Cable Firms Get Ready for Spread of HDTV
What's been holding back high-definition TV, promoted as the next big thing in home entertainment for more than 15 years?
Analysts have pointed to three things: the cost of the digital TVs needed to receive ultrasharp pictures, the lack of HD programming and the cable TV industry's reluctance to carry HD content.
Cable firms are key because they provide pay TV to seven out of 10 homes.
The good news is that retail TV prices are falling, more content is on the way, and cable TV firms are carrying a handful of HD channels in many markets.
Still, it's unclear when the HDTV market will take off. Only a few million U.S. households are equipped with pricey, HD-ready TV sets.
Robert Sachs, head of the cable industry's trade group, talks about recent developments in this interview.
IBD: Why are cable firms warming up to HDTV?
Sachs: HDTV became a bigger priority for cable about 15 months ago. That's when a number of (cable executives) were out at the Consumer Electronics show in Las Vegas. They saw that most of the displays featuring HDTV were using satellite as a signal source.
That probably caused them to think about expediting their plans in respect to launching HD services. They didn't want satellite to gain a competitive edge.
IBD: What are competitive advantages of cable vs. satellite?
Sachs: Both cable and satellite are now offering HD options to consumers. Because of its distribution technology, satellite is (generally) a national service. But with spot beam (technology), satellite also has the ability to target programming to particular markets. With that said, satellite companies carry local broadcast signals in only 50-60 markets.
One of cable's competitive strengths is that it is a local business. Cable companies in every market across the country today carry broadcasters' digital local signals, their analog signals. And they're carrying digital HD signals in an increasing number of markets.
IBD: Cable TV firms agreed to carry about five HDTV channels as part of voluntary rules set up by the Federal Communications Commission last year. How many cable firms will actually carry more than the five channels agreed upon?
Sachs: It really is a market-by-market determination. They need to see what the initial consumer response is to HDTV and how many HDTV channels fit with their overall programming mix.
IBD: Some cable firms are charging extra fees for HDTV channels while others aren't. The same is true for satellite TV rivals. What's going on?
Sachs: Business models are still evolving. Even within the same cable company, they might be trying different pricing models in different markets. Typically, operators aren't charging digital customers extra for HDTV beyond equipment costs - except where programmers are charging them more.
But there are different pricing models for equipment too. Cox, for example, in some of their markets has done deals with (retailer) Best Buy. In that case, consumers purchase the HD set-top box at Best Buy. Other operators are leasing equipment. There are a variety of arrangements.
IBD: The National Association of Broadcasters has complained that cable operators are carrying less than 10% of the nearly 800 local stations broadcasting digital TV. Are they correct?
Sachs: That's a misleading statistic for several reasons. Most broadcast stations that are on the air in digital are using the standard-definition format (with less picture quality than HDTV). They're simply broadcasting digital duplicates of their analog signal.
Cable customers are already receiving the same broadcast content with very good analog picture quality. What makes a dramatic difference is where a broadcaster is producing substantial amounts of HD programming opposed to standard-definition digital. HD is what offers consumers something more.
The challenge that cable operators face today is one of bandwidth. Even where they've rebuilt their systems, there's still only 200 megahertz of new bandwidth for digital services - digital video channels, pay per view, Internet access, cable telephony.
There's a finite amount of bandwidth. It's a question of what is the optimal way to allocate it.
Cable operators today are offering HDTV in systems passing 45 million homes - including 73 of the nation's top 100 markets. In more than half of those 73 markets, the package of high-definition programming supplied by the cable operator includes one or more local broadcast stations.
IBD: Didn't the NAB also complain that viewers in many markets couldn't watch the Super Bowl on ABC in HD format through local cable systems?
Sachs: You need to understand that some broadcasters are asking for additional compensation for cable carriage of their digital signal, which includes high-definition programming.
It wasn't a situation of cable operators blocking access. It's a question of whether ABC was seeking to charge them for carriage of their digital signals.
Where ABC affiliates make their HD broadcasts available at no additional cost for cable subscribers, I'm unaware of any situation where the cable operator has said no to carrying the signal.
IBD: What will influence whether HDTV becomes mainstream with consumers?
Sachs: The greatest factor today is the price of high-definition TV sets.
Until we see digital TV sets break the $1,000 price mark and get down to around $600, these sets are going to be beyond the reach of millions of consumers.
There's also a big need for more HD or other high-value digital content. It's great that HBO, Showtime and Discovery have HD offerings, that ESPN is going to be offering an HDTV channel in April, that Bravo and Cinemax have announced launches for later this year.
You're also starting to see regional sports channels, like Comcast SportsNet and MSG in New York with HD offerings.
-- excerpt from Investors Business Daily... |
