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Cable Television Comes of Age.

Cable television's turbulent history has taken a decided turn for the better during the past decade as the number of systems in operation soared to 4,430, the number of communities served climed to 13,100 and the number of subscribers "on the cable" increased from 8,500,000 in 1974 to 27,800,00 in 1984!

But, bright tho these numbers are, cable television is still basically an industry of unfulfilled promise . . . both for the customer (less than five percent enjoy an form of the long-awaited "Two-way" services and few find much escape from the "TV wasteland" of programming) and for the cable system operator (escalating costs and disppointing profits).

Cable television was begun in 1948 as a community antenna service (CATV) to help those who could not receive conventional broadcast television signals because of geographic location. Cable consisted basically of a master antenna system serving communities that had litle or no TV reception. John Walson of Service Electric Company, Mahanoy City, Pennsylvania, is generally thought to have established the first CATV system.

Although the cable industry remained small and underdeveloped for almost a decade, it expanded as viewers became more discriminating. Cable operators could no longer offer just a few local television station to their subscribers; cable viewers also wanted to see programming other than network offerings.

Operators began importing "distant signals" via microwave from the closest city receiving conventional television. And public grew even more interested in cable when it realized the medium could also originate programming. A major industry seemed about to blossom. Multiple system operators grew with the cable audiences.

Cable's growth was stunted, however, when the FCC effectively froze its development with stiff regulations in the late 1960s as a "broadcasting versus CATV" war raged for most of the decade. These regulations were eased somewhat in 1972 when the FCC established new rules governing the cable industry.

In 1975 satellite communications expanded programming capacities of cable systems so that they no longer had to depand solely upon broadcasters for products. Diversity became a hallmark of cable, and a new facet of the industry was its role as a vehicle for pay TV.

Focusing most of their attention on wiring cities, towns and suburbs over the last three decades, and intent on keeping pace with the growing demand for cable programming services, the cable industry is just now beginning to wire some of the major cities such as New York and Chicago and cable TV operators are at last beginning to recognize the virtually untapped business communications market, offering their large-capacity channels to large users as an alternative to the local telco loop.

An important breakthrough in the business area came last year in Pittsburgh when Warner Amex Cable Communications signed up Westinghouse for the first commercial use of cable in a major metropolitan area.

Under the agreement, Warner Amex is providing Westinghouse with a high-speed, all digital cable link which will serve three Westinghouse facilities in the downtown area of Pittsburgh. The Warner Amex cable link also became part of the overall national communications network of Westinghouse sending and receiving satellite-fed information for Westinghouse facilities across the country, marking the first time a cable communications company has been able to successfully interface with a privately operated microwave system.

Bob Bennis, Manager of the Communications Systems Department of Westinghouse, said, "These high speed digital communications facilities provided by Warner Amex will serve as vital links in the advanced communications network being installed by Westinghouse in the greater Pittsburgh area. This network is a major investment by Westinghouse to improve the productivity of corporate operations in Pittsburgh."

Looking at "CATV Markets in the United States," New York City-based Frost & Sullivan sees the number of cable subscribers growing from 17 million in 1981 to 40 million 10 years late and the nine million of those who were pay-TV subscribers will nearly triple to 34 million by 1991, representing 85 percent of the basic CATV subscribers. Revenues for cable operators will also soar, says the study, going from $3.6 billion in 1981 to $11.4 billion 10 years later. Pay-TV is expected to account for the largest spurt, going from $1.3 billion in 1981 to $4.5 billion in sales in 1991. The number of two-way interactive cable-equipped homes will also rise substantially, according to International Resource Development of Norwalk, Connecticut . . . rising from 2.4 million households so equipped in 1982 to 5.8 million by 1984, then to 14.4 million by 1987 and to 36 million by 1992.

Actually the cable television business today is there businesses: first, the community antenna television business bringing sharp clear pictures to areas which otherwise would not receive them; second, the premium entertainment business taking publishing concepts and applying them to video . . . in other words, the business of identifying a market, developing product for it and collecting revenues from both advertisers and consumers; and third, the information business using capacity built for other purposes to become a major player in the information age.

The cable industry, earlier beset with problems with the broadcasting industry and the federal government, is now finding local governments its most formidable foe. Today five cents of every dollar paid by cable subscribers goes to local government in a "hidden tax."

