18158704 Managing the Cable Television System

8/8/2019 18158704 Managing the Cable Television System

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Group Members


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Cable television (also called CATV) was developed in thelate 1940s in communities unable to receive television

signals. The cities of Mahanoy City and Lansford, Pennsylvania

as well as Astoria, Oregon, are credited with having beenthe first set of communities in the U.S. to offer CATVservice to its residents.

What is important about such communities is that itprovides a basic blueprint of how cable television startedin the U.S. Each example started as a pragmatic solutionto the problem of poor television reception.


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One such cable system was started in1948 in Mahanoy City, PA to cope withthe problem of poor television

reception. In Mahanoy City, a coalmining town of 10,000 people in theAppalachians, reception from the threeTV networks 86 miles away inPhiladelphia was all but nonexistent.

An appliance store owner by the name

of John Walson, could not sell any TVsets to local residents. The lack ofreception prevented Walson fromdemonstrating his TV sets.


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During the summer of 1947, Walson erected an antenna on ahigh ridge of a nearby mountain. Later that year, Walson strungelectrical ribbon wire from the mountain antenna down to hisappliance warehouse, which was a few blocks from his store.

He was then able to demonstrate for visitors a video image and aweak audio signal. In 1948, he erected a larger antenna on top ofthe mountain and replaced the ribbon wire with a more efficienttwin lead wire. The display caused a local sensation. Peoplegathered outside the store window to watch the programs beingbrought 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 setswith the promise that they would be connected to his service.The demand for television sets and for inclusion in the systemjumped substantially in Mahanoy City. The CATV service was soonestablished as an ongoing business.


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A typical cable television system will usually containfour 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 DigitalVideo Recording

Cable Telephony


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Basic cable is the gateway service that allsubscribers must take in order to obtain

expanded basic and/or premium services. Basiccable consists of approximately 20-30 services. It typically includes the four major broadcast

networks, PBS, minor broadcast networksincluding the CB network, a Spanish language

channel (Univision, Telemundo etc.), a fewindependent stations, a few select cable services,C-Span, public access channels and one or morereligious channels.


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Expanded Basic is the foundation of cable televisionprogramming and consists of 60-90 channels ofprogramming. 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 publicaccess channels.


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Pay cable television is charging the customer anadditional fee for the right to receive a premiumtelevision channel or service. Pay cable television comes

in two forms, including monthly services like Home BoxOffice, Showtimeand STARZas well as pay-per-view(PPV) events which involves charging the customer by theprogram rather than by the service (or channel).

In principle, pay cable services add a premium value tothe traditional television viewing experience by offering

subscribers programming that they wouldnt normally beable to get on basic cable such as recently released films,made for cable specials, specialized concerts, sportingevents, adult entertainment etc.


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Video onDemand (pay-per-view) television represents adistinct category of pay television services.

PPV involves charging the customer by the programrather than by the service (or channel). PPV represents theconsummate form of interactive television and has provenan excellent strategy for promoting special event programslike feature films, professional boxing and wrestling, musicconcerts and adult entertainment.

PPV television is not a new idea. Early attempts at

marketing PPV can be traced back to the 1950s and the earlysubscription television systems involving traditionalbroadcast television.


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The future design and development of a broadbandresidential network has to be understood in thelarger 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 DigitalVideo Recording Cable Telephony

Broadband residential networks represent a corecomponent in planning for tomorrow's "smarthomes.


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Franchising & Refranchising Procedure

Organization

Economics Marketing & Promotion

Regulatory Environment


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A cable television system operates underthe a franchise agreement.

A cable television franchise is a contractualagreement between the cable operator andlocal government which defines the rights

and responsibilities of both parties in theconstruction and operation of the cable

system.


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One of the cable operator's importantresponsibilities, includes the requirement

to pay a franchise fee to the localcommunity 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 franchisecomes up for renewalapproximately every ten to

twelve years. At that time, the cable

operator and the saidcommunity are both

obligated to negotiate anew franchise agreementthat will outline therequirements andexpectations of both parties.


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

1.Evaluate the Past Performance of the Incumbent Cable

Operator

Has the cable operator fulfilled its obligations to the communityand to its subscribers? If not, the cable operator should not expectrenewal

2. Determining the Future Cable-related Needs of the Community

1) What are the future cable related community needs andinterests?

