Friday, August 16, 2013

Even OTT Providers Need The Cable Operator

With the price of a cable subscription rising year over year, consumers might just be cheering that new companies are offering content that allows them to bypass their cable subscription.  From the recent news that Sony has forged a programming deal with Viacom for its linear networks, to Netflix and Amazon offering video content to consumers through their Apple TV, Roku, XBox or other OTT device, streaming content is growing.  But to access this content requires a broadband subscription, BYOB or Bring Your Own Broadband, and that service comes from the same company that you were getting your cable content from.

Certainly cable operators worry that consumers will cut their cable cord, but they aren't cutting their broadband cord, literally the same wire that runs into the house.  And cable operators are likely going to penalize customers that drop their cable service.  In the past, they created the Triple Play marketing campaign of cable, broadband, and phone to discount services, but take one service away and the discount goes away and the total price for service will rise.  Cable operators are also testing usage based broadband fees, charging more for heavy users of broadband.  And since we know that video streaming uses more data then say e-mail, streaming broadband access costs will only rise at a faster and faster level.  Ultimately, customers that think taking an OTT service instead of cable service may actually find themselves paying a higher fee for a lesser number of channels and shows. 

The best opportunity for BYOB customers that are dropping cable subscriptions for OTT video is that new broadband providers can enter the industry.  Whether that is LightSquared or Clearwire or Google, the industry needs competition to keep broadband streaming prices in check.  Otherwise the broadband industry will look just like the airline industry, an oligopoly with limited choice and rising prices, not only for seats, but any extra legroom.  And that is not in OTT video's best interest and so for now, OTT providers need the cable operator.  

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