Congress is now considering a bill (S-66 and HR-4103) to "deregulate" the cable industry and cable interests and city governments are talking "truce" in terms of a four-year rate freeze at the beginning of a franchise term with freedom to raise rates up to five percent a year without city approval thereafter.

Former NCTA President Tom Wheeler stated cable's position when he said: "Cable's competitors are universally deregulated or unregulated. Either through direct federal intervention or through quirks in the law, these services are beyond the reach of local governmental authorities. As a result these competitors enjoy a significant competitive advantage. They don't pay franchise fees, they don't have to give away service, they don't have to underwrite various local ventures from production studios to police firing ranges, they don't have to go to a regulatory body to seek permission to adjust rates or services and they don't have to expose their business to local political hyjinks when their license is up. There is no way that cable can be described as a monopoly in the face of all these alternative delivery methods and alternative services. We may be the only wire in town (even that isn't true when one considers unregulated SMATVs and telephone company provision of competitive pathways) but cable systems aren't the only way consumers can receive various services.

"Mayors and other local officials opposing Congressional passage of the Cable Telecommunications Act, or demanding unrealistic concessions, are running the risk of losing most of their authority over cable TV to the Federal Communications Commission. Mayors fighting the legislation, if successful, will have won a battle but will certainly lose the war. The FCC made clear in two recent rulings that it will allow local authorities only a "quite narrow" jurisdiction over cable. Firing a loud warning shot across the bow of local officials, the FCC said it is concerned about . . . and presumably will strike down . . . any local regulation that may impede new cable services and burden interstate communications."

James McKinney, chief of the FCC's Mass Media Bureau, sent an even louder warning to local and state communications regulators. In a recent speech before the Federal Communications Bar association, he denounced them as "mini-FCCs." and said the real FCC is fully justified in preempting their power.

Former FCC Commissioner Nicholas Johnson was really not exaggerating when he said: "The difference between ordinary television and cable is the difference between a garden hose and Niagara Falls."

A state-of-the-art cable system offers subscribers more than 100 channels with the capability of offering not only a wide range of network programming but also the potential for local access, a range of interactive services such as home security systems and even video games, a method of information retrieval from data banks, an "electronic order blank" connection with stores, Videotext, and countless other services.

"Cable is more of everything," says Les Brown, adding, "Beyond being just a television medium, it is also a communications network for a municipality. Many of the new cable installations link schools, libraries, hospitals, and police and fire departments for point-to-point communications."

Ever since it hooked up with satellites less than a decade ago and added scroes of additional programming options, cable television has been one of the "glamour" industries. With the explosion in cable-only programming now available there are now some 43 satellite-delivered services.

Cable companies have embarked on a $4.4 billion construction program that will provide a 60 percent increase in cable plant at new and upgraded systems by 1987. This in turn will increase subscriber households dramatically, to around 55 million by 1990. Cable companies are now adding subscribers at a nationwide rate of a monthly net gain in subscribers in excess of 300,000 homes.

"The growth of the CATV industry into the larger cities and additional communities, the expansion of existing systems and the rebuilding and replacement of existing systems, will result in significant equipment purchases over the coming years," predicts a recent industry study by Frost & Sullivan. The chart at the buttom of this page projects the growth in the number of cable systems and of basic service subscribers, indicating a steady pattern through 1991.

Cable TV is coming to mean more than one-way entertainment services. In fact, "CATV is driving hard to become the first supplier of universal broadband, integrated communications networks capable of simultaneously transmitting two-way voice, data and viceo signals," notes a recent report from Strategic of San Jose, California. It predicts that two-way CATV could play "a major role in the development of such a universal communications service before the turn of the century. The market for these services is expected to be greater than the market for telephone services today. In fact, the new system might well absorb telephone services as we know them."

What does the future hold? A recent IRD study says: "By 1990 fiber optics will have replaced coaxial cable, which will allow the carriage of over 200 full video channels. Some of these channels will be able to feed full video upstream from home video cameras." IRD also suggests that cable subscribers then will be able to circumvent telcos by use of fiber-optic multipoint-to-multipoint transmission, and could "even use home cameras to see each other during conversations."

Despite dramatic growth, the line on cable television remains the same as it has been through two decades: unfulfilled potential.
COPYRIGHT 1984 Nelson Publishing
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1984 Gale, Cengage Learning. All rights reserved.

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Publication:Communications News
Date:Sep 1, 1984
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