T-Mobile Not So Subtly Hints That It Wants To Disrupt The Cable TV Industry

from the a-swift-kick-in-the-pants dept

While T-Mobile isn't without its faults (like its opposition to net neutrality, or the time its CEO mocked the EFF), there's little doubt that T-Mobile has been a good thing for the wireless industry. The company has managed to drag the industry kicking and screaming in an overall positive direction, including the elimination of the carrier-subsidized handset model, the elimination of annoying hidden fees, and the recent return to more popular unlimited data options. And its brash CEO John Legere, while sometimes teetering into absurd caricature, has at least managed to bring a sense of industry to a traditionally droll telecom sector.

And while T-Mobile had been mocking AT&T and Verizon's forays into video as "distractions," the company this week strongly hinted that it may bring a little bit of disruption to a sector that needs it most. Both Legere and T-Mobile COO Mike Sievert made numerous comments during their earnings call this week making it pretty obvious they wanted to test the market's reaction to the idea of some kind of T-Mobile video service:

"Talk about a poster child for an industry that has really kind of ignored customers and ignored customer cares and gouged at every corner,” Legere said of the pay-TV market during T-Mobile’s earnings call Tuesday. “Clearly, I salivate when I think about the possibilities of changing some of those (video) industries. And frankly, I’m fascinated with how little AT&T has done since they spent the mother lode buying DirecTV, and pretty much have let it sit on the side, and still be an old, crappy linear TV that they bundle weakly with their unlimited offer, so maybe more to come."

Subtle. Legere didn't get into specifics about how T-Mobile would enter the sector, but one possibility remains some kind of M&A with Dish Network, which has plenty of TV assets and a long-harbored desire to jump into the wireless sector (Dish has been not-so-quietly hoarding wireless spectrum for a long while). Like Legere, Sievert also spent more than a little time making fun of the cable sector, which continues to sport some of the lowest customer satisfaction ratings in any industry in America:

"The data on this is really clear. The cable industry is statistically one of the most unloved industries in the history of the consumer economy. So, obviously, it’s ripe for innovation in this area,” T-Mobile COO Mike Sievert said on the call. “I’ll tell you one thing, in 2017 we will reach the point where people have more screen time on mobile devices than on any other kind of screen, that’s really something incredible when it comes to watching their video. So we’ll see how this convergence unfolds, but in it we’re where the industry is going, not where it’s coming from, and we’ve got a brand that really resonates with people and possibly could resonate in an industry that’s even more maligned than we found ours four years ago when we got here."

A Dish M&A is one of the more palatable consolidation possibilities facing the telecom sector under what's expected to be a dramatically more M&A-friendly Trump administration. T-Mobile is also a rumored acquisition target for Comcast or Charter Communications, neither of which would be likely to continue T-Mobile's foray into price competition or disruption. Similarly, a Sprint acquisition of T-Mobile would reduce the number of overall wireless carriers in the space, reducing competition and potentially putting T-Mobile's disruptive run to an ignominious end.

Filed Under: cable tv, competiton, disruption, john legere, tv
Companies: t-mobile

Vox Joins Growing Chorus Of Outlets Weirdly Crapping On Cord Cutting

from the cheaper,-more-varied-options-really-suck dept

For a few years now there's been a lazy trend among reporters analyzing "cord cutting," or the practice of leaving legacy cable TV for streaming alternatives. Usually the narrative goes something like this "cord cutting is (stupid/failing/irrelevant/on the ropes) because users need to subscribe to multiple streaming video services to get the same amount of content they used to get with cable." Despite these stories popping up pretty much constantly these reports miss a few key points, the biggest being that nobody wants to duplicate the 300 channels of bullshit that comprises the traditional cable bundle.

Gizmodo recently ran one such article where the author was shocked and outraged after he discovered that subscribing to four different streaming services cost him a measly forty-seven bucks, proof positive in the author's estimation that cord cutting "isn't a bargain any more." And while Reddit users were quick to point out how cord cutting saves them significant cash every month, this narrative never seems to die. Case in point is Vox, which appears to have piggybacked on the Gizmodo report with a similar story proclaiming that "cord cutting is bound to fail":

"Recently, Gizmodo ran the numbers and concluded that if you subscribed to every streaming service collecting most of the TV shows and movies you’d likely want to see (and thus excluding niche services like horror-centric Shudder or anime-centric Crunchyroll or etc., etc., etc.), your monthly bill would be more expensive than an average cable bill on its cheapest tier."

Again though, Gizmodo didn't "run any numbers." The author just subscribed to HBO Now, CBS All Access, Netflix and Hulu and thought (incorrectly, if you ask actual cord cutters) that the $47 total was incredibly expensive. Analysts oddly forget that the same companies setting licensing rates for traditional cable also set the licensing rates for streaming alternatives. As such, pricing for both is probably going to be higher than anybody would like, and that's why Hulu, Amazon and Netflix are feverishly developing original content.

