Opinion
Why a Charter-Time Warner Cable Merger Won’t Actually Kill Cable Companies
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But is this the demise of cable TV companies? Not at all. The streamers need Internet service, and, presently, coaxial cable is the premier way to deliver broadband Internet residential service.
By Nicholas Economides
As federal authorities prepare to approve a deal, it could reinvent cable providers.
For decades, there was practically no regulation of cable TV service. This had left consumers at the mercy of cable providers. For many years, the cable company was the only provider of video at home, in most parts of the country. Video was sent via a cable box belonging to the cable company and running a program’s guide interface reminiscent of 1970’s-era computers, not only predating Windows, but also predating DOS 1.0. The setup in cable TV has been very much like the pre-1981 MA Bell monopoly: The company owns the appliance (box, telephone) and you have to rent it. You can only buy channels in bundles. Even if you watch only five channels, you have to buy bundles of over 100 channels to cover the five you want, and you must pay for all of them.
However, in the last couple of years, radical change has arrived to the video–at–home market. The emergence of inexpensive “smart” TVs allowed for new streaming video companies such as Netflix NFLX -1.25% , Hulu, and Amazon AMZN 1.18% to reach home consumers bypassing the cable company. For those TVs that were not-so-smart, add-on hardware such as Roku, Apple AAPL 0.79% TV, and Amazon Fire TV ensured that the streamers had access to the TV, again bypassing the cable box. With cable service prices and cable boxes’ rental fees skyrocketing, hundreds of thousands of cable customers have cut the cable cord.
Read the full article as published in Fortune.
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Nicholas Economides is a Professor of Economics.
For decades, there was practically no regulation of cable TV service. This had left consumers at the mercy of cable providers. For many years, the cable company was the only provider of video at home, in most parts of the country. Video was sent via a cable box belonging to the cable company and running a program’s guide interface reminiscent of 1970’s-era computers, not only predating Windows, but also predating DOS 1.0. The setup in cable TV has been very much like the pre-1981 MA Bell monopoly: The company owns the appliance (box, telephone) and you have to rent it. You can only buy channels in bundles. Even if you watch only five channels, you have to buy bundles of over 100 channels to cover the five you want, and you must pay for all of them.
However, in the last couple of years, radical change has arrived to the video–at–home market. The emergence of inexpensive “smart” TVs allowed for new streaming video companies such as Netflix NFLX -1.25% , Hulu, and Amazon AMZN 1.18% to reach home consumers bypassing the cable company. For those TVs that were not-so-smart, add-on hardware such as Roku, Apple AAPL 0.79% TV, and Amazon Fire TV ensured that the streamers had access to the TV, again bypassing the cable box. With cable service prices and cable boxes’ rental fees skyrocketing, hundreds of thousands of cable customers have cut the cable cord.
Read the full article as published in Fortune.
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Nicholas Economides is a Professor of Economics.