April 10, 1997
The cable television industry has dug up the streets and wired just about every community in America. 97 percent of homes with TV's can get cable and about 64 million U.S. homes do subscribe to cable TV. But there are wireless ways to deliver TV signals, and those alternatives are trying to knock cable off its throne.
JIM LEHRER: Now the changing world of telecommunications Part 2. Last night Jeffrey Kaye of KCET-Los Angeles reported on the media merger blitz of the past year. Tonight he looks at our wireless future.
JEFFREY KAYE: The cable television industry has dug up the streets and wired just about every community in America. 97 percent of homes with TV's can get cable and about 64 million U.S. homes do subscribe to cable TV. But there are wireless ways to deliver TV signals, and those alternatives are trying to knock cable off its throne. The one that might present the first real challenge is satellite receivers.
SPOKESMAN: Our goal still remains to place a satellite dish in every home, school, and business throughout the world.
JEFFREY KAYE: But up until now the satellite industry has had a hard time competing with cable. Only 4 ½ million homes have installed antennas known as dishes, partly because of the cost. The 18 inch receiving dish ranges from 200 to 600 dollars. Also, while satellites can offer more national channels than cable, they lack the capacity to carry local stations. That shortcoming has been the Achilles Heel of the satellite industry according to Gene Kimmelman of the Consumers Union.
GENE KIMMELMAN, Consumers Union: Up until now satellite really has not been practical. It hasn't had the capacity to provide each local community their local broadcast channels.
JEFFREY KAYE: But, says communications law professor Tracy Westen that may soon change.
TRACY WESTEN, Communications Law Professor: I view cable versus direct broadcast satellites as a little bit, the difference between the tortoise and the hare. Cable is very slow and steady and gradually expanding across the country like the tortoise. And they ultimately win the race. But satellites and microwaves can jump in and in an instant they turn on the transmitter and they have a higher percent coverage in the community. It's very fast.
JEFFREY KAYE: The hare in this tale might be media tycoon Rupert Murdoch.
RUPERT MURDOCH, CEO, News Corporation: In America we can offer the huge variety of services the consumers want at a fraction of what it would cost cable companies to upgrade their systems and be able to compete with us.
JEFFREY KAYE: Murdoch's News Corporation, which controls newspaper, book, and magazine publishing companies, as well as 20th Century Fox movies and Fox Broadcasting, is aggressively expanding its satellite operations. News Corp. Already dominates the satellite business in Europe and Asia, and is now moving into America. In February, Murdoch announced a $1 billion deal with Echo Star Communications, which operates the Dish Network. Until Murdoch came along Echo Star was struggling. Its stock was dropping. It had fewer than ½ million subscribers. But the Colorado-based company had enormous value because it owned two satellites over the U.S. and the rights to more frequencies than any competitor. If approved by regulators, the new partnership, to be called SKY, would control two of the three satellite slots, in essence, outer space parking places that can beam signals to the entire continental United States. With those slots, SKY would have enough channel capacity to threaten cable TV.
GENE KIMMELMAN: This merger of two separate satellite entities vastly expands capacity and now creates the opportunity for satellite to do what cable has been doing as a monopoly for years, and that is combine a whole set of cable programming with your local broadcast signals beamed into each individual household.
JEFFREY KAYE: Preston Padden is president of News Corp's satellite operations. Charles Ergen is CEO of EchoStar.
CHARLES ERGEN, EchoStar Communications Corp.: When we build our complete system out with the total seven-satellite platform that we envision in this agreement, that will be delivered to your home, at least five hundred channels and probably more--
JEFFREY KAYE: By this time next year.
CHARLES ERGEN: No. Two years. It takes about two years to build the whole platform.
JEFFREY KAYE: Realistically, by this time next year what do you expect?
CHARLES ERGEN: Probably more in the neighborhood of three hundred to three hundred and fifty channels plus in about half the homes in the United States your local channels as well.
PRESTON PADDEN, News Corporation: Our goal is that by this time next year we would be able to offer local signals in about 50 percent of U.S. television households, and by the end of 1998 we hope to grow that to 75 percent of all U.S. television households. And we would keep pushing as far as we could get beyond that.
