Cable Fight Over Digital TV
A proposed FCC rule that would require cable companies to carry broadcasters' new digital television signals has cable executives like Marcus Cable's David Intrator fuming.
Under the proposal, the FCC would force cable operators to carry broadcasters' new digital signals, even though that may force cable operators to cut back on their own offerings.
Cablers hate the so-called "must carry" rule because digital signals take up a lot of bandwidth, which could be used for more lucrative purposes. The plan will likely be a hot topic at this week's National Cable Television Association Convention in Atlanta.
Intrator, Marcus's vice-president of marketing and programming, says he would rather use that bandwidth to give his customers more choices and to fight off challenges from satellite TV companies.
"By using the digital bandwidth for pay television, our customers who are most vulnerable to defect from cable to alternative technologies will be secure," Intrator said.
Intrator is particularly concerned about protecting his turf from satellite companies, such as Echostar Communications and Hughes Corp.'s DirectTV.
He says Marcus Cable, which serves about 500,000 customers in Dallas, wants to use digital capability for pay channels, such as HBO, Showtime, Cinemax and the Movie Channel . "The satellite industry has taught us that movies drive that [satellite viewership] model," he said.
Intrator said premium pay channels are currently purchased by a third of Marcus Cable customers. Instead of carrying broadcast stations' local digital offerings, Marcus wants to use that bandwidth to keep its audience happy with crystal-clear, high-definition pay-TV. Customers who don't opt for pay TV programs will have more room for additional, analog-based channels.
The FCC currently requires cable operators to carry local analog broadcast signals as a public service because they hold local monopolies. Some 70 percent of the American public gets its local programming from cable TV.
Other cable operators have argued they shouldn't be required to carry digital signals because the television sets to interpret them won't be affordable to the general public for many years.
Projected prices for the new TVs range from $2,000 to $10,000 once the sets are available.
In the next few years, the networks will only broadcast a few hours a week of digital programming. The FCC requires all stations to be capable of digital broadcasting by 2006, by which time it is expected digital TVs will have become more affordable.
For their part, broadcasters argue that they are being forced to invest millions of dollars in setting up new digital broadcast technology, with uncertain likelihood of recovering their investments any time soon.
First Honolulu Securities analyst Leonard Deal says broadcaster may be able to increase advertising rates during the early phases of the transition to digital broadcasting. "The can say that they are at the technological forefront, that they are implementing the [digital] service," he said.
However, Deal said, digital TV will largely remain an experiment for the networks for years to come until digital broadcasts to become as common as color telecasts.
Deal said while the FCC appears to be leaning towards adopting the "must carry" rule, the fight is likely to wind up in a long and protracted legal battle.
David B. Wilkerson, CBS MarketWatch