Cable Television

I

Introduction

Cable Television, industry built around the delivery of television programming to people’s homes by means of a cable system. The term is now usually used to refer to broadband cable systems, constructed from coaxial and fibre-optic cable, usually carrying more than 30 analogue channels and—where the infrastructure has been upgraded—potentially hundreds of digital channels.

Most television channels transmitted by cable operators are picked up from satellites, which may also be sending signals direct to people’s homes (DTH, from “direct to home”; sometimes called DBS, “direct broadcasting by satellite”), to be picked up by small individual reception dishes. A DTH-connected home normally receives channels from only one satellite however, whereas cable operators can offer channels from several satellites.

The digitalization of cable systems that started to take place towards the end of the 1990s and the increased use of fibre-optic cable allow operators to offer pay-per-view services (where viewers pay a fee to watch each programme of their choice) and video-on-demand (where programmes from a huge electronic library are on offer). Interactive services, such as home banking, home shopping, and distance learning are beginning to be available. Cable systems tend also to offer high-speed access to the Internet.

DTH satellite can offer some of these services, but does not have the capacity, even with digitalization, to offer video-on-demand or some advanced interactive services. It has been argued that as a result, while in rural areas, where it is too expensive to construct cable systems, DTH will be the main means of conveying multichannel and interactive services. In urban areas cable television should win out.

II

Cable Television Around the World

In its modern, multichannel form, cable first became established in the 1970s in the United States. By the end of 2001 more than 72.9 million US homes—around two thirds of the country’s 105.4 million homes with television—were subscribing to cable television.

In the United States, cable was able to develop without competition from DTH (which was launched only in 1994). In Britain, broadband cable got off to a slow start in 1983, and investment came only towards the end of the decade and in the early 1990s, when US cable and, particularly, telephone operators were stimulated by an improvement in the programming and legislation allowing them to offer telephony services.

Since 1989, however, cable in Britain has had to compete against a DTH service provided by Rupert Murdoch, while at the same time relying on Murdoch to provide most of cable’s programming. The slowness of constructing cable systems, the higher price of cable programming, and the inability of cable to offer popular cable-only services led to a cable subscriber-base of only 3.6 million subscribers by the end of 2001 (out of 12.5 million homes passed by cable), against 5.7 million DTH subscribers. The success of cable telephony—with more subscribers than cable television—and hopes that interactive services will be popular compensate for the poorer than expected performance of cable television. However, since 2001 both Telewest and in particular NTL have decided to conserve cash in attracting new subscribers, concentrating instead on maximizing revenue from their existing subscriber base.

Cable television has grown much more successfully in some European countries, in particular the Netherlands, Belgium, and Germany. German cable was helped when the government and state-owned Deutsche Telekom decided to install cable across what was then West Germany. By the end of 2001, some 20.6 million German homes were hooked up to cable. Germany is large enough to support a significant DTH market as well, with more than 12.9 million subscribers (December 2001). In all three nations cable is treated as a low-cost utility service.

Most European countries are developing either cable or DTH systems, largely depending on their topography. The most rapid development, however, is taking place in Asia, where Murdoch and US programmers are seeking to start DTH services and to feed emerging cable networks (see Satellite Television). Among these newer networks are those of Foxtel and Optus Vision in Australia, whose services are also available via DTH satellite.

There is clearly a demand for multichannel television in the United States and many other countries across the world. It is not clear, however, how great the demand is or whether it exists for the more advanced, interactive services that are being introduced.

III

The Future for Cable Television

The future for cable television may well depend on whether a rival DTH service is offered. The slowness and high cost of constructing cable systems would suggest that cable operators need a very long head start over DTH. The successful launch of the DirecTv DTH service in the United States in 1994, however, also shows that DTH’s ability to offer the advantages of a new technology—almost 500 digital channels—across its whole coverage area from the first day is a major competitive threat even to well-established but slow-moving cable systems. If the limited interactivity offered by DTH satiates public demand, cable-television operators could face further difficulties.

The cost of digitalizing their networks is the major issue facing cable operators around the world. Digital cable technology is by far the best technology to provide numerous television channels, pay-per-view, and video-on-demand, as well as data and interactive services, telephony, and access to the Internet. Quite apart from the questionable strength of consumer demand, however, the investment costs are high and the pay-back period longer than most cable operators imagined. Europe’s three “new” key cable operators, UK-based NTL and Telewest, and UPC (based in the Netherlands) have successfully led a major—but financially expensive—industry consolidation throughout the 1990s. It will be some years before cable emerges as a fiscally successful business.