datacasting, or some combination thereof. PBS and AgileVision both employ the ATSC-standard, Moving Picture Experts Group, Version 2 (MPEG-2) compression 19.39 Mbps transport stream. Thus, AgileVision maps well with PBS’s content distribution model.
   The major networks (ABC, CBS, NBC, etc.) have distributed a NTSC 45 Mbps transport stream to commercial stations via satellite for 25 years. This system was adopted as a replacement for shipment (via U.S. mail or Federal Express) of 2-inch video tape. Twenty-five years ago, the technical limit on compression was 45 Mbps, which corresponded to the satellite transponder bandwidth, as well as to the maximum capacity for the DSC-link. As such, industry adopted the 45 Mbps transport standard. This level of compression became known as “mezzanine-level” or distribution-level compression.

Given these technical considerations, AgileVision is marketed to PTV stations. As will later be discussed in Section 5, business drivers are emerging that will enhance AgileVision’s viability for adoption in the commercial market. In addition, the AgileVision system is undergoing continuous redevelopment; the system’s specifications may more closely align with the typical commercial station’s studio operations in the future, though it is difficult to project the time such viability will be realized. This analysis therefore only quantifies the present, “first-generation” AgileVision system. In the absence of the ATP project, JV members indicated that the JV would not have formed and AgileVision’s enabling technologies, and therefore the system, would not have been developed. None of the project costs or benefits would have occurred. To quantify benefits, this analysis takes the approach of comparing the cost of installing AgileVision to the cost of installing some alternative system that would accomplish the same results.

Alternative System Implementation to AgileVision

In the absense of the ATP project, JV members indicated that the JV would not have formed and AgileVision's enabling technology, and therefore the system, would not have been developed. None of the project costs or benefits would have occurred. To quantify benefits, this analysis takes the approach of comparing the cost of installing AgileVision to the cost of installing some alternative system that would accomplish the same results.

AgileVision’s core capabilities allow stations to provide some of their own content, pass through only a part of the PBS network feed, delay programs to another time slot, and/or add text and graphical content in addition to passing through PBS network content. AgileVision permits stations to adjust the Program and System Information Protocol (PSIP). PSIP supports on-screen programming information, program content timing, and channel designation. The channel designation capability is critical because without correct PSIP information, digital tuners cannot find the minor channel (e.g., channel 5.1 or 5.2) when a station is multicasting (delivering four channels of SDTV instead of one channel of HDTV). PSIP correction is a technical requirement for all stations because they may delay broadcast of some content or may need to adjust for their time zone or channel designation, for example. Stations can also brand their content by inserting logos and station identification spots and must provide a means to support (e.g., a message crawl) the emergency broadcasting system (EBS).

Leitch representatives note that to accomplish the above tasks without AgileVision, a station would need to

• decompress and decode the network feed to base band,
• route the feed to a master control switcher,
• insert logos and other information,
• re-encode and recompress the video, and
• route it to a PSIP corrector.

The station would need a router, a master control switcher, decoders and encoders, and process products (for inserting logos and EBS). If the station does not have these products, or if the products are not capable of handling DTV signals or if they are not interoperable, the station must purchase new ones. A plethora of products are needed; studios often build massive control rooms to add, drop, and insert content. Systems integrators (both consultants and engineers) are often called in to manage system design and set-up, charging large fees for their services. Additional employees would need to be hired to operate and maintain the digital equipment.

Information from South Dakota Public Broadcasting (SDPB) illustrates AgileVision’s impact on studio configurations. The nine-station PTV network provided a detailed comparison of their prospective costs for converting their studio broadcasting operations to DTV with and without AgileVision that served as a major source of data for the analysis of benefits to pubic broadcasting stations nationwide. AgileVision lowered their equipment costs by $1.1 to $2.2 million (SDPB, 2003; see Table 3-1).

SDPB’s cost savings were most concentrated in the areas of encoding equipment, studio automation, and video servers. Alternative Implementation 1 consisted of equipment purchases that would match the capabilities of a studio configured using AgileVision. Alternative Implementation 2 expanded those of Alternative Implementation 1 and added additional digital video servers and editing suites.

