Managing The Cable Television System

Group Members Wajid Javaid Amir Habib

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Cable television (also called CATV) was developed in the late 1940’s in communities unable to receive television signals. The cities of Mahanoy City and Lansford, Pennsylvania as well as Astoria, Oregon, are credited with having been the first set of communities in the U.S. to offer CATV service to its residents. What is important about such communities is that it provides a basic blueprint of how cable television started in the U.S. Each example started as a pragmatic solution to the problem of poor television reception.

One such cable system was started in 1948 in Mahanoy City, PA to cope with the problem of poor television reception. In Mahanoy City, a coal mining town of 10,000 people in the Appalachians, reception from the three TV networks 86 miles away in Philadelphia was all but nonexistent.  An appliance store owner by the name of John Walson, could not sell any TV sets to local residents. The lack of reception prevented Walson from 

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During the summer of 1947, Walson erected an antenna on a high ridge of a nearby mountain. Later that year, Walson strung electrical ribbon wire from the mountain antenna down to his appliance warehouse, which was a few blocks from his store. He was then able to demonstrate for visitors a video image and a weak audio signal. In 1948, he erected a larger antenna on top of the mountain and replaced the ribbon wire with a more efficient twin lead wire. The display caused a local sensation. People gathered outside the store window to watch the programs being brought in from Philadelphia. Walson next arranged to wires for a fee between his warehouse and store to the homes of several residents living along the route. Many of them were neighbors that he had sold television sets with the promise that they would be connected to his service. The demand for television sets and for inclusion in the system jumped substantially in Mahanoy City. The CATV service was soon

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A typical cable television system will usually contain four types of programming service. They include:  1. Basic Cable  2. Expanded Basic  3. Pay Cable Television ▪ Video on Demand

 4. Enhanced Information Services ▪ ▪ ▪ ▪

High Speed Internet Access High Definition Television Digital Video Recording Cable Telephony

Basic cable is the gateway service that all subscribers must take in order to obtain expanded basic and/or premium services. Basic cable consists of approximately 20-30 services.  It typically includes the four major broadcast networks, PBS, minor broadcast networks including the CB network, a Spanish language channel (Univision, Telemundo etc.), a few independent stations, a few select cable services, C-Span, public access channels and one or more religious channels. 

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Expanded Basic is the foundation of cable television programming and consists of 60-90 channels of programming. Expanded basic represent the highly recognized cable program services such as ESPN, CNN, MTV, Discovery Channel, USA Networks etc. Most cable operators do not distinguish between basic and expanded basic and sell the two as an integrated package. Expanded basic cable services are mostly advertiser supported with the exception of PBS, C-Span and public access channels.

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Pay cable television is charging the customer an additional fee for the right to receive a premium television channel or service. Pay cable television comes in two forms, including monthly services like Home Box Office, Showtime and STARZ as well as pay-per-view (PPV) events which involves charging the customer by the program rather than by the service (or channel). In principle, pay cable services add a premium value to the traditional television viewing experience by offering subscribers programming that they wouldn’t normally be able to get on basic cable such as recently released films, made for cable specials, specialized concerts, sporting events, adult

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Video on Demand (pay-per-view) television represents a distinct category of pay television services. PPV involves charging the customer by the program rather than by the service (or channel). PPV represents the consummate form of interactive television and has proven an excellent strategy for promoting special event programs like feature films, professional boxing and wrestling, music concerts and adult entertainment. PPV television is not a new idea. Early attempts at marketing PPV can be traced back to the 1950’s and the early subscription television systems involving traditional broadcast television.

The future design and development of a broadband residential network has to be understood in the larger context that it is providing an electronic gateway to a whole host of enhanced information, entertainment and value added services. including:  High Speed Internet Access  High Definition Television  Digital Video Recording  Cable Telephony  Broadband residential networks represent a core component in planning for tomorrow's "smart homes.” 

 Franchising

& Refranchising

Procedure  Organization  Economics  Marketing & Promotion  Regulatory Environment

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cable television system operates under the a franchise agreement.

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cable television franchise is a contractual agreement between the cable operator and local government which defines the rights and responsibilities of both parties in the construction and operation of the cable system.

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of the cable operator's important responsibilities, includes the requirement to pay a franchise fee to the local community in which it operates. The franchise fee cannot exceed 5% of the cable operator's gross annual revenues.

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A cable television franchise comes up for renewal approximately every ten to twelve years. At that time, the cable operator and the said community are both obligated to negotiate a new franchise agreement that will outline the requirements and

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Whether the process is formal or informal, there are four basic steps that the community (or franchising authority) should follow:

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1. Evaluate the Past Performance of the Incumbent Cable Operator  Has the cable operator fulfilled its obligations to the community

and to its subscribers? If not, the cable operator should not expect renewal

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2. Determining the Future Cable-related Needs of the Community  1) What are the future cable related community needs and

interests?  2) What are the cost requirements in order to meet those needs?

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3. Evaluation of the Incumbent Operator's Proposal  The task here is to evaluate the incumbent operator's proposal for

a new franchise taking into consideration the operator's financial, technical and legal qualifications to fulfill its proposal

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4. The Decision to Renew or not Renew the Existing Operators Franchise including Terms and Conditions  After conducting the community assessment and establishing

priorities, (as well as reviewing the operators proposal) it is then time to begin serious negotiations between the cable operator and the franchising authority.

