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Tenacious Cable Collects Winnings

May 14, 2007  •  Post A Comment

The money is finally pouring in for the cable industry after billions of dollars in investments that Wall Street wasn’t sure would pay off. That made executives such as Comcast CEO Brian Roberts and Time Warner CEO Dick Parsons high rollers in Las Vegas last week.

The upbeat tone of the National Cable & Telecommunications Association’s annual convention was unmistakable in part because the big cable companies have been reporting record revenues and higher earnings. Much of cable’s current financial success is built on the broadband pipelines it has been building for years. Those lines now enable the industry to supply high-speed Internet access and telephone service on top of multichannel television.

The theme of the show was “Competition Works, Consumers Win,” but the cable guys were mostly crowing about how they were kicking the pants of their new rivals, the telephone companies. Cable companies also are enjoying dominance over satellite TV providers, which are having difficulty offering competitive bundles of services.

One of the cable executives’ favorite statistics last week was that for every cable TV subscriber they lose to the telecommunications companies, they pick up 10 telephone subscribers.

“Their ability to get our video subs is more limited than our ability to get their subs,” Comcast Chief Operating Officer Stephen Burke said. “We’re going to come out ahead in the competitive balance and I think it’s going to stay that way for quite a while.”

Mr. Burke also quoted his boss, Mr. Roberts, as calling the telcos’ high-speed DSL Internet services “the new dial-up.” He said 55 percent of the high-speed subscribers that cable gets are former DSL users.

Mr. Roberts showed off a new, faster form of high-speed technology that Cable Labs, the industry’s technical consortium, is working on. Called wideband cable modems, they can download files at 150 megabits per second by “bonding” four channels to provide added bandwidth.

He downloaded the entire Encyclopedia Britannica in a matter of minutes and said the development would continue to give cable the upper hand versus the telcos or wireless providers.

While some analysts have seen the advent of faster, clearer video over broadband as a threat to cable television, Mr. Roberts and his colleagues said their companies are prepared to take advantage of the opportunities it presents.

“The notion the new kids on the block are taking over is a false notion,” said Time Warner’s Mr. Parsons. “Ten years from now, these companies will still be here,” referring to big media companies such as Comcast, News Corp. and Viacom, whose top executives were on the stage.

He said those companies will learn to adapt their content to the new technology.

“When we do, we’re going to run the little guys down,” Mr. Parsons said.

A visit by FCC Chairman Kevin Martin, whose views are seen as anti-cable by many in the industry, only briefly dampened the mood.

Before starting his speech, Mr. Martin said he was surprised to be invited to the convention, given the criticism and complaints from the industry.

“I actually don’t dislike cable,” he said, noting that he is an “avid consumer” of cable services, including digital cable, digital video recorders and high-speed Web access.

He praised cable for rolling out broadband service and promised an open dialog with the industry.

But he stuck to his guns in telling the cable crowd that he favors channel-by-channel pricing for cable networks and a requirement that cable channels carry local broadcasters’ signals.

“Consumers should be able to purchase what they want, without [having] to purchase those they do not,” he said of the a la carte channel-pricing issue. “I don’t believe consumers should have to buy Spike to get Discovery.”

Regarding must-carry, the requirement that cable operators carry signals from local TV stations, he said the broadcasters’ extra channels would be a benefit to consumers who face the prospect of having to buy converter boxes when broadcast converts to all-digital signals.

Without dual must-carry, the government would be forcing consumers to get converters simply to prevent their sets from going dark. Without cable carriage, Mr. Martin said, broadcasters don’t believe multicasting the digital signals is viable.

Mr. Martin also accused the cable industry of hypocrisy in saying it needs to sell channels in bundles while also saying the carriage of broadcast channels should be decided by the market.

“You can’t have it both ways,” he said.

NCTA President Kyle McSlarrow rebutted that argument, saying that the chairman’s position on a la carte is tantamount to unbundling, and his position on digital must-carry equates to more bundling.

“You can’t have it both ways,” was Mr. McSlarrow’s echo.

These issues did little to dent the buoyant mood of the convention.

“I don’t see any of this slowing down our momentum in the slightest,” Mr. McSlarrow said.

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