What's the state of the cable industry today?
Think of it as a conflict taking place on heavily contested ground-potentially the bedrock of all future communications. Traditional cable, satellite, and large telecom companies have been amassing troops and looking for ways to capture a dominant share of the market. For years, cable reigned supreme, but the passage of the Satellite Home Viewer Improvement Act in 1999 allowed satellite providers to carry local television, effectively opening cable's empire to attack. In response, cable operators scrambled to solidify new revenue streams such as cable modems and digital video. Armed now with telephony and Internet, and reams of fiber-optic lines, cable operators are poised for growth. But remember: Historically, cable has been slow to react to challenges.
Where will cable be in five years?
Because it bundles Internet access with TV, cable can-for now-offer more to subscribers than satellite, a distinct edge in reaching the 87.5 million homes in the multichannel market. Still, industry tracker Paul Kagan Associates expects the number of satellite homes supplied by DirecTV, EchoStar, and others to represent more than a quarter of the 100 million multichannel homes by 2005. Why? Decreased consumer costs for satellite, low infrastructure costs, and better two-way communications.
Who will win the broadband war? Cable, DSL, or satellite?
It's becoming a close race. According to Jupiter Media Metrix, of the 80 million U.S. homes online in 2005, 29 million will be broadband equipped with 13.8 million using cable modems, 11.8 million on DSL, and the remainder on satellite connections. While DSL has proved more robust than most anyone expected, it's hard to install in some markets-parts of New York City, for example, where existing phone lines are too decrepit to upgrade. "This game is being played out market by market," says McKinsey & Co. media analyst André Dua.
What are the prospects overseas?
In most European and Asian countries satellite has an edge over cable, largely because of cable's infrastructure demands. In the U.K., for example, News Corp. (NWS) chief Rupert Murdoch's BskyB, part of Sky Global Networks, has led the rollout of digital video. Murdoch is also well positioned in India-where thieves have been known to dig up cable lines and resell them-with satellite operator Star TV.
What's next for cable?
Interactive television (ITV) is the hot, new technology, and backers hope it will be used to e-mail, check stock quotes, play along with Who Wants to Be a Millionaire, and order pizza-a boon for cable operators. But some wonder whether ITV will mesh with the couch potato passivity. Case in point: When British Interactive Broadcasting launched Open, an interactive service, in 1999, it attracted much interest but few sales.
Who are cable's big players?
With cable systems and networks, the Internet, publishing, and a market cap well over $200 billion, AOL Time Warner (AOL) is clearly the leader. Much smaller RCN (RCNC) had been making inroads in markets like New York, but overbuilding and service snags have taken a heavy toll. Cox Communications (COX), a company with a reputation for excellent customer relations, offers the triple threat of digital video, telephony, and high-speed access. Meanwhile, Liberty Media Group (LMGA), an AT&T (T) subsidiary, has taken a stake in USA Networks (USAI), News Corp., and News Corp. subsidiary Sky Global.
What roles can MBAs play?
Take your pick. With cable's capital requirements and the consolidation it has experienced, the opportunities for financial restructuring seem limitless. Same for management: As the battle to provide content and Internet service continues to heat up, margins will tighten and the cable industry will need effective leadership to stay in the game.
