MI: Comcast Deadline to Respond to Chairman Dingell Approaches

Posted on January 7, 2008 - 11:01pm.

from: Blogging Broadband

Comcast Deadline to Respond to Chairman Dingell Approaches

Within hours, Comcast is expected to respond to Representative John Dingell’s December 21, 2007 letter which asked the company to postpone its plan to migrate public, educational, and government (”PEG”) access channels to the company’s digital tier. Representative Dingell is Chairman of the House Energy & Commerce Committee, and may well be the most experienced member of Congress on cable issues. Nevertheless, I fear that Comcast will proceed with its plan.

Last November, Comcast announced that it would be moving all PEG channels from its analog basic tier — its lowest level of service — to the “900″ range of its programming lineup. The company’s migration is to be finished on January 15th. In order to complete the planned move, Comcast will have to “digitize” the PEG channels, and customers will then need a digital converter to continue to receive those channels. While Comcast has indicated that it will provide digital converters for free to basic customers for one year, the company plans to charge for the digital converters thereafter.

Why the change? Like most things cable, it comes down to economics. To understand the equation, two things are helpful. First, “bandwidth” measures a cable system’s signal carriage capacity — it’s like cable’s real estate: The more you can build on a parcel, the more revenue you can potentially generate. Second, the process of “digitizing” a signal also compresses that signal, and you can get a lot more within the same bandwidth: In fact, you can get anywhere from eight to twelve or more digital cable channels in the same space as just one analog channel. To keep with the real estate analogy, the analog bandwidth can be thought of as being zoned for “single family” homes; the portion of the bandwith devoted to digital signals, though, is zoned for high-rises. A lot more can be fit onto the same-sized parcel, which means a lot more income-producing potential.

So when Comcast reclaims the standard three analog PEG channels (one each for public, educational, and government access) and then digitzes those channels, the company can fit around one hundred eighty digital channels in the same bandwidth as currently used by three analog PEG signals. The migration costs the company just three digital PEG channels, for a net increase in equivalent bandwidth of one hundred seventy-seven digital channels. Essentially, Comcast will free up a lot of very valuable real estate if the migration proceeds.

So what’s the problem? Comcast should be able to use its system as it sees fit, shouldn’t it? Well, yes and no. Cable operators use the public’s rights-of-way to deliver their services; consequently, there are some public-interest matters that have been imposed on cable operators since the industry was first regulated by Congress in 1984. One of those public-interest issues relates to PEG. From the beginning, Congress viewed public, educational and government access programming as the soapbox of the 21st century — a place where elected officials could reach out locally to their constituents, a mass medium that members of the public could use to express particular views, and an opportunity for schools to interact with parents. While PEG channels may not be the most widely viewed or lavishly produced programs on the cable lineup, Congress knew that they nevertheless served important social and civic purposes. Consequently, federal lawmakers felt that PEG channels should be made available on the lowest-cost tier to all cable customers. Historically, this meant that PEG programming has been offered to all customers on a whole-house, equipment-free basis.

Comcast’s plan, however, changes two important aspects of this history. First, just a slim majority of the company’s current customers has a digital box. That means that about 500,000 customers in Michigan alone will be unable to view PEG programming after the January 15th migration date. For those customers, the social and civic aspects of PEG programming originally valued by Congress will be lost. Second, even if analog basic customers upgraded their service or obtained a digital box, those boxes would have to be located at every TV used in the house, as digital service is not the “whole house” service characterized by analog basic.

Comcast, of course, could retain the low-cost, whole-house nature of the current PEG channels even after the planned digital migration: All the company would have to do is make sure that one or two digital boxes get into the hands of each of the 500,000 Michigan customers that don’t already have a digital box. But that plan would cost the company tens of millions in capital, an investment the company will resist.

Consequently, a collision course with Comcast will probably remain after today’s deadline with Chairman Dingell arrives: The analog bandwidth is too valuable for Comcast to relent, and the company will be unwilling to make the capital investment necessary to maintain the current low-cost, whole-house characteristics associated with PEG. Today, Comcast may concede something relatively inconsequential to create some good will. For example, the company may delay its plans for a short while in order to discuss the matter further with Chairman Dingell, or an extension of the free digital box offer may be made. The crux of these issues, however, will remain the same: Because there is no change in the economics of the issue for Comcast, the dispute will continue to develop.
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