But the fact remains that streaming alternatives offer something cable refuses to: more flexibility at a lower price point. Vox's central thesis is that because cable providers have all the leverage in negotiations with broadcasters, they can strike much better deals than streaming video providers, offering their own dirt-cheap bundles of streaming packages:

"So there’s going to be a lot of demand for some form of bundling — of an option to subscribe to a bunch of streaming services, both mainstream and niche together — in packages that will be slightly more affordable than ordering each service a la carte. And when it comes to bundling, the cable companies know it better than anybody else."

But because the cable industry can do this doesn't mean they will do this. Yes, your cable provider could offer cheap bundles of streaming services. But this would cannibalize their existing legacy TV cash cow subscriber base, and the sector has made it abundantly clear it simply refuses to seriously compete on price. Instead, industry executives would rather pretend that cord cutting isn't a real problem, and defections will cease once Millennials have more babies. As a result the closest we've seen to price competition are skinny bundles that give the illusion of value, but saddle users with hidden fees.

If there's one thing the Vox report gets right, it's that consumers are growing increasingly frustrated with and confused by exclusive, temporary licensing and vanishing streaming catalogs. But that brings us to something all of these analysts and reports willfully, hysterically ignore: piracy. You'll note that none of the "cord cutting is dying" articles ever acknowledge that piracy exists as an option for the consumer frustrated by high prices, poor service or confusing exclusivity arrangements. It's as if these authors are not formally allowed to acknowledge piracy's existence by their editors because it's naughty.

But as this website has noted repeatedly, piracy is a competitor. Because you don't like that fact doesn't make it less true. The reality is that if streaming begins to fail the consumer as a cheaper, more flexible alternative to cable, the last place many of these customers will be headed is back to cable. Instead, countless millions will simply hide behind a VPN and head back to piracy, a shame given the progress we've collectively made in dragging many of these broadcasters, kicking and screaming, into the modern age.

Filed Under: cable, cable tv, cord cutting, tv
Companies: vox

Gizmodo Completely Misses The Point Of Cord Cutting

from the missing-the-forest-for-the-trees dept

Roughly every month or so I'll see a story proclaiming that cord cutting is a bad idea because you need to subscribe to multiple services to mirror the same overall volume of content you receive from pay TV. There are a few problems with that logic, first being that cord cutters aren't looking to precisely duplicate cable TV. They're looking to get away from paying a small fortune for hundreds of unwatched channels, including an ocean of religious programming, infomercials, whatever the Weather Channel is up to these days, and C-grade channels focused on inherently inane prattle.

Writers of these pieces always seem to forget that broadcasters dictate the pricing of content on both platforms, so any surprise that the pricing of television remains somewhat high (when you pile on multiple streaming services) is just kind of silly. All told, "cord cutting is really expensive when I subscribe to every streaming service in the known universe" is just a weird narrative that just keeps bubbling up across various media outlets despite not really making much sense.

The latest example is a recent piece over at Gizmodo by Matt Novak that proudly proclaims that "cord cutting isn't a bargain any more" when you sign up for a pile of different streaming services:

"So, let’s see, if you pay for Hulu Plus (which is now just Hulu, since they’re dropping their free tier) that sets you back about $8 per month. And if you go subscription free that’s $12 per month. And Netflix is another $10. And HBO Now is another $15. And obviously you’re going to get the new commercial free CBS, so that’s $10 per month. What are we up to? About $47 before tax? And then you toss on your high-speed internet bill, which you’re probably paying to the cable company anyway. Yeah, this whole cordcutter thing sounds like it liberated consumers alright, doesn’t it?

So............................................. ¯\_(ツ)_/¯"

And that's it. Pretty much Gizmodo's entire argument is that because the author had to pay $47 for four streaming services, cord cutting isn't a bargain and can't be taken seriously. But compared to traditional cable, that's not really a bad deal. Novak also appears to ignore that countless people save a significant amount of money when they decide to trim back their programming lineup or cut the cord entirely. As such, it was entertaining to watch users over at Reddit quickly and repeatedly point out how much money they've saved by moving on from traditional cable:And it's worth pointing out that these consumers are still saving money despite every effort by the broadcast and cable industry to make cord cutting as difficult as possible, whether that's via restrictive licensing agreements, lawsuits intended to deter innovation, or the use of usage caps to otherwise penalize users who try and leave the legacy TV pasture. The entire point of cord cutting is the flexibility to mix and match various services to craft the precise lineup of content you want, something the cable industry continues to pay empty lip service to via "skinny bundles" saddled with obnoxious fees and caveats.

