Let me answer a few of the comments and questions about cable:
There are several very legitimate reasons why premium cable services continue to be so expensive-- and probably will remain so, regardless of the entry of telephone companies into the video market:
1) Premium broadband services such as high-speed internet, digital video (including HDTV), video-on-demand and digital voice cost a premium to provide. The ability to provide such services requires cable companies to spend millions of dollars upgrading their plant from the headend right down to the equipment in the customers' homes. And that's just to get started.
Once a certified broadband plant is in place, it has to be maintained. That means training and retaining an enormous technical workforce, providing that workforce with the tools and equipment they need (they need a LOT of tools and equipment, and a lot of it isn't cheap), maintaining a large fleet of service vehicles, and paying for the gas that goes into those vehicles. And that's just for the technicians! Think of all the customer service representatives, dispatchers, routers and other office support personnel that are required to keep things running behind the scenes.
2) The digital equipment that goes into customers' homes is high-dollar as well. On average, your cable company pays about $250 for a basic digital converter box. Add in all the premium bells and whistles like HDTV and DVR functionality, and now you're talking upwards of $600 per box.
Now think about how sensitive these chip-laden devices are to even the slightest fluctuation in power (no, we can't make our customers buy high-end surge protectors), and consider how many thunderstorms sweep through during your average east coast summer. That means your cable company winds up having to spend that much more money to replace damaged or malfunctioning equipment.
3) Then there's the programming costs. Cable companies pay a lot of dough to all those networks that fill up the 150 to 200 channels on their digital platforms. The really popular networks charge even more. And if you want to provide their network in high definition, well yeah, that's gonna be another fee on top of that.
4) People like to talk about how cable companies have local monopolies. Well, that's not entirely true, since you do have to consider that the DSS option has been around for quite some time now. And yes, the DSS companies do represent real competition to the cable companies. At least in the digital video realm.
Phone companies have been providing high-speed internet services for a while now, too, so cable has had competition in that arena as well, though DSL has never really been able to keep up with cable internet's transmission speeds. But cable companies like Comcast continuously upgrade their systems to provide increasingly higher speeds precisely because DSL is always pushing from behind. That's why high-speed cable internet service continues to demand a premium price-- competition drives upgrades, which in turn drives costs.
Now telephone companies want to enter the video market as well... and they want their pick of only the best markets to make their own plant upgrades more cost-effective, which leads us to point number five:
5) The "monopolies" that cable companies purportedly enjoy are in fact government-sanctioned franchises. In order to operate in a locality, the law requires that the cable company negotiate a franchise agreement with the local government. The local government, if it has the best interests of its constituents in mind, has the right to make certain demands of cable companies, including requiring them to meet and maintain prescribed service levels, standards of performance, rate restrictions, as well as pay a significant franchise fee to the local government to operate in that locality.
Additionally, and perhaps most importantly, the local government can require the cable company to meet stringent plant coverage requirements. For most cable companies, that means their services must be accessible to at least 80% to 85% of the homes in the locality. This of course means the cable company winds up spending a lot of money to extend their plant to areas that may never justify that cost.
But the big, powerful phone companies like Verizon are trying to back-door their way into the video market by spending millions of dollars on lobbying efforts to circumvent that particular requirement. Why? Because it would cost them hundreds more millions to build-out their fiber optic networks to the same coverage specs required of the cable companies. So in a sense, they want the ability to cherry-pick only the best, most profitable markets for their high-end video and internet services, while cable is still saddled with the franchise requirements that ensure equitable service coverage throughout a locality. That's why you're seeing these 'PSA'-styled advertisements championing "freedom of choice" in the video market, telling you to let your elected officials know you want them to remove the "regulatory hurdles" to competition in the video market. The big phone companies are spending lavishly on these commercials and other lobbying efforts to bypass the franchising laws that keep the cable companies in check. Of course, the cable companies are putting up a fight to defend themselves from this anti-competitive strategy.
So, if competition in the form of fiber-optic video service does get clearance, it will either be in only the areas where people can afford to pay a premium for it; or it will be in the same areas as cable, which means telephone companies will have to pay a fortune to build-out their fiber-optic plant, and that means prices certainly won't go down.
The bottom line is, this is a very high-overhead business, particularly when companies start getting into an arms race of sorts for competitive broadband services. The cost of that broadband arms race is ultimately going to be passed on to the consumer. It sucks, but if people weren't willing to pay those prices for those services, cable companies wouldn't be providing them...
...and yes, I do work for the cable company!
