
Ask HN: I want to build a cable company. How would I get started? - jayzalowitz
I want to build a cable company that centers around viewer types. Basically, it is my understanding that the majority of my cable costs centers around channels (like fox) that I just dont watch, if I wanted to build a system that let customers limit this, where would I get started?
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windexh8er
Having worked at the largest-small ISP in the US (>250k subs). Very ambitious,
and I think it can be done, however your biggest problem is in the over-build.
What that means is you will have to engineer and deploy your own HFC (hybrid
fiber coaxial) network first. If your original intent was to lease space on an
existing provider's network, and potentially buy some frequency on their coax
you're in very steep uphill battle. Even if a provider did happen to let you
do this you're beholden to them at that point and they, bluntly, have you by
the nuts if you start to threaten them. Meanwhile overbuilding where there
already is infrastructure isn't very efficient as you have to plan and
engineer (if you have no experience with this think civil + RF + data
engineering collaboration plus legal hoops for right-of-way and licensure into
actually laying fiber and coax). Add to that along the way you'll piss people
off for digging in their yards.

Sure, you can sell channels a la carte, however say you purchase 5 channels -
and you have 50 customers. Say every person of the 50 only chooses one to
subscribe to, now you only have a ratio of payment for 10 customers per
channel. This will likely put you in the red right there since each channel
has a pretty steep licensing fee for distribution. Once you get to scale -
this could work, but it would almost be easier for you to go in and buy out a
small customer base instead of starting from scratch.

On top of all these considerations realize if you're offering Internet and/or
phone you need CMTS and phone switching systems plus the engineering clout to
run them. If you plan on spanning multiple cities then you have to deal with
leasing or running your own fiber and then building out transport back-haul
(Infinera is an awesome company for DTN platforms BTW).

Long story short - you need a lot of smart people to help you design and build
this out, and if you've never worked with any ISP engineering verticals you've
got a ton to learn. Keep in mind this equipment is pricey and the only way to
make a good profit is to own your networks end to end (we were turning up 1 &
10 Gb circuits like hot cakes after we installed a new 1Tb system and since we
owned all the infrastructure we were looking at tacking on another Tb right
behind it to keep pace with demand - but keep in mind all the Tier 1
connectivity you need to support this as well).

Good luck!

~~~
eclipticplane
Not to mention that many of the channels are run by the same network. It's
unlikely they would license one channel to you without all of their channels
unless you have massive financial clout to effectively shut out their
other/useless channels.

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patio11
Could I suggest something a smidgeon less capital-intensive and ambitious for
your first business? In addition to a successful outcome making your cable
bill irrelevant to your personal happiness, the experience may demonstrate how
far an innovative charging model and a viable business idea are from each
other.

P.S. If insanely ambitious ideas are within the project scope, your plan
should probably be closer to YouTube/Spotify/etc for TV rather than actually
running a cable company, because owning wire has little to recommend it if
your primary concern is ability to negotiate Extraordinarily Favorable (TM)
licensing terms. Buying $200 million of copper would make 0 progress to that
goal.

~~~
w1ntermute
This brings up a good question. Why hasn't anyone tried to undercut cable
providers by creating a "TVoIP" service that piggybacks on Internet
connections the way VoIP services have done to undercut phone companies? I
imagine the requisite Internet speeds are there, since Netflix works for most
people.

~~~
PeterisP
A major point is that the content sellers do not want you to undercut their
cable partners (cannibalize their sales), so they will charge you more than
the cable companies. In essence, expect that if they are getting $x from
subscriber that is getting 10 of their channels from a cable package, then
they will want you to pay at least $x for the same subscriber. It is not in
their interest to allow the subscriber to get less channels for less money, so
they can simply disallow it.

VoIP service providers are creating and selling their own "goods". Cable
companies and "TVoIP" companies are resellers of something that is owned and
controlled by others, and it's not a commodity. If a channel owner decides
that they don't like TVoIP (or your particular TVoIP) for whatever reason,
tough luck. You might convince them with a lot of money - but even Netflix and
Hulu are not really enough for that.

