Cable's Digital Drive irks Basic Customers

Across the country, cable operators have been moving popular channels from analog to digital service, which offers customers better picture and sound but also can handle much larger volume, allowing cable operators to use their networks for more lucrative options such as video on demand and Internet and telephone services. Cable operators such as Comcast, Time Warner Cable, Cox Communications and Cablevision are tight-lipped about the changes, which affect many of the nation's cable subscribers. Markets seeing the change include cities in Pennsylvania, Connecticut, Illinois, Michigan, Massachusetts, California, Louisiana, Nevada, Colorado, and Texas. "They're trying to reclaim some of the capacity, mostly for HD" or high-definition TV, said Bruce Leichtman, president of the Leichtman Research Group. Digital services let cable operators better compete with satellite TV and soon, phone companies, said Jimmy Schaeffler, an analyst with The Carmel Group, a market research firm. Another reason why digital is alluring to cable: "It's hugely more profitable," Schaeffler said. Fees for advanced services can inflate a basic subscriber's bill by 30 percent to 40 percent or more. "If you're paying $40, it could be $60 to $70 or higher," Schaeffler said. Advanced services such as digital packages have driven revenue per subscriber at Comcast to $83 in the second quarter of this year from $42 in 1998, John Alchin, co-chief financial officer, said at the Merrill Lynch Media and Entertainment Conference on Sept. 13. The figure does not reflect revenue from the company's phone service. But to increase their offering of digital services, cable companies need to free up space on their cable lines - which means cutting back on analog channels. "It's a clear industry strategy: They are trying to find ways to push customers to spend more," said Gene Kimmelman, senior director of public policy at Consumers Union. "There's no other reason for this other than their greed."
[SOURCE: Associated Press, AUTHOR: Deborah Yao]