New options may help television views ‘cut the cord’ on cable

With a reputation for poor service, limited choices and a perverse pricing structure that punishes loyal customers, the cable company is the business Americans love to hate.

Now, some new developments are threatening to overturn the business model that has given the cable companies near monopolistic power for decades. But consumers can’t celebrate yet.

One potentially big development came earlier this month when the premium channel HBO announced it would start offering its shows by subscription over the Internet next year.

Shortly thereafter, CBS, the epitome of traditional broadcast TV, said it would provide its programs over the Web for $6 a month. If more content providers follow the lead of HBO and CBS, it will threaten the pay-TV industry’s longstanding refusal to give customers the “a la carte” service they want. Consumers have been forced to accept packages with dozens of channels they may never watch to get the handful they actually want.

HBO’s plans are particularly threatening to the cable industry because it’s one of the few channels (along with ESPN) that many people buy cable packages specifically to get. If they can watch HBO for, say, $20 a month (the actual pricing has not been set yet), they may no longer be willing to spend three or four times that much for a high-end TV package.

The recent developments may only accelerate an ongoing trend of consumers, particularly younger ones, “cutting the cord” – the number of consumers who subscribe to cable, satellite or fiber TV services fell by a quarter of a million in 2013 according to the research firm SNL Kagan.

Today you can stream movies and original programs from Netflix and watch TV shows online on Hulu, and the number of such services is steadily increasing. (Then there are the frugal few who are rediscovering they can watch TV the way their parents did – with an antenna, for free.)

So does this spell the end of the cable industry monster? Probably not. The reality is that for most people the company you get your TV service through is also the one that connects you to the Internet, and the money (and monopolistic power) they may lose in one business they can make up by raising prices in the other.

By manipulating streaming speeds, the big telecom companies could even deny you some of the options now available or soon to come on the market. Earlier this year, Netflix complained that some of its customers were having trouble getting its streaming service through some Internet providers – a problem only solved when Netflix agreed to pay those companies for better connections.

The changing landscape makes it even more important for the Federal Communications Commission to adopt strong “net neutrality” rules that guarantee that broadband companies cannot discriminate against any content providers or offer any entity preferential service.

Only if there’s a truly level playing field can consumers take advantage of all the new alternatives to the old cable colossus.

– The Holland