Cable TV's Haves and Have-Nots

May 6, 2006


Why you might be missing out as competing providers race to offer HDTV and on-demand

By PETER GRANT

May 6, 2006; Page P5
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This year, U.S. sales of flat-panel TVs could reach a record 14 million. But when many Americans get those TVs home, plug them in to teeth-rattling sound systems and turn them on, they could be facing an unpleasant truth: When it comes to television, this country has turned into a society of the haves and have-nots.


In some cities, cable customers can choose from as many as 20 high-definition channels. In other areas, they can't get any. Some cable operators supplement their regular programming with thousands of choices of so-called video on demand, movies and TV shows that can be watched at any time. Others don't offer this feature at all.


LOCATION, LOCATION [go to chart] See where the coolest cable technologies are rolling out -- and some places that are still behind the curve.


In Hawaii, subscribers to Time Warner's cable service have 181 channels and about 1,000 on-demand selections, and can use their remotes to order from dozens of restaurants, scroll through help-wanted listings or find a pet to adopt. Customers of the local cable company in Moundridge, Kan., Mid-Kansas Cable Services, can get 33 channels -- and that's it.


For John Chapin, who runs a real-estate-management company in Leesburg, Va., such disparities mean watching as residents of neighboring Herndon, Va., get more of the good stuff. That's because his town is served only by Adelphia Communications, which has been operating under bankruptcy protection for close to four years and offers no phone service and only a few hundred on-demand shows in Leesburg. Less than 20 miles away in Herndon, residents can choose from Verizon Communications (2,200 on-demand movies) or Cox Communications (launching interactive services for everything from weather to movie listings). "It's very frustrating," says Mr. Chapin.


These inequalities reflect the advances that have changed the television industry more rapidly over the past decade than at any other time since the medium went mainstream just after World War II. Besides high-definition TV and video on demand, couch potatoes in recent years have been introduced to interactive services to check weather, monitor traffic and even find a date with a click of the remote. They can fast-forward through commercials with their TiVos, and watch episodes of "Desperate Housewives" on their iPods.


All this comes as cable and satellite providers, long the lone giants of the business, are seeing their turf invaded by up-and-comers trying to get a piece of the pie. Telephone companies like Verizon and AT&T are rapidly upgrading their networks with fiber optics -- Verizon recently started offering TV service in about 50 markets -- while Yahoo, Google and dozens of other companies are now delivering video content over the Internet.


For consumers in areas with only one cable provider, more competition could be welcome news. But for the cable companies, it's new pressure: Get up to speed or risk losing market share. That's because in TV, as in real estate, location is key. In some cities, operators have made it their business to stay on the vanguard of new technology. Others have basically kept the same offer for decades. In some areas, consumers have up to four choices. In others, there's only one.


To be sure, despite all the new players getting into the TV-distribution business, most American households still get TV the way they have for decades: from their cable companies. More than 66 million homes subscribe to cable today compared with more than 27 million that take satellite. Phone companies are so new to the business that they make up only a tiny fraction of the market.


But cable companies vary widely in their approaches to rolling out new services, depending on business strategy, financial health and other factors. For example, Cox Communications has put a higher priority on offering phone service than video on demand. As a result, its customers in cities like Wichita, Kan., and Phoenix can get digital phone service from their cable company but not on-demand.


In contrast, Comcast, the country's largest cable operator, just started to roll out phone service last year, so it offers it to less than half of the 41 million homes reached by its network. But it has put a higher priority on video on demand. More than 90% of the homes in Comcast country can get that service, although the operator only recently launched it in a few midsize cities like Sarasota, Fla.


Operators that do have extensive on-demand shows aren't equal either. In parts of New York City, Time Warner Cable makes half of its 2,000 or so on-demand titles available for free and charges for the rest. Comcast offers nearly all of its 7,000 on-demand titles free in most of its markets, on the theory that it will convince subscribers to upgrade from analog service to digital service, which costs about $15 a month extra and is needed for on-demand.


In some Comcast cities, singles can submit videos of themselves to Comcast's Dating on Demand service, and in Philadelphia the operator has launched a Real Estate on Demand feature that lets viewers take virtual tours of houses on the market. Not surprisingly, the best cable TV can be found in the country's largest cities, where the cost of operators' investments in new features and services can be distributed over a wider population.


The worst is in small cities and rural areas served by small cable companies that haven't invested much in upgrades. In Northfield, Vt., for example, the 1,350 customers of the local cable company, Trans-Video, can get 64 analog channels at most and no special features like high-definition, digital video recorders or on-demand. Many customers have switched to satellite, but some don't have that option because mountains block their reception.


George Goodrich Jr., the president of Trans-Video, says customers are constantly complaining. "We hear it all the time: Where's my HDTV and where's my this and that," he says. "We're just not in the position to place that in the system." He adds that Trans-Video is planning to offer digital service sometime this year.


Suddenlink Communications, formerly Cebridge Connections, an operator that owns about 350 separate small cable systems, has actually shut down service in about 80 communities, including Montague, Texas, Norwood, Mo., and Fairplay, Colo. "There was no way to make the economic model work," says Pete Abel, a Cebridge spokesman. "In one of those communities, the median age was 69."


Because some regions are served by two or three cable operators, adjoining neighborhoods can have different service. Adelphia has 16 high-definition channels in the Los Angeles area, compared with 14 for both Time Warner and Charter, which also serve that market. But Time Warner offers phone service, while Adelphia and Charter do not.


Some of the most fortunate TV fans are those who live in markets with more than one cable operator or in a market where telephone companies have first introduced service. Verizon, for example, has targeted the New York City region with its new TV service. For $34.95 a month, customers who also take high-speed Internet service from the company can get 180 channels, 20 of them in high definition. Cablevision Systems, one of the local cable companies, is fighting back with a "triple-play offer" of video, phone and high-speed Internet for $90 a month.


Also lucky are consumers living in markets where cable operators test out their new services before launching them nationally. When some Time Warner subscribers in Columbia, S.C., get phone calls, for example, the callers' numbers flash on their TV screen. In Austin, Time Warner customers can monitor their eBay auctions while watching TV. "You don't have to sit at your computer all night," says Lydia Agraz, a spokeswoman for the Austin Time Warner office. "When anyone challenges your bid, it flashes on the screen."


Write to Peter Grant at [email protected]

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