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As users flock to iTunes, Hulu and Netflix, TV stations struggle to survive

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As the audience for free television fades, federal regulators are wrestling over the future of the government-mandated broadcasts, which were originally intended to knit the nation’s disparate communities together.

Today, only 10 percent of the nation relies on free, over-the-air TV, which was created by the Telecom Act in the 1930s. To get a license, broadcasters had to offer local, educational and political programming, and to make it widely available to rich and poor alike.

Now that viewing audience is becoming fragmented once again, social scientists say. On the Web, where users pick and choose what they want to watch, it’s harder to ensure that public broadcasting, local news and political debates will reach the bulk of American households. With options such as iTunes, Hulu, YouTube and Net-flix, communities are no longer bonded by watching the same evening news and prime-time shows.

And as fewer people rely only on broadcast television, stations around the nation are struggling to survive even as some rural residents, elderly and the poor continue to rely on free TV.

“Broadcast has an in­cred­ibly important function for community and political reasons, and that programming will need to be delivered to 100 percent of the people,” said Reed Hundt, former chairman of the Federal Communications Commission.

Americans watch about 147 hours of cable, satellite and broadcast television a month, a figure that hasn’t changed much in recent years, according to Nielsen, a media metrics firm. Now they are supplementing that with about 4.5 hours of online video each month, double the amount of three years ago. Younger viewers are watching even more hours online.

Those who only watch free broadcast television comprise a niche audience. In the third quarter of 2011, they totalled 5.8 million homes, down from 6.25 million homes in the third quarter of 2010. Over the past four weeks, all four major networks said prime-time viewing declined, according to Nielsen.

That has made it harder for broadcasters to court advertisers as viewers shift to the Internet, analysts say. Viewership for local television news has steadily declined since 2007, Nielsen said. Six in 10 consumers, meanwhile, now get their news online.

Network companies such as NBC Universal, News Corp. and Walt Disney Co. are responding by trying to divert advertising dollars from local television stations to Hulu, the online video site in which they have stakes. Hulu’s viewers watched about 1.7 billion ads last month.

And local broadcasters are faced with new rivals such as Aereo, an online start-up that the networks are suing for alleged copyright infringement. The company, funded by IAC/Interactive chief executive Barry Diller, provides access to online shows from New York City broadcast stations for $12 a month. Diller will testify in a Senate Commerce Committee hearing on Tuesday on the future of television and online video.

The business battles being fought for video dominance in the digital age have created an abundance of new options. But not always for the better, some consumers say.

Linda Taylor, 70, thinks that cable and the Internet have led to a decline in the quality of local television shows she watches from the kitchen television of her Herndon home. She’s disappointed by what she says is too much repetition and not enough original reporting. She can’t rely on her Washington area stations for national and international news, Taylor said.

For that information, she turns to the big-screen television in her living room, where Direct TV gives her dozens of channels. But she often wonders if the average $85 monthly bill is worth the three to four channels she likes most. She has a broadband connection but hasn’t taken to Internet video, which she fears would add more costs as she and her husband prepare for retirement.

“There seem to be so many options but at the same time no options,” she said. “I am paying so much for what doesn’t seem like a lot. Nothing gives me everything I want.”

Video’s migration to the Internet creates new challenges for lawmakers and regulators, who have strict rules for broadcasters and cable providers but none for the Web.

Senator John D. Rockefeller IV (D-W.V.) will focus in a hearing this week on how rural and disadvantaged communities are affected by the shift in technologies.

“We need an intelligent discussion about how to reflect public interest on the Internet when TV and radio broadcast is moving there and the Internet has become the venue for civic dialogue,” said Michael Copps, former commissioner of the FCC and board member of public interest group Public Knowledge.

“I want to focus this hearing on what these changes mean for consumers, especially in rural areas, and if this evolution of video can bring them higher-quality content at lower rates,” Rockefeller said.

Broadcasters say the decline of their business is exaggerated. Political ad money is still being funneled to their stations, and the networks are charging retransmission fees to cable and satellite providers to run the hottest network shows.

“As policymakers review online video’s potential, make no mistake that there is no substitute for the role of the free and local broadcaster in delivering compelling content, niche programming, and lifesaving information in times of emergency,” said Dennis Wharton, executive vice president of the National Association of Broadcasters.

The FCC said it remains committed to broadcast television even as it tries to get stations to give up airwaves to resell to wireless providers. With its eyes set on solving the capacity crunch on wireless networks, the agency is considering ways to ensure broadcast television is protected. But there are no guarantees a town won’t lose stations that choose to sell airwaves.

“The FCC is committed to making sure that consumers can get the information that they need, and expects to see a healthy broadcast industry after incentive auctions,” spokesman Neil Grace said. “At the same time, many broadcasters recognize the changing landscape and are working to seize the opportunities of a multiplatform broadband world by experimenting with new technologies, platforms and business models.”

As technology improves, new options will only become more attractive, analysts say.

Jenn Rubin, a 28-year-old Web producer, rarely watches a video without using another device that may also stream videos at the same time. With broadband and WiFi at her Bethesda home, she can catch video news and movies on any of her multiple devices — last Friday, for instance, she watched a Boston Celtics basketball game on ESPN 360 over her tablet while working on her laptop. But she isn’t prepared to give up her Comcast cable subscription — even as new technologies are already poised to replace it.

“It’s still a great experience to sit with friends in front of the TV with takeout and just hang out together,” Rubin said. “That doesn’t change.”

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