in America.[10-11] It had gone from the farms to the centers of the largest cities.
The number of stations increased dramatically, as the technology enabled
hundreds of channels. And the range of channels exploded with the de-
crease in the number of viewers needed to make any particular channel suc-
ceed. When channels multiplied, the opportunity cost for each new channel
fell; when opportunity costs fell, then uses of the networks increased.

Cable was about to hit a number of bumps in the road, however. Some
were of its own creation -- perceived "price gouging" led Congress twice to
regulate the prices of cable services. But some it did not control.[10-12] Satel-
lite TV was the first of these; the Internet was the second.

Satellite TV offered competition to cable in the same way that cable had
offered competition to TV. Services like DirecTV provided access to many
more channels of television than cable, as well as the possibility to sell TV
on a pay-per-view basis. Yet because it used no wires, the costs of providing
this service were relatively low -- at least when compared to cable. Thus,
satellite provided a great challenge to the monopoly that cable was.

To respond to this competitive threat, cable needed to upgrade its systems
to make it easier to supply two-way communication. Two-way communica-
tion was needed so consumers could make pay-per-view selections for tele-
vision; fatter pipe would make it possible for cable to provide a wider range
of content.

But while upgrading to compete with satellite, cable soon realized that it
could also upgrade to provide two-way Internet service. And if it upgraded
to provide Internet service, then cable could also be used to provide tele-
phony. Thus the upgrade could secure cable in its primary market, while so-
lidifying cable in these two new and growing markets.

/tab\/tab\AT&T CABLE/tab\/tab\

To upgrade, however, would require a great deal of investment and,
more significantly, technological development. First, there was no standard
for enabling Internet across cable. Second, there was a great deal of poor-
quality cable that needed to be upgraded. Some was quite old. And even the
cable that was not old would require new technologies to make two-way
cable work. So the cable companies formed an independent company --
Cable Labs -- to develop an open standard for serving cable. This standard --
called the DOCSIS standard -- would then be usable by modem providers
that wanted to build cable modems to serve the growing Internet commu-

[[153]]

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