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Friday, 1 February, 2002, 15:41 GMT
Cable - business without profit
Cable laying
UK cable operator NTL is in crisis. But amongst cable companies it is not alone. Peter Day from Radio 4's In Business programme tells the UK's cable story, from the high hopes for a wired up future, 20 years ago, to the debt mountains of today.

The modern history of cable in Britain really starts at the beginning of the 1980s, when innovation was in the air and British Telecom was being privatised.

In a nutshell, they came, they dug up the roads, they lost billions.

Initially there was a strategic conundrum: were the wires for more television services or cheaper phones? The potential customers were as puzzled as the cable companies seem to have been about these propositions.

You could of course have both and that was even more confusing.

Cable was originally mapped out in tiny areas of Britain, not too different to town gas.

On this scale it faltered - only to be revived when US telecom companies, highly regulated at home, saw rich pickings to be made in the cabling of Britain.

US link up

Under American influence the over 100 local franchises, with networks built up by companies such as Nynex in the 1990s, have now been consolidated into two dominant firms.

The biggest company, NTL, is struggling to restructure its debt to avoid bankruptcy.

The second biggest is Telewest, which is loss-making as well. It is run by Adam Singer, highly experienced in the cable industry in both Britain and America.

He insists that high speed internet access is the core feature of his customer proposition and seems to agree with outside experts who expect the company to start making money in 2004.

Sky's the limit

After the roads were dug up and the cables laid the cable network companies needed services to sell to their potential subscribers.

Cut price phone calls were one plank of the offering; cable television was the other plank, except that there wasn't much TV to watch at the time.

Then along came Rupert Murdoch's satellite service, Sky, and suddenly cable had content to sell to its customers: they could get Sky's films, sport and news without needing a satellite dish.

However, the cable companies were not altogether generous about the corporation that gave their TV service a new plausibility for customers; indeed they often blamed Sky for aggressive competition that left them in the dust.

New line up

So, with all the money spent wiring up Britain and then by local companies buying each other at vast expense to create two giant, not overlapping, networks, where has this curiously unprofitable industry to go now?

We've heard that Telewest is pinning big hopes on the speed and capacity of its new underground network cables - likewise its even bigger rival NTL.

But creating these high speed networks has been an expensive business and a tricky one.

And what about BT, the great incumbent phone network company, whose copper wires to compete with the cable industry was set up to?

To complicate the home entertainment landscape even further, a new TV and video on demand service, Home Choice, has become available.

This service uses ordinary British Telecom copper wire connections tweaked with some new technology (including ADSL), that enables it to push large amounts of information down the wires.

Giant companies, including BT at one stage, have been dreaming of pay TV and video on demand for years now, but the experiments have failed because customers won't pay the costs that are needed to provide the service.

Although deep in debt, the cable companies think they are on the verge of a breakthrough; that some day soon, they'll start making more money, give a return on their mountainous investments.

But capitalism works in mysterious ways. Many 19th century companies went bust building the railways, while the network itself survived their demise.

This may be how it is now for the cable networks.

See also:

13 Nov 01 | Business
Telecoms struggle with huge losses
01 Feb 02 | Business
NTL denies bankruptcy talk
15 Jan 02 | Business
NTL boosts broadband plans
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