Right up your ally? Digital TV offers "Stiffer competition"...
Time Warner cable guy hails digital
He sees lower system costs, but new competitors
By Steve Gelsi, CBS MarketWatch
Last Update: 5:01 PM ET Sep 17, 1998 See: NewsWatch
NEW YORK (CBS.MW) -- Time Warner Cable's president, Glenn Britt, said Thursday that high channel capacity in new digital television systems will save the company about $600 million in profit-eating capital-improvement costs by 2000.
But an industry analyst pointed out that, by then, the company may also face increased competition from phone companies, Internet service providers, software and computer companies, and even other cable operators with access to its customer base.
Britt, speaking at a conference on digital TV hosted by Warburg Dillon Read, said the Time Warner (TWX) unit will spend about $1.6 billion this year on capital improvements. About 38 percent goes to system upgrades, a perennial cost to cable operators as they've added channel capacity over the years.
Capital expenses, Britt said, will fall below the $1 billion level once new digital TV systems -- with capacity for dozens of new channels -- are installed by the year 2000.
"As we get past 2000, our upgrade operations will be finished," he said. "Digital TV will break the cycle of spending. We'll have so much channel capacity that we won't need to have any upgrades for a very, very long time. ... We can carry whatever broadcasters want."
New industry
Britt was among a group of executives from cable operators, consumer electronics makers and retailers meeting to address the challenges of digital television, which is to be rolled out in some markets starting in November.
Companies such as General Instrument Corp. (GIC) are offering cable operators and broadcasters technology for providing consumers video on demand, which allows viewers to watch programs and movies at their convenience rather than at scheduled times.
Meanwhile, retailers and cable operators are gearing up for store sales next year of $600 to $900 set-top boxes to decode digital TV signals and provide Internet access.
Price Waterhouse Coopers analyst Howard Postley, who is preparing a digital TV report, told CBS MarketWatch.com that Time Warner Cable will see savings in capital improvement costs but faces challenges from other competitors that may eat into that windfall.
"The TV industry is going to become more competitive," Postley said. "It's starting to look like the Internet business."
Stiffer competition
Digital TV may also open up local cable markets -- now the domain of individual cable operators -- to competition from competing cable companies, he said.
Broadcasters, Internet service providers and software companies such as WebTV owner Microsoft (MSFT) may perfect other means of delivering video content to consumers, he said.
Time Warner is already testing digital TV services -- dubbed the Pegasus project -- in Austin, Texas, with expansion slated for next year, Britt said. Pegasus is to be followed by Pegasus II, which is expected to include video-on-demand capacity.
Gary Shapiro, president of the Consumer Electronics Manufacturers Association, said that while digital TV promises considerable revenue growth, analog television will still be around for several years.
"Digital is the future of television," said Shapiro, warning, however, that there may be some "bumps in the road" as the industry copes with new formats and new rivalries.
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