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Cable industry bracing for boom fraught with challenges

Industry leaders at the annual National Cable Television Association conference in New Orleans are planning for a future brimming with potential new services but tempered with some setbacks.

NEW ORLEANS--Cable industry leaders here at the annual National Cable Television Association conference are planning for a future brimming with potential new services but fraught with challenges.

Enthusiasm for high-speed Internet access, cable-based local phone service and interactive TV offerings are tempered somewhat by the reality of delivering these services. After all, in the mid-1990s this same conference helped spawn the expectations for 500 channels of cable TV programming--a vision yet to come true.

Major cable operators such as AT&T, Time Warner, Cox Communications, Charter Communications and Comcast all are launching high-speed Internet services at a fast pace. But there have been a number of setbacks. The cable modem and phone services are still not widely available, for example, and the network upgrades necessary to offer these services are costly. Cable telephony and interactive TV services, meanwhile, have been far slower to appear on the market.

"It's really about execution now," said Cynthia Brumfield, a cable industry analyst and author of the "Broadband Intelligence" newsletter. "The technology is known. How you get from A to B is understood. It's just about network upgrades and fine tuning."

The potential for new "broadband" cable services is huge. Most analysts expect about 3 million cable modems to be in use in North America by the end of the year, up from just a few hundred thousand a few months ago. And executives clearly are excited by those prospects, which has led them to think beyond simply providing multichannel TV programming.

"The future is information from any source in any form--voice, video and data--to any device such as the phone, computer or television," said AT&T chief executive C. Michael Armstrong in a keynote panel session this morning. "That's the foundation of today's AT&T."

The industry has evolved rapidly over just a few years. Time Warner chief executive Gerald Levin described the recent merger of Time Warner with America Online as "a symbol of convergence" between multiple industries.

A year ago in Chicago, Armstrong introduced himself as the new "cable guy" to this same audience. Industry leaders also have recognized and are embracing the increasingly corporate ownership of cable systems.

"The face of cable is changing. With investments by major corporations such as AOL, AT&T and Paul Allen, our industry is changing. By year's end, companies that have joined our business since 1998 will own more than half the cable systems in the country," said Robert Sachs, the new president of the cable association.

One potential setback for the cable industry is regulation. Federal policymakers, including Congressman Billy Tauzin (R-La.), chairman of the House Telecommunications Subcommittee, and U.S. Commerce Secretary William Daley both argued against new regulations, suggesting the cable industry is doing its part to bridge the so-called Digital Divide in which lower-income Americans have limited access to the Internet.

"I don't think there's a need at this point to talk about regulation either here or back in Washington," Daley said, addressing the topic of "open-access" laws that would force cable operators to open their Internet systems to other ISPs.

"In this world of competition, consumers will determine the winners from losers, not bureaucrats in Washington, D.C.," Tauzin added.