The cable industry has a long, proud history of advertising one rate, then socking consumers with a significantly higher bill thanks to hardware rental costs and various other fees. That's something correctly pointed out by Jared Newman, who apparently found Gizmodo's narrative as tiring as I did:

"Cable TV might seem cheap when you first sign up, but that’s only because you’re getting a short-term promotional deal, and the advertised price rarely factors in hardware rental and other hidden costs, such as regional sports fees and broadcast retransmission fees. Keeping your payments down requires constant vigilance, and you’ll never actually pay the advertised rate anyway."

There's also a weird tendency among TV beat writers to act as if piracy doesn't exist just because it's not formally sanctioned by the United Nations or Homeland Security as a legal and accepted way to obtain content. But reality doesn't work that way. You don't get to magically eliminate discussing piracy as an avenue for consumer cost savings when discussing the pay TV landscape just because it's naughty. Many cord cutters pirate because the cable industry refuses to give them the flexibility and pricing they want. That doesn't somehow mean piracy isn't a legitimate competitor for consumer affections and shouldn't be discussed when analyzing cost savings.

If there's a problem with the streaming model, it's one that Gizmodo almost accidentally stumbles into. Namely that broadcaster licensing has increasingly fractured streaming content availability, forcing users to hunt and peck between multiple services to find the content they're looking for, something that's only going to increase as broadcasters exclusively offer their own content via their own services. That's incredibly confusing for the consumer, especially given the frequency with which content disappears as licensing periods expire. Ultimately this confusion will only make piracy more attractive.

And yes, consumers in the future will likely have to pay even more as more and more ISPs turn to usage caps to simultaneously cash in on a lack of competition while protecting legacy TV revenues. But that's not somehow the fault of cord cutting as a concept. Cord cutting may not be for everybody (especially sports viewers), but it's a very organic response to an aggressively inflexible pay TV sector that absolutely refuses to compete on price despite the obvious writing on the wall. So yes, ¯\_(ツ)_/¯ indeed.

Filed Under: broadband, bundles, cable tv, cord cutting, options, streaming, tv
Companies: amazon, comcast, hulu, netflix

Washington State Sues Comcast For Routinely Ripping Off Its Customers

from the customer-service-is-our-top-priority dept

Washington State has sued Comcast for, well, being Comcast. A new lawsuit filed by the state this week (pdf) accuses the cable giant of 1.8 million violations of Washington state’s Consumer Protection Act (CPA), including misrepresenting the scope of the company's "Service Protection Plan," charging customers improper service call fees and improper credit screening practices. More specifically, the lawsuit states that Comcast misled more than 500,000 Washington State customers by charging them $5 per month for this protection plan, then intentionally hitting them with fees for services the monthly fee should have covered.

As it stands, the company repeatedly sold the plan as being "comprehensive," covering all service calls, including those related to inside wiring, customer-owned equipment connected to Comcast services and "on-site education about products." But when customers called up thinking they'd then get a break from Comcast on service charges, the company would routinely bill customers for all manner of services that should have been covered under the plan:

Comcast’s Customer Guarantee promises: “We won’t charge you for a service visit that results from a Comcast equipment or network problem.” Comcast discloses no limitations on this guarantee. Contrary to this promise, Comcast charged thousands of Washington customers for service calls that resulted from a Comcast equipment or network problem, including issues with Comcast HDMI and component cables, Comcast cable cards, and the installation of drop amplifiers, which fix Comcast signal problems.

Anticipating that Comcast would claim this sort of thing was accidental or the behavior of some rogue support technicians, the AG's office pointed out that billing customers for things that should have been covered under the protection plan was so routine, Comcast had actually created a specific technician code allowing them to sock consumers with charges they never should have been subject to:

"In addition, until approximately June 2015, Comcast provided its technicians with a service call fix code that expressly allowed them “to add service charges to a normally not charged fix code.” In other words, the company created a code for technicians to add charges to a service call that should be provided at no cost."

Of course if you've followed Comcast over the years, this is a relatively minor offense for a company that works tirelessly to take full advantage of the lack of competition, especially in its broadband markets. And while for a decade now Comcast annually informs the press it's doing everything in its power to shore up what's statistically the worst customer service of any company in America, apparently eliminating systemic, routine fraud from the company's repertoire was somehow overlooked until the AG's office became involved last year. Whoops a daisy!

Granted these are the same regulators that routinely approve Comcast's merger requests to grow larger and less competitive, then act shocked after the fact when this time, and time, and time again results in systemic fraud. Washington also is one of 19 states that let ISPs write and pass state protectionist laws hindering municipal broadband competitors. Meanwhile, Washington State AG Bob Ferguson is up for re-election; surely only coincidental as he targets what is probably the easiest, most broadly-hated target in politics: ye olde cable company.