Hypothesized AgileVision User Benefits

AgileVision’s user benefits lie totally within the studio. PTV viewers would notice no difference in the quality of the DTV programming they receive. Benefits are simply that PTV stations have less equipment to buy and need to allocate fewer labor resources to digital studio operations, management, and installation than they otherwise would have.

This study hypothesizes that there are three quantifiable economic benefits from using AgileVision: equipment cost savings, installation cost savings, and on-going labor savings. On the average, the AgileVision system costs $275,000. Comparable implementations may well cost $750,000 for an HDTV-only studio upgrade and $1.5 million for an HDTV/SDTV upgrade, as would be required to match the PBS distribution model. In addition to SDPB, several other PTV stations provided input on the costs savings of installing AgileVision. The mean response was used in the calculations. Simplified installation translates into lower onetime costs for “building-out” the DTV studio. In addition to capital cost savings, staffing requirements should be much lower with the AgileVision box. According to Leitch, one engineer can accomplish the work that would take several people using an alternative technology.

There are two additional benefits that are not quantified because they are more speculative and may not be true for all stations. These two benefits are maintenance agreement savings and electricity savings. It is possible that employing AgileVision reduces or eliminates fees for maintenance agreements for the alternative equipment. For instance, if a station opted for the alternative installation they may also opt for maintenance agreements for their equipment investment. An AgileVision adopter may also enter into such an agreement with Leitch.

However, it is unclear whether there would be a net benefit to the station of opting for the AgileVision agreement because PTV stations often do not sign on for maintenance agreements, according to stations interviewed for this analysis. Thus, we hypothesize that this benefit may exist for some stations, but it would be difficult to normalize this benefit across all stations because it is not known whether stations would enter into these agreements and what the increment may be, if any.

Additionally, there may also be electricity savings from running AgileVision as opposed to the alternative equipment installation. But respondents were not able to quantify this benefit and were unsure whether the benefit would exist since AgileVision operates similarly to a high performance computer and consumes a lot of electricity. The AgileVision benefit analysis will therefore yield a conservative estimate because of the inability to accurately gauge these additional two potential benefits.

Estimated Private AgileVision Benefits

The firm that commercialized the unique AgileVision technology would be expected to earn economic profits from sale of these units to customers over the life of the technology. As AgileVision was a single-product firm, the present discounted value of future expected profits would comprise a major share of the value of the enterprise. Leitch Corporation purchased this unique technology, and its future stream of sales and profits, when it bought AgileVision in February of 2002. An analysis of Leitch’s Annual Report from that year indicates that the company purchased the AgileVision technologies for approximately 989,000 Canadian dollars, or about $619,000 (Leitch Corporation, 2002a).⁽²⁾

3.2.2 Counterfactual to Digital Adaptive Predistortion (DAP)

The counterfactual scenario to the development of DAP is similar to that for AgileVision in that DAP reaps equipment, installation, and operations and maintenance benefits for DTV stations. The technology enables more efficient digital transmitter operation because it provides a cost-effective means for mitigating television signal out-of-band products. Those products degrade the signal quality of channels in adjacent bands (Fries and Jenkins, 2000). DAP reduces filtering requirements and manual adjustments that would otherwise be needed to eliminate out-of-band products.

However, there is another dimension to the DAP counterfactual. Evidence exists that the results of the JV project’s digital transmitter research reinforced the Federal Communications Commission’s (FCC) spectral mask policy for adjacent channel signal broadcasting. Other transmitter manufacturers subsequently innovated and developed similar technologies that were introduced in the products they installed beginning in 2000. In DAP’s absence, it is possible that the FCC might have relaxed its spectral mask policy at the request of a consortium of transmitter manufacturers. In that case, equivalent DAP technologies might not have been developed, or if so, might have been introduced at a much later date.

