• by Adam Bernard , December 19, 2001

Merrill Lynch expects the rollout of new digital cable TV boxes in U.S. homes for most cable operators to slow this quarter, and next year, as the share of households with access to digital cable approaches 30%.

The pace of the rollout, which is important to cable TV operators who look to digital cable to boost subscriber revenue, is expected to slow by 15% in 2002 from 2001.

The investment firm forecasts cable TV operators to add 10,900 digital subscribers per week in 2002 compared with its estimate of 13,000 new digital subscribers per week in 2001. Overall penetration of U.S. homes, which is now about 24% , is expected to rise to 29% by the end of 2002, according to the Merrill Research.

The pace of digital rollouts is expected to be about 11,900 subscribers per week in the current, fourth quarter, down 9% from 14,800 per week in the third quarter and 40% from 21,300 per week in the fourth quarter last year.

Merrill Lynch said new video-on-demand (VOD) services could boost the rollout, but added that the prospect for large deployments backed by huge marketing campaigns was unlikely.

In the past two years, cable TV operators have been installing new digital cable TV set top boxes in homes in order to deliver new, enhanced services such as electronic program guides and VOD, for which they can charge additional fees.