Broadband Cable Association of Pennsylvania


October 4, 2013

Lacking on-demand service and a lineup of high-definition channels, Pitcairn (Allegheny Co.) Community Cable is struggling to keep up with its deep-pocketed cable and satellite TV competitors. The number of subscribers has fallen to less than 600, and borough officials hope to sell what may be Pennsylvania's last municipally owned cable TV service to a larger provider.

A meeting was held last week with Comcast Corp. to discuss a potential buy out, but as of this week no deals had been made, said Councilman Kevin Dick, who leads the cable committee. The company, which is managed out of the borough building, hasn't been very profitable, he said, and the cost of programming is escalating. "Since I've been involved, I haven't seen it make much money at all," Dick said. "There has been a steady decline in profit. The company is in the red" as it works to pay off a loan for cable upgrades. Comcast Spokesman Bob Grove declined to comment Tuesday on whether the company was negotiating with the borough.

Established in the 1950s, Pitcairn Community Cable flourished for decades as the only source of cable TV in the borough. "Because of Pitcairn's location in the valley, it's hard to get a TV signal," Council President John Prucnal said. "The citizens couldn't receive a signal and only got three channels." The cable service began with some makeshift equipment on top of a hill, on land the borough solicitor owned. "They put telephone poles in the ground and put old house antennas down, and ran wires down from there into Pitcairn," Councilman Orelio "Rollo" Vecchio said.

At one point, no competitors were allowed in town, Prucnal said. "Then, the satellites came out. We lost a few customers to them, and then Verizon got their foot in the door, and we lost a big majority of customers." Verizon Communications Inc. has offered its FiOS fiber-optic service in Pitcairn for about three and a half years, company spokesman Lee Gierczynski said. Pitcairn officials approved a franchise on Dec. 23, 2008. FiOS TV, Internet and phone service costs $99.99 a month, while DirecTV sells a package with more than 285 channels for $86.99 a month. Pitcairn basic cable includes 90 channels -- which includes seven high definition channels -- for $45.50 per month. The most expensive package includes HBO and Showtime -- the only two premium channels offered -- in addition to internet access for $114.36. "Our peak amount of clients was between 1,200 and 1,400," said Jim Comunale, utility foreman for the cable company.

As of August, 576 Pitcairn residents subscribed to the service, Pitcairn Manager Malisa Migliori said. Revenue totaled $463,443 last year, and the company had $451,761 in expenses including about $281,000 for programming fees, $45,000 for salaries and wages and $56,000 for the cable upgrade loan. "It was profitable when we had no competition. We are losing customers on average of 100 a year," Councilman Doug Crothers said. Dick said Pitcairn Community Cable lacks digital video recorder service, pay-per-view programming and an extensive lineup of premium channels. "At one point, local channels didn't even charge" to have their programs carried on the cable service, he said. "But now they all do. It's a lot of money to keep upgrading and it's not feasible anymore." Prucnal said a half dozen communities statewide once ran their own cable TV companies, "but Pitcairn may actually be the last."

It is uncommon for municipalities to provide cable service to residents, said Brian Herrmann, communications director of the Broadband Cable Association of Pennsylvania, a trade group based in Harrisburg. No numbers were available for how many communities might offer such services.

Cable industry consultant Stephen Effros said Pitcairn could be fortunate that Comcast has a presence in nearby Monroeville. "If you had Comcast in an adjacent large community, then Comcast could say, 'We will take it and rebuild it and connect to the existing plant we've got,'" said Effros, of Washington, D.C. It's difficult for a small town to compete with large cable providers, because the technology and the equipment is constantly changing, Effros said. Also, TV and broadband services are highly competitive, and involve negotiating with programmers and assembling and pricing service packages, he said. Due to the loss of so many customers, "We will get to a point when we will have to shut it down," Crothers said of the cable company.

Still, Bob Duncan of Duncan Communications Consulting, hired by the borough to help find a buyer, said the operation is an attractive asset with updated technology. "It has a state-of-the-art, 860 megahertz system and it provides video and internet, Duncan said. "It also has the capability to provide telephone service." Resident Carl Howard switched back to Pitcairn Community Cable TV and Internet after subscribing to Verizon FiOS for a while. "I'm satisfied with it," said Howard, also president of Pitcairn's historical society. Vecchio said the cable company is "a service to the people of Pitcairn, especially the seniors. We're giving them a decent product for a fair price." Pittsburgh Tribune-Review Inc. is taking steps toward releasing a video-streaming device in time for the holiday selling season, according to people briefed on the company's plans.

