A paper released today by Federal Communications Commission (FCC) economists Andrew Wise and Kiran Duwadi draws several interesting conclusions when examining whether Direct Broadcast Satellite (DBS) and basic cable services are substitutable for each other. Their paper, “Competition between Cable Television and Direct Broadcast Satellite – It’s More Complicated than You Think,” is available at the FCC's Website.
Of all the things their research found, one was that DBS penetration is lower where cable operators carry regional sports channels. Video providers take note: The ability to watch college football or basketball without fighting the college stadium crowd is a big selling point.
Another finding was that DBS penetration is higher in areas where basic cable prices go up significantly. "Thus, large quality-adjusted price increases for the most popular or basic cable service may not be sustainable for cable operators," the economists write.
Also interesting: For all the talk of the importance of bundling, this report notes that "almost all consumers who can subscribe to cable Internet access service can do so without subscribing to the cable operator’s video service, although sometimes at a higher cost."
Those consumers usually have DSL available locally, too. So, they conclude, "it is perhaps not surprising that cable provision of high-speed Internet access service is not a significant factor for consumers in deciding which video service to subscribe to."
If true, that could be a powerful competitive argument against the RBOC's push into video services. DBS providers and cable guys might be able to hold onto customers and beat the big, bundling phone companies just by providing the best available TV service at the lowest possible price.
— Phil Harvey, News Editor, Light Reading