As I wrote on Monday, this holiday season may finally be time for millions of Americans to cut the cord on cable TV and shift to watching TV over the Internet and over the the air.
Already, only half of your time in front of the TV involves cable channels–the other half comes from free over-the-air channels like ABC and CBS (which now broadcast in digital and high-definition) and from the Internet. With services like Netflix, Hulu, and iTunes, and some whiz-bang consumer electronics devices, supplementing that over-the-air TV with Internet TV is becoming easy and cheap–even if you want to watch the Internet on the flatscreen in your living room.
The CEO of Roku–a device that streams movies and shows from the Internet to your TV screens—has stated, “Our goal is to have everyone cancel their cable subscription.” And, today, with more people watching Hulu.com than watch many channels on cable TV, and with over-the-air TV providing high-definition channels, at least some people–if not everyone just yet–will cut the cord on cable.
While not everyone will “cut the cord” on cable, some will.
As a result, Internet TV could actually inject much-needed competition in a TV market long dominated by cable companies. Having more competitors in the game would lower prices, increase innovation, and create new job opportunities for entrepreneurs in the businesses they build. More importantly, with Americans watching Internet TV on their living-room TV television, TV becomes more democratic. Users would have more choice for speech and news. They could more easily share and tag video, and even produce their own channels without having to negotiate with and get a special deal from a cable operator. The cable operator would no longer be the gatekeeper of television.
Cable companies (of course) don’t want this threat of competition. The New York Times recently reported: cable companies “are trying to make sure people have a reason to keep paying hefty cable bills.”
They won’t go down without a fight.
In fact, cable companies have spent many years fighting the emergence of Internet TV.
Let’s review the three previous tactics, all of which have resulted in consumer outrage, draft legislation, and/or Federal Communications Commission proceedings.
Cable companies have used their position as providers of Internet access to block (or threaten to block) technologies for online TV. Last year, the FCC had to order the largest cable company, Comcast, to stop blocking an Internet technology used by online TV distributors providing high-definition TV. The FCC concluded Comcast had an obvious anti-competitive motive. Since the early years of the Internet, cable companies would use their control of Internet access to discourage online TV. A cable CEO in 1999 declared he didn’t get into the cable business to “have the blood sucked out of the vein” by Internet TV. After several bills and some FCC enforcement proceedings, the FCC has moved towards adopting a rule.
2. Cap and metering.
While most Americans are used to paying a flat price for “all you can eat” Internet service, cable companies are experimenting with charging consumers based on consumption. Some usage-based pricing models might not always gouge consumers. But Time Warner Cable announced a trial of a pricing schedule that appeared targeted directly at people watching high-definition TV online. (You’d pay an arm and leg to watch Twilight!) Public outcry–which included draft legislation in the House and Chuck Schumer’s leadership in the Senate–delayed some trials, but the cable (and phone) companies continue testing this idea.
A set-top box is the device sitting next to your TV which you connects your cable cord to the TV so you can watch cable channels on your TV. Chances are you rent this from your cable company at some non-competitively high price because of the lack of competition. In fact, there is no competitive market in set-top boxes. With competition, hundreds of consumer electronics companies could produce innovative boxes with cutting edge features. In addition, device makers like Apple and Roku or Tivo could integrate the cable TV offerings into one user-friendly interface, a point even the FCC has raised. (Imagine having to use your iPod only for digital downloads and to switch to a CD player for CDs; or imagine having to use the cable interface and to switch to an antenna to watch over the air television.) Congress has twice passed legislation requiring the FCC to ensure competition in set-top boxes. To its credit, the FCC has admitted its earlier, cable-friendly, attempts were a big big failure…
And now comes battle tactic number four, just in time for the holidays. And like the previous cable industry tactics, government officials should be concerned.
4. TV Everywhere.
TV Everywhere is a simple concept. Cable companies like Time Warner Cable and Comcast are making deals with their friends, the content companies like TBS and TNT, to lock up programming behind a wall. To get past this wall and watch the TBS, TNT (and most other) shows on the Internet … you have to be a cable subscriber. So, go ahead, try to cancel your cable TV bill. Try to watch TV online. Soon enough, unless you’re a cable subscriber, you’ll find you’ll have nothing to watch online. You can’t even buy an online-only subscription.
If you think TV Everywhere seems “anti-consumer” and “anti-technology”, you took the words right out the mouth of Disney’s CEO.
TV Everywhere is actually a pretty odd business concept.
It would be as though all the newspapers got together and decided that the only way to read newspapers online was to prove you were a home subsciber.
Or, it would be as though cable companies–competing with satellite TV–only let you watch TV shows on satellite TV if you were also a cable subscriber.
As an observor told Reuters: “It seems like a system designed to prevent the emergence of competitors.”
And it’s the latest tactic to keep competition at bay and maintain the cable companies’ control over your television.
As with tactics 1-3, TV Everywhere signifies the cable industry thrashing around to kill the biggest competitive threat they’ve ever faced–innovators on the Internet.
And as with tactics 1-3, the government has a role to promote competition and free speech, even at the expense of powerful special interests like Comcast and Time Warner Cable. The government should take that role seriously.
And as with tactics 1-3, consumers should make their voice heard.