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Group Members

Wajid Javaid
Amir Habib
 Cable television (also called CATV) was
developed in the late 1940’s in communities
unable to receive television signals.
 The cities of Mahanoy City and Lansford,
Pennsylvania as well as Astoria, Oregon, are
credited with having been the first set of
communities in the U.S. to offer CATV service
to its residents.
 What is important about such communities is
that it provides a basic blueprint of how cable
television started in the U.S. Each example
started as a pragmatic solution to the
problem of poor television reception.
 One such cable system was
started in 1948 in Mahanoy
City, PA to cope with the
problem of poor television
reception. In Mahanoy City, a
coal mining town of 10,000
people in the Appalachians,
reception from the three TV
networks 86 miles away in
Philadelphia was all but
 An appliance store owner by the
name of John Walson, could not
sell any TV sets to local
residents. The lack of reception
prevented Walson from
 During the summer of 1947, Walson erected an
antenna on a high ridge of a nearby mountain.
Later that year, Walson strung electrical ribbon wire
from the mountain antenna down to his appliance
warehouse, which was a few blocks from his store.
 He was then able to demonstrate for visitors a video
image and a weak audio signal. In 1948, he erected a
larger antenna on top of the mountain and replaced
the ribbon wire with a more efficient twin lead wire.
The display caused a local sensation. People
gathered outside the store window to watch the
programs being brought in from Philadelphia.
 Walson next arranged to wires for a fee between his
warehouse and store to the homes of several
residents living along the route. Many of them were
neighbors that he had sold television sets with the
promise that they would be connected to his service.
The demand for television sets and for
inclusion in the system jumped substantially in
Mahanoy City. The CATV service was soon
 A typical cable television system will
usually contain four types of programming
service. They include:
 1. Basic Cable
 2. Expanded Basic
 3. Pay Cable Television
▪ Video on Demand
 4. Enhanced Information Services
▪ High Speed Internet Access
▪ High Definition Television
▪ Digital Video Recording
▪ Cable Telephony
 Basic cable is the gateway service that
all subscribers must take in order to
obtain expanded basic and/or premium
services. Basic cable consists of
approximately 20-30 services.
 It typically includes the four major
broadcast networks, PBS, minor
broadcast networks including the CB
network, a Spanish language channel
(Univision, Telemundo etc.), a few
independent stations, a few select cable
services, C-Span, public access channels
and one or more religious channels.
 Expanded Basic is the foundation of cable
television programming and consists of 60-90
channels of programming. Expanded basic
represent the highly recognized cable program
services such as ESPN, CNN, MTV, Discovery
Channel, USA Networks etc.
 Most cable operators do not distinguish between
basic and expanded basic and sell the two as an
integrated package.
 Expanded basic cable services are mostly
advertiser supported with the exception of PBS,
C-Span and public access channels.
 Pay cable television is charging the customer
an additional fee for the right to receive a
premium television channel or service. Pay
cable television comes in two forms, including
monthly services like Home Box Office,
Showtime and STARZ as well as pay-per-view
(PPV) events which involves charging the
customer by the program rather than by the
service (or channel).
 In principle, pay cable services add a premium
value to the traditional television viewing
experience by offering subscribers
programming that they wouldn’t normally be
able to get on basic cable such as recently
released films, made for cable specials,
specialized concerts, sporting events, adult
 Video on Demand (pay-per-view) television
represents a distinct category of pay television
 PPV involves charging the customer by the
program rather than by the service (or
channel). PPV represents the consummate form
of interactive television and has proven an
excellent strategy for promoting special event
programs like feature films, professional boxing
and wrestling, music concerts and adult
 PPV television is not a new idea. Early attempts
at marketing PPV can be traced back to the
1950’s and the early subscription television
systems involving traditional broadcast
 The future design and development of a
broadband residential network has to be
understood in the larger context that it is
providing an electronic gateway to a
whole host of enhanced information,
entertainment and value added services.
 High Speed Internet Access
 High Definition Television
 Digital Video Recording
 Cable Telephony
 Broadband residential networks represent
a core component in planning for
tomorrow's "smart homes.”
 Franchising & Refranchising
 Organization
 Economics
 Marketing & Promotion
 Regulatory Environment
A cable television system operates
under the a franchise agreement.

A cable television franchise is a

contractual agreement between
the cable operator and local
government which defines the
rights and responsibilities of both
parties in the construction and
operation of the cable system.
 One of the cable operator's
important responsibilities, includes
the requirement to pay a franchise
fee to the local community in
which it operates. The franchise
fee cannot exceed 5% of the cable
operator's gross annual revenues.
 A cable television
franchise comes up for
renewal approximately
every ten to twelve
 At that time, the cable
operator and the said
community are both
obligated to negotiate
a new franchise
agreement that will
outline the
requirements and
 Whether the process is formal or informal, there are four
basic steps that the community (or franchising
authority) should follow:
 1. Evaluate the Past Performance of the
Incumbent Cable Operator

 Has the cable operator fulfilled its obligations to the community

and to its subscribers? If not, the cable operator should not expect

 2. Determining the Future Cable-related Needs of

the Community

 1) What are the future cable related community needs and

 2) What are the cost requirements in order to meet those needs?
 3. Evaluation of the Incumbent Operator's

 The task here is to evaluate the incumbent operator's proposal for

a new franchise taking into consideration the operator's financial,
technical and legal qualifications to fulfill its proposal

 4. The Decision to Renew or not Renew the

Existing Operators -
Franchise including Terms and Conditions

 After conducting the community assessment and establishing

priorities, (as well as reviewing the operators proposal) it is then
time to begin serious negotiations between the cable operator and
the franchising authority.

