Until a few years ago, being in the pay-television business was pretty simple - and profitable. You simply set up receivers to bring in as many stations as you could, strung cables around town, hooked up subscribers, and watched the money roll in. Sure, other pay-TV services came along, but if customers wanted to get more than one special channel, they had to come to you and your cable.
With the addition of satellite transmission in the mid-1970s, the range of programming available to cable systems grew substantially, and subscribers grew with it. Since 1975, the number of homes equipped with cable nearly tripled, to 27 million, representing 33 percent of all US homes having TV sets.
Now, cable is facing new competition. The battle pits cable against a variety of services, including movie channels, Home Box Office, and entertainment channels. The latest entry in the field poses perhaps the most serious competition for cable and stands to give consumers looking for multichannel pay-TV their first real choice.
In an application filed with the Federal Communications Commission last week, CBS Inc. and Contemporary Communications Corporation, of New Rochelle, N.Y., asked permission to begin a five-city test of multichannel, over-the-air programming. If the FCC gives the go-ahead, programming prepared by CBS would be available on four to eight channels in New York, Los Angeles, Chicago, Philadelphia, and St. Louis. In the test, one of the cities would receive four channels, another would have eight, and the others would have from five to seven.
While many of the details have yet to be worked out, the cost of these services to subscribers is expected to be ''competitive'' with cable, said Gary Cummings, vice-president of CBS's Television Station Division. Programming, he added, would be similar to what is available on present cable systems, including movies, sports, and information.
The CBS-Contemporary Communications proposal is similar to one made in February by the Microband Corporation of America. Microband's service, chairman Mark Foster said, would expand its present one-channel service to multiple channels and would include capability for two-way transmissions, something that has so far been limited to cable services.
The entry of the expanded services renews a debate over pay-TV, centering on just what it is customers want and the best way to provide it.
In many cities today, one of cable's main selling points is the high number of channels available to the viewer. A far cry from the days when people could get only three to six channels, a ''modern'' cable system is expected to have a minimum of 52 channels, and many will have well over 100.
But, it is wondered, how many channels do people want?
A survey conducted in the Denver area for Microband found, perhaps not surprisingly, that people wanted ''somewhere around four or five channels in addition to the four or five being received now,'' Mr. Foster said. ''More important, we just feel having that many channels is not profitable.'' There are only so many channels that can earn enough money to make them worth keeping, and with 50 or more, he feels, that leaves a lot of programming being seen by very few people.
Services like Microband and the CBS venture, Foster said, accomplish three things: They eliminate cable's monopoly on multichannel programming; they can go into locations that cable cannot reach, such as rural areas; and they can be put in very quickly, which can be useful in big cities that may take several years to wire for cable. In contrast to cable, these multichannel systems can be set up in a matter of weeks, and distribution needs only as much time as it takes for people to put antennas on their roofs and receiving boxes on their televisions.
With widespread use of both kinds of systems, consumers in many urban areas will have a choice between the local cable system and the multichannel broadcaster. Truly dedicated videophiles can even have both.
For their part, cable operators are almost unanimous in their optimism that the new services will not slow the growth of cable.
''Multichannel direct broadcast will provide some complementary services,'' said William Bresnan, chairman and chief executive officer of Group W Cable, a subsidiary of Westinghouse Electric Corporation. ''But it's not in the same league with cable.''
In addition to their limitations on programming, systems not using cable ''have a lot of limitations,'' he contends. One is the fact that most have to have a clear ''line of sight'' from the transmitting antenna to the home antenna. In addition, there are problems of security. Almost as soon as a new over-the-air pay-TV service comes along, it is followed by some electronic wizard who has designed a box that can ''unscramble'' the signal so people can receive the pay services without paying for them.
While they have met with mixed success in stopping this activity in the courts, the pay-TV companies appear to be doing better through technology. Many of the new over-the-air pay systems, including those proposed by CBS and Microband, are ''addressable'': In addition to the transmittng equipment, they also have a computer at the station that gives subscribers access to particular programs and can tell when an unauthorized user is attempting to horn in.
How cable TV has grown
Cable Households Percentage of systems (in millions) TV-equipped homes also having cable 1975 3,506 9.8 14.3% 1976 3,681 10.8 15.3 1977 3,832 11.9 15.6 1978 3,875 13.0 16.6 1979 4,150 14.1 19.0 1980 4,275 16.0 20.0 1982 4,772 27.0 33.0 Source: National Cable Television Association