Starting a Small Cable Co
Fred Smith writes:
This question is for ggore. Can you give me a brief synopsis of what is involved in starting a small town cable company? How much regulation, rules, FCC involvement etc.? How much programming costs compared to what you can sell it for? How much equipment costs and how is it set up? I live in a very small town Northwest of St. Louis, and have been mulling it over in my mind about trying this. Please answer as much as you want or as little. If you have links to the info, that would be fine too! Thanks in advance, Fred Smith
Thanks for the question, Fred, I will try to answer as best I can. You probably will not like my response, but it’s based on 25 years of experience, the past 5 bringing me to the realization that the era of cable television in small towns is about to come to an end.
The economics of cable and broadband in general have changed in the past 10 years and have made it impossible for a small town system to keep up while still making enough money to live on. Starting a system from scratch with enough programming to compete effectively with satellite today is just impossible. There are hundreds of channels, some with broad-based interest and some for a very specific market, yet you would have to offer all of them because there would be a few customers that would not subscribe to your service if you didn’t carry them. In a small town that would kill you right off the bat.
HD equipment is very expensive for satellite channels. Dish and DirecTV can add one set of equipment and cover the entire country, spreading that cost out over millions of potential customers. Spending $4000 for one premium channel that might generate $50 in revenue per month just doesn’t make sense.
There are FCC regulations such as EAS (Emergency Alert System), Cable Card, retransmission consent, etc, that cable must provide that are not required of satellite. EAS is expensive to implement and has no payback associated with it.
My best example of the “Wal Mart-ization” of television is Classic/Cequel/Cebridge/Suddenlink. That MSO bought hundreds of small town cable systems and proceeded to shut down 90% of them except the ones that could be linked together with fiber optics supplied by a master headend and the systems in towns over 20,000 in population. That population level is now the threshold for economic viability for cable, and even those sized towns are usually linked by master headends to form systems of 200,000 subscribers. That is considered a small cable system today!
My town of 400 population that I brought reliable TV reception to 25 years ago would never be considered for a cable system today. Not even with a fiber optic link to a bigger town’s headend.
The National Cable Television Cooperative in Kansas City would be your best resource of more information. They are a purchasing and programming cooperative for independent and small cable systems. They would be more than happy to visit with you. http://www.cabletvcoop.org is the link to their site. Very good people there, I’ve known some of them for my entire 25 years in the business.
My system is doing OK, but being in operation for this long has made it easier to keep up. I carry every local channel I can receive here that Dish and DirecTV don’t carry to differentiate my offering as best as I can.
I can’t imagine starting from scratch nowadays. In my own case I foresee shutting down my video offering in a year or two and just being an internet service provider using wireless and the biggest bandwidth pipe I can possibly afford. I believe that is the best option going forward.