Dogged by competition with satellite, cable firms face new challenges as the sector consolidates, writes Andy Fry
When the cable industry boasts of its technological advantages over satellite, it likes to position itself as a Rolls-Royce to British Sky Broadcasting's Morris Minor.
Unfortunately, such comparisons have a habit of coming back to haunt it.
With Sky utterly dominant in the image stakes, cable currently appears to have more in common with a De Lorean or, worse still, a Sinclair C5.
Three weeks ago, when Sky, Carlton Communications, Granada and the BBC jointly applied for a digital terrestrial television (DTT) licence, as British Digital Broadcasting, cable's much-vaunted advantages did little to prevent its stock sinking to a new low in the financial markets.
The DTT announcement wrong-footed a market which had assumed that Sky's commitment to developing a digital satellite broadcasting (DSB) system would kill the commercial opportunities for DTT. Instead, it looks as if both will be available via the same conditional-access set-top box.
Cable's major players
Homes passed Connected
Cable & Wireless(*) 2,514,223 487,136
TeleWest 2,435,520 521,998
Commercial Cable 602,147 134,238
Comcast 484,748 124,685
Telecential 449,707 95,614
Cable Tel(**) 410,646 108,433
Diamond Cable 217,065 50,109
* Subject to merger with Bell, Nynex and Videotron
** Cable Tel has also bid for a DTT licence
The implications of this joint venture are important for cable. But first, it is worth reviewing the sector's laboured progress.
Cable firms, largely driven by US players, began laying a network in the mid-80s. So far, the industry has spent around [pounds]6bn of the estimated [pounds]10bn it will take to complete. Some 19 million UK homes are within designated franchise areas, although only 7.8 million have cable running past them.
Even with the leverage of Sky programming, cable penetration remains low. Only 1.6 million (about 21% of the available audience) subscribe to its television package, and it has a high subscriber fall-out rate.
In recent years, cable operators have seemed confused about how they should market their service. At one point, the emphasis was on cable's ability to provide cheap telephony. More recently, a [pounds]12m marketing campaign, fronted by Dawn French, attempted to clarify the cable television proposition. The campaign was pulled, having had little impact on public perceptions of cable.
As the industry underwent a new phase of acquisition activity, its trade body, the Cable Communications Association (CCA), had its marketing function stripped and was left to focus on its lobbying role under a new director of communications, Roy Payne.
A positive consequence of cable's ineffective marketing has, however, been a consolidation in ownership among the players.
In October, the merger of telecoms giant Cable & Wireless and cable operators Bell Cablemedia, Videotron and Nynex, created the UK's largest group. It took the top slot from TCI-US West-backed TeleWest, which is now expected to look for further acquisitions. The two companies control 70% of the homes so far passed.
Cable's future lies in the hands of these two companies, and even dispassionate observers would agree they face obstacles.
First, there is the branding problem. The beauty of satellite is that it allows Sky a consistent, highly visible brand all over the country. Cable, by comparison, seems more parochial and fragmented.
In addition, BSkyB has rights to most of the good programmes. While the cable sector dug up roads, Rupert Murdoch bought sports and movie rights, to drive dish sales. …