The Cable Center’s president and CEO Larry Satkowiak.

As a student of cable history, I am continually searching for patterns from the past that might contain a key to the future. As I developed the three-generation model for cable, the two most prevalent forces that mark the beginning or end of a generation have been a combination of technological innovation and government regulation. I have been on record for some time talking about the end of the Third Generation of cable before the close of this decade, and believe all the pieces are falling into place for a major change.

The cable industry reinvents itself every 20 – 25 years, which represents a typical technology cycle. We mark the beginning of the Third Generation in 1995 with the invention of the cable modem and passage of the Telecommunications Act of 1996. Broadband defined a new era and the cable industry responded by investing billions of dollars in the internet infrastructure we enjoy today. It also marked the beginning of competition as the satellite operators, AT&T, and Verizon entered the television business and conversely, cable entered the telephone business. This heightened competition is the cornerstone of the current telecommunications industry and will play an important role in the future.

The Internet Service Providers (ISP) and major distributors of content for the next generation are already well defined. Although we automatically think of Comcast as the leader, its market capitalization against most of the likely competitors in the following decade is staggering. Consider the following data from The Wall Street Journal (8/27/14) showing the market capitalization of each company: Comcast, $141.11B; Apple, $608.01B; Google, $394.33B; AT&T (without Direct TV), $178.97B; Verizon, $204.15B; and Amazon, $154.33B. The Comcast merger with Time Warner Cable would potentially add another $41B, which puts it on par with AT&T and Verizon. There are approximately 650 additional cable companies in the United States—further consolidation and adjustment are likely for them as well. The cable industry will compete well in this new environment, but change is inevitable. Business history shows that new competitors are always in place to compete for market share. The marketplace will be poised to determine the winners.

So, what is the biggest variable? We need to look at the FCC for the answer. The telecommunications industry has changed dramatically since the Telecommunications Act of 1996. The FCC, especially in times of rapid technological change, pushes to define the limits of its authority. Challenges to that authority, such as the Verizon vs. FCC case, determine the parameters of their power. While all of the above competitors are improving their technologies daily, the FCC is under pressure from some consumers to reclassify broadband as a Title II (common carrier) service. A ruling in this direction would defy the lessons of telecommunications history. If the FCC takes the Title II route, all of the above companies will reevaluate their plans for capital investment, and the inevitable court challenges would only serve to impede the development of broadband services in the United States.

The country has benefitted from classification of broadband as an information service, especially freeing AT&T and Verizon in a wireless broadband world. It also gave Google the opportunity to expand into numerous new cities and lay fiber to compete with the existing players. A transition from an information service to a common carrier would affect not only the cable industry, but also AT&T, Verizon and Google. Many customers do not remember receiving their telephone bill from the old AT&T with the onerous taxes and long distance charges that emanated from Title II regulation. Almost all supporters of Title II ignore the financial models implied by Title II and its detrimental effect on capital investments.  We should also learn a lesson from the heavy-handed 1992 Cable Act, where populist legislation meant to help the consumer, ultimately hurt many of our customers. In contrast, the Act of 1996 promoted competition through a light regulatory touch and we have all reaped the rewards. While the FCC contemplates its next move, the telecommunications industry is eager to invest in the future. The FCC’s upcoming decision will have profound historic consequences.

(Larry Satkowiak is president and CEO of The Cable Center, the nonprofit educational arm of the cable industry. The Center preserves cable’s enduring contributions to society, strengthens relationships between cable and academia and unites the industry around the advancement of exceptional customer service.

The Daily


Mediacom, West Des Moines Settle

The West Des Moines City Council on Tuesday night approved a settlement with Mediacom resolving the operator’s lawsuit over the city’s construction of a $50 million conduit network.

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