'Hocus Pocus 2' Review Wi-Fi 6 Router With Built-In VPN Sleep Trackers Capital One Claim Deadline Watch Tesla AI Day Student Loan Forgiveness Best Meal Delivery Services Vitamins for Flu Season
Want CNET to notify you of price drops and the latest stories?
No, thank you

The changing face of cable

The face of the family-run cable industry is changing, and analysts say deregulation, competition, and consolidation have cleared a path for even greater corporate ownership.

It's no longer a family affair in the cable business.

AT&T, one of the nation's largest telcos, has quickly become the biggest cable operator in an industry long dominated by family-owned and operated cable companies.

A wave of consolidation has run over See related story: The new world order smaller family-run cable operators in the past decade, and players like Microsoft and billionaire investor Paul Allen, through a series of investments and acquisitions, are now exerting considerable control over the once close-knit group. With Microsoft's $5 billion investment in AT&T last week, Redmond is ready to make an even greater impact in the cable arena.

The face of the cable industry already has dramatically changed and, analysts say, deregulation, competition, and consolidation have cleared a path for even greater corporate ownership.

"Over the next four to five years we think the cable industry will have to morph to look more like the regional Bells with four or five dominant players," said Alan Gould, a financial analyst at Gerard Klauer Mattison. "AT&T, Time Warner, and Comcast will be among them."

Cable networks are capable of delivering much more than just the TV programming they carried a few years ago. Advances in technology allow coaxial networks to carry a variety of advanced digital services, including Internet and telephony. With demand for these services on the rise, cable operators are quickly upgrading their networks, and in the process, reinventing themselves.

"It's become a completely different business," said one cable company spokesman. "We aren't even cable companies anymore."

The largest change has been AT&T's recent cable push as a way to side-step its costly dependence on the Baby Bells to connect long distance phone calls.

Ma Bell acquired Tele-Communications Incorporated earlier this year. Through the purchase of TCI--founded and controlled for years by Bob Magness, a former Texas cotton seed salesman--Ma Bell also indirectly bought more than one-third of Cablevision via TCI's stake in that family-owned New York area operator.

And AT&T is not alone in its role as recent cable industry newcomer.

Software titan Microsoft took a $1 billion stake in Comcast two years ago, although the cable company still is controlled by the family of Comcast president Brian Roberts.

Meanwhile, Paul Allen, a Microsoft co-founder who owns Charter Communications and several smaller operators, has quickly climbed the cable ranks with his own series of acquisitions.

"This industry is changing dramatically because of outsiders such as AT&T and Paul Allen," said Abhi Chaki, a telecommunications analyst at market research firm Jupiter Communications. "This is really kind of forcing cable operators to take a very hard look at their management."

A dying breed?
The cable industry was once a bastion of maverick "good old boy" entrepreneurs--the so-called cable cowboys--who began stringing coaxial wires about 30 years ago to provide better television reception, primarily in rural areas.

The changing technologies have led cable operators to a closer relationship with the computer industry and Silicon Valley, and with that comes a new look at the top.

"It's still kind of a clubby business, but it's less than used to be," said Michael Harris, president of Kinetic Strategies, a broadband market research firm. "As they change from video signal providers to telecommunications carriers, the culture needs to change. And it is changing. You see that in the kind of partnerships, and alliances, and deals these guys are doing."

Some industry insiders say the management changes are just part of a natural evolution. And, despite the move to combine for strength, some of the original cable families are far from extinct.

Several influential family-controlled cable operators like Comcast, Cox Communications, and Adelphia Communications are still in the thick of things. But it will be difficult for the firms to wield the same kind of cable influence that AT&T chief executive C. Michael Armstrong has gained in less than a year since announcing his intention to acquire TCI.

Analysts point out that AT&T's proposed acquisition of MediaOne Group doesn't change the corporate- vs. family-owned balance. MediaOne is a recent offshoot of regional phone giant US West.

However, the predecessor to MediaOne, US West Media Group, was one of the first corporate-owned cable operators to gobble up a smaller family-owned system when it acquired Continental Cablevision in 1996 from founder and owner Amos Hostetter Jr.

The No. 2 cable company, Time Warner, is another corporate run operator and has been for years.

"In reality not much has changed with the top tier," said Bruce Leichtman, a cable industry analyst at The Yankee Group, a market research firm. "What has changed is that you've lost a lot of those smaller family owned operators. There's virtually no mid-tier anymore."

The likes of Jones Intercable and Marcus Cable, smaller family-owned operators, have been taken over in the last year by Comcast and Charter, respectively.

Ironically, the AT&T-MediaOne deal does bring one of cable's pioneers back into the fold: Hostetter will become a non-executive chairman of AT&T's cable unit as part of the agreement.