 The decision to renew or not renew is usually the result of

extensive negotiations (or failed negotiations) with the operator.
 The current system of local cable
franchising is about to undergo a major
 Current legislation as it is presently
constituted, will allow new video providers
to get a 10-year franchise within 30 days
of filing the requisite application.
 It also allows cable operators to get a
franchise under the same national
franchise terms if a competitor enters the
market with a national franchise or when
their current franchise expires.
Amir Habib
 Government Affairs & Community
 Human Resources
 Business Operations
 Advertising Sales
 Technical Operations
 Marketing
 Customer Service
 The business of cable
television consists of two
primary sets of players,
 1. The cable television operator
 2. The cable program supplier.
 The cable operator is
responsible for providing
cable television service
to the community.
 The cable operator
packages a diverse set of
program services and
charges subscribers a
fee accordingly.
 Comcast
 Cox Cable
 Charter Communication
 The program supplier is
responsible for delivering
program services to the
cable operator.
 A program supplier can
include both the broadcast
television networks (CBS,
ABC, NBC and Fox as well
as cable network suppliers
(CNN, MTV, ESPN etc.)
 Program suppliers break
down into two major
 1) advertiser
 Cable television is often considered a
natural monopoly; that is, a one of a
kind service in the community in
which it operates.
 Obligations:
 Must provide service on a nondiscriminatory
 Must maintain quality level of service
 Rights:
 Is allowed to make all programming decisions
 Is allowed to make sufficient return on
 In the U.S. today,
cable television is
the primary
means of
services to the
 Cable television is
available in
Table 1.
Cable Television Development in the U.S.

U.S. Television households 110,900,000

Basic cable TV households 65,600,000
Penetration: Basic cable 58.8%
to television households: (compared to 66.8% in 2005)
Cable Operating Systems
High Speed Internet Services
Avg. Monthly Price for Expanded Basic
(compared to
$38.23 in 2005)
Comcast 21,495,000
Time Warner Cable 11,039,000
Charter Comm. 5,913,000
Cox Communications 5,400,000
Adelphia* 4,876,900
Cablevision 3,065,700

* Adelphia has been sold in a joint

acquisition by Comcast and Time Warner
 Cabletelevision has fundamentally
changed the American television
landscape in four very important
ways. They include:
 1. Increasing the level of consumer choice
 2. Narrowcasted television services
 3. Leveling the electronic playing field
 4. Exercising a critical gatekeeping function
 Historically,the relationship
between broadcasters and the
cable industry can be considered
 Beginning in the early 1980’s, the
U.S. under the Reagan
administration actively promoted
the cause of economic
deregulation. The passage of
the Cable Act of 1984 was
especially important to the cable
 One of the direct consequences of
increased programming and limited
capacity is that the broadcast industry has
experienced a steady decline in broadcast
television market share.
 In response, most of the major television
networks (or transnational media parent
companies) also own cable network
services. Examples:
 Disney (ABC) – ESPN
 Viacom (CBS) – MTV, BET, Nickelodeon
 News Corp. (FOX) – Fox News Channel, Fox Sports
 Programming for a cable operating
system differs significantly from
 A broadcaster is responsible for
programming one channel, whereas,
a cable operator must program a
multichannel television service that
can range in size from 60 to 250
plus channels.
 It reflects maturity of the business
 It consists of Ads, TV Guides, PPV,
Premium service promotions.
 Due to cable TV promotion the battle
between subscribers & advertisers
continues to intensify.
 Professional organizations that can
assist, one of that organization is
 Thecable TV industry has gone
through both deregulation and re-
 By 1984, Congress believed that
there was sufficient competition to
ensure consumers fair prices and
quality service.
 The Cable Communications Policy
Act of 1984 deregulated the cable TV
 After a period of rapid price growth,
the industry was re-regulated in
 Cable operators were required to
reduce prices by nearly 17 percent
in 1993-94.
 They claimed that the lost revenue
will keep them from desired
 The Telecommunications Turns Act
of 1996 mandated that rate
regulation be phased out and ended
completely by March 1999.
 Cable prices soared again.
 System with more than 12 channels
must set aside up to 1/3 of their
channel capacity for local signals.
 Home shopping stations are entitled
to must carry as are qualified low
power TV (LPTV) stations.
 System with up to 12, 36 & more
than 36 channels must carry 1, 3 &
more than 3 local non commercial
stations respectively.




Regulated Deregulated Reregulated Deregulated

Prices Prices Prices Prices
1976 – 86 1986 – 92 1992 – 95 1996–2007
Data and closed-captioned services
broadcast by cable T.V. system
 The cable industry is currently
undergoing a major redefinition as to
its core business. While
television entertainment will continue
to be the main engine that
drives cable television forward, the
very nature of programming will
undergo a profound change.
 Today’s cable operator is much more
than a purveyor of television
entertainment. Rather, cable delivery
of broadband communication services
makes possible a whole host of
utility and value added features
including: local government,
public safety, health care,
education and business
 In a multichannel universe, the origins
of entertainment, information and
utility based services become less
distinguishable. The future of
electronic media will come to include a
Thank you 