 The decision to renew or not renew is usually the result of

extensive negotiations (or failed negotiations) with the operator.

The current system of local cable franchising is about to undergo a major change.  Current legislation as it is presently constituted, will allow new video providers to get a 10-year franchise within 30 days of filing the requisite application.  It also allows cable operators to get a franchise under the same national franchise terms if a competitor enters the market with a national franchise or when their current franchise expires. 

Amir Habib

 Government

Affairs & Community

Relations  Human Resources  Business Operations  Advertising Sales  Technical Operations  Marketing  Customer Service ALL HEADED BY “GM”

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business of cable television consists of two primary sets of players, including:  1. The cable television operator

and  2. The cable program supplier.

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cable operator is responsible for providing cable television service to the community.  The cable operator packages a diverse set of program services and charges subscribers a fee accordingly.  Comcast  Cox Cable  Charter Communication

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The program supplier is responsible for delivering program services to the cable operator. A program supplier can include both the broadcast television networks (CBS, ABC, NBC and Fox as well as cable network suppliers (CNN, MTV, ESPN etc.) Program suppliers break down into two major categories:  1) advertiser

 Cable

television is often considered a natural monopoly; that is, a one of a kind service in the community in which it operates.  Obligations:  Must provide service on a nondiscriminatory

basis  Must maintain quality level of service

 Rights:  Is allowed to make all programming decisions  Is allowed to make sufficient return on

In the U.S. today, cable television is the primary means of delivering broadband television services to the home.  Cable television is available in approximately 

Table 1. Cable Television Development in the U.S. (2007) _______________________________________________________________________ _

U.S. Television households Basic cable TV households

110,900,000 65,600,000

Penetration: Basic cable 58.8% to television households: (compared to 66.8% in 2005) Cable Operating Systems 7,090 High Speed Internet Services 119,100,000 Avg. Monthly Price for Expanded Basic $41.17 (compared to $38.23 in 2005)

Comcast Time Warner Cable Charter Comm. Cox Communications Adelphia* Cablevision

21,495,000 11,039,000 5,913,000 5,400,000 4,876,900 3,065,700

* Adelphia has been sold in a joint acquisition by Comcast and Time Warner

 Cable

television has fundamentally changed the American television landscape in four very important ways. They include:  1. Increasing the level of consumer choice  2. Narrowcasted television services  3. Leveling the electronic playing field  4. Exercising a critical gatekeeping function

 Historically,

the relationship between broadcasters and the cable industry can be considered antagonistic.  Beginning in the early 1980’s, the U.S. under the Reagan administration actively promoted the cause of economic deregulation. The passage of the Cable Act of 1984 was especially important to the cable

One of the direct consequences of increased programming and limited capacity is that the broadcast industry has experienced a steady decline in broadcast television market share.  In response, most of the major television networks (or transnational media parent companies) also own cable network services. Examples: 

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Disney (ABC) – ESPN Viacom (CBS) – MTV, BET, Nickelodeon News Corp. (FOX) – Fox News Channel, Fox Sports GE (NBC) – MSNBC

 Programming

for a cable operating system differs significantly from broadcasting.  A broadcaster is responsible for programming one channel, whereas, a cable operator must program a multichannel television service that can range in size from 60 to 250 plus channels.

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reflects maturity of the business itself.  It consists of Ads, TV Guides, PPV, Premium service promotions.  Due to cable TV promotion the battle between subscribers & advertisers continues to intensify.  Professional organizations that can assist, one of that organization is CTAM.

 The

cable TV industry has gone through both deregulation and reregulation.

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1984, Congress believed that there was sufficient competition to ensure consumers fair prices and quality service.  The Cable Communications Policy Act of 1984 deregulated the cable TV industry.

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a period of rapid price growth, the industry was re-regulated in 1992.  Cable operators were required to reduce prices by nearly 17 percent in 1993-94.  They claimed that the lost revenue will keep them from desired upgrades.

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Telecommunications Turns Act of 1996 mandated that rate regulation be phased out and ended completely by March 1999.  Cable prices soared again.

 System

with more than 12 channels must set aside up to 1/3 of their channel capacity for local signals.  Home shopping stations are entitled to must carry as are qualified low power TV (LPTV) stations.  System with up to 12, 36 & more than 36 channels must carry 1, 3 & more than 3 local non commercial stations respectively.

+9.5% +6.8% +5.1%

+0.9%

Regulated Prices 1976 – 86

Deregulated Prices 1986 – 92

Reregulated Prices 1992 – 95

Deregulated Prices 1996–2007

Data and closed-captioned services broadcast by cable T.V. system

The cable industry is currently undergoing a major redefinition as to its core business. While television entertainment will continue to be the main engine that drives cable television forward, the very nature of programming will undergo a profound change.  Today’s cable operator is much more than a purveyor of television entertainment. Rather, cable delivery of broadband communication services makes possible a whole host of utility and value added features including: local government, public safety, health care, education and business  In a multichannel universe, the origins of entertainment, information and utility based services become less distinguishable. The future of electronic media will come to include a 

Thank you 