~~~
w1ntermute
> A major point is that the content sellers do not want you to undercut their
> cable partners

Why not? By reducing my costs (by piggybacking on existing internet
infrastructure), I could pass on (part of) the savings to the content sellers.
So it would be a profitable decision for them.

~~~
PeterisP
The big question is, can you? The cable TV delivery costs are not that big
compared to content costs. Can you really offer a substantial markup for the
content even if you halve the delivery costs, and still offer a competitive
solution that customers would want?

And internet delivery is far from free. If you want live TV, the bandwidth and
jitter requirements are enormous, the burst requirements for fast channel
switching are a pain. We launched a small IPTV project last year, and IIRC our
delivery costs were actually higher than those of a comparable cable operator
- the benefit was flexibility and extra features, not cost.

~~~
w1ntermute
> The cable TV delivery costs are not that big compared to content costs.

I was under the impression that infrastructure buildout was very expensive and
was the main reason why it took someone of Google's size to create a new fiber
service.

> If you want live TV, the bandwidth and jitter requirements are enormous, the
> burst requirements for fast channel switching are a pain.

Netflix seems to be pulling it off OK. Do you mean that the costs are high for
the business (in terms of bandwidth spent delivering content) or that the
costs are high for consumers (in terms of getting a fast enough connection to
make this realistically possible)?

~~~
PeterisP
The reason it took Google is that this is an economy of scale industry - it
doesn't make financial sense to do anything small, you invest either a lot or
nothing. That's what "barriers of entry" mean.

I am speaking about the technical bandwidth burst + jitter requirements on the
whole channel from your [caching] servers to the settopbox or equivalent.

Netflix is not available where I live, but as far as I know, it's not a TV
service, it's a completely different animal. Launching a movie is trivial
because it's done once. For TV, imagine a person on a couch with a remote
pressing the 'next channel' button, browsing through 10+ live TV channels in
one minute. It is a major pain to get this experience to feel pleasant on an
internet TV setup.

Movies can have a small buffer for better viewing experience, but a live
football game needs to be, well, live - so that you see a goal before getting
a tweet or SMS about it.

------
fleitz
Print a sell sheet of the channels you want to offer in various packages. Go
door to door and ask if anyone would be interested in switching.

Once you have a decent number of potential customers in a small area phone the
content providers and find out how much it is to license the channels.

If you're still profitable you'll then need to estimate costs for building out
your headend, source a location for your satellite dishes, call centres, etc.
Find out costs for this. A lot of cable companies, especially Rogers in Canada
outsource a lot of their infrastructure / install work, you should be able to
find out from their builders rough estimates of build out costs.

Write a business plan and then find out if you can find someone to fund it.
When you find someone to fund it, go build it, then sign up your customers.

But seriously the trick to this plan is to figure out how _NOT_ to build out
cable infrastructure, I'd look at piggy backing on LTE / Internet in the same
way that hulu/netflix/youtube do.

You'd be far better off spending $50 million figuring out how to build
synthetic aperture recievers / transmitters and figuring out how to transmit
data over the wifi spectrum within the power limits outlined by the FCC rather
than building $50 million in 1990s cable infrastructure.

------
johnrgrace
First figure out how you're going to get the content to people.

Cable delivered via wire is considered to be a natural monopoly that in the
united states cities (or other sub state level groups) grant one company the
rights to string cable i.e. the Cable Franchise Fee. Running a second set of
wires is expensive, and simple economics are going to have every existing
cable company keep you out of their system. Google's fiber is the one set of
to the house pipes that MIGHT let you use them. So unless you have lots of
money doing it the "industry standard way" isn't going to be possible.

So long as you're tied to using wires cable systems are local monopolies and
capital intensive, figure out a good way to bypass this any you may have a
good business.

Go look at Comcasts financial statements if you want to see what the cost
structures are. Note they're spending 13% of revenue on Capital expenditures.
In 2011 they spent 40% of revenues on Programing ($19,625 in video
revenue,$7,870 on programing).

<http://www.cmcsk.com/earnings.cfm>

Second, figure out if the content providers will even let you have the
content.

Cable is a big market, a business that could disrupt it would do well.

~~~
nilsbunger
Nice. A direct link to the 2011 10K with parent's figures is at:
[http://files.shareholder.com/downloads/CMCSA/2210267075x0x56...](http://files.shareholder.com/downloads/CMCSA/2210267075x0x561695/79426950-eb48-4e46-a761-f999d155a226/BookmarkedComcast10K.pdf)

------
bobdvb
First I recommend looking at the groups on LinkedIn, please don't dive in
there and ask stupid questions, but read and perhaps ask a well placed
question. Give context and you'll find the experts there mostly willing to
help.

