DBS threatens cable revenues, but not subscribership >BY Shira McCarthy, Associate Editor-News

Cable subscribership rates may not be suffering from the recent surge of interest in direct broadcast satellite services, but cable operators are still losing money as a result of DBS, industry experts say.

While consumers have been flocking to DBS for its high-quality digital signal and the array of channels available, DBS's inability to deliver local programming has been a drawback. The local programming is generally limited to network broadcasts uplinked from a limited number of locations and delivered to the entire country, said Jimmy Schaeffler, president and chief executive officer of the Carmel Group in California.

DBS companies have addressed that problem by touting a so-called A/B switch, a button that switches back and forth between the DBS signal and local broadcast signals received over traditional TV antennas.

But for viewers who didn't have good reception to begin with-particularly those in remote or hilly areas-the A/B switch doesn't solve their problem, said John Aronsohn, senior analyst at The Yankee Group.

"It's not a seamless kind of operation, and for some viewers who couldn't receive stations with antenna equipment, it's a definite drawback," Aronsohn said.

It's more likely, Aronsohn said, that a DBS subscriber would keep his basic cable service in addition to his satellite service, paying the extra money to receive local programming.

But that means while cable operators don't entirely lose those customers, they do lose revenue when those customers discontinue their premium services.

"We've found that cable operators have begun looking less at overall penetration and more at revenue per subscriber," said a spokesman for the Cable Television Administration and Marketing Society. "An operator may not have an appreciable drop in penetration but less revenue per subscriber."

Cable operators have tackled the problem with more sophisticated marketing and efforts to improve service, he said.

"They're learning how to differentiate their product by marketing to individuals within the household-not just the household itself-using database management," he said.