After more than a decade of political haggling, financial trauma and near failures, the Washington area's cable television business is on the verge of taking off.
It is likely that before the end of the year, every major jurisdiction in the metropolitan area, except the District of Columbia, will have been awarded a cable television franchise.
The industry has the potential to expand its subscriber base above its current 80,000 area homes to several hundreds of thousands of homes. Cable systems are well established in Arlington, Alexandria, Gaithersburg and Reston, and several smaller systems continue their growth in Prince George's County.
But the history of cable television here is littered with unmet pledges, technical failures, increasing competition from other services such as subscription television, and high interest rates and inflationary pressures during difficult times.
In recent years, for example, two locally owned systems, franchises in Gaithersburg and Alexandria, have been sold to The Tribune Co., the giant media concern that is the parent company of the Chicago Tribune and The New York Daily News. The company also owns Tribune Cable Co., an emerging cable firm, the nation's 38th largest.
And, perhaps the most sophisticated system now widely in use in the area, the cable system in Arlington County, Arlington Telecommunications Corp. (ARTEC), was in such difficult financial shape last year that it was forced to seek an extension, from 1985 to 1991, in its franchise agreement.
Government and cable officials note that the difficulties the Arlington and Alexandria cable firms encountered are problems that generally plague the entire industry, and that the systems' officials cannot be held completely responsible for those troubles.
When a blue ribbon Arlington County task force recommended that the county extend its agreement with ARTEC, that group said that, without the extension and an accompanying restructuring of ARTEC's debt, the system "could be forced to default on its loan repayment or, alternatively, to sell its system."
The task force, which was headed by former Federal Communications Commission chairman Richard Wiley, noted that ARTEC, which is half owned by a venture capital subsidiary of General Electric Corp. and by a small group of suburban Virginia investors, could not have anticipated volatile credit markets and high interest rates when it won its franchise in 1973.
"In addition, the task force also observed that part of ARTEC's economic problems have been caused by circumstances beyond its control and ones that could not have been foreseen by the company or the county board," the report said.
The report went on to say that the rapid national growth of the industry "has caused severe delays in equipment deliveries and a shortage of trained installation personnel."
The Washington area, some experts say, is not the best of markets for cable television. For one thing, there are a variety of television channels to chose from and the area gets good reception. Many parts of the area receive Baltimore stations as well.
Although the introduction of pay television via Channel 50 came about only last year, the growth of that service, Super TV, and another subscription TV competitor, Marquee Television, only makes the competition for the television dollar more intense. "There is competition, even though cable is considered a monopoly by many municipal governments," said Howard Gann, vice president of The Cable Television Information Center.
Washington area residents also have access to a wide variety of cultural events, and many can afford them. The presence of the federal government also guarantees an abundance of free activities, from museum exhibits to concerts.
As a consequence, Washingtonians in general do not watch as much television as other Americans. There also remains a basic snobbery about television among the well-educated. "Many people don't like to say they're into television," noted Gary Hurvitz, vice president for regulatory affairs of Malarkey-Taylor Associates, a Washington consulting firm.
John Evans, ARTEC's vice president and chief operating officer, said that in the average American household the television is turned on six hours a day. In Arlington, that figure drops to four, although Evans said ARTEC subscribers watch 4.6 hours a day.
"This is a market where cable has to be sold to the public," said Hy Triller, executive vice president of Alexandria Cablevision. "But Washington should be a very successful cable market."
On the other hand, a well-run, aggressively marketed and efficiently constructed cable system is a money machine waiting to be turned on. Cable television is a difficult but potentially very lucrative business.
Perhaps even more lucrative, however, is the market for data, voice and video messages that a "wired" Washington network will some day be able to offer. Area cable officials talk excitedly about the prospect of linking their systems for a variety of business and public-service purposes.
There is, experts say, an enormous business telecommunications market here for the kinds of services that coaxial cable is just beginning to offer, such as a high speed data network bringing stock prices and other financial information over the wires of Manhattan Cable, a system run by Time Inc.'s American Television and Communications.
In addition, many people believe that young married couples with children are among the most eager to subscribe to cable, and the Washington area has a large number of families that would seem to fit that bill.
There is also great interest in sports here, and since Washington sweats through its summers without baseball, cable television offers one way to expand options for the national pastime.
The success or failure of cable television in the Washington area is vital to the interests of the industry, which prides itself on its record of success in federal legislative and regulatory battles. Elected officials, congressional aides, U.S. and foreign journalists and policy makers are regular visitors to ARTEC, for example.
Thus, the local cable firms operate "showcase systems" that shape the views of decision makers toward their industry. "How we deal with visitors, and, just as importantly, our subscribers, shapes their perception of the whole telecommunications business when legislation comes up," Evans noted. "We influence them."
Consequently, the cable television community in Washington, a growing group of lawyers, consultants, lobbyists and writers, suffers the insecurity of knowing that few residents either have access to or understand their industry.
