Cable Losing Its Captive Audience

Cable World, Sept 3, 2001 by Erik Wemple

George Feigley makes no secret of his preference for cable over satellite TV. His old service, from Adelphia Communications, gave him about 50 channels and cost just $13 a month. But now he has to pay 17% more for only 35 channels from a satellite provider.

Most customers who share his gripe could simply switch back to cable, but Feigley doesn't have much choice. He's an inmate in Pennsylvania's Smithfield Correctional Insitution, a two-time prison escapee serving a sentence for statutory rape. And his beef exposes a growing threat to cable operators, who for years have enjoyed a profitable hold on the ultimate niche market, the nation's 1.5 million-strong inmate population.

In an arrangement that Feigley complained to federal regulators was a "bizarre socialistic scheme," Pennsylvania last year contracted with Correctional Cable TV Inc. of Tyler, Texas, to beam a centralized palette of programming--via satellite, not cable--to all 26 state prison facilities. Over the next seven years, as the cable contracts of the state's prisons expire, all 18,000 multi-channel subscribers in Pennsylvania facilities will switch to the satellite feed, authorities say, locking the state's cable providers out of roughly $3 million in annual revenue.

Other states are following suit, as prison authorities seek educational programming for their inmates as well as a means of filtering out content deemed offensive. Correctional Cable TV, a subsidiary of Austin, Texas-based MSO Classic Communications, serves more than 300 facilities in 33 states, according to company vice president. Ronald Schaeffer. Authorities in Florida say they may be the next to sign up. Another prison satellite programmer, Corrections Learning Network of Spokane, Wash., has cut deals with 232 facilities in 38 states.

Of course, prisons represent a relatively small market for cable operators. But pro viding entertainment for inmates is a growth area. "There are 1.5 million people behind bars," says corrections consultant Art Leonardo, a former warden in the New York state system. "I think the market is probably unlimited."

What's more, the emergence of satellite outfits like Correctional Cable points out some of cable's drawbacks: Limited by franchise boundaries, one cable system can't service the prison facilities of an entire state. Nor have operators found it easy to tailor programming for a specific institutional facility such as a prison.

"Cable companies could not come in and provide selective programming," says Schaeffer, who founded Correctional Cable in 1987. "What if a facility wanted just three channels? It would be cost-prohibitive for the cable company to chop out, say, 52 others."

According to Pennsylvania state officials, approximately seven cable providers stand to lose business with the new arrangement. Comcast Cable Communications, for one, will lose contracts at three prisons, according to company spokesperson Jaye Divine. And Chet Isset, general manager of Adelphia's Huntingdon system, says he'll lose 781 subscribers at Smithfield.

"Unfortunately, they chose a provider from out of state," says Brian Barno, vice president of government affairs for the Pennsylvania Cable & Telecommunications Association. "It's a loss of business for our companies, which we regret."

Some inmates aren't happy with the switch either. "Several channels will be `educational' or otherwise purely propaganda, controlled and produced by the state, while essential outlets of unbiased information will be excluded," Feigley wrote in a complaint last year to the Federal Communications Commission.

As of last December, prisoners at state facilities numbered 1.23 million, while the federal prison population stood at 145,000. According to Federal Bureau of Prisons spokesperson Traci Billingsley, "close to all" federal prisons prohibit TV sets in cells--meaning that inmates watch in designated TV lounges, which are all hooked up to either cable or satellite, according to Billingsley. The 84 federal penitentiaries have an average of eight such viewing areas per facility.

The real money for cable providers, though, lies at the state level. A Cable World survey--along with data from the American Correctional Association--found that 35 states, including California, New York and Illinois, allow inmates the privilege of in-cell television. Nearly all such states allow cable TV. Cable World estimates that state prisons across the country house roughly 370,000 potential cable subscribers-not to mention thousands of additional cable hookups in TV lounges at the 1,320 state facilities.

To be sure, the prison population isn't quite the dream demographic for the Home Shopping Network. But many inmates rely on TV as their sole source of entertainment, and in state penitentiaries across the country, it's not uncommon to find cellmates with individual TVs wired to cable, taking in the audio with headphones. "Inmates like cable TV and will forgo cigarettes and potato chips to get their cable TV," says John S. Shaffer, deputy secretary for administration with the Pennsylvania Department of Corrections (PDOC).