Should Comcast lose the lawsuit, those costs will be immediately passed on to consumers that -- at least if they want a relatively fast broadband connection -- will in most cases have no alternatives to switch to.

Filed Under: broadband, cable tv, consumer protection, washington, washington cpa

Under Cable Lobbying Assault, FCC Commissioners Waffling On Cable Box Competition Plan

from the $21-billion-reasons-to-fold dept

The cable industry's relentless lobbying assault on the FCC's plan to bring competition to the cable box appears to be working. As we've been covering, cable lobbyists have been filling editorial sections nationwide with all manner of misleading dreck, claiming the FCC's plan (which you can read here (pdf)) will increase piracy, hinder innovation, hurt minorities, and rip giant holes in the time-space continuum. They've also engaged in the time-honored tradition of paying lawmakers that have no idea how technology works to make all manner of false claims about what the FCC's plan actually does.

Unfortunately for those of you tired of paying the cable industry $21 billion annually to rent a shitty cable box, it looks like the efforts are working.

Two of the Democratic Commissioners that originally voted yes on the plan say they're starting to get cold feet, surely only coincidentally after the cable industry decided to ramp up lobbying to levels not seen since 2009 to try and kill the plan. FCC Commissioner Jessica Rosenworcel, for example, is now claiming that the FCC plan she voted for is "too complicated" and that the FCC should compromise with the cable industry on some kind of new arrangement:

"Kudos to the chairman for kicking off this conversation [Rosenworcel voted along with Wheeler and Democrat Mignon Clyburn to kick off that conversation], but it has become clear the original proposal has real flaws and, as I have suggested before, is too complicated. We need to find another way forward." She was not endorsing the cable effort, but instead appeared to be supporting the effort to find a compromise proposal that addresses the flaws. "I am glad that efforts are underway to hash out alternatives that provide consumers with more choice and more competition at lower cost."

Except there's nothing really that complicated or "flawed" about what the FCC is proposing. Under the plan, cable operators simply have to provide access to their programming -- using systems and copy protection of their choice -- to third-party hardware vendors without the need for a cable card. While there's certainly some engineering challenges with the idea, the "complicated" part only really comes from the cable industry's decision to fight cable box competition tooth and nail.

Meanwhile, the "compromise" referenced by the article that appears to have swayed Rosenworcel isn't much of one. Instead of real cable box competition, the cable industry has proposed a plan whereby they simply have to deliver their programming via app -- but consumers would still have to pay for a cable box if they want to do things like record via DVR. Consumer advocates and groups like INCOMPAS are warning that the cable industry will go out of is way in any voluntary proposal to find creative ways to continue forcing consumers to use their hardware and services.

And Rosenworcel doesn't appear to be alone in waffling. Commissioner Mignon Clyburn also appears to be buckling under the weight of false narratives suggesting the FCC's plan somehow needs to be rolled back, lest it damage "copyright, security and privacy":

"We also asked Democratic Commissioner Mignon Clyburn's office if she still supports the original proposal and got this response: "Commissioner Clyburn appreciates and welcomes the constructive ‎efforts by industry to put forward an alternative apps-based proposal. She continues to study the proposal with an eye towards a solution that adheres to Section 629 of the Communications Act; ensures truly competitive choice; enhances access to diverse programming; and provides the protections for copyright, security and privacy that consumers have come to expect."

Note again that the two waffling commissioners don't really provide any solid reasons why the FCC's original proposal couldn't work, but it's pretty clear that they've been influenced -- to one degree or another -- by the paid sound wall cable lobbyists have constructed in trying to scuttle real cable box competition. With their fellow Commissioners Pai and O'Rielly voting no on the proposal (because voting no on consumer friendly policies is their entire purpose in life) and foundering support among Democratic commissioners, Wheeler won't have the political firepower to get the plan approved.

Again that's not the end of the world. The legacy cable TV industry's empire is slowly crumbling with or without the FCC's help, it will just take a little longer if the FCC doesn't give the entire process a swift kick in the ass. If the FCC's cable box proposal sinks, the agency has more time and calories to focus on what's truly going to be important in the new streaming TV age: bringing real, sustained competition to bear on the broken U.S. broadband market.

Filed Under: cable, cable tv, competition, fcc, jessica rosenworcel, mignon clyburn, monopolies, set top box, tom wheeler, unlock the box
Companies: comcast, time warner cable

Cable Industry: Our Shitty TV Apps Are Just As Good As Real Cable Box Competition, Right?

from the half-baked dept

The cable industry is aggressively fighting the FCC's attempt to bring competition to the cable box market. So far that's been via a two-pronged approach of buying a torrent of incredibly misleading editorials by people pretending to be objective observers (including Jesse Jackson), and throwing money at politicians who oppose the plan, but pretty clearly have no goddamned idea what they're actually talking about.

