Cable television companies and their equipment suppliers are on the verge of installing new technology that will pack many more channels into cable networks, thereby creating a potential programming revolution with implications for broadcasters, telephone companies, and the consumer electronics industry.

Digital compression uses computer techniques to squeeze 3 to 10 programs into a single channel. A cable system fully using digital compression technology would be able to offer well over 100 channels, compared with about 35 for the average cable television system now used. If the new technology is combined with the increased use of optical fibers, it might be possible to offer as many as 300 channels.

A cable company is considering installing this new technology to increase subscription sales and save on satellite time. The company estimates that the installation will take place over 2 years. The system is expected to have an 8-year service life and produce the following savings and expenditures:

Digital Compression Investment   Now $500,000 First year $3,200,000 Second year $4,000,000 Annual savings in satellite time $2,000,000 Incremental annual revenues due   to new subscriptions $4,000,000 Incremental annual expenses $1,500,000 Incremental annual income taxes $1,300,000 Economic service life 8 years Net salvage value $1,200,000