TCS Daily

Cable's Future

By Jeremy Slater - July 17, 2002 12:00 AM

BRUSSELS -- A recent bid by Norwegian telecoms company Telenor for French TV company Canal Plus's Scandinavian division seems to go against the grain of current activity in the European cable market. This is because industry observers have interpreted the move as aggressive and positive rather than as a desperate attempt to stave off financial extinction. Whereas, other recent attempts at partnerships in the industry have resembled more the end of evening gropes on the last-chance saloon dance floor.

Take the Spanish coupling of Sogecable and Via Digital. The bid will leave Sogecable in an extremely strong position in Spain, because the third player in the market, Quiero has gone belly up. Earlier this year there was a proposed partnership between Italian cable players News Corp and Vivendi, but after the national competition authority made heavy demands and things got worse for the French conglomerate they gave up. In fact so parlous is the state of the industry, that in the research done for this article I asked one person for a possible source and he appositely commented; "I knew a good guy to talk to, but he went bust."

The problems for the industry are much like other high-tech businesses, such as mobile phones and telecoms that blossomed in the late 90s. Cable is down on its luck having gambled heavily on building an infrastructure that would bring to consumers services they would be willing to pay for at a premium. Having spent all that money on these high-speed networks it now seems they don't have enough spare cash to buy the necessary quality TV programs or content.

Or to put it another way.

"They have a Rolls-Royce, but no petrol to put in it," said David Wood, partner at Brussels-based lawyers Howrey Simon. "We've been through a long period of businesses acquiring infrastructure, but now they are saying what are we going to put through the pipe. These companies now have to work harder to find the next "Friends" or "Seinfeld" or go into co-production and develop their own material. They can't rely on the traditional content providers, such as film studios, as they can pick and choose the networks they will supply."

Despite the malaise in the industry new entrants into the market or non-European companies that wish to buy up the stragglers will find that there are national and international regulators set against them. US media investor, John Malone, found that his attempts to get a license for a German cable company were thwarted by demands from Berlin that he upgrade the cable infrastructure. Many governments feel that foreign ownership of the media is to be frowned upon and European Union initiatives, such as Television Without Frontiers, are seen to defend the status quo. This is because the latter regulation demands that new entrants to the TV market must carry various established national stations.

"Television Without Frontiers has kept public TV in the market. It is a system of price control and price control is a recognition that the market has failed," said Mr Wood.

Another Brussels-based observer believes that the directive, which became law in 1989, needs updating to reflect the current market.

"The market has moved on and there are certain bits that are outdated," said Alison James, head of the Information Society Practice at public affairs company Apco-Europe. "The quota rules, where 50% of all output must be of European origin, do not help new entrants. There are also country of origin restrictions [dealing with taste and decency] that could stop TV companies from broadcasting in other countries."

The European cable market is also very regional as there are countries with high penetration such as the Benelux region, Germany and Scandinavia and others where satellite is the more popular platform for the delivery of subscriber or pay-TV. In France, Spain and other Mediterranean countries this is the case. For new entrants there is also the problem of digital platforms to consider. Many European countries have targets of switching over from analogue output to digital by the end of the decade, but the latest figures for the EU point out, take up is only 18%.

The Commission has a target of making the EU the most highly competitive and technologically advanced economy by 2010. It also claims that its legislation is not hindering the growth of new media by quoting the fact that there are now 2,000 broadcasters rather than 50 in 1990.

"We need to help the industry by agreeing on interoperable standards for digital expansion such as Multi Home Platform for set-top boxes. We want to see 100% of our population linked up to the digital age. Cable provides a physical network and an infrastructure for people to be part of the Internet and other new technologies," said a Commission spokesman.

With this and the state of the industry in mind, future legislation by and decisions in Brussels could be more cable TV friendly.



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