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Cable slips amid satellite competition

Although cable television operators remain the dominant route for accessing video programming, a new study shows the industry has lost some ground to direct-to-home satellite broadcasters.

Although cable television operators remain the dominant route for accessing video programming, the industry has lost some ground to direct-to-home satellite broadcasters in the last year, a new study shows.

As of June, 85 percent of all multi-channel television subscribers were multiple system cable operator (MSO) customers, down slightly from 87 percent a year ago, according to the Federal Communications Commission's fifth annual report on competition in video delivery markets. Summary results of the study, conducted by the FCC's cable services bureau, were released today.

Direct broadcast satellite services have grown, with subscribers up to 7.2 million, from 5 million in June 1997. Some direct broadcast satellite (DBS) industry experts have pegged the number of DBS subscribers as currently closer to 9 million.

Although direct-to-home satellite services have made but a small dent in cable's armor, the potential of the industry is huge. The study shows that almost two-thirds of new multi-channel TV subscribers have chosen satellite service over cable.

DBS operators, such as DirecTV, PrimeStar, and EchoStar Communications, have been aggressively expanding their reach.

Hughes Electronics, which owns DirecTV, bought U.S. Satellite Broadcasting for $1.3 billion this week.

Meanwhile, EchoStar made a similar acquisition last month and will extend its popular free satellite dish offer to new customers into 1999.

As a result, non-cable video programming options, including DBS, accounted for 15 percent of the 76.6 million households subscribed to a television service, up from 13 percent last year.

The study is intended to provide data for the FCC to review when considering regulations on cable television, including managing rate increases. The FCC's authority to review rate hikes ends in March.

Some cable operators have pointed to the recent subscriber increases enjoyed by DBS providers as evidence that competition is alive and well. At the recent cable industry conference, The Western Show, cable executives said rate constraints would be a top priority for the industry in 1999.

However, cable subscription prices continued to rise between June 1997 and June 1998 by 7.3 percent, the report found.

Additionally, the study showed that significant competition from local telephone companies for video programming service--a business made easier following the passage of the 1996 Telecommunications Act--has been slow to evolve.

Ameritech, to date, is the only regional Bell operating company (RBOC) with a significant stake in the television programming marketplace. The company today announced it has been awarded its 90th local cable TV franchise in Brook Park, a Cleveland suburb. Ameritech offers cable TV service in Chicago, Detroit, and Ohio.

The FCC's entire report will be released in early January.