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 fora new franchise taking into consideration the operator's financial,

technical and legal qualifications to fulfill its proposal

4.The Decision to Renew or not Renew the Existing Operators -Franchise including Terms and Conditions

After conducting the community assessment and establishingpriorities, (as well as reviewing the operators proposal) it is thentime to begin serious negotiations between the cable operator andthe franchising authority.

The decision to renew or not renew is usually the result ofextensive negotiations (or failed negotiations) with the operator.


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The current system of local cable franchising isabout to undergo a major change.

Current legislation as it is presently constituted, will

allow new video providers to get a 10-year franchisewithin 30 days of filing the requisite application.

It also allows cable operators to get a franchiseunder the same national franchise terms if a

competitor enters the market with a nationalfranchise or when their current franchise expires.


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Government Affairs & Community Relations

Human Resources

Business Operations Advertising Sales

Technical Operations

Marketing

Customer ServiceALL HEADED BY GM


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The cable operator isresponsible for providing cabletelevision service to the

community. The cable operator packages a

diverse set of program servicesand charges subscribers a fee

accordingly. Comcast Cox Cable Charter Communication


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The program supplier isresponsible for deliveringprogram services to the cable

operator. A program supplier can include

both the broadcast televisionnetworks (CBS, ABC, NBC andFox as well as cable network

suppliers (CNN, MTV, ESPN etc.) Program suppliers break down

into two major categories: 1) advertiser

2) pay supported services


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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 investment


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In the U.S. today,cable television is the

primary means ofdelivering broadbandtelevision services tothe home.

Cable television isavailable inapproximately 58.8%of all U.S. homes.


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

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U.S.Television households 110,900,000Basic cable TV households 65,600,000Penetration: Basic cable 58.8%to television households: (compared to 66.8% in 2005)

Cable OperatingSystems 7,090HighSpeed InternetServices 119,100,000Avg. Monthly Price for Expanded Basic $41.17

(compared to $38.23 in 2005)

Source: National Cable & Telecommunications Association


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Comcast 21,495,000

Time Warner Cable 11,039,000

CharterComm. 5,913,000

Cox Communications 5,400,000

Adelphia* 4,876,900

Cablevision 3,065,700

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


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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


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Historically, the relationship betweenbroadcasters and the cable industry can be

considered antagonistic. Beginning in the early 1980s, the U.S. under

the Reagan administration activelypromoted the cause of economic

deregulation. The passage of the CableAct of 1984 was especially important to thecable industry.


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One of the direct consequences of increasedprogramming and limited capacity is that thebroadcast 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 owncable network services. Examples:

Disney (ABC) ESPN Viacom (CBS) MTV, BET, Nickelodeon

News Corp. (FOX) Fox News Channel, Fox Sports

GE (NBC) MSNBC


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Programming for a cable operating system

differs significantly from broadcasting.

A broadcaster is responsible forprogramming one channel, whereas, a cable

operator must program a multichanneltelevision service that can range in size from

60 to 250 plus channels.


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It reflects maturity of the business itself.

It consists of Ads, TVGuides, PPV, Premium

service promotions. Due to cable TV promotion the battle

between subscribers & advertisers continuesto intensify.

Professional organizations that can assist,one of that organization is CTAM.


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The cable TV industry has gone through both

deregulation and re-regulation.


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By 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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After a period of rapid price growth, the

industry was re-regulated in 1992.

Cable operators were required to reduceprices by nearly 17 percent in 1993-94.

They claimed that the lost revenue will keepthem from desired upgrades.


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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 36channels must carry 1, 3 & more than 3 local

non commercial stations respectively.


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+5.1%

RegulatedPrices

1976 86

DeregulatedPrices

1986 92

+9.5%

ReregulatedPrices

1992 95

+0.9%

DeregulatedPrices

19962007

+6.8%


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Data and closed-captioned services broadcastby cable T.V. system


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The cable industry is currently undergoing amajor redefinition as to its core business.While television entertainment will continueto be the main engine that drives cabletelevision forward, the very nature of

programming will undergo a profound change. Todays cable operator is much more than a

purveyor of television entertainment. Rather,cable delivery of broadband communicationservices makes possible a whole host ofutility and value added features including:local government, public safety, health care,education and business

In a multichannel universe, the origins ofentertainment, information and utility basedservices become less distinguishable. Thefuture of electronic media will come to include avariety of entertainment and information basedservices and give new meaning to the termprogramming.


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18158704 Managing the Cable Television System