Monday, December 11, 2006

Cable Costs Rising, FCC Upset

FCC head K-Martin is upset that cable fees keep rising for the consumers. He thinks handing the nation over to the RBOCs will solve this problem. Apparently, he knows nothing about media and TV, which does not surprise me in the least. (Someone Has to Pay for TV, NY Times).

And let's not forget that competition already exists in the form of Satelliet (DBS) - DirecTV and DISH. (Two companies that the FCC blocked from merging - go figure!). However, broadcast TV is a static market. Customer acquisition and retention is a costly business. Some Green-field and MDU FTTH projects are stealing lucrative customers from the market. VZ FiOS entering a market drops the pricing tremendously. But who wins? Temporarily, the client. Then when no one is looking the price starts rising, because you can only sell underwater for so long.

Many of the 1200 MSO's in the US are small cable companies with analog systems that provide for a limited amount of channels and no cable modem service. In these markets, DBS is winning subscribers. IPTV or triple play will not make it to these markets since delivery is just too expensive.

But back to the cable fees rising. They are rising for 3 reasons:

  1. The cost to upgrade cable systems. To upgrade 6000 homes is about $3M*** not including the $400 set-top boxes.
  2. Debt payment from upgrading cable systems. Comcast has about $29B in debt.
  3. Programming costs. Besides the NFL and other sports, recall that the six stars of "Friends" earned $1M per episode! Syndication pays back much of that.

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