l the "quadruple play" of voice, video, data, and wireless. This places them squarely in the game, offering a converged set of bundled services to customers for as single, low price. The U.S. cable industry is taking its voice penetration strategy seri- ously. The industry as a whole has invested over $70 billion in network upgrades to accommodate the demand for high-speed data, and although cable companies have attracted significant numbers of voice customers away from ILECs, the ILECs have done very little in the way of compet- itive pricing or service expansion to combat cable-though SaskTel's MAX service is intriguing. The newly released DOCSIS 2.0 for high- speed data promises transmission at very high bandwidth-as high as 30 Mbps. Furthermore, the operating margins on cable modems are quite high-35 to 40 percent. So what's the bad news? The bad news is that there is more to running a successful company than having impressive technology. The cable industry's debt load is enormous because they have all invested heavily to ensure market penetration and their ability to deliver the services demanded by customers. Adelphia, for example, the sixth largest cable company in the United States, has nearly $14 billion in current debt and approximately 5 million subscribers-which works out to a debt load of $2,800 per subscriber. And while this number seems large, it also seems (perhaps) manageable-until we begin to factor in other numbers. Sub- scribers spend approximately $800 per year on services. However, cable companies spend an average of $480 per year to provide routine service to each subscriber, which leaves $320 per subscriber. Furthermore, capi- tal spent on routine maintenance averages roughly $100 per subscriber, leaving far less in the way of income against incurred debt. And to add Downloaded from Digital Engineering Library @ McGraw-Hill (www.digitalengineeringlibrary.com) Copyright © 2004 The McGraw-Hill Companies. All rights reserved. Any use is subject to the Terms of Use as given at the website. Tel