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Changing Times for Cable

November 27, 2007 | Author: Ibex Marketing

It’s hard enough to play in a fiercely competitive game, but even harder when they go and change the rules. That’s the problem being faced by cable companies in the United States.

When cable services first started, the federal, state, and local governments worked out a carrot-and-stick arrangement to encourage them to make the investment required to create the business. In most cases, cable companies were allowed to string their wires in a town, but only if they agreed to maket the service available to all residents. This 100% coverage added to the cost, but a single company was given exclusive access so that they could be sure of their market.

All that has changed. Satellite service is available just about everywhere that cable is, and other places as well. Telephone companies — Verizon and AT&T — are offering television services over fiber optic broadband. And now the FCC appears to be taking the stance that the cable companies collectively control too much of the market, and need to be regulated more closely. Cable companies have to allow competitors to offer alternative service in large apartment buildings. The FCC has decided that 70 percent of the US consumers have access to cable service, and of those, 70 percent subscribe. This determination gives the FCC additional regulatory powers.

Cable is also facing technological challenges as well. The satellite companies can increase their bandwidth more or less by just sending up new, more powerful satellites. As a result of such expansion, they are offering more and more HD content. DirecTV has promised to deliver 100 HD channels by the end of the year. The company has a goal of 150 national and 1,500 local HD channels. The telephone companies are rapidly building out their optic fiber networks, which have enormous bandwidth. Meanwhile, cable companies have a gigantic investment in their existing infrastructure, which may have limited bandwidth in some areas. This makes it difficult to offer more HD content without resorting to over-compressing the signal.

Between increased regulation and greater competition, cable companies are getting squeezed in both directions. At the same time, they have invest in new infrastructure without losing subscribers to the new alternatives.

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