Under the FCC's plan (pdf), cable providers would be required to provide their existing programming to third-party hardware vendors, creating competition and hopefully a flood of better, cheaper hardware without the need for expensive, and annoying CableCARDs. But with the average user paying $231 annually in set top box rental fees, the cable industry is pulling out all the stops to protect $21 billion in annual, captive revenues.

The cable sector's latest attempt to scuttle the FCC's plan? A voluntary counter-proposal that pretends to deliver what the FCC is asking for, but falls well short. Under the proposal unveiled during recent meetings at the FCC (pdf), the cable industry would instead provide much of its existing programming via apps. This, the cable industry claims, would somehow create competition in the third-party hardware market without FCC involvement:

This alternative could be built on enforcing an industry-wide commitment to develop and deploy video “apps” that all large MVPDs would build to open HTML5 web standards....They expressed their belief that such an approach could further advance competition for independent device manufacturers within the context of a market transformation already underway and in a manner that fully protects and respects the rights of content owners.

But while this has been portrayed as some kind of revolutionary concession by hired telecom sector policy cheerleaders and several different press outlets, it isn't much different than what cable operators offer today. Currently, most cable providers offer some of their content via apps usable on tablets, smartphones, and many streaming devices. Historically, they offer fewer features and less content than is available via full, traditional cable; little more than a token gesture toward innovation in the hopes of keeping paying customers from jumping ship to Netflix, Amazon, or a collection of other cheaper options.

Under this latest proposal, you'd be able to watch some cable content via apps, but if you wanted to, say, record via DVR -- you'd still have to sign up for old, vanilla QAM-based cable and pay for the same, old, clunky set top box. Ultimately, my guess is that these cable executives would eventually get rid of the cable box if you use their apps, but force you to pay a monthly fee for their cloud-based streaming or other services. Potentially using zero rating (exempting their services from usage caps) to ensure fealty. Slight variation on the same, existing song.

INCOMPAS, a trade association that has Google, Amazon, Netflix, and some ISPs as members (mostly telcos with no interest in selling cable TV), issued a statement pointing out that this "compromise" wasn't much of one, while reminding everyone that cable sector promises historically don't mean much:

...The cable industry is proposing competitive choice for streaming devices, but still seeks to retain a controlling grip on DVRs and recordable devices. “The cable industry has made promises before about ditching the set-top box, that have not materialized. So it is important for the FCC’s unlock the box proposal to include enforceable standards that will create a thriving market for competition, congruent with the law.

Consumer groups too were quick to point out that the cable industry's proposal is murky and falls short:

"The proposal does not allow for many features that consumers want, such as home recording, and it does not allow for true user interface competition," Public Knowledge Senior Staff Attorney John Bergmayer said in a statement sent to Ars. "Additionally, core aspects of the proposal are unclear, in particular, the precise mechanism by which MVPDs propose to provide apps for various hardware and software platforms, and whether consumers would need a broadband connection to access video programming instead of leveraging their existing pay TV connections."

While it's good this proposal at least brings the cable industry to the table, skepticism is more than warranted. This is, after all, an industry with a long, proud history of engaging in anti-competitive behavior under the auspices of phantom technical justification, with net neutrality and usage caps being only a small part of the equation. Comcast, for example, is so eager to limit streaming competition it refuses to let its broadband customers access HBO Go across a wide variety of devices, providing only fleeting, half-baked justifications for the behavior.

Make no mistake, the cable industry is absolutely terrified of not only losing tens of billions in rental fees, but of truly open hardware platforms willing to direct customers to cheaper streaming alternatives. Under this app-based approach, you can be dead certain that cable would include all manner of caveats to ensure customers still need to sign up for traditional cable or their DVR services if they want the "full TV experience." Anyone who thinks the sector's going to honestly volunteer any plan that puts its existing monopoly power at any serious risk -- simply doesn't know the cable industry.

If the FCC is truly intent on real competition to the set top box market, the cable industry may need to be dragged kicking and screaming to the finish line.

Filed Under: apps, cable, cable tv, competition, fcc, set top box, unlock the box

Cable Company CEO Calls TV Business A 'Tragedy Of The Commons' That Ends Badly

from the mass-seppuku dept

While larger cable companies have the scale and leverage necessary to negotiate better programming, smaller cable companies are finding themselves facing tighter and tighter margins as broadcasters push for relentless programming increases. As such, many have begun candidly talking about exiting the pay TV sector entirely and focusing on broadband service only. When approached by broadcasters like Viacom about major hikes, some cable operators have simply culled the channels from their lineup permanently and refused to look back.