The set-top box, which would pit the online retailer against a host of established rivals, is a small device that resembles a Roku Inc. player and is similarly styled as a platform to run apps and content from a variety of sources, these people said. It would also serve as a delivery vehicle for Amazon's existing streaming video service-available as part of its Prime membership-which competes with Netflix Inc. and has been expanding lately. Plans for a device that would stream video were reported in April by The Wall Street Journal and other media outlets. Such a set-top box would broaden Amazon's reach into the living room, where today it is dependent on other hardware makers to reach consumers watching video on TV sets. Providing a device of its own is a potentially crucial component to Amazon's ambition of expanding beyond its core online marketplace business.

Prior reports about Amazon's plans have focused primarily on prospects for streaming its own content, which it now delivers to PCs and through other living room devices. But the company also plans to feature varied apps from other companies for streaming video and music, as well as some games, the people briefed on Amazon's plans said. In recent weeks, Amazon has approached a variety of media app developers, as well as cable television providers, seeking partnerships for the rollout of the set-top box, these people said. The Seattle-based retail giant has given some a deadline of mid-October to submit apps that could work with the device, the people said. An Amazon spokesman declined to comment.

Amazon hasn't made clear the intended release date of the set-top box, code-named "Cinnamon," nor has it discussed possible pricing, these people said. Amazon Chief Executive Jeff Bezos has said he likes to sell devices, such as its Kindle Fire tablets, at close to the cost of manufacturing and profit from the sale of services available through the hardware. Roku sells its set-top devices for as little as $50, while Apple Inc. offers its Apple TV for $99. Such devices reach the Internet using Wi-Fi or Ethernet connections, through which video and music can be streamed to televisions. Subscriptions to streaming video or music services like Netflix and Pandora Media Inc., cost extra.

A key motivation for Amazon is boosting its Prime membership rolls, which may be bolstered by a set-top box. The $79-per-year service offers thousands of movies and television shows for streaming, as well as two-day shipping on many items and, analysts say, compels users to buy more goods through Amazon. The company may offer a separate remote control for the set-top box, though it is likely to also be controlled through apps on smartphones and tablets, similar to the Apple TV set-top box, the people said. Last month at Amazon headquarters, Mr. Bezos demonstrated features of the latest Kindle Fire which allow it function like a remote control, including sending streaming video to web-connected televisions. A set-top box could be shelved or delayed due to financial, performance or other considerations, the people said.

Streaming video has been an increasing focus for Amazon, which has been racing to distinguish itself from rivals Netflix, Hulu LLC and others with exclusive content deals and a slate of television pilots that are set to become available starting later this year. That mirrors a similar strategy by Netflix which has won acclaim for its proprietary series, like "Orange Is the New Black" and "House of Cards," which garnered an Emmy nod. Based on the dizzying array of free and paid apps available on Roku devices--from the Yachting Channel to YogaGlo to Trigger Talk TV for gun enthusiasts-it is easy to imagine potential e-commerce tie-ins on an Amazon device. The two most-watched Roku apps are Netflix and Amazon Instant Video, according to Roku's website.

Today, Amazon users can only stream content through specially equipped televisions, set-top boxes like those sold by Roku, or videogame systems such as Microsoft Corp.'s Xbox. With its own set-top box, Amazon would gain additional data about its customers as well attract exclusive apps. "If Amazon can produce a box that will have a truly complete package of streaming sources, that would be very compelling," said Michael Pachter, a Wedbush Securities analyst. "This fits into their vision of dominating the competition in every area." Mr. Pachter said Amazon shouldn't face problems with content rights for its box, because the apps already work on Roku and other devices.

An Amazon set-top box would be entering a crowded field. Millions of televisions and gaming consoles already enable streaming video from Amazon and Roku, based in Saratoga, Calif., said it has sold at least 5 million devices in the U.S. Samsung Electronics Co. this year bought Boxee, a streaming television service, and Intel Corp. is working on its own video service and accompanying device. Amazon has broad hardware ambitions, including at least two smartphones and an audio-only streaming device, people familiar with the company's plans said earlier this year. Wall Street Journal

NBC says it will air a competition show with an out-of-this-world prize: a ride into space. The network said Thursday that TV producer Mark Burnett is teaming with Richard Branson's Virgin Galactic on Space Race, a game where the winner will get a ride on Virgin's aircraft atop the Earth's atmosphere. Virgin has been testing its rocket-powered space vehicle with the goal of taking paid customers into space. Virgin said the plan is for Branson and his children to be the first civilians to take a ride sometime next year. This isn't Burnett's first taste for space: In 2000, shortly after his Survivor became an instant hit, he announced plans for Destination Mir, an NBC competition series in which the winner would orbit Earth with Russian cosmonauts en route to the Mir space station. But the project was abandoned when Russia decided to crash the decaying Mir into the Pacific Ocean the following year. USA Today