Is Internet Video a “Substitute” For Cable?
Is Internet Video a “Substitute” For Cable?
Is Internet Video a “Substitute” For Cable?

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    Comcast and NBC Universal don't see online video as a competitor to cable. In their world, it's just something that people use in addition to the bundled package of hundreds of channels that they're so happy with. It's an irrelevant little side issue, hardly meriting the big stink we and others have been making about it in the context of the proposed merger.

    David L. Cohen of Comcast wrote in a blog post that “We don't view Hulu and Fancast as competitive – with each other or with our cable service – rather, they are both complementary services.” And a statement filed with the FCC by both companies claims that “few consumers regard online video as a close substitute for MVPD service, and would therefore consider 'cutting the cord.'”

    You'll see a similar message in other places, too. Multichannel News reports that surveys show few people considering dropping their pay TV subscriptions because of online video. Now, I take industry reports like these with a grain of salt–it appears to take the fact that cord-cutters also rent more DVDs as some kind of ding against online video, for instance–but there's no reason to doubt that its basic premise is true. Most people are happy with their pay TV subscriptions, and online video doesn't have the same content. If you're happy with cable, you can afford it, and the alternative doesn't look all that compelling, why would you want to switch?

    But there's a difference between recognizing that online video isn't a full-fledged competitor to cable today, and thinking that it never can be. Comcast/NBCU dismiss the possibility that online video might some day prove to be a threat to traditional video systems like cable as “entirely speculative.” But is it?

    According to the Wall Street Journal, Move Networks is trying to build a full-fledged online video competitor, with channels and everything. Boyd Peterson, an analyst quoted in the linked article, says that the “technology is good enough,” but the article notes that he believes that

    it could be difficult for Move to sign up enough content creators, particularly small cable channels, who risk alienating the cable and satellite operators they depend on. “You're starting to see the tensions,” he adds.

    It's not “speculation” to observe that Comcast and its pals seem to be the biggest barrier to online video–not consumer skepticism. What bigger barrier is there than TV Everywhere, which the Journal describes as a “pre-emptive strike against technologies like Move TV,” and which we've described as an attempt to keep customers from cutting the cord?

    And let's not forget the shenanigans with Hulu, a joint venture of ABC, Fox, and NBC, which has been handicapped by its owners, and forced to limit the number of viewers it has, by blocking Boxee–software that also increases the number of viewers of Hulu's ads, by the way. The content industry, as well as cable companies, is interested in keeping online video in check.

    Steve Jobs likes to repeat an apocraphyl quote by Henry Ford: “If I'd have asked my customers what they wanted, they would have told me 'A Faster horse.'” If customers are going to switch to a new kind of product, they need to be shown what it is. Who is going to say they are perfectly willing and able to “switch” to a product that doesn't even exist yet?

    Cable is and will continue to be important, but an online competitor to Comcast/NBCU can't come into being if companies with a vested interest in the previous generation's distribution model control both the content the new generation needs access to, and the pipes the new generation needs to travel over–and so frighten their partners that they won't work with upstarts, either.

    As for the “public interest commitments” that NBCU and Comcast announced, all I can think of is the quote of St. Augustine: “Charity is no substitute for justice withheld.” We need more than “commitments” to lessen the problems with this merger. The threat to online video is just one of its many potentially anti-competitive effects. Online video is still small enough to be squashed, and consumers might never know what could have been.