Three Market
Forces in
U.S. Cable Competition
Cable's two-way
interactive services must confront interactive satellite
services, telephony DSL services, and cable's own market
practices.
by Judah Ken Freed,
"America Watch" columnist in
Euromedia.
American
cable television operators claim their strongest
marketplace advantage over satellite and telephony
competitors is the ability to deliver the two-way
broadband bundle.
But cable face
three vital market forces that likely will continue to
counter this advantage for the industry. These are
interactive satellite services, telephony DSL services,
and cable's own market practices.
Let's consider each
in turn.
Cable retains a
strong lead over satellite in terms of total households
served, but in terms of digital households, penetration
is roughly equal.
Satellite so far
has not enjoyed the ability to deliver interactive
television and Internet services requiring a broadband
upstream pipeline.
A modern digital
cable plant has the capability of simultaneously
delivering to each household such services as video-on
demand (VOD), multi-player games, home shopping,
telephone dialtone services, plus high-speed access to
the global Internet.
Satellite so far
has only been able to emulate these services.
VOD has been
possible, for example, by the viewer cherrypicking
content within the digital stream beamed from an orbiting
transponder. And many satellite receiver boxes now
contain hard darks with the software of a personal video
recorder (PVR), replacing the analogue tape
VCR.
Cable guys would
argue that's not true VOD, which in their mind means
accessing a server, then streaming the content with full
VCR control. Now that most of the cable plant has been
rebuilt in metropolitan areas and even the smaller
communities, the rollout of "true VOD" services is a top
priority of almost every American digital cable
operator.
The satellite guys
reply that from the customer's point of view, so long as
people get to watch what they want when they want it, the
technology used to deliver the content on-demand does not
really matter to them.
As for high-speed
Internet, the best the satellite service providers have
been able to offer was a walled-garden of selected
websites carried within the satcast bitstream, using
standard phonelines for email or online
shopping.
This situation will
change as the satellite operators begin launching
two-way, Ka-band spotbeam satellites. For instance,
EchoStar plans to orbit it new EchoStar IX Ka-band bird
in May 2003 to expand the Dish Network. Not only will
Ka-band give cable a run for it's money, the global reach
and cost of the Ka-band services will challenge telephony
Internet services, too.
As for cable
competition with telephone service providers, the main
contest nowadays is for broadband Internet
services.
Telephony pioneered
the digital subscriber line (DSL) technology for
delivering two-way broadband services. Offering speeds
starting at ten time faster than 56 kilobyte per second
dialup modems, some DSL services pass 1.5 Megabits per
second, a blazing speed in comparison. Telephony DSL
services are available almost everywhere in America by
now, except the rural areas.
Cable modems, in
contrast, can rip many times faster than the best DSL
speeds, fast enough for the anticipated convergence of
video, data and voice. For instance, cable modems are
fast enough to handle live two-way streaming viewphone
services without the herky-jerky motion we often see
today in videoconferencing.
But cable modems'
market penetration has been weak in the US. The two
primary causes are technology and pricing.
Cable modems have
gained a bad reputation from privacy and security
concerns, even when not accurate. What has been
demonstrated, however, is that when too many users jump
online at once, such as early evening, the neighborhood
processing node can bog down, and this problem still has
not been adequately resolved.
Price is where DSL
modems beat cable modems hands down. Home or small
business customers can order DSL services at an average
price tag of $40 a month or less. The average cable modem
service fee is about $70 a month.
Because of DSL's
apparent advantages, small wonder that so many of the
cable modem service providers, such as High Speed Access,
have gone belly up since the economic
downturn.
Yet there is a
third market force that threatens to block cable's
victory over satellite and telephony competitors in the
"broadband services space" &endash; the cable companies
themselves.
The lingering image
of Adelphia cable executives being hauled off in
handcuffs has not left the mind of either investors or
consumers.
Cable's troubles
from a visceral distrust of the industry's accounting and
billing practices, bluntly, is not helped by the abiding
complaints of poor customer service practices, an
arrogant legacy from holding local monopolies.
American cable may
overcome the growing competition from both satellite and
telephony industries, but will the cable trade ever get
its own house in order? 
.
