Is satellite television facing the big squeeze? US cable operators are rapidly signing up telephone customers. Telecoms companies have responded with big fibre investment plans – to allow them to offer a rival package of telephone, broadband and video services over one pipe.

That leaves satellite stuck in the middle. It cannot yet offer a “triple-play” bundle, leaving it to fight without the same weapons as rivals. So far, satellite operators have not suffered disproportionately. In fact EchoStar and DirecTV shares have outperformed those of Comcast – the biggest US cable operator – by about 10 and 20 per cent respectively since the beginning of 2005. That is largely due to Comcast’s weakness rather than their strength. But, in their defence, DirecTV and EchoStar are adding video subscribers at a good clip compared with Comcast. They are focused on differentiating their TV offerings through high definition services. Their more rural exposure offers some protection. And cash flow should rise rapidly for a few years.

Satellite has outfoxed cable before. This time, however, the long-term picture looks more challenging. The cable industry is getting its act together, selling keenly-priced “triple-play” bundles. On top of providing revenue growth, the bundles show signs of boosting customer loyalty and breathing some life into cable operators’ mature video businesses. If, and it remains an if, telecoms operators also make real inroads in the next few years, it would add a competitor and potentially put pressure on video pricing. It could also turn partnerships – telecoms operators currently re-sell satellite video services – into competitive rivalries.

It is hard to see many silver linings to the cloud of new competition. Satellite operators will look increasingly naked without a bundle and they are likely to suffer more than the cable operators. But, at least, tougher competition could one day make regulators less adverse to the idea of a DirecTV/EchoStar merger than they were in 2002.

Copyright The Financial Times Limited 2018. All rights reserved.

Comments have not been enabled for this article.