How many subscribers can you afford to lose...

How many subscribers can you afford to lose...

Several months ago a small cable system owner in Montana asked the question, “How many subscribers can you afford to lose before you have to add high-speed Internet?” He had been observing basic cable losses to EchoStar and DirectTV for months with little sign of a reversing trend in either other cable systems or his own. With only a few hundred subscribers and being located in a extremely rural area, standard commercial Internet options were either too costly or not available. The future appeared to be frustratingly depressing as more and more subscribers responded to the lure of hundreds of “digital quality channels” for less than the cable bill. Clearly, something had to be done. Understandably, he was not surprised to hear that he was not alone in his dilemma.

In the August Multichannel News article, “STEALING SUBS – Cable Sustains More Tough Losses to DBS”, columnist Mike Farrell reported second quarter increases in DBS subscriber growth of 795,000 subscribers while the cable industry claimed 280,000 of that figure in losses. Annualized, this represents a cable industry loss of over 1 million basic subscribers IF the trend does not continue to escalate. In the same article, Echostar chairman, Charlie Ergen, made it clear that the 67 million strong cable television subscriber base is the primary marketing target for Echostar growth. “The real focus is cable companies,” Ergen said. “They have 67 million customers. If we are going to grow our business, we’ve got to get customers, for the most part, from those guys.” The second quarter growth figures for DBS together with the reported cable industry subscriber losses suggest that the Echostar strategies are working and the DirecTV is likely vying for the same subscribers.

Today, setting aside local channel carriage in rural cable markets, there is one service that differentiates DBS from the cable services; reliable high-speed Internet. For those cable companies fortunate enough to be operating in larger communities, Internet services can be contracted from the telephone company and can be provided cost effectively to relatively large numbers of Internet subscribers. For those cable companies in rural America without these telecommunications resources, often times the choice is either to purchase expensive telephone company Internet services and attempt to amortize the expense over a dozen or so Internet subscribers or not offer Internet services. It will likely become increasingly evident that the latter option will be met with steadily declining basic subscriber numbers and a proliferation of small dishes throughout the community if the DBS industry has anything to say about it.

Today, there is an option for the small system cable operators. Two-way high-speed Internet services can be provided without the need for telephone connectivity. Moreover, the Internet rates are based upon a fixed fee per subscriber, thus, ensuring profitability with the first subscriber added. Unlike the DBS attempts at two-way satellite Internet using small rooftop dishes, the cable company solution is a reliable high-speed system designed for businesses and cable companies with a larger two-way satellite dish designed to be immune from all but the worst local weather. Maximum data rates may be contracted up to 6 mbps or as low as 2 mbps on a per subscriber basis.

Last mile delivery to the cable subscriber can be via a two-way cable plant or wireless solution direct from the cable headend.

Today, the small cable operator can meet the challenge presented by Charlie Ergen and the DBS industry as easily and cost effectively as the larger metropolitan cable operations…………..or not.