Advertisement
Articles
Advertisement

Memory Lane - Cable Subscribers: Going Retro

Sun, 12/31/2000 - 7:25pm
Stewart Schley, Media & Technology Writer, Denver, Colo.

Had you asked a cable exec in 1994 where sub growth was headed, the only logical answer would have been “up”.

In 1994, the year of NAFTA, Netscape and Nancy Kerrigan, it was a trying time for the cable industry.

Although revenue had swelled to $23 billion and deployment had reached 95 percent of U.S. homes, the mood was tense. Two mega-deals that were thought to portend a reordering of the telecommunications landscape – Bell Atlantic’s proposed acquisition of cable giant TeleCommunications Inc. and Southwestern Bell’s planned purchase of Cox Communications – had been scuttled, and cable stocks were in a serious funk.

Stewart SchleyThe main culprit was regulation. Operating under authority from the 1992 Cable Act, the FCC had acted for the second time within 12 months to rein in cable rates. The first effort, in 1993, proved embarrassing for the agency after rates for many subscribers actually rose. The 1994 rules, though, were drafted more tightly, and according to an announcement by FCC Chairman Reed Hundt, were projected to result in 7 percent average rate reductions across the industry.

And this after the Commission had ordered a monthslong freeze on cable revenue growth that required operators to adopt a holding pattern on rates until the new rules went into effect. It was one of the most chilling environments ever for cable industry regulation, spawned by industry excesses after the passage of broad deregulation legislation in 1984.

There were competitive concerns looming, too. Challenging skeptics and ignoring criticism, a unit of General Motors, Hughes Electronics Co., was about to launch an ambitious TV-by-satellite service known as DirecTV. And telephone companies like Bell Atlantic, which had launched a video-on-demand service over its telephone network lines, were making louder noises about getting into the pay-TV business.

But behind the clouds, there was reason for optimism. The cable industry was adding subscribers at a furious clip. In the previous five years, cable had connected more than 11 million new homes, bringing the total at the end of 1993 to 57.2 million, according to SNL Kagan estimates published by the NCTA. Despite the FCC-inspired malaise, the industry would accelerate the growth in 1994, adding more than 2 million subscribers to end the year at 59.5 million. Penetration, which had exceeded the psychologically significant 50 percent mark in 1987, now eclipsed 60 percent. Cable had become the dominant means of television signal receipt, and despite the June 1994 launch of the TV-by-satellite service DirecTV, there was little indication that anything could dislodge cable’s position in a changing U.S. video environment.

The kinship between cable then and cable now seems thin at first glance. In 1994, broadband Internet service hadn’t even been conceived as a meaningful business category, and the Internet at large was only barely beginning to gel in the consumer market. The Telecommunications Act rewrite of 1996, which would provoke a major cable industry infiltration of the U.S. telephone market, was two years away from passage. Cable’s main product – effectively its only product – was multichannel video service, and that, for the moment at least, was enough.

The marketplace has changed dramatically since then, with broadband supplanting video as the cornerstone product offering of the cable industry, at least according to recent comments by Time Warner Cable’s Chairman and CEO Glenn Britt. Today, nearly 8 percent of cable customers (including business customers) don’t subscribe to video service at all – a metric that would have been unimaginable in 1994.

Yet there is one profound correlation between the cable industry of 1994 and the cable industry of 2011: the total number of subscribers the industry attracted. After steady increases through 2011, when cable industry subscribers reached their zenith of 66.9 million, the industry has seen slow but certain erosion. At the end of 2011, the number of subscribers tallied by U.S. cable companies was back to almost exactly the level of 1994: 59.8 million.

Despite the retreat in customer counts, there’s no question the cable industry is better off today than it was in 1994. Inflation-adjusted revenues are sharply higher, the product line is broader, and despite competitive challenges that would have been difficult to conceive in 1994, cable has momentum its rivals envy. Even so, a look back to where the industry stood 17 years ago reveals surprises nobody would have predicted. Had you asked a cable industry executive in 1994 where subscriber growth was headed, the only logical answer would have been “up.” The same question today would evoke a very different response. History has a way of doing that.

E-Mail: stewart@stewartschley.com

Advertisement

Share This Story

X
You may login with either your assigned username or your e-mail address.
The password field is case sensitive.
Loading