Postulating on potential counterfactual policy outcomes ex post is contentious. There is no chain of public reporting to support an argument that DAP was the sole catalyst for the FCC’s restatement of its original spectral mask requirements. It is possible, however, to trace the chain of events surrounding the development of DAP and matching technologies from non-Thales manufacturers. This analysis assumes that the FCC would have maintained its spectral mask requirements regardless of DAP’s development. It then estimates the costs that all DTV stations would have incurred to meet the spectral mask requirements in DAP’s absence. In essence, the counterfactual scenario is that most DTV transmitters would have been more costly to purchase, install, and operate in the absence of the ATP project. The following discussion explores this scenario more fully and presents benefits and benefits population hypotheses.

Digital Transmitter Technological Innovation History, 1995 to 2000

The mechanics of digital transmitters are “not a big technological leap” (Jessell, 1996). Digital transmitters are a scaled-down version of analog transmitters with a digital exciter, the device that generates the broadcast signal. According to Jessell, “the principal difference is that digital transmitters have to be more linear—that is, less likely to generate spurious sideband signals that can interfere with adjacent channels” (Jessell, 1996). Herein lay the project’s challenge; preventing digital broadcast signals from interfering with adjacent channels in an efficient manner necessitated innovative technologies that would maintain the linearity of the signal.

Thales’s DAP research beginning in late 1995 was focused on ensuring that DTV signals met FCC requirements. In the mid to late 1990s, other manufacturers focused their research efforts on developing advanced filtering technologies (McConnell, 1995b). In contrast, the JV developed technology for preempting out-ofband products that bypassed much of the need for stringent filtering. Though non-Thales manufacturers were able to develop digital filtering systems to meet FCC specifications, such filtering added to the total cost and reduced the operating efficiency of the transmitter (Jessell, 1996; Harris, 2002). The JV’s development of DAP was successful and eliminated much of the additional filtering that would be required by other transmitter manufacturers.

Thales digital transmitters with DAP technology first entered into service in 1998; other manufacturers did not release transmitters with comparable technology until 1999 for service entry in approximately late 1999 or the beginning of 2000, though they already had digital transmitters in operation beginning in 1997.⁽⁴⁾ The market for digital transmitters is highly competitive as one manufacturer’s product is a close substitute for another’s. Non- Thales transmitter manufacturers innovated and developed technologies that met DAP’s performance specifications. For example, in 1999, Harris Corporation, the leading transmitter manufacturer by total market share, introduced its Real-Time Adaptive Correction (RTAC) technology that provided continuous adaptive correction in the transmission system (Seccia and Simon, 1999). Other manufacturers soon followed suit. By 2001, nearly all transmitters delivered to DTV stations had some DAPequivalent technology.

Given the level of competition in the broadcast equipment industry and the pattern of transmitter technological innovations, it is reasonable to assume that the JV’s research demonstrated to other manufacturers an alternative to stringent digital filtering to prevent signals from bleeding into adjacent channels. Thus, this analysis proceeds on the premise that, in the absence of the ATP JV project, nearly all digital transmitters would be operating less efficiently. The hypothesized DAP benefits population consists of all DTV transmitters that contain DAP or equivalent technology. In essence, this includes all DTV transmitters except those from non- Thales manufacturers installed prior to 2000 that did not contain DAP.

Interviews with industry stakeholders suggested that there are three quantifiable benefits of DAP: equipment, installation, and operating cost benefits.

Some stakeholders stated that the absence of significant filters permitted DTV stations to purchase transmitters of lower power level than they otherwise would have. The filters consume large amounts of electricity and therefore reduce operating efficiency. For example, a station might have to purchase a 25 kW unit as opposed to a 20 kW unit, thus incurring additional equipment expense.

Table 3-2 summarizes the technical and economic impact metrics presented earlier in this section. In addition, Table 3-2 also presents the metrics for evaluating investment costs incurred by the project, which are simply the sum of the ATP and cost-share funds expended to develop JV technologies. Since this analysis is measuring the performance of the JV project as a whole, including all studio technologies, total expenditures will be included, not just those for the development of DAP and the technologies embodied by AgileVision. As noted in Section 2, the JV would not have been successful had all members not contributed and commented on the program’s direction and technology research and development.