Not too surprisingly, the narratives being told by these smaller cable companies vary differently from larger cable operators, many of which deny that pay TV is caught in an unsustainable death spiral thanks in part to relentless broadcaster demands. CableOne CEO Thomas Might, for example, candidly declared last week that the traditional cable sector is a "tragedy of the commons" that's going to end badly for everyone involved:

"The actions of content owners is easily explained by the concept of tragedy of the commons. Once one programmer started taking double-digit rate increases, even in the face of falling ratings, each of the other programming groups felt compelled to do the same. The reason the theory is named "tragedy" is because it is guaranteed to end badly for all in the long run. It appears that long run is finally arriving."

And again, while large cable operators and broadcasters have denied cord cutting's very existence -- and downplay "cord shaving" (reducing your cable packages or opting for a skinny bundle) at every opportunity, Might states the obvious in noting the kids just aren't watching regular TV anymore:

"Linear video ratings are plummeting for several reasons. The lower end of the market can no longer afford the big bundle; the number of disruptive OTT technologies and vendors are now multiplying rapidly; and the millennial generation has very limited interest in traditional TV viewing. These patterns will inevitably bring an end to the ubiquitous fat bundle, but only slowly and painfully."

As we've long noted, cable operators could pretty easily defeat cord cutting by competing on price and value. But instead their solution so far has been to raise rates on broadband and TV like it's going out of style, to impose usage caps to punish cord cutting, and to offer "skinny bundle" packages that give the illusion of value, but saddle users with misleading fees post sale. Only when cord cutting shifts from a trickle to a steady roar will most major cable executives finally change tack, at which point they'll be surrounded by an ocean of hungrier, leaner companies all doing what cable refused to do for a generation: offer a cheaper, more flexible pay TV product.

Filed Under: cable tv, thomas might, tv
Companies: cableone

Comcast 'Only' Lost 36,000 Pay TV Subscribers Last Year, Prompting Renewed Cord Cutting Denial

from the best-bad-year-we've-ever-had dept

Despite 2015 being a banner year statistically for cord cutting, you're going to see a renewed surge in cord cutting denial over the next few weeks. Why? Cable companies like Time Warner Cable and Comcast managed to eek out modest gains in pay TV subscribers in the fourth quarter.

Comcast's earnings indicate a net gain of 89,000 pay TV users in Q4, despite seeing a net loss of 36,000 video subscribers for the year. Despite still seeing a net loss, that's the best video performance the company has seen in eight years (which in and of itself speaks volumes). Time Warner Cable's earnings (pdf) note the cable provider added 54,000 TV subscribers in the fourth quarter, while only seeing a net gain of 32,000 TV subscribers for the year. That's the best Time Warner Cable has done since 2006, and it's a stark improvement when each year's subscriber numbers are put in graphical form:

We'll ignore for a second these companies continue to see impressive subscriber and revenue growth thanks to network improvements, despite claiming Title II would destroy the known universe (that's a different blog post). But the fact that these companies finally saw a modest turnaround after years of steep video subscriber losses was quickly used as evidence by the cable industry, some investment websites and a few analysts that cord cutting is "overblown":

And I'll go further. Cord-cutting fears were overblown by a combination of the journalistic echo chamber and analyst self-interest.

— Swanni (@SwanniOnTV) February 3, 2016

Cable cord-cutting fears overblown. Comcast Gains 89,000 Video Subs In 4Q; other MSOs also gaining. https://t.co/FFgC51M7hy via @SwanniOnTV

— Lee Spieckerman (@spieckerman) February 3, 2016

Except these gains don't debunk cord cutting. Many of these additions are users that had previously fled to satellite TV and phone providers. For years, cable's subscriber losses were predominately to satellite and telco TV providers, whose set top boxes were notably more innovative (Dish's Hopper, for example). In the last few years Comcast and Time Warner Cable have dramatically bumped broadband speeds and updated their own set top boxes, moves that have won some former defectors back. As a result Verizon FiOS saw its worst video subscriber additions since 2006, while AT&T and DirecTV combined saw a 54,000 broadband user net loss and a net loss of 24,000 TV customers last quarter.

That's lateral subscriber movement between legacy pay TV providers, not evidence that cord cutting isn't real. And there's absolutely nothing in those numbers that suggests the very real trend of cord cutting has been "overblown" as a broader industry phenomenon.

There's another major reason cable companies are once again adding video subscribers: their growing monopoly over broadband markets. There are now hundreds of markets in which AT&T and Verizon (now focused almost solely on more profitable wireless) are actively trying to hang up on unwanted DSL customers via a one-two punch of price hikes and apathy. Those annoyed users are being forced to flee to cable if they want current generation broadband speeds. When those users arrive, companies like Comcast and Time Warner Cable are offering them TV and broadband bundles that are cheaper than what they'd pay for broadband alone in order to boost legacy TV subscriber rolls.

