Ratings highs, DBS competition discussed by NCTA

ATLANTA — More than 30,000 cablers are descending on Ted Turner’s hometown, eager to celebrate some impressive gains over the last year.

Since last year’s National Cable Television Assn. confab, cablers have scored all-time highs in ratings, collected significant increases in advertising revenue and watched their stocks gain favor on Wall Street.

At the same time, the industry is beginning to put the billions of dollars it has invested in digital technology to use through the introduction of dozens more digital channels, super-high speed Internet access and even telephone service.

But as cable celebrates its 50th anniversary this year, there are, lurking below the self-congratulatory hype, a few serious questions the industry will need to face during the coming year.

While cable’s stock has risen, so has the DBS industry’s, which has signed up 5 million subscribers during the last two years and is now taking on new customers as quickly as its suppliers can churn out receiving equipment.

Later this year broadcasters will launch their own digital service, which not only marks the introduction of high definition television but also the local TV stations’ ability to offer their own multiplexed signals.

On top of competitive worries, cablers also are well aware that several influential members of Congress, including Rep. Ed Markey (D-Mass.), are pointing to soaring cable rates and are trying to derail the March 1999 deadline for deregulating subscriber fees. Those fee increases, which are running at a rate four times inflation, are largely responsible for Wall Street’s change of heart when it comes to cable stocks.

While cable insists that its growing fiber optic infrastructure provides a dramatic advantage over the rival broadcasting and satellite industries, there is some cause for concern. After all, beginning this fall in Washington and Los Angeles, it will be possible for viewers to receive digital signals from four local TV stations, while getting their cable programming from a pizza-sized DBS dish.

There is also a move afoot to require cablers to carry broadcasters’ digital TV signals. Cablers are hoping to block a congressional mandate by entering voluntary carriage agreements with the major networks. Right now cablers are holding talks with networks and individual stations over carriage agreements for the first 10 digital TV stations. Those stations are slated to go on the air Nov. 1.

Cablers hope to shore up their technological advantage with the next generation of set-top boxes — a device that will be so powerful that Silicon Valley refers to it as a set-top computer. Those digital boxes promise everything from Internet services to the ability to target advertising by zip code.

But cable honchos such as Tele-Communications Inc. CEO John Malone want to make sure that cable stays in control of the set-top box. Cable leaders are aiming to set up safeguards to ensure that while companies like Microsoft and Intel are allowed to create the technology for the boxes, the cablers remain in control of them.

In part to address cable’s technological concerns, Microsoft topper Bill Gates will be the keynote speaker at the NCTA confab today. The cable industry owes Gates a favor — it was his $1 billion investment in Comcast that fueled a general run-up in cable stocks.

As computers reach their saturation level in the marketplace, Gates hopes to open up a new revenue stream for his company by providing the software for the set-top box. Gates is betting on the cablers because he also believes that their wired infrastructure provides a competitive advantage over broadcasters and satcasters, whose ability to provide expanded services is crimped by their limited spectrum allotment. But as cablers cheer themselves on this week, they must also realize that it’s one thing to have a competitive advantage, it’s quite another to exploit it.

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