Times have been pretty tough for cable TV providers lately and it is looking like they will only get worse. Not only are people dropping the premium channels & packages in favor of saving a few bucks, there is also a huge flight to internet-based television services like Netflix, Hulu, and Amazon Video on Demand.
Unfortunately for the consumer, there is a catch. The cable companies who provide high bandwidth internet are the same ones providing the cable television channels. So what they see is a whole lot of people abandoning their profitable television packages while simultaneously gobbling up more bandwidth from the download of high definition video. Revenue drops, but the demand on their infrastructure is headed up.
Of course, the cable companies aren’t going to let this happen without a fight, and they’ve got quite a few points of leverage to influence the market situation.
Transfer fees: Last month, Comcast made a bold move in demanding that Netflix be held responsible for some of the costs of transferring data across the web. This is sort of an odd request for an ISP to make, as it basically claims that the content provider is responsible for the costs of moving data across the network. In that paradigm, what exactly does the ISP do to earn that cash we send them every month? This model would make them in to a brokerage house for various content providers, and that model is basically why cable TV includes a bunch of channels you don’t want while charging extra for the ones you do like to watch. For that to happen to the internet would basically be a huge step backwards!
Monopoly: Well, how can an ISP get away with this? A lot of customers don’t have a real choice in who brings them internet. For example, I live in a city big enough to have a (bad) professional football team, but we’re not big enough to have competition in cable. Bell South offers a relatively slow DSL service that can’t run streaming video in high definition, and Comcast is the only company that has access to the city’s cable infrastructure. So they know it doesn’t matter how much they charge or what restrictions they put on the internet service because you don’t really have a choice!
Bandwidth Caps: Remember when AOL switched to “unlimited” internet plans? It was a long time ago, but it was a pretty big deal. For about a decade there, we had come to see the web as an all-you-can-eat buffet of information. Server and network upgrades outpaced traffic demand and it suddenly didn’t matter if you spent all day chatting and playing online games.
Well, that all-you-can-download model of the internet is basically dead for now thanks to the factors and business interests described above.
Since 2008, Comcast has set a monthly 250 GB traffic limit for all residential web accounts. In standard definition, it could take 14 hours a day of internet TV – every day – to burn through that kind of bandwidth. But when you consider 720p or 1080p resolutions, you can really start to burn through some gigabytes every hour.
Think 250GB is bad? Some providers are even stricter in their attempt to salvage their TV business:
Rogers in Canada recently reduced the cap to 175 gigs per month. Time Warner tried to tried to introduce a 40GB monthly limit, but was met with fierce resistance from customers and eventually backed down. For a lot of wireless internet plans, it just gets even worse with “unlimited” services really just delivering a maximum of 5GB a month. So you buy this wireless video device and pay out the nose for services, just to find out that you weren’t supposed to actually use the service!
Content Ownership: The last ditch effort for Comcast seems to be their attempt to buy NBC. If they own the content, they can negotiate the licensing fee for internet TV providers, and basically make it prohibitively expensive for Netflix or Hulu or GoogleTV to run NBC’s popular programs while selling at a discount to other cable providers in order to keep the system as stagnant as possible.
Monopoly & Conflicting Interests
The basic situation is this: Hardware technology has caught up to the point where just about any video on the web can be easily transfered to a standard television. From the consumer’s point of view, there suddenly isn’t much use for cable and satellite TV. However, the ISPs that deliver that online data have a huge investment and financial stake in those obsolete content delivery plans. And unfortunately, they’ve got political and economic leverage to slow down progress for their own gain.
So what can we do? Well, give them some more to complain about! In a few days, my cable TV account will be going dark and I’ll be saving $50 a month while actually improving my choices when it comes to what shows and movies I want to watch (and when I want to watch them!) Comcast will be losing out on about $50 a month, and I’ll be putting a higher demand on their web servers.
Will they try to drop the caps again, raise prices, starve Netflix of content, and shake down the companies that own high-traffic web lines? Of course, but for every television package that gets canceled they lose just a little bit of that financial leverage that protects them from regulation and negotiation. Eventually, when the cost of internet access gets too high and restricted, competition becomes more feasible and new companies can rise up without the dead weight created by reliance on these old models of content and media distribution.