As a result, many of these subscribers may not have even wanted TV, and once the promotional rate expires may decide to simply leave again. That's of course where Comcast hopes that the use of usage caps comes in. The company is now exempting its own streaming service from usage caps in the hopes of preventing TV users from cutting the cord. Should they cut the cord anyway and embrace streaming alternatives, they run face-first into usage caps and overage fees. If cable is forced to compete on price for TV, it will be sure to seek its pound of flesh from your broadband bill.

Cord cutting continues unabated in the background of this tussle, like the drip, drip, drip of a leaking faucet nobody wants to fix. And while pay TV growth remains flat or in decline, it's important to remember the overall population and the housing market continue to grow, without a corresponding uptick in cable subscribers. That's a sign that younger people and many new homeowners simply don't think traditional cable is all that important, and the slow drip of cord cutting will, over time, become something more resembling a torrent as, quite bluntly, legacy TV's older audience dies. Cable can do something about this, but it's going to require seriously competing on price above and beyond short-term, subscriber roll boosting promotions.

Filed Under: cable tv, cord cutting, denial, tv
Companies: comcast

Time Warner Eyes Hulu Stake, Wants Service To Remove Current Seasons Of Shows

from the don't-innovate-too-much dept

We've discussed for years now how Hulu is hamstrung by the fact that it's owned by the traditional cable and broadcast industry. Owners 21st Century Fox, Disney and Comcast/NBC have gone out of their way to ensure the service is never too disruptive -- lest it hurt the traditional cable cash cow. And that's been the cable industry's mantra for years now -- crow ceaselessly about how you're "innovating," while simultaneously trying not to innovate too much, lest your customers realize your legacy TV service is absurdly expensive, inflexible, and outdated.

As the industry has slowly realized that it can no longer just pretend cord cutting doesn't exist -- things have improved slightly, with Hulu making a renewed effort to invest in original programming and dramatically broadening its content catalog to better compete with Amazon and Netflix. The company has also listened to consumer complaints and now offers an ad free version -- while placing fewer ads in the ad supported option. Hulu is also attracting new investors, with reports that Time Warner is looking to give a $2 billion cash infusion in exchange for a 25% stake.

But while Time Warner isn't making it a condition of the deal, the company is making it clear that it would like to see Hulu pull current seasons of shows in a misguided belief that it can turn back time:

"Time Warner believes that the presence of full, current seasons on Hulu—or anywhere else outside the bounds of pay-TV—is harmful to its owners because it contributes to people dropping their pay-TV subscriptions, or "cutting the cord." In the discussions about taking a 25% equity stake in Hulu, Time Warner has told the site's owners that it ultimately wants episodes from current seasons off the service, at least in their existing form, although that is not a condition for its investment, according to the people familiar with the discussions.

The problem is that Time Warner would join Comcast in sharing the delusion that you can be both simultaneously disruptive and innovative on the streaming side, while still magically preventing traditional cable customers from noticing and cutting the cord. Comcast was barred from meddling in matters of Hulu management as a condition of its acquisition of NBC, but it's a condition Comcast largely ignored. It's also a seven year condition that will expire shortly after Time Warner seals its new ownership stake, meaning a double dose of myopic, backward-looking leadership at Hulu at precisely the wrong time.

Though many in the insular cable industry ecosystem like to pretend otherwise, it's simply no longer a debate: consumers are increasingly cutting the cord and migrating to cheaper, more flexible viewing options. Traditional TV customers get 194 channels, but they only watch, on average, about 17 of them. 16% of consumers cut the cord last year, while 23% of consumers engaged in "cord-trimming" (reducing their overall cable package) in some way. 57% of those asked, unsurprisingly, say that price is the biggest reason they're looking to shake things up.

It's not an enviable position for the traditional TV industry to be in. To seriously combat cord cutting, it needs to offer a more flexible product at a lower cost -- something that (with a few "skinny bundle" exceptions) it absolutely refuses to do. What we get instead is turf protection (broadband usage caps), a boat load of denial and failed "me too" services like Comcast Streampix that, thanks to fear of cannibalizing the legacy cash cow, are neither here nor there. The problem is, if Hulu isn't willing to offer what consumers want, Netflix, Amazon, or some other company certainly will.

