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.