JEFFREY KAYE: But first, SKY must secure government approval for the venture. There are anti-trust issues, as well as copyright laws, that prevent satellite companies from transmitting local stations without permission.
TRACY WESTEN: Murdoch's News Corporation, for example, owns Fox. In theory, if they wanted to retransmit Fox Network signals, they would consent to that. It's the same company. But can they pick up ABC, CBS, and NBC signals, for example, from Los Angeles and re-transmit them down to Los Angeles? That is a copyright question that has not been resolved. And the cable industry argues aggressively they cannot do that. They don't have the permission to do that.
PRESTON PADDEN: We are going to be seeking changes in the law to make the process simpler and more satisfying for both our satellite business and the local station, but even without a change in the law, we have the ability--legal ability--to begin re-transmitting local stations as soon as we can get our system up and running.
JEFFREY KAYE: That means, though, negotiating with every single local station.
PRESTON PADDEN: Yes, it does.
JEFFREY KAYE: Are you prepared to do that?
PRESTON PADDEN: Sure.
JEFFREY KAYE: News Corporation is not the only big player in the satellite game. DIRECTV, the market leader in the industry, is owned by Hughes Electronics, the subsidiary of General Motors. DIRECTV is also looking at ways to expand capacity so it can offer local stations, but company president, Eddy Hartenstein, says consumers should remember they don't need satellite or cable for local TV reception.
EDDY HARTENSTEIN, President, DIRECTV, Inc.: There are some 1500 local television stations across the land.
JEFFREY KAYE: Right.
EDDY HARTENSTEIN: So we're looking at a solution and the solution we feel best fits right now anyway is the off-air broadcast antenna and the majority of our 2.4 million subscribers have re-learned and figured out and re-discovered that you can get your local stations in most cases, if you're in an urban area, by a simple off-air antenna. So we're going back, as it were, in time to re-educating people and the consumers at large about free broadcast television.
JEFFREY KAYE: Cable companies are taking the satellite challenge seriously. They are trying to add channels by slowing upgrading systems and by offering some satellite services. Bob Thomson, vice president of TCI, the nation's largest cable operator, insists that in the end cable will win out.
ROBERT THOMSON, Tele-Communications, Inc.: The major problem is not a technical problem. It will--in the final analysis probably not be a legal problem, with respect to the dishes providing some local signals--it's a technology problem and an economic problem. After all, we've spent $18 million--$18 billion in my company alone putting in place the infrastructure to provide all the local signals, not just a few, in each of the local communities, not just a few. That's going to be hard to match with any proposed dish service, or any conceivable dish service.
JEFFREY KAYE: In the meantime, will you try to block this merger?
ROBERT THOMSON: No. I can't anticipate we will be taking any legal steps to block it.
JEFFREY KAYE: Thomson says the SKY deal gives TCI greater impetus to push forward with plans to upgrade its own systems so it can provide more channels. And the cable industry is pointing out what it seems as the disadvantages of satellite compared to cable TV.
SPOKESMAN: You'll also find there are hidden costs and no local news. Satellite TV--make sure you get all the facts.
JEFFREY KAYE: The challenge to cable is not only coming from the satellite industry. In Los Angeles, Pacific Bell plans to soon offer so-called wireless cable to 3 million potential customers. Its system is designed to transmit 150 channels of programs from a microwave tower to homes equipped with special antennas and receivers.
TRACY WESTEN: It's a very flexible technology. It can put many channels into the home. It does not have direct broadcast satellite's limitations in that microwaves or wireless cable can carry all the local broadcast signals. So you could see the development of microwave systems all over the country with a full complement of local broadcast signals, plus everything that you would get on cable television. That, I think, is perceived to be the promise of the technology.
JEFFREY KAYE: As competing technologies evolve no one can predict winners or losers with any certainty, but a recent report from the Federal Communications Commission suggests that increased competition should eventually lead to lower prices and more choices for consumers.
JIM LEHRER: Today, Rupert Murdoch continued his push to make satellite TV competitive. At a Senate committee hearing he asked for changes in the copyright law that would enable satellites to carry local television stations.