The political factor puts an added pressure on system operators to perform efficiently and creatively. But Washington has a pool of talent and expertise that probably no other place, with the exceptions of New York and Los Angeles, can offer.
The "visibility" of the personnel operating cable systems here has made it difficult for the largest concern, ARTEC, to keep people, Evans said. "Virtually all our senior management talent is from outside the industry," Evans said.
Evans's personnel difficulties are magnified by the fact that his system is relatively unique in the industry. It is a cable system that is not affilated with a major system operator, the only one of its kind in the area. Without that affiliation, ARTEC cannot offer employes extensive corporate experience.
And ARTEC is the only one of the area's operating franchises without such direct links to a major cable operator. The Tribune Co. owns the Gaithersburg and Alexandria systems, Warner Amex Cable Communications Inc., which is jointly owned by Warner Communications Co. and American Express Co., owns the Reston cable system.
Storer Communications Co. owns Storer Cable, which currently has in operation 12 of 17 municipal franchises it has won in Prince George's County. In addition, the company has won the franchise for the northern half of that county, although that contract has not been signed by County Executive Lawrence J. Hogan. Hogan is waiting for Maryland Gov. Harry Hughes to sign legislation clarifying cable television's antitrust status.
Storer's stake in Prince George's County is about 130,000 homes, presuming the entire system is approved by the county government. According to John Margeson, system manager of Storer's holdings there, the company is offering more channels to its 7,050 subscribers than any system in the area, providing more than 60 channels, including local stations, "superstations" from Atlanta, Chicago and New York, 'round the clock news from Ted Turner's Cable News Network, and six pay movie, entertainment channels.
ARTEC, while offering 35 channels, now transmits similar fare to 22,000 homes, and its wires are in front of 70,000 of the 75,000 homes in Arlington County.
Tribune's holdings include the Alexandria system, which has more than 13,000 subscribers, serving just over a third of the homes that could have access to cable. Triller said the system still has another 3,000 to 4,000 homes left to include in the 36-channel system, which is capable of offering 52 channels.
Tribune has owned the 10-year-old Gaithersburg system since acquiring it from Douglas Communications in 1981. Douglas purchased it from a group of Gaithersburg business officials in 1979. The system serves just over 3,000 subscribers and has access to about 9,000 homes in a territory that encompasses about 12,000 homes, although Tribune is, along with a host of major system operators, making a bid to win the coveted franchise for all of Montgomery County.
The area's oldest system is in Reston, where Warner-Amex serves 8,500 of the 13,000 homes passed by its wire and its recently upgraded 27-channel system. In 1973, Warner-Amex became one of the nation's first cable systems to offer a pay movie channel. The system has won industry awards for local programming.
ARTEC, the Tribune cable systems and the Reston system all expect to earn a profit before the end of 1983, with the major capital investments to build their systems mostly past.
The real boom is, however, just ahead. Fairfax County, although it received only two bids when it sought proposals this year, may award a franchise this year, and Montgomery County is also likely to do so before the end of the year. The District may be close to passage of a cable ordinance, a step that would precede its seeking bids.
Yet, each of the systems is grappling with major issues in trying to make inroads into the urban cable markets. The high cost of doing business is one such issue. A second is in deciding how to bring affluent subscribers who claim they don't watch much television. "People with high disposable incomes don't buy ARTEC," Evans said.
Each is fighting with major regional landlords for the right to wire their buildings. The problem is atop or near the top of the industry's legislative agendas in Virginia, where the legislature is moving on a bill, and in Maryland. Because ARTEC is unwilling to pay apartment or condominium managers for the right to wire their buildings, it has been denied access to 17,000 multi-family units in Arlington and 36,000 such units in Alexandria.
In New York, cable access to such buildings is mandated by law. "They want a percentage of gross and our policy is absolutely not to pay ," Evans said of the developers here. "It's discriminatory and unfair for single family dwellers and others to be subsidizing people in apartments."
Although these issues, and those raised by municipal governments demanding that cable operators fulfill their franchise promises, will continue to keep life interesting, a whole new set of issues and opportunities are likely to rise in coming years.
Privacy concerns are likely to come to the fore as old systems convert to--and new ones introduce--two-way cable, which will allow cable subscribers to bank and shop at home.
As the public grows to understand the use of the cable wire, it is also likely to demand more of it: extensive educational programs, better coverage of local government, social service programs, home security and a variety of data services now being introduced in modern systems. "New services are likely to drive this business," notes Triller.
Clearly, the cable business in the area will grow. Ultimately, system owners here and elsewhere are almost certain to earn tidy profits. Whether in the process cable will also provide a medium for raising local issues and, simultaneously, link a disparate metropolitan area, remains to be seen.
"We can air points of view that wouldn't otherwise get out to the community," Triller said. "That's why this is so damn valuable. This is a small television station that doesn't have to worry about sponsorship."