Last week cable operators weren't quaking in their boots about the stealth-like entry of U.S. Digital Television Inc., which has quietly launched a wireless cable service in Salt Lake City for $19.99.
USDTV, which is leasing digital bandwidth from TV stations, includes such offerings as local TV stations, local HDTV broadcast signals and about a dozen cable networks. USDT also hooked up with retailers, including the all-powerful Wal-Mart Stores Inc., to sell digital set-tops for $99.
Frankly, I wouldn't be too nervous about the likes of USDTV, even though it intends to expand into a total of 30 markets, with Las Vegas next up.
What really gives me the creeps is the company's partnership with Wal-Mart and how lethal a combination that could be — if the discount mega-retailer gets serious about pushing those set-tops off its shelves.
Look what Wal-Mart has done to local economies, the national economy and now the global economy. When a Wal-Mart moves into town, it's the kiss of death for small-time merchants who cannot compete with the chain on price. Wal-Mart was also the final chapter for hundreds of community newspapers, which lost their advertising base because it would not support them.
During the last holiday season, you couldn't listen to a newscast without learning even more about the awesome power of Wal-Mart and how it is flexing its muscles.
Wal-Mart has successfully negotiated favorable prices with vendors worldwide, thus being able to offer its customers products at attractive prices. Just ask FAO Schwartz and Kids 'R' Us about Wal-Mart's brute strength. The answer: out of business.
Beyond toys, grocers are now feeling the pain as Wal-Mart continues its march to conquer the supermarket arena. Last December, a unionized supermarket chain in California saw its employees go on strike because their employer was trying to renegotiate its labor contracts, to emulate Wal-Mart's.
Wal-Mart's hiring practices are questionable to say the least: Hire the cheapest labor pool and don't give them health benefits.
Personally, I have boycotted Wal-Mart all of my life, and for all of the above reasons, will never step into one of their stores.
But back to cable. Clearly USDTV is going after a niche market — people who have never subscribed to cable — by luring them with a $19.95 price tag. The programming offering is limited, but for a low- to mid-income family, the cable channels offered are pretty compelling. USDTV has added Disney Channel, Toon Disney, ESPN, ESPN2, Lifetime Television, Lifetime Movie Network, Home & Garden Television, Food Network, Discovery Channel and TLC.
Many of those are cable's best-rated networks. And the real question at the end of the day is, how many channels does the average cable subscriber really watch? We all know the answer: less than a dozen.
Cable, with its bundled offering of voice, video and now telephony is more worried about the likes of what News Corp. chairman Rupert Murdoch will do with DirecTV Inc., as the industry braces itself for a new marketing war, where the weapons will be interactive whistles and bells.
Cable can argue until it's blue in the face that customers want more channels. But will they pay for them if they are offered another choice like USDTV? Frankly, USDTV is one of the most interesting challenges for cable on the horizon. It too has a whistle and bell of its own, the hi-definition feature. And it has a hell of an ally in Wal-Mart.