MOUNT AIRY — The idea seems sensible enough: With cable TV customers grumbling about the service of the area's lone operator, town leaders suggest bringing in a competitor to keep the incumbent on its toes.
It works with banks, hardware stores and restaurants, Council President R. Delaine Hobbs said last week during a public hearing on the proposition.Why not cable TV?
But the forces of free-market competition rarely apply so neatly to the capital-intensive cable TV business, an industry analyst says.
Mount Airy is leaning toward inviting Frederick Cablevision Inc. to town to compete with Prestige Cable TV of Maryland Inc. But the town may be about to tread a path where little is certain, said John Mansell, a senior analyst with Paul Kagan Associates Inc., a media-analysis firm based in Carmel, Calif.
Data on "overbuild" -- industry jargon for an area served by more than one cable company -- are scarce. At best, results are mixed, Mansell said, but overbuild is not viewed as a sure way to create long-term competition marked by stable prices and satisfactory service.
In fact, Mansell said the "vast majority" of overbuild cases nationwide last under five years. Sometimesthe incumbent outlasts the challenger and buys it out. In others, a third company comes in and takes control of the other two.
Overbuild remains fairly rare, Mansell said. Cable companies operate in morethan 25,000 U.S. cities, but only about 65 areas have more than one.
However, the trend is growing. The most recent data are for 1990,when there were 170 pending and 65 existing overbuilds. Those numbers are up 83 percent and 45 percent, respectively, from the previous year.
Perhaps the most important consideration in overbuild, Mansell said, is penetration -- how many homes in a given area subscribe tocable.
Two companies would seem hard-pressed to succeed in Mount Airy.
On average, a cable company needs 40 percent penetration in an area to make a profit, Mansell said.
Prestige serves about 65 percent of the Mount Airy homes to which cable is available. FrederickCablevision would have to add 15 percent -- pushing the total to about 80 percent -- for both companies to have a reasonable chance at success.
Yet the national average for cable TV penetration is about 58 percent.
"A lot depends on overall penetration," Mansell said.
What's driving the council is a desire to give cable customers in Mount Airy a choice.
Prestige's 39-channel "basic" service costs $20.50 a month. Frederick Cablevision charges $15.95 for its 41-channel "extended basic" service, which includes Home Team Sports, for which Prestige charges $12. Frederick Cablevision also offers a 22-channel "minimum basic" for $9.95.
One important distinction is the converters the companies use. Prestige's more modern "addressable" converters give it an edge on pay-per-view events.
For example, both companies charged $24.95 for the Dec. 4 special, "The Judds' Last Concert." Prestige subscribers could order the event by phone, but Frederick Cablevision customers had to obtain -- and put a deposit on -- a converter from the firm's business office.
Both companies offer "premium channels." Prestige charges $12 a month each for HBO, Cinemax, The Movie Channel, Showtime and Playboy. The Disney Channel costs $9.95. All can be activated from the business office.
Frederick Cablevision offers HBO ($10.95), Cinemax ($8.95) and Disney ($8.95). A homeservice call is required to add the premium channels. To obtain Showtime ($8.95), subscribers must rent a converter for an additional $5 a month.
PRESTIGE VS. FREDERICK
. .. .. .. .. Prestige.. .. .. .. ..Frederick
Basic charge .. ..$20.50.. .. .. .. .. .$15.95
Basic chanels.. ..39.. .. .. .. .. .. ..41
Premium channels..HBO, Cinemax,.. .. .. HBO (10.95), Cinemax
.. .. .. .. .. .. The Movie Channel.. ..($8.95), Disney ($8.95)
.. .. .. .. .. .. Showtime, Home.... ..and Showtime ($13.95
.. .. .. .. .. .. Team Sports and.. .. .includes converter rental)
.. .. .. .. .. .. and Playboy ($12.. .. .. .. .. .. .. .. .. .. ..
.. .. .. .. .. .. each); The Disney.... .. .. .. .. .. .. .. .. .
.. .. .. .. .. .. Channel ($9.95).. .. .. .. .. .. .. .. .. .. ..
Other features.. ."Addressable" con-.. .'Conventional' converters
.. .. .. .. .. .. verters, (premium... for non-cable-ready TVs
.. .. .. .. .. .. channels and pay-.. ..(service call required for
.. .. .. .. .. .. per-view events .. .. adding premium channels;
.. .. .. .. .. .. can be ordered by.. ..subscribers must rent and
.. .. .. .. .. .. phone).. .. .. .. ...pick up converters for pay-
.. .. .. .. .. .. .. .. .. .. .. .. .. .per-view events)
NO: Fees are monthly