This section discusses how economic benefits are created by the development of new technologies and describes a number of potential approaches to quantifying these benefits. The finalized approach presents a model similar to Mansfield’s and explains how the model will be used to evaluate the success of the ATP HDTV JV project. This section concludes with a brief description of the primary metrics by which the economic benefits arising from the combined ATP and JV investment in the HDTV project are assessed.

3.3.1 Measuring the Benefits from Technological Change

Technological change generates economic benefits through the creation and use of entirely new goods and services, as well as through improvements in existing products. Truly novel goods increase the overall satisfaction of purchasers by delivering experiences previously unobtainable; by improving buyers’ level of nutrition, comfort, security, or happiness; and by appealing to tastes for added variety. Improved products generate benefits by providing a given level of service at a lower opportunity cost to the consumer, by offering higher quality or performance level, or by delivering a broader array of services.

For example, the widespread adoption of television after World War II brought moving pictures into households for the first time; in that sense, it would be considered a new product. Television news improves timeliness over that provided by newspapers and conveys a greater emotional impact than radio news, both of which are quality improvements. As television makers have streamlined their manufacturing processes over the years, they have reduced prices charged to buyers for TV sets, an opportunity cost improvement. Finally, the addition of stereo sound and input devices has made it possible to play movies and video games on a piece of equipment formerly used only for displaying television broadcasts.

A variety of analytical methods can be used to measure these types of improvements, with the degree of complexity or sophistication depending on the difficulty of the measurement task. For new goods and improvements in multidimensional products and services, discrete choice models are often chosen (Berry, Levinsohn, and Pakes, 1995; Trajtenberg, 1989). If one or more dimensions of quality or performance are improved, price index (Austin and Macauley, 2000) or hedonic modeling approaches (White, 2000) are available. When cost or price reduction to the user is the primary result of the improvement, a straightforward algebraic approach can be used, such as that described in Mansfield’s classic paper on rates of return from industrial innovations (Mansfield et al., 1977).

Figure 3-1 illustrates Mansfield’s approach. An innovation affecting an input or production process lowers the user’s marginal cost of production from MC 0 to MC’. The user can therefore cut its price accordingly from P 0 to P’, and with downward-sloping demand, will increase output and sales from Q 0 to Q’. The economic benefits from the innovation include all of the shaded areas in the figure. Reduction in the cost to the user from P 0 to P’ creates a surplus for the customers of the good or service, which may in turn be passed on to the user’s consumers in the form of lower product prices. If the innovating firm can set a price above its costs, it can earn a profit on each unit sold (c in the figure), realizing private benefits from its actions.

3.3.2 Approach to Measuring Benefits from the HDTV Joint Venture Project

In the current case study of ATP’s HDTV JV project, both AgileVision and DAP created an almost pure cost impact on the broadcast studios that purchased them, just as in the firms that Mansfield studied in the 1970s. PTV stations faced with a mandate to convert their operations to digital format could choose one of two options—the more expensive defender installation, or the lower-cost AgileVision embodying JV-developed technology.

Similarly, digital transmitters either included DAP or they did not. As explained in the previous section, counterfactual scenarios assess the hypothetical cost of choosing the defender option and compare it with AgileVision and DAP installations.

The nature of the FCC’s digital mandate simplifies the analysis even further from that depicted in Figure 3-1. In conventional product and service markets, the innovation-induced price reduction will cause an increase in the quantity supplied in the final product market, either through expansion of the firm or market entry. In the case of the television studios, however, their quantity is fixed by access to operating licenses, and the FCC required them to install digital broadcast equipment. As a result, a reduced cost for digital equipment would not create market entry or induce firms to expand their operations.

