Page 175 - Communication Commerce and Power The Political Economy of America and the Direct Broadcast Satellite

Capital, Technology and the US in an 'Open Market' 165

broadcasting - left the development of DBS to the vagaries of corpo-
rate competition. But such structural regulatory practices, in effect,
provided the cable television industry with the opportunity in fact to
avoid competition. The liberalization of the cable television industry
had previously facilitated its tremendous growth and eventual market-
place dominance as both television distributors and producers. From
1976 to 1991, US cable revenues grew by more than 2,100 per cent and
the number of households subscribing to cable rose from 10.8 to 55.8
million. By this latter date, three of the largest cable operators - Tele-
Communications Inc. (TCI), Time Warner and Continental Cablevi-
sion - together serviced almost 40 per cent of this market. ° From
1
1980 to 1990, the monthly 'basic service' subscription rate charged to
households by cable operators increased 223 per cent. Practically all
11
of the cable programing services developed since the late 1980s are
owned or have involved significant equity participation by at least one
of the country's largest cable distributors. Most US cable channels
also became participants in emerging overseas cable developments.
These investments have been financed, in large part, by revenues
generated by their domestic local monopolies. 12
Despite this success, since the end of the 1980s cable companies
have had good reason to fear DBS. While DBS has always had cost
advantages over terrestrial distribution systems in three markets -
areas with low population densities; areas where cable lines are limited
in the scope of their coverage; and areas where cable systems are, in
relative terms, technologically obsolete - digital technology develop-
ments have provided DBS distributors with immediate advantages
due to their signal compression capabilities. In effect, because com-
pression enables more information to be transmitted over existing
bandwidths (in the mid-1990s providing distributors with an eight-
fold increase in television signal transmission capacity), and because a
DBS system can accommodate this compression at virtually no cost in
relation to the complex and expensive infrastructure upgrades facing
cable operators, economic efficiencies and relative per-household dis-
tribution costs provide direct broadcasting operators with obvious
competitive advantages. 13
In North America, especially in areas where cable has not already
been laid, DBS is particularly cost effective. In order to reach its
subscribers, cable companies must install lines and equipment past
every household en route. DBS, in contrast, enjoys much greater
flexibility in that the overhead cost of installing one reception unit
will not require the enormous investment found in a cabled