As a long time streamer of media via Netflix, I have become accustomed to watching content on my schedule. As most of you know, I travel a lot for business, so watching my favorite shows when the content providers want me to is a non-starter. I’ve also begrudgingly held a cable subscription for one show I like to watch on Sunday evenings. I have known for a while know that it is just a matter of time before over-the-top programming becomes the norm, and that a la carte programming is the future. Naturally, the major cable and satellite companies have been fighting to prevent this, but their hegemony is losing power at an escalating pace.
I was quite intrigued and elated when I saw that Sling TV launched an over-the-top service in February of this year. The original package of channels was nothing to write home about, but it included some major names like ESPN and CNN. Rumors were also circulating about AMC coming to Sling TV as well. For me, this meant that I could cancel my cable subscription as AMC is literally the only channel I care about on regular cable. (FYI, AMC is now officially in the lineup for Sling TV) At the Apple event this past Monday, the CEO of HBO announced a new over-the-top offering, called HBO Now, that does not require a cable or satellite subscription like HBO Go. The launch and ultimate success of these two services are merely the first cracks in the dam of the hegemony which is cable and satellite TV.
Overall, this is great news, but there is still one more wall that needs to be knocked down in order for this new world of services to thrive...
Let’s put aside the fact that cable companies have been given near monopolies in most cities, billions of tax payer dollars to build out networks for ‘the common good of the people,’ and hidden behind vague interpretations of FCC rules to avoid being regulated as common carriers. The biggest scam the cable industry has wrought on the public is that of the infamous ‘bundle.’ With these bundles, the cable companies tell us that we can save money over individually prices services, most often cable content, internet and phone service. The problem isn’t in the bundle itself, but rather in the dismantling of said bundle. You see, now that Netflix, Hulu, Sling TV, HBO Now and other over-the-top offerings are becoming the de facto way to watch content, the cable bundle doesn’t make sense any longer.
Most people use mobile phones for all of their voice communications (especially younger people), so residential phone service is redundant if anything. With older and newer streaming options, many people are ditching cable and satellite altogether. These forward thinking individuals are called ‘cord cutters’ as they are cutting the cable cords that have bound us for nearly three decades. This means that for many people, myself included, only the internet connection matters. If a typical cable bundle is $99 for cable/internet/phone, it would make sense that each should cost about $33. Perhaps it costs more to offer cable service as opposed to internet or phone, so that ratio can fluctuate, but this is where the insidiousness of the cable companies really surfaces. If I want to drop cable and phone service, my internet service ‘miraculously’ jumps from about $33 a month to $79 a month. There is no increase in speed or class of service. So does that mean that cable and phone service are only $20 a month (for both) in the bundle? Of course not! This is simply the cable companies’ way of making internet service, by itself, seem unattractive from a fiscal perspective. They know the streaming services are aiming to dismantle the monopolies granted to them by municipalities over the years, and by having the dual position of offering paid content and the very lines that the streaming services must transmit across, they can manipulate prices to keep their paid offerings in front.
This is why the recent move by the FCC to regulate these broadband providers under Title 2 is so critical. First and foremost, it will mandate a level playing field between the streaming services and the cable companies’ own over-priced content offerings. It will also prevent cable companies from introducing barriers to entry for other new content providers. In addition, it allows competing broadband offerings to enter the market without the legislative and legal red tape the cable companies have used to maintain their monopolies. Services like Google fiber are already having a huge impact on the broadband market in the US. In the few cities that it has been deployed, the cable providers somehow found a way to offer gigabit broadband at competitive (to Google fiber) prices after years of saying that it was not possible. Even in cities where Google fiber has yet to arrive, cable companies are doubling internet speeds ‘for free’ and touting new gigabit offerings where it was ‘impossible’ before according to these same cable companies. Do you see a pattern here? Competition is forcing these cable companies to compete in a free market as opposed to enjoying the protection of a monopoly.
Eventually, the price of broadband internet will plummet to a more realistic $20-$50 a month for 100 megabit to 1 gigabit. This coupled with the increasing amount of content available via streaming will finally break the monopolies that cable companies have enjoyed for so long. It is so apropos that both of these issues (Title 2 regulation and over-the-top content offerings) came at just about the same time. It was a beautifully executed one-two punch to the head of the cable industry, and only good can come of it. I can’t wait to see how this benefits consumers over the next few years. Indeed, the initial cracks in the facade of the dam are showing, only this time, the inevitable flood will wash out the filth that has fleeced consumers for decades.