There are different types of cable companies, but things you need to know are:
1) Coax costs more than fiber optics You might think this is a stupid
statement but when you are rolling out over a wide area you will find this.
Look at GPON technology, even small community cable companies in Spain are
using this advanced technology. 2) You either use digital TV or IPTV
technology to deliver the channels. Digital TV (like DVB-C), will allow you to
use a lot of legacy technology but it will leave you stuck in a legacy
quickly. IPTV will require using all new hardware but that hardware may be
cheaper to invest. 3) TV networks often need heavy constraints on content
security (encryption and DRM), don't think that you can change the world, the
Hollywood/MLB/NFL/NHL/Premier League lawyers won't budge and even the TV
networks have to bow to the rights holders. If you don't have security built
in then you will fail to get content, poor security will result in you having
to do a major swap out which could bankrupt you. 3) IPTV should be multicast
in order to reduce the costs of delivery on the network. 4) You will need a
_big_ internet connection. 5) Employ some people who know what they are doing
already, there are lots of semi-retired engineers who can help you achieve
what you want and they needn't cost you the earth. Again, check LinkedIn for
this.

------
rdl
If I were doing this, it would be a high-quality IPTV (VOD, streaming) and
customized network configuration for hotels. i.e. I want my 2000 room
conference hotel to let people have ethernet ports in room and in attached
conference center booth on effectively the same VLAN at least. I'd also like
to offer 30-50Mbps down and 10-20Mbps up to hotel guests.

You'd have a lot easier time going after LodgeNet, etc., with far lower
engineering costs, and still have a chance of doing innovative licensing, than
as a cable company doing residential service. After that, you can expand to
IPTV for public exhibition (bars, etc.). Maybe partner with someone like
Sirius who does radio for those environments and offer a video and vod
service.

Several orders of magnitude less capex, a much smaller minimum feasible size
(you could be profitable on ~20 big city hotels, I think), easier licensing,
and far less regulation (at the local government level).

------
FfejL
You would need to start by raising a large amount of capital. Tens of
millions, if not hundreds.

Now, you have two choices. "Easiest" is buying an existing, up and running
cable company. There are quite a few:
[http://en.wikipedia.org/wiki/List_of_cable_television_compan...](http://en.wikipedia.org/wiki/List_of_cable_television_companies#Detailed_list),
and if you've got a hundred million or two in cash, I'd bet you can find a
seller.

Much, much harder is finding at least one municipality willing to give you
franchise rights. That's going to take a lot of time and a lot of lawyers.
Franchise rights aren't cheap, and generally require an "OK" from a city
council. Once you've got that, you'll can start running cables. Even more
time, and plenty of that capital. Figure on a couple of years to get to the
point of actually being able sign up your first customer.

------
tedchs
Cable companies are beholden to the content providers, who have contracts that
say if $CABLECO wants to carry channel X, they also need to carry e.g. these 5
other channels.

However... if you want to start a cable company... the easiest way to make a
million dollars is to first start with a billion dollars.

~~~
jayzalowitz
I appreciate that, I really do, but I would find it hard to believe some of
the smaller cable companies wouldnt be at least in part willing to play ball
if I am willing to pay them more than they are used to.

Also, the easiest way to make a million dollars is by doing what you love,
nobody ever said losing 999m is easy.

~~~
PeterisP
The current smaller cable companies have strict agreements on what packages,
what distribution channels and for what time they have licenced their
channels. If they have a licence to transmit HBO over their cable network,
they most likely are not allowed to transmit HBO over public networks (i.e.,
Internet). If they have a licence to include a sports channel in their basic
package, they most likely are not allowed to take it out of the basic pack and
offer it a-la-carte.

All the service terms are detailed before they get the channels, and if you
convince them to really change their mind, then they can (try to) negotiate
these new rights for their next content term, which comes up every two-three
years.

------
eduardordm
After reading your blog, I just asked a friend who is a cable company director
(and one of the owners) how you could do that, the answer:

Build a cable company (there is local regulation about how that's done, you
are not creating a 'new' thing, cities and states might already have
guidelines and/or legislation on that subject - and the tech is already there)
Sometimes that's not possible, because those services are state regulated that
the spots are auctioned every zillion of years. A mile of cable coverage can
cost more than 10k USD and it's not guaranteed that you will make any sales on
that specific mile.

