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Media
Center > Press Releases
For Immediate Release November 29,
2001
Contact: David Beckwith/Marc O. Smith,
202/775-3629 |
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Robert Sachs
President & CEO
National Cable
& Telecommunications Association
"The Changing World of
Cable TV"
San Diego State University
November 30,
2001
San Diego, California
Thank you,
John, for your warm introduction. It’s an honor - really a
special honor - for me to be here with you.
You know,
it’s difficult to believe all the changes that have occurred
in the telecommunications field since we first met, some 25
years ago. At the time, John was the young Director of The
White House Office of Telecommunications Policy, and I was an
even younger congressional aide. OTP was still recovering from
its politicization during the Nixon years, and John was the
man placed in charge of directing telecommunications policy
for the Ford Administration.
In the small world of
things, Lionel Van Deerlin, for whom John’s professorship is
named, was then the soon-to-be Chairman of the House
Communications Subcommittee. A former San Diego broadcaster,
Congressman Van Deerlin was a man whose warm and genial manner
won support on both sides of the political aisle. His
chairmanship was marked by bi-partisanship and by dramatic
changes in the telecommunications landscape.
The
telecom world was much simpler then….
Essentially,
there was one phone company, AT&T, which provided both
local and long distance service. There were no "Baby Bells,"
just "Ma Bell," and MCI and Sprint were but visions of
entrepreneurs.
Back then three commercial networks
(ABC, NBC and CBS) defined American television and the big
three captured nearly all the viewing audience. PBS was still
in its infancy. Fox, UPN and the WB Network had yet to be
created.
In the mid- 70’s, cable TV was essentially an
antenna service for extending the reach of local broadcast
stations. Known then as "CATV," cable provided only analog
television channels over a one-way delivery system. Cable’s
tree and branch architecture involved a cascade of amplifiers
and coaxial cable that was prone to service interruptions.
There were no basic cable networks like Discovery, ESPN, or
Lifetime, and HBO had just been launched.
Yes, life was
much simpler then. But consumers also had far fewer
choices.
With all that is taking place today in the
telecoms and home entertainment fields, one could easily talk
for hours…. Should some of you be wondering whether I plan to
do so, you’ll be relieved to know that I do not. But from the
front row seat I enjoy as head of the organization that
represents the cable TV industry, I’d like to share my
perspectives on these changes.
Today, cable is much
more than just television. Cable operators provide digital TV,
high speed Internet and cable phone service in addition to
traditional cable services.
Whereas once there were
hundreds of small cable companies, today nearly 90 percent of
the cable subscribers in the U.S. are served by 10 companies.
And while the major companies range in size from AT&T
Broadband with 14 million customers to Cable One with just
under a million, all share a common vision in their belief in
the power of broadband technology.
Over the past four
years, companies like AT&T and AOL have invested billions
of dollars in our industry, as has Microsoft co-founder Paul
Allen. Fully half of the cable systems in the United States
have changed hands.
Cable system ownership is not all
that is changing.
Programming ownership and practices
are changing as well. Each of the major commercial broadcast
TV networks is now owned by a media company which has
interests in 10 to 20 cable networks. That’s right. ABC, NBC,
CBS, and Fox all have multiple cable outlets for their
programming. Some are analog cable channels; some digital.
Some are nationally distributed channels like CNBC, while
others are regional channels like Fox Sports Net.
During last year’s Presidential election, two of the
broadcast networks - NBC and Fox - switched live coverage of
the Presidential debates to their cable networks so that NBC
and Fox stations could instead air the baseball playoffs or
launch a new series during primetime. When tragedy struck our
nation on September 11th, some broadcast owned cable networks
switched to broadcast news feeds.
Upon completion of
its merger with CBS, one of the first things that Viacom did
was to put Nickelodeon in charge of Saturday morning
children’s programming on CBS.
Adding to the fuzzy
boundaries between broadcast and cable programming is the fact
that the so-called "free" major commercial broadcast networks
now seek to charge the public to receive their signals.
Eighty-five percent of TV households today receive
ABC, NBC, CBS, and Fox via cable or satellite. Increasingly,
the networks are demanding compensation for retransmission of
their broadcast signals from cable and DBS providers, who must
in turn pass these costs on to subscribers.
At the
same time that cable ownership and network models are
changing, so too is the very business that we’re in.
Today, cable uses a combination of optical fiber and
coaxial cable to deliver several hundred channels of TV and a
wide array of two-way services, including high-speed access to
the Internet, and cable telephony. Reliability and customer
satisfaction has improved dramatically, and we are competing
head-to-head with satellite, telephone, broadcast, and
wireless companies. Once just an extension of the television
industry, cable is now a leader in the telecommunications and
multimedia industries and leads the way in deploying advanced
broadband services to consumers.
