Last weekend, I was at Pebble Beach to speak at the NAB Futures Summit. That's the National Association of Broadcasters, the trade association that represents U.S. television and radio station owners. The Futures Summit is 200 fat rich guys playing golf and talking about how new technology will affect their industry. My job was to play the skeptic and warn that all the very good changes that the Internet might bring to broadcasting are going to take longer than most people expect. The best part of the summit, given that I don't play golf, was what I learned from the other speakers. This is a very scary time to be a local TV broadcaster, and the Internet is what makes it scary.

I am not the only skeptic these days. The stock market seems to be reviewing its enthusiasm for Internet companies, for example. But what I saw at the Futures Summit was a long-term Internet enthusiasm on the part of the broadcast television networks that surprised me. And by the end of the weekend it was all making sense.

What we have here is an impending clash of station owners and networks. These two groups have always had a love-hate relationship, but what's soon to come is more like Armageddon, and will have implications that reach across the Net to all viewers and surfers alike. Amazingly, it has almost no effect at all on PBS.

At PBS, the local stations pay fees for programs they receive from the network. These fees are based on the size of each market, with stations in bigger cities paying more than stations in smaller cities. And no matter what size the city, the fees don't cover the actual cost to PBS of buying or producing those shows, the remainder of which is covered by corporate, government and charitable underwriters. But the system works very differently in commercial television, where there are no underwriters and where stations and networks alike are expected to show profits. In commercial television, long tradition says the cash flow is reversed, and networks pay the local stations to carry their programs. This has been great for the local stations, since the networks not only give them for free the shows that attract viewers, the networks pay their local affiliates for carrying those shows.

That was all in a world without 500 channels, the networks say. Today, the television market is shared by cable channels and many other potential viewers are too busy downloading dirty pictures from the Internet to even be bothered to watch. The result, say the networks, is that they have fewer viewers than before and can't afford to keep paying the local stations. In fact, the networks would like to follow the PBS model and have the local stations pay them. This is the fight that's taking place right now as affiliate agreements expire and each network tries to changes the rules. It's in the news all the time.

But there is another part of this drama that is much longer term and has even greater impact. The networks are fairly confident that they can leverage the Internet to completely subvert their local stations, taking them completely out of the loop over time. An outfit called I-Beam Broadcasting appears to be the networks' weapon of choice for this part of the battle. I-Beam is an IP-based video distribution company that doesn't use the Internet, but does use Internet Service Providers to reach viewers.

See, it's the Internet that's the bottleneck in distributing quality video. Sending "I Love Lucy" over the average 15 hops between any one spot on the Net and any other ensures enough packet loss and jitter that "Lucy" would have some real 'splaining to do. That's why Internet video looks so bad. But I-Beam bypasses the Internet backbones by distributing "Lucy" by satellite direct to streaming servers in ISPs. People with DSL or cable modems can get pretty good video quality this way. And since we'll all have DSL-or-better bandwidth eventually, the networks see this as their way to serve viewers directly in the future. Larry Roberts, who was the program manager on the original Arpanet, made a very compelling presentation suggesting that we'll all have broadcast-quality bandwidth within seven years.

I-Beam has so far spent $250 million, which isn't much to replace $50 BILLION worth of local stations. I-Beams investors are TV networks, movie studios, and most especially Sony, which would love to own a TV network but can't because of FCC restrictions on foreign ownership. I-Beam gives Sony the equivalent of that TV network.

As presentation after presentation went forward in Pebble Beach, the TV station owners sank deeper and deeper into their chairs. The news for them was not good. So it wasn't surprising when I canvassed the members during a cocktail reception and couldn't find a single station that wasn't for sale. If the TV networks have their way, they'll become like Yahoo — national or international program suppliers, each with a virtual network. And the local stations will at best supply news and have no part of national programming.

So why should we care about this? For one thing, it shows a clear growth direction for the Internet and a multi-billion-dollar reason for that growth to happen. This is yet another reason why the Net isn't going away. But the other reason we should care is because the local station owners are very powerful in their own right and aren't about to just roll over and die. They will retaliate and such retaliation can take only two paths that I can think of. One path is political and has the local stations doing whatever they can to slow down broadcasting on the Internet or even try to make it illegal. The other path, which I greatly prefer, is for the local stations to throw their financial muscle behind an alternate technical future in which they are on top. If the station owners are smart, that's what they will do, subvert I-Beam by creating something even better. Let the best technology win. And that would be good for us all.