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Since 85 percent of households have cable, the local stations are already in competition with 500 channels - going to digital will not change that. The locals have to survive on what unique things they can provide, and digital will provide at least some opportunity, like the full-time local news and weather at the same time as the network entertainment program goes on.
The ABC O&O here in Chicago is doing both news (the local news is simulcast live with the main channel, then repeats interspersed with public affairs programs until the next live newscast), plus a 24-hour weather channel. The NBC O&O is doing 24 hour weather in addition to the main channel.
Small PBS stations that have checked their viewership and taken the digital-only plunge seem to be successful. However, everyone would agree that this experiment won't work right now for a major network station, because the 15 percent of homes and 22 percent of TV sets not on cable or satellite still serve too many viewers.
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