The following is an excerpt of comments made by Robert Sachs, president and CEO of the National Cable & Telecommunications Association to broadcasting executives at the NAB Futures Summit in Pebble Beach, Calif., on March 19, 2002.
Broadcasting and cable compete vigorously, and we also have some policy differences. But even though we contend in the same marketplace, neither of our industries would have achieved their level of success without the other.
As much as broadcasting created the need for cable, cable has returned the favor by extending the reach of over-the-air signals.
The digital television transition provides another significant opportunity for cooperation and mutual success. And given the convergence of our businesses — as reflected in both the ownership and content of broadcasting and cable — it makes sense to commit to finding more common ground.
As a recent National Association of Broadcasters study reported, American consumers own some 267 million analog TV sets. Eighty-one million of those sets — more than one-quarter — aren't connected to cable or direct-broadcast satellite. Of some 30 million new TVs sold in the U.S. last year, fewer than 1.3 million were digital.
So the market challenge we face is how to get a nation of consumers to migrate from a very good analog TV environment to an even better digital one.
It took more than 15 years for the majority of Americans to purchase color TVs, so we know the digital TV transition is likely to take a very long time. But working together, the broadcast, cable and consumer electronics industries can accelerate the DTV transition.
Since 1996, cable operators have invested over $55 billion — about $1,000 per subscriber — to upgrade their plant to take advantage of the efficiencies of digital technologies. What prompted this massive upgrade program was competition from DBS.
Six years ago, state-of-the art cable systems were 550 MHz, enabling cable operators to transmit up to 78 downstream analog channels. But 78 channels proved no match for DBS which, being all digital from the start, was able to offer 150 channels or more.
So cable operators replaced hundreds of thousands of miles of coaxial cable with fiber optics and upgraded headends with digital technology. By so doing, systems typically have added 200 MHz of digital capacity.
Upgraded cable systems today are able to match DBS's video and pay-per-view offerings. Nonetheless, with 18 million customers and a couple hundred thousand more being added every month, DBS remains a very tough competitor.
One way that cable operators are seeking to win back DBS subscribers is by offering more high-definition programming choices to consumers. Consider these recent developments:
- Time Warner Cable, which serves 18 percent of cable households, has launched high-definition digital tiers in 42 markets. In major markets like New York, Houston, Minneapolis and Orlando, Fla., the tiers include HD broadcasts of ABC, CBS, NBC and PBS, as well as Home Box Office, Showtime and other high definition cable programs.
- Comcast Corp. has launched a high-definition tier in Philadelphia and earlier this month said it would be offering HDTV in Washington, Detroit and Indianapolis—its largest markets outside of Philadelphia—before the end of this year. It also announced that Comcast SportsNet soon would offer more than 200 professional sporting events a year in HDTV.
- Charter Communications Inc. has just announced the launch of HD tiers in seven markets including Birmingham, Ala.; South Miami, Fla.; and St. Louis, Mo.
There's a clear trend developing here, and market forces are driving it. In coming months, you'll see more cable operators launch HDTV.
Offering HD represents a huge capital commitment by operators. HDTV consumes considerable digital capacity, typically 3 MHz for each HD signal, above and beyond the 6 MHz of channel capacity used for carriage of each TV station's analog signal. To date, the cable industry has spent more than $1.5 billion for each 6 MHz of new digital capacity it has added.
We believe compelling, high-definition programming will drive DTV sales up, and prices down, to a range more consumers can afford. For the DTV transition ever to succeed, this must happen.
The cable TV industry seeks to join forces with the broadcast and consumer electronics industries to bring this about. We commend NAB and the Consumer Electronics Association for the DTV advertising campaign you recently launched — and offer to add our advertising resources to yours to promote digital television in markets where MSOs are providing HDTV.
In addition, the cable industry shares the broadcast industry's desire to protect copyrighted digital-video content from being retransmitted for free over the Internet. Through Cable Television Laboratories Inc., the cable industry's research and development consortium, we are actively participating in the Copy Protection Technical Working Group and the Broadcast Protection Discussion Group in an effort to assure that broadcast flag and watermarking mechanisms work seamlessly with cable technology.
The cable industry has strongly supported digital copy protection through endorsement of the 1394/5C and DVI digital connectors. As special HD digital set-top boxes that include one or both of these connectors become available, cable operators are preparing to deploy them.
But it takes two to tango. It's essential that consumer electronics manufacturers include digital connectors on all DTVs and digital recording devices. Otherwise, consumers will find themselves purchasing devices that are unable to receive copy protected digital content.
Another issue that has come up in the DTV debate is the question of the compatibility of upgraded cable systems with DTV sets. The fact that cable operators like Time Warner and Comcast currently
are providing cable customers with high-definition broadcast and cable programming, via special HD set-top boxes, should put this question to rest. Cable compatibility is not an issue.
The real challenge for cable operators is to offer services that consumers want in order to compete with DBS. And while adding considerably to existing analog capacity, 200 MHz of digital capacity isn't unlimited. So cable operators are looking to add services that bring the most value to consumers — services like video-on-demand, high-speed Internet, cable telephone and HDTV.
As demonstrated by the Time Warner, Comcast, and Charter HDTV launches, broadcasters that offer any significant amount of HDTV are more and more likely to find receptive cable operators. And by providing consumers with compelling high-definition digital content, broadcasting and cable together will accelerate consumer demand for digital TV.