Cable vs Satellite

Despite long-running consumer complaints and generally stagnant wages, cable television rates continue to rise. For the 12-month period ending July 1, cable rates rose 8.2%, according to figures recently released by the Federal Communication Commission (FCC). The average monthly bill went from $37.06 to $40.11, with basic cable costs up 3.7% and equipment fees up 12%. The rate of increase exceeded the 7.1% annual rise over the past five years.

Cable providers attributed approximately 60% of their rate increases to growing costs for programming, pointing out that over the past year they have invested an average of $216 per subscriber in system upgrades. They claimed that cable subscribers are enjoying more choice now than ever before, with a national average availability of 62.7 channels. Cable television is a "superior entertainment value," according to the National Cable and Telecommunications Association (NCTA).

Cable rate increases are one of the primary reasons for the growing acceptance of satellite TV, according to Satellite Broadcasting and Communications Association (SBCA) president Andrew Wright. "The cable industry has consistently used its market power to raise its rates each year in order to finance upgrades in an effort to match DBS (direct broadcast satellite)," Wright stated. Constantly rising cable rates are "one reason why the number of DBS subscribers grew my more than 10%," he added.

Satellite signups may be growing, but not fast enough to please Wall Street. On July 17, Reuters news service reported that shares of TiVo, Inc. dropped 11% after DirecTV reported "slower-than-expected second-quarter growth in subscribers to its TiVo television recording service." DirecTV is TiVo's biggest distributor, and plans to expand its promotional efforts.

Cablevision Systems Corporation has a new eye in the sky. The New York-based company's Rainbow-1 direct broadcast satellite was lifted into a geosynchronous orbit on Thursday July 17, by an Atlas 5 rocket that left Cape Canaveral at 7:45am EDT. The Atlas 5 is the most powerful rocket used to date for satellite launches. Cablevision has committed to developing its own satellite broadcasting system that will compete against DirecTV and EchoStar's DISH Network, with programming to commence October 1. There could eventually be nearly 500 channels available on the Cablevision satellite system, according to company execs.

Charter Communications, Inc. isn't resting on its laurels, either. On July 15, the St.Louis–based cable provider announced a new set-top box (STB) that includes high-definition capabilities, a hard-drive recorder and built-in DVD player. To be made available to Charter subscribers this fall, the new high-performance STB will also serve as a media center for digital photos and music. The box will feed two televisions simultaneously, thanks to twin tuners, and supports pay-per-view and video-on-demand services. It can also be networked to computer systems, to accept digital music streams or photo "slide shows," but won't output digital video due to copyright concerns. Charter has ordered 100,000 of the new devices from Motorola. The operating software for the STBs is the "Moxie" platform from Digeo, Inc.