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Ask HN: I want to build a cable company. How would I get started?
67 points by jayzalowitz on Dec 9, 2012 | hide | past | favorite | 52 comments
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?

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!

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.

If entering the market is this hard, at what point do cable companies that own fiber in a region become a de facto monopoly?

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.

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.

If http://Aereo.com wins their fight with the broadcasters they could become the next generation cable company, as they will be able to attract a fairly large sized audience.

By accumulating a nice user/audience base Aereo could then begin to add other channels like small to mid size broadcasters like Al Jazzera and possibly even AMC or a live netflix channel and more.

I am hoping they win this fight with broadcasters as I want to watch my local antenna channels via the net!

Also and recently I saw an article of Bit Torrent live streaming app, which could be another way to disrupt and destroy the cable business.

Update: I'm reading other entries and wonder if the OP actually wants to build a cable company the old fashion way, i.e. running wires and stuff? Seems old fashion to me, as opposed to creating the new cable industry using the net.

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.

> 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.

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.

> 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)?

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.

Isn't that how Verizon's FIOS and AT&T's Uverse TV services work? The difference is that they don't decouple the TV service from their Internet service. But there's no real technical reason I couldn't get their TV over IP delivered to their set top box through my cable modem…

And a more direct answer to "Why hasn't anyone tried to .." is that many have tried to do that and failed - but the general public doesn't see that because such attempts tend to simply result in a wasted year and a wasted million, written off before even getting to a launch.

The failure point is content. If you wonder where to start - try to figure out the content deals, because all other aspects (technical, customers, design, etc) are much easier and can be solved if you have money; but without [good] content, your TV service is useless.

I don't know how successful they are but wilmaa.com is doing that in CH.

Recall joost, ms web TV, and a few others.

You mean like Hulu or iTunes ?

Why not real IPTV over the Internet? Probably wouldn't want to without multicast, but wouldn't this be feasible when IPv6 adoption starts reaching decent percentages?

Infrastructure is/was the easy part of cable (due to the monopoly grants). Content is, and always was, the hard part. Without the proper licenses to stream Video over IP, you're DOA.

But it has been done before, many times, successfully...by the data companies (see e.g., Verizon FIOS).

OK, so why can't anyone get those licenses? Google was able to get the licenses for the TV service that goes along with Google Fiber, for example.

Why is this always done by the companies that own the infrastructure? Why was Vonage, a company with preexisting no phone infrastructure, able to get into the VoIP business, but no one has been able to do that with TV?

Is it perhaps because some of the cable companies also own the content companies, and so they don't allow this sort of system to develop?

It's because you have to commit to a minimum viewer count if you want anybody to talk to you - i.e., if you want to negotiate content rights for a good channel, expect to pay for a minimum 100.000+ subscribers even if you have 0 or 10.000 viewers for that one. That means that either you have a large 'captive' viewer base already to make up for it, or you have to be willing to bet a large amount of money (hard to estimate, but think 100m+) before you get your first viewer.

Is Google just eating the costs with Google Fiber then? They can't possibly have 100k subscribers already.

Google Fiber seems to offer a standard cable TV licence, you can subcontract them from resellers if you follow all standard rules and offer the same service as everyone else. Or they might have a cableTV partner that handles that - I don't know their details.

However, if you want anything (I mean, changing a single word in the agreement) nonstandard, then you need offer a decent size deal to make it worth the bother.

I was actually thinking more of using ... and I shit you not... the really old school Aol model (you get 40 hours a month! Of the internet!) for more of the cheaper versions.

Everyone gets x hours a month, the system wide number of hours watched on them gets paid out to the channel providers as our users would have fairly watched that amount..

You can do non-standard billing to your customers, but don't expect to do non-standard billing to the channel providers.

If your subscriber watched 5 minutes of our football game last month, we'll invoice you full price for that subscriber for that month, thank you very much. Fairness doesn't matter - you can have different pricing terms if can you convince content owners that this will result in more $ per subscriber than before.

More subscribers is not an argument - they'll assume that each your subscriber is cannibalized off some other provider, so you'll have to extract as much or more from each subscriber.

Cable companies are always borrowed to the hilt ... But the reason they can get the loans is that they're great at cash-flow. Still, you'd need to pick a niche carefully (the best example I can think of is how Telebeam started up in central PA).

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.

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).


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.

Nice. A direct link to the 2011 10K with parent's figures is at: http://files.shareholder.com/downloads/CMCSA/2210267075x0x56...

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.

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).

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..., 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.

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.

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.

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.

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.

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..

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...

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.


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.

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.

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.


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?

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.

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.

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.

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

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.

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

Combine Netflix with Google Fiber

Start with a 100 million dollars* ...

* Size of Hulu's A round

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.

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?

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