Far-reaching promises of digital cable

Service key to phoning, electronic commerce, movies on demand

More channels for a price

Industry hopes to keep viewers from defecting to satellite companies

January 03, 1999|By Mark Ribbing | Mark Ribbing,SUN STAFF

Cable television companies in Baltimore and around the country have found a way to offer dozens of new channels -- and, with any luck, make bundles of money.

It's called digital cable, and it could push television into a long-promised new era of movies on demand, Internet links and new specialized channels.

The cable industry is also hoping digital cable can entice customers to pay more for monthly service and prevent them from defecting to direct broadcast satellite (DBS) companies like DirecTV Inc., which have begun to erode cable's share of the pay-TV market.

"In a sense, digital cable exists because of DBS," said Bruce Leichtman, an analyst with the Yankee Group in Boston. "It's really an attempt to get the channel capacity DBS already has."

Locally, TCI Communications of Baltimore, the cable company for the city of Baltimore, has begun offering a digital service that carries 45 more channels than its traditional, nondigital packages. With digital, a customer of TCI's typical, "expanded basic" service gets 111 channels, including 10 audio channels devoted to CD-quality music.

Comcast Corp. offers digital cable in Baltimore County, and plans to roll it out in Howard and Harford counties this year. Comcast's digital package has 86 additional channels, 40 of them audio. This gives a Comcast expanded basic customer 170 channels in all.

Jaye Gamble, Comcast's vice president for the Baltimore area, said digital cable fits customers' ever-expanding demand for entertainment options: "You need more than 100 channels to choose from, otherwise it's just a random occurrence that you tune into one particular channel at a given time and say, `Hey, this is what I want to see.' "

The new video channels offered by digital cable run the gamut from BBC Americas to Fox Sports World. Comcast customers can buy programs from pay-per-view channels or lose themselves in a dizzying array of movie offerings.

Comcast's package, for example, has nine HBO channels, seven Cinemax channels, nine Showtime channels and four incarnations of the Movie Channel.

Digital cable can offer so many channels because it can cram more signals down a wire than traditional cable systems can. This expanded capacity also allows digital cable to offer such extras as on-screen program synopses and an electronic lockout for parents who want to prevent kids from watching a show.

However, all these goodies may be just a prelude to something much bigger. Josh Bernoff, principal television analyst at Forrester Research Inc. in Cambridge, Mass., said that for digital cable, "the idea is that it's really going to go way beyond delivering video."

Bernoff said cable companies plan to use their digital networks to break into entirely new markets, like telephone service, electronic commerce and video on demand, which would allow customers to watch whatever movie they want, whenever they want it, complete with a pause function for bathroom breaks and raids on the refrigerator. Comcast hopes to begin testing video-on-demand service in its Baltimore-area market this year.

DBS as challenger

It remains to be seen whether digital technology will allow cable to stave off the challenge from DBS, which has grown from a mere 70,000 customers to about 7 million in less than five years, with 30 million subscribers expected by the end of 2007.

DBS, which uses a pizza-sized dish to receive signals, has grown largely by offering far more chan- nels than most cable companies.

Digital networks bring cable companies alongside or ahead of DBS in terms of channel count. A typical customer of DirecTV, the biggest DBS provider, pays $30 to $40 per month for about 80 channels plus pay-per-view access, in addition to paying $250 to $350 for a single-receiver equipment set.

TCI's package of 111 channels that includes digital service costs just over $30 per month, in addition to an installation charge of $13 for current cable customers and $45 for nonsubscribers, said TCI spokeswoman Jean Davis.

Comcast spokesman David Nevins said his company's 170-channel offering costs about $43 per month, plus a $30 installation fee. Taxes and other required monthly fees are extra.

In addition, unlike DBS, digital cable carries local broadcast channels and offers a two-way connection that can allow customers to interact electronically with what they see on their TV screens.

Market is small

The trouble is, digital cable still reaches only a fraction of the national cable market. Estimates vary as to the number of households that currently receive digital cable; one of the more liberal figures is 1.3 million, a mere sliver of the 67 million-household American cable market.

Some consumer advocates say cable companies might try to lure more customers away from traditional analog cable systems to the more expensive digital networks by making some popular channels available only on digital.

Locally, TCI has shifted the BET Action channel and the foreign-language programming International Channel from its analog package to digital, saying the change was needed to make room for new analog channels.

"Rather than raising rates in a direct way, one of the easier ways to extract revenue is making you buy things you might not otherwise want," said Andrew Jay Schwartzman, president and chief executive officer of Media Access Project in Washington.

Some industry analysts say the cable industry will largely avoid channel-shifting, since it fears such moves would cause nondigital customers to halt their cable service. Forrester Research's Bernoff said of the cable companies: "They need to pull people in rather than push them away by making their current package worse."

Pub Date: 1/03/99

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