Figure 3-2 illustrates the resulting model, with a slightly more realistic upward-sloping supply curve replacing Mansfield’s assumption of constant marginal cost. The equilibrium with the defender studio technology shows the price on the supply curve at P 0 and quantity fixed at Q 0 . Substitution of products containing the JV-developed technology allows a reduction in costs to the supply curve S’, with price falling to P’ in equilibrium.

The social benefit from the innovation is represented by the shaded area between the supply curves, with quantity remaining constant. This can be shown algebraically to be equal to (P 0 – P’) Q 0 . To operationalize this model, therefore, we need only estimate the change in supply cost for each station that will undergo conversion from analog to digital and multiply that perstation savings by the entire affected population.

Assuming that all stations have costs along the same supply curves is an oversimplification that requires additional discussion. Clearly, the operating costs of a broadcast studio are more complex than just those associated with the two technologies considered here. In addition, there is a considerable degree of heterogeneity within the broadcast studio community. As an example, commercial studios and large public TV stations that create much of their own content require a great deal of flexibility and capability in their equipment. They are likely to choose the more expensive defender technology, rather than AgileVision, to provide their operations with the equipment they need. For the cash-constrained PTV studios that receive most or all of their content in a compressed data feed, the AgileVision technology is optimal. For this reason, the value of Q 0 may be a subset of the population of studios, rather than the total quantity faced with the digital mandate.

3.3.3 Estimating Measures of Performance

The evaluation of the economic impact of the HDTV JV project involved calculating several performance measures, summed across the two principal commercialized applications, the AgileVision system and DAP. Total social benefits measured included public benefits arising from the cost savings achieved by the television studios, and private benefits from additions to innovator profits. Three measures—benefit-to-cost ratio (B/C), net present value (NPV), and internal rate of return (IRR)—provide estimates of the net social surplus created by the combined public and private investment. A more in-depth description of each of the measures follows.

Benefit to Cost Ratio (B/C)

Annual time series of benefits derived from the two products and program costs were assembled. Letting Bt be the benefits accrued in year t by technology users and JV members and Ct the total funding for the project in year t by ATP and industry, then the benefit-cost ratio for the program is given by

(3.1)

where t is the first year in which benefits or costs occur, n is the number of years the benefits and/or costs occur, and r is the social rate of discount. In this study, r was set at 7 percent, the Office of Management and Budget (OMB) specified level. Because benefits and program costs may occur at different time periods, both are expressed in present-value terms before the ratio is calculated.

Net Present Value (NPV)

The NPV of the combined ATP and JV member investments in the HDTV JV project was calculated as

(3.2)

where the terms have the same meanings as identified for the B/C determination. Any project that yields a positive NPV is considered to have been economically successful. Projects that show a positive NPV when analyzed using OMB’s 7 percent real discount rate are socially advantageous. A negative NPV would indicate that the costs to society outweigh the benefits.

Internal Rate of Return (IRR)

Because this study measures both public and private benefits generated by the JV, the IRR is equivalent to a rate of return to society from ATP’s investment in HDTV technology. For this reason, the term ’social rate of return’ is used throughout this report to describe the IRR.

___________________
1. Sarnoff partnered with Mercury Computer Systems to commercialize these technologies in a spin-off venture originally named AgileVision. AgileVision existed as a stand-alone company for approximately two and a half years before it was purchased by Leitch.

2. The 989,000 Canadian dollars was adjusted using the historical exchange rate for February 8, 2002, the day on which the AgileVision transaction was completed, as obtained from the Federal Reserve Board (FRB, 2003). The exchange rate on that date was 1.579 Canadian dollars to 1 U.S. dollar.

3. According to Fries and Jenkins, “[the FCC] desired to allow for adjacent channel allocations since the assignment of DTV channels was effectively doubling the amount of spectrum used by broadcasters. This required that some channels be assigned adjacent to other used channels with no guard intervals” (2000).

4. According to individuals interviewed for this analysis, there was a 6- to 9-month time lag between the date a transmitter order was placed and when the transmitter entered into service.

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Date created: July 12, 2004
Last updated: August 3, 2005

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