Europe’s cable operators are undoubtedly suffering. After borrowing heavily in the mid-1990s to roll up small players and to upgrade digital systems intended to help them sell bundled services, they now find themselves counting losses rather than the profits they expected. The industry’s "triple-play" bet—that customers would jump at the convenience of buying television, Internet, and telephony services from a single provider—hasn’t yet paid off, for consumers have failed to summon enough interest to make it succeed.

Not surprisingly, attention has focused on the operators’ enormous debts. NTL, a US company that is Europe’s fourth-largest operator, declared bankruptcy in May 2002, exchanging $10.6 billion of debt for equity and wiping out its equity holders. United Pan-Europe Communications (UPC), Europe’s third-largest operator, defaulted on its bond payments and was delisted from Euronext (the combined stock exchange of Belgium, France, and the Netherlands) when its debt exceeded its shareholder equity. Ish, a German cable operator, has filed for Chapter 11. These are just a few of the many companies across Europe that are struggling. But merely restructuring this debt won’t get them out of their predicament. The problem is strategy.

To survive, companies must create new business models for themselves quickly....