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25
Aug
2014

Cable Companies Reborn As Broadband Providers

by Bill

cable companies becoming broadband providersThis week, for the first time ever, the number of broadband subscribers with became greater than the number of cable subscribers with the major U.S. cable companies according to a Leichtman Research Group. While people continue to refer to them as “cable companies” or “television networks” out of habit, these new demographics suggest they are now broadband providers first and foremost.

With 49,915,000 broadband subscribers compared to 49,910,000 cable television subscribers, the tipping point has been reached and the current momentum will continue to marginalize the video only aspects of television contracts in favor of broader data-pipe business models.

This was a shift that has been a long time in the making, affording cable companies ample time to adjust and adapt. As Peter Kafka at Recode pointed out “Some smart people suggest that the cable guys would not be unhappy if most of their business moved over to broadband instead of video, since there are much better margins—and almost no competition—for broadband.” After all, broadband is purely about access, while cable is about content. That means the cable side of business requires complex negotiations and significant costs from deals with sports leagues, news providers and entertainment studios. As an example, the cost of deals with Disney owned ESPN raise the average cable consumer’s bill by $5 per subscriber per month about his.

Meanwhile, broadband is something that the cable companies don’t have to negotiate or split profits with anyone else. Internet based networks like Netflix, Hulu, and Amazon Instant Video are starting to shatter the paradigm by producing their own content in an effort to negotiate a piece of the pie for themselves, but the more the needle moves toward broadband and away from traditional channel based programming – the more the businesses formerly known as cable companies stand to gain.

Consumers may finally be able to look forward to ala carte pricing on a per channel or per show basis, but total costs are unlikely to dip substantially as even fewer companies compete for the broadband dollars of each customer than once competed for a taste from your cable bill.

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