Ever heard of a micro cap company called Broadcast International (BCST)? If not, you might - sooner than you realize, and the hard way. As part of our ongoing goal of spotting looming trends before they become obvious, the research staff at the Micro Cap Press has uncovered a potential problem with the U.S. government’s requirement that all television broadcasting soon be done in ‘HD’ format.

High-definition, digital video is indeed an improvement relative to current and previous formats. However, as the FCC-mandated standard changes to an ‘all HD’ mode, the country may be surprised that a bandwidth bottleneck is going to be created. In other words, the infrastructure (wires) needed for the United States to be an all-digital-broadcast system is not adequate.

The straight-forward solution is to install more capacity. It would work, but will take lots of time and lots of dollars. The alternative is better compression of digital broadcasts, which could utilize (but not burden) the current infrastructure.

Better compression isn’t a new idea. However, it too has inherent problems. Specifically, most of the digital sending and receiving hardware is designed to compress and decompress one video format - MPEG2. The problem is, MPEG2 may not be compliant with the FCC’s ever-changing ‘H.264′ high-definition standard in the future. If the H.264 standard changes to something besides MPEG2 (and it’s assumed it will), much of the current hardware may become obsolete. Moreover, the currently-preferred MPEG2 format still may not be compressed enough to use the current infrastructure’s bandwidth capacity.

The solution? Hardware that can adapt by upgrading the compression/decompression software in perpetuity. That includes the ability to make a complete switch of digital formats.

Enter Broadcast International (BCST). They’re working on that very technology. Click here to see the website and see for yourself exactly what it is they’re doing….and plan on doing in the future.

From an investment perspective, it looks as if at least some traders like BCST’s place in the race. The stock has moved from below $1.00 to $3.00 over the last three months. The volume behind the rally was significant too. Though the fundamentals don’t look great right now, it looks like the market is looking well into the future in trying to find the ‘right’ price for these shares.

Whether or not Broadcast International is the industry leader or has cutting-edge R&D, the misunderstood (and underestimated) problem of inadequate bandwidth could mean some company in this space is poised for explosive growth.

We’ll add details to the dilemma as we can. In the meantime, if you have thoughts, opinions, or other investment ideas related to the looming video compression challenge, leave us a note below.