Out of Control Policy Blog

DTV Transition Illustrates Video Competition

The FCC-mandated conversion to digital TV broadcasting next February is touching off a battle among cable TV and telephone companies to hook-up so-called "nevers," consumers, who for whatever reason, have been content to watch over-the-air TV and have never been interested in purchasing cable, so reports cable industry trade Multichannel News.

When the DTV conversion becomes effective Feb. 17, 2009, consumers who have older analog models will have a choice of purchasing a new TV, using a government-provided $40 voucher to purchase a digital signal converter, or sign up with a cable, telco or satellite TV provider.

Naturally, multichannel video service providers are hoping to entice consumers to embrace the last option. AT&T reportedly will offer a bundled package at $44 a month. Comcast is prepping a basic cable tier, with less frills, priced at $15 to $20 a month. Their target: people like Andrew King, a 45-year-old airplane mechanic who watches off-air television in Culpeper, Va., 70 miles from Washington, D.C.

King is satisfied with his free TV experience. He picks up broadcast stations from two markets, Charlottesville, Va., and the nation's capital. He is unenthusiastic about the prospect of paying a cable, satellite or telephone company for television.

"I'm kind of a cheapskate," he said wryly, adding he'd sign up for subscription television and then the "rates will shoot sky high."

King's objections echo responses cable researchers have long heard from TV viewers they classify as "nevers" or "formers." This audience of 14 million to 19 million households are viewers who have steadfastly refused to take, or keep, pay television programming. Winning the hearts, minds and pocketbooks of such consumers is a top priority for cable, satellite and telco TV providers during the next year.

"Frankly, this may be the last big chance to gain market share," said Cox Communications vice president of product marketing David Pugliese.

Regulators and legislators should note, that despite accusations that cable TV is a stagnant duopoly and needs competition from local government to meet all consumer needs, the article lays out four important facts, backed up by market research:

1) There is heated competition for cable customers.
2) Consumers are aware of service provider choices.
3) Video service providers are interested in attracting budget-conscious customers, even those who might pay only $15 to $30 a month.
4) That even when prices drop, there is still a segment of the population who does not desire cable service.


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