Filed Under: cable tv, disruption, ownership, streaming, streaming tv, tv
Companies: comcast, hulu, time warner

The Cable Industry Is Absolutely Terrified Of Set Top Box Competition

from the hey-we're-innovatin'-over-here dept

Last week, we noted that the FCC has proposed new guidelines that would bring some much-needed competition to the cable TV set top box market. Data shows that 99% of consumers pay something on average to $230 a year in set top box rental fees, despite much of this dated hardware being worth little to nothing. Collectively, the cable industry pulls in around $20 billion annually in set top box rental fees, which are fairly consistently increased once or twice a year. Unsurprisingly, whenever the FCC has tried to do something about this proprietary, captive market, the industry becomes downright hysterical.

That was exemplified last week when the FCC simply proposed requiring cable operators deliver programming data to third-party hardware using any accepted standard they choose. Cable operators can still provide the traditional set top box (and consumers can still rent them), the industry would simply suddenly face competition for what's been captive income. But with $20 billion in annual revenues at risk, the industry quickly got to work trying to argue that the FCC's plan would demolish the very fabric or time/space and result in no limit of untold harm to consumers.

Despite the reality that most cable boxes (and many executives) are outdated relics of a dying era, the cable industry stuck to one central theme last week: the FCC's plan is "big tech's" attempt to thwart all of the amazing innovation occurring in the cable industry. A "diverse" group of cable companies and broadcasters calling itself the "Future of TV" coalition quickly launched to deride the FCC's "attack on innovation," with one press release circulated by the group going so far as to suggest that Google has been holding secret meetings at the FCC that undermine the cable industry's relentless thirst for...diversity:

"...Secrecy and subterfuge shouldn’t be tolerated and professional staffers who know the ropes and are unlikely to be swayed by a flashy demo and a Golden Ticket. The AllVid scheme being flogged by Google and the FCC is unfair and destructive to values held far too dearly on Capitol Hill – undermining free market competition and putting a government thumb on the scale for powerful incumbents like Google, and making it harder for those serving communities of color and providing diverse and independent programming to make the video ecosystem work.

There's no secret cabal in the fact that Google, Apple, Roku, TiVo and countless other companies have lobbied for years for an open cable set top box market. But the cable industry has lobbied ferociously to dismantle any attempt to bring this goal to fruition (including CableCARD). So to mock Google for "secretly" lobbying for broader competition is both strange and hilarious. The argument that more robust set top box competition will somehow hurt diversity is equally absurd (more choice and lower product cost is good for diversity), yet it seems to pop up all over the Internet in mysteriously placed editorials.

But credit the cable industry for one thing, it knows how to rally around a central message, even if that message is absolute bullshit. The central theme of this blog post by the industry's biggest lobbying organization (the NCTA) was cable's amazing knack for innovation:

"We see these innovations almost daily, which is why it’s so strange that government feels compelled to insert itself in the mix in order to do Big Tech’s bidding. By forcing new government mandates on network providers and content creators, the FCC may intend to reward Google handsomely, but in the process it will ignore contractual freedoms, weaken content diversity and security, undermine important consumer protections like privacy, and stall the creative and technical innovation that is driving positive changes in today’s TV marketplace.

Likewise, a blog post by Comcast largely involves the company patting itself on the back for being incredibly, awesomely innovative:

"Comcast is responding with our innovative X1 platform, and enabling access on a growing array of devices. Like other traditional TV distributors, online video distributors, networks, and sports leagues, Comcast is using apps to deliver its Xfinity service to popular customer-owned retail devices. These apps are wildly popular with consumers. Comcast customers alone have downloaded our apps more than 20 million times. This apps revolution is rapidly proliferating, and we are working with others in the industry and standards-setting bodies to expand apps to reach even more devices.

Given these exciting, pro-consumer marketplace developments, it is perplexing that the FCC is now considering a proposal that would impose new government technology mandates on satellite and cable TV providers with the purported goal of promoting device options for consumers.

Oooh, step back FCC, Comcast is developing apps! The problem is, and the insular cable industry forgets this constantly, that absolutely nobody likes or believes the cable industry outside of the cable industry. Cable providers continue to have the worst customer satisfaction and support ratings of any U.S. industry or government agency (no small feat). So when "big cable" breathlessly insists it's just trying to protect its monopoly over cable set top hardware to the benefit of minorities and puppies, it's unclear who the hell would be daft enough to actually take them seriously.

Here's the thing: if the cable industry's existing set top box systems are as "innovative" as the industry claims, surely competition will bear that out? When faced with a myriad of new hardware options, customers will clearly want to continue paying Comcast a significant amount of money for a traditional cable box, right? If the cable industry is half as adaptive as it claimed last week, surely this sudden influx of competition will be like a gnat at the ear of a god of innovation. Unless of course this prattling on about innovation is just the insecure braying of an industry absolutely terrified by the foreign specter of real competition?

Filed Under: allvid, cable, cable tv, competition, fcc, innovation, set top boxes
Companies: comcast, ncta