A single company usually owns many channels, they want to sell them all to you
(based on your subscription numbers) those prices change based on your
performance. You need to invest money to receive their signal, so it's usually
better to receive the 'whole package' they are offering anyways. This is more
or less how it works.

Our take on this (over a beer):

A pay-per-hour-view cable company. Using your alien negotiation skills you
will convince all companies to give you all the channels and you will log what
viewers are watching. You will charge viewers based on how much they watched.
Prices would vary per channel and every ad watched would generate a 'credit'.
You and the channel would split the revenues.

------
hdra
not that i have any experience starting a company, but wouldn't it better for
you to find a job at a cable company for a time and get to know the industry
first? i don't know much about cable tv industry, but it seems to rely quite a
bit on connections..

~~~
pixl97
This. It would be better for the author to understand the legal requirements
and the legal history of cable TV. The technical side is only a small part of
the equation here. He would be dealing with regulations at local, state,
national, and international levels.

<http://www.fcc.gov/guides/regulation-cable-tv-rates>
[http://www.fcc.gov/encyclopedia/evolution-cable-
television#s...](http://www.fcc.gov/encyclopedia/evolution-cable-
television#sec7)

So I guess the real answer to his question 'Ask HN: I want to build a cable
company. How would I get started?' is here.

<http://www.fcc.gov/>

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mesozoic
This is something my friend brings up all the time and every time I have to
explain to him why cable companies operate the way they do.

------
irishcoffee
I've been kicking around and researching this idea for literally years. There
are a few huge roadblocks to success, some of which are mentioned in the
replies here. I'd be interested in talking to you more if you'd like.

~~~
dbz
It might be helpful for you to post a lot of your ideas here. Big cable
companies aren't going to steal them and people here may offer improvements.

------
joezydeco
What is your planned transport mechanism? Do you plan to build out an entire
town with coax cable, amplifiers, and headend? Do you have a franchise
agreement in place with a municipality?

------
robryan
In Australia things have headed towards cable consolidation over time. There
are huge upfront infrastructure costs in cabling, if you are allowed to go out
and cable at all. It might be completely different where you are but here it
seems like current providers are incentivised to maintain a monopoly over
delivery.

If anything you are probably better off trying to build out something over the
internet with many more potential customers now having the bandwidth to take
advantage of.

------
dokem
It seems like it would be pretty hard to get investors to back a cable
company. Cable television is dying and its for the same reasons you are
mentioning. Most people don't watch half the crap they are buying when they
pay for cable. That's why so many young people don't even have cable anymore,
just Netflix, Hulu, or The Pirate Bay.

------
sciurus
As others have said, you likely don't want to build a cable company, and
probably couldn't anyway.

Google for terms like "unbundling" and "a la carte" in relation to cable.
You'll find that some cable operators are in favor of it, but enough cable
operators and content providers oppose it to prevent it from happening.

------
niggler
The traditional firms are actually trying to divest their interests in cable.
For example, a few years ago Verizon sold off landline buildout in some rural
areas to Frontier Communications

~~~
taligent
Yep. The future isn't in cable. It's in FTTH/FTTN like what is happening in
Australia right now.

Which means any opportunity for disruption are going to come from platforms
like Netflix, BBC iPlayer, Vimeo, YouTube, CollegeHumor etc.

------
ChuckMcM
The simplest way to get into this would be to create a Roku channel. You could
design your channel's content around viewer types.

------
raheemm
Combine Netflix with Google Fiber

------
stevewilhelm
Start with a 100 million dollars* ...

* Size of Hulu's A round

------
taligent
Okay so three things.

Firstly I don't think you understand the business you are trying to disrupt.
YOU may not watch particular channels e.g. Fox but others do and they help to
subsidise the unprofitable channels. So trying to break apart the channels
will be impossible without a deep understanding of the economics of each
individual channel and how that relates to your ability to sustain a profit.

Secondly it is widely rumored that Apple will be building a TV that offers an
a la carte model. So something to be mindful of given how well their products
sell.

Thirdly if the top two don't faze you then there is the fact that you picked a
problem that is extremely high cost, low margin and with players who seem to
get a kick out of destroying competition through financial and legal means.

But hey by all means give it a try. You learn more by trying and failing than
not trying at all.

------
rorrr
You're asking such a generic question, it means you don't really understand
what you are planning to do.

Is knowledge really your main problem?