The robustness of our
business model reflects the convergence that we’ve seen in
digital technologies and the Internet. Today, incumbent phone
monopolies like SBC, Verizon, BellSouth, and Qwest are
scrambling along with cable, satellite, and wireless companies
to offer consumers one-stop shopping. No longer is cable the
only multi-channel video game in town.
If you don’t
like cable’s package of voice, video, and data services, you
can try another provider. The race is on, and companies are
investing billions of dollars to win your business and keep
you as a customer.
Seven years ago, there was no such
thing as Direct Broadcast Satellite. DirecTV and The Dish
Network were ideas on the drawing board. If you wanted
networks like MTV, A&E, TNT, Nickelodeon, or Disney, you
subscribed to cable. Broadcasters, microwave TV, and ten-foot
backyard dishes provided some alternatives, but cable served
just about all of the multichannel video market.
Since
then things have changed dramatically.
DBS, which
launched in June 1994, has been one of the most successful new
consumer products ever marketed. Compared to zero subscribers
seven years ago, it boasts 17 million today. Two years ago,
Congress gave DBS operators the right to retransmit local
broadcast signals, thus putting satellite on a competitive
plane with cable.
It now serves more than 20 percent
of all multichannel video households, and cable’s share of the
video market has fallen to 77 percent. To put this in
perspective, DirecTV today has more subscribers nationwide
than all but two cable operators, AT&T and Time Warner,
while only five cable MSOs have more customers than Echostar’s
Dish Network. And recently, EchosStar and DirecTV announced
plans to combine. If you don’t think consumers have real
choices, just ask Drew Carey.
Our industry has not been
standing still. To compete effectively with satellite and
other broadband providers, cable operators have been upgrading
their networks and deploying digital video services at a
record pace. During the first nine months of this year, the
number of digital cable subscribers grew nearly 40 percent -
from just under ten million to 13.7 million.
But this
is only the beginning. We are at the threshold of an era of
interactive TV which will fundamentally change the way we
experience - and use - television. There is a whole host of
new iTV services coming online that will allow people to
interact with the programs and advertisements they are
viewing.
Still another form of interactive TV lets
consumers record and play back the programming of their choice
from among everything that is being offered on broadcast and
cable television. Using digital technology, new personal video
recorders allow consumers to record up to 60 hours of their
favorite programs. By downloading and storing the video on a
set-top device, services like TiVo and ReplayTV allow
consumers in effect to program their own networks, and watch
what they want to watch, when they want to watch it. Is this
technology likely to affect established network models? You
betcha! And look for it to be included in the next generation
of digital cable set-top boxes.
Meanwhile, competition
between cable and its new broadband competitors - especially
the phone industry - is intense.
Cable’s deployment of
high-speed cable modems spurred local phone companies to
deploy digital subscriber line service (DSL), a broadband data
technology that actually has been available for almost 10
years. When there was no competition from cable, companies
like PacTel and Ameritech - now SBC - preferred to sell more
expensive T-1 and ISDN lines, not to mention second phone
lines. However, as soon as cable offered broadband access to
the Internet, the phone companies quickly dusted off DSL and
are now aggressively selling it in telephone exchanges
throughout the nation. As of the end of the third quarter,
cable operators served approximately 6.4 million high-speed
data customers compared to roughly three million DSL customers
today.
The Telecom Act’s deregulation of cable TV and
local phone service has given investors the confidence to pump
billions of dollars into both markets. Since 1996 cable has
raised and invested $52 billion to upgrade its networks. Those
upgrades are making cable telephony possible. But Rome was not
built in a day, and replacing tens of thousands of miles of
cable plant with fiber optics is a multi-year
process.
The good news is that cable’s upgrade is now
three-quarters percent complete, and cable is beginning to do
exactly what Congress hoped it would do: it is giving
value-oriented consumers choice in local phone service. The
cable TV industry started this year with about 800,000
residential phone customers. It nearly doubled that number in
the first nine months of the year. Cable operators like Cox
and AT&T are providing feature-rich local telephone
service at prices substantially less than those charged by
incumbent phone companies.
This rollout will continue
to gain momentum as cable companies offer services that are
more attractively priced than anything the Bell companies can
provide. For instance, Cox offers its first residential line
for about 10 percent less than the incumbent Bells, and the
second line at roughly 50 percent off. Feature packages, such
as call waiting and call forwarding are offered at 20-30
percent discounts.
All of these service enhancements
and technological innovations are occurring in a fiercely
competitive marketplace - one where the federal government
should exercise great restraint when it comes to regulation.
The result of this competition and innovation is that
consumers now face an array of choices that could not have
been imagined a few years ago, much less when John Eger and I
met in 1975. And there is more to come as newer entrants
compete and develop a wider array of services to sell over
their facilities, leading to competitive responses by
established players - including cable.
So stay
tuned…
Thank you.
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