For the past year or so, there has been a surge in interest in the quarterly results of the big cable ISPs. The tech press has looked to the number of customers cancelling their video subscriptions in order to determine if people are really “cutting the cord” and giving up their video subscription for a combination of Internet streaming/downloading and free over-the-air video. While it is clear that cable is losing subscribers, no one can quite agree if the losses are enough to substantiate the cord-cutting trend. What no one is discussing is that the losses reported by cable companies may wildly underestimate the true rate of attrition.
A bit of background. I myself cut the cord about a year ago. I replaced my cable subscription with an HDHomeRun digital tuner and connected a low power PC running Windows 7 acting as a DVR to my TV. I combined that with a Netflix subscription that includes streaming video and have not looked back since. Between over-the-air HD network programming, Hulu, and Netflix I can watch almost everything I want within a day or two of it airing (if not live). For those handful of cable shows that are not available for free online, I just wait for the DVD to be released and get it delivered by Netflix as part of my subscription. By almost any measure, this is classic cord cutting.
However, not quite every measure. You see, for this plan to work I still need a high-speed Internet connection. My local ISP is Comcast – also a cable company and also a phone company. As far as Comcast is concerned, I am not a cord cutter. In fact, as far as Comcast is concerned, I am actually a Triple Play (Internet, video, and voice) subscriber.
How is this possible? Bundling (and a bit of creative categorization). When I called to cancel cable, I was shocked at how much “naked” Internet would cost me. I was a bit less shocked to find out that it was actually cheaper to subscribe to a basic cable package AND Internet than to just subscribe to Internet access. As a result, as far as Comcast is concerned I am still a “cable subscriber” even though there is not a TV in my house connected to cable television.
And the voice? I should probably mention here that the last time I lived somewhere with a landline was my freshman dorm room, and that’s because it was there when I arrived. For some reason, when Comcast upgraded me to a DOCSIS 3.0 modem they started billing the monthly rental as a voice service (I know, I know, but I have not gotten around to buying my own new DOCSIS 3.0 modem so I can stop renting. Feel free to call me a sucker in the comments.)
Of course, this is only one way that bundling distorts pricing in the subscription TV and Internet access markets. Cross subsidization in the Triple Play prevents single play competitors from emerging. But this post is not about that.
Instead, it is a suggestion that the best way to decide if cord cutting is “real” is not necessarily to look at cable company attrition numbers. Instead, listen to how people around you talk about watching video programming. How often do they mention streaming video from Netflix or Hulu? Are they talking about connecting a computer (or some other Internet video set-top box) to their TV? Do they know that HD network programming can be had for free with a pair of rabbit ears? You can be sure that if they do, it has at least occurred to them that they may not need to pay for cable anymore. And chances are, more people have followed through with that thought than show up in quarterly reports.