Satellite/Phone Alliance Provokes Cable's Push for Quality

Is your local cable company tempting you with a low-cost upgrade package? The improvement it's offering isn't coming from the kindness of its corporate heart, but because cable companies are feeling the heat from satellite competitors, thanks to some strategic alliances with regional telephone companies.

Ninety-eight of every 100 American homes have at least one TV, according to the Consumer Electronics Manufacturers Association, and cable companies provide television signals to more than 67% of them. Direct-broadcast satellite (DBS) providers supply another 10%. Satellite services try to wean customers away from cable by offering hundreds of channels with crystal-clear pictures and sound, but their marketing efforts have been hampered by Federal Communications Commission regulations prohibiting them from beaming local stations' signals into customers' homes.

Satellite customers who want to receive local broadcasts must use rooftop or rabbit-ear antennas to get them, or they must also have cable service---a situation prohibited in some communities. However, antennas work well only in strong-signal areas with clear sightlines to transmitters. Obstacles like large buildings, bridges, and hills cause signal reflections that interfere with clear reception.

Most viewers find cable to be a huge improvement over terrestrial broadcasting, but the biggest glitch in the development of the cable system was the FCC's assignment of large geographical areas to single operators, following the model of electric utilities. The monopolies that resulted soon acquired a reputation for poor customer service and lack of concern for quality of service. As a result, the popular animosity toward cable is largely justified.

A system more like today's loosely regulated long-distance telecommunications industry would have encouraged competition and quality. However, such thinking hadn't penetrated the upper echelons of legislative and administrative bureaucracies 25 years ago, when the cable industry was in its infancy.

Lack of local programming has kept legions of disgruntled cable customers from jumping ship to DBS, but a move by the recently merged DirecTV and US Satellite Broadcasting could change all that. These DBS providers have quietly arranged joint-marketing deals with regional telephone companies like Southwestern Bell and Bell Atlantic, who will provide local station feeds to customers' homes via small-dish antennas aimed at terrestrial broadcast towers. The phone companies experimented extensively last year with their system---sometimes called "wireless cable"---and will expand it this year. "The local signal solution" is how Bell Atlantic Video President Richard Beville describes his company's business.

Ninety percent of DBS customers rate their satellite service as "good" or "excellent," according to a survey by the Yankee Group of Boston, and almost all of them say they would recommend it to their friends. But the coming age of high-speed two-way communication (as in cable modems) would seem to give the cable industry the advantage in the race. The satellite industry does not have an equivalent technology---such as consumer uplinks---to compete with cable modems.

That's why cable executives make such confident pronouncements about their industry's healthy future---they really are in an advantageous position. But the effects of DBS's mutual-aid pact with the phone companies could benefit all consumers, regardless of how they receive their television signals.