Monday, November 25, 2013

Cable All About The Pipe To The Home

The future of cable is all about the infrastructure and the wires that connect homes to headends.  While first built to provide cable service, it now enables broadband, telephone and cable signals to function in two-way mode.  And it has become increasingly clear that the future of cable is the broadband pipeline.  "The cable companies — at least in the U.S. — have the fastest pipes into majority of homes. They are faster than phone companies and have a deeper footprint."  Despite the threat of cable cord cutting, consumers still rely on cable's wire to access their OTT subscriptions and videos.

So control of the US landscape is essential for efficiencies and economies of scale.  It also allows for WIFI expansion and new revenue streams.  Many talk about broadband moving from an all-you-can-eat model to a utility model based on usage; but, it opens up other revenue streams for security, cloud functionality, and more.  And it is why cable operators are circling Time Warner Cable with a possible feeding frenzy over their coverage area.  "So the cable industry, if it can consolidate, gets access to the most important pipe coming into people’s homes (after power and water) and the fewer cable companies there are, the more unified the rate structure might appear." Ultimately, a more monopolistic industry with fewer competitors to upend the egg cart. 

But will the FCC put any resistance to this level of consolidation.  It seems less with Charter, a smaller cable company swallowing up Time Warner Cable; but it raises red flags with the largest cable operator, Comcast, entering the picture.  It screams anti-competitive although it is part of the natural industry life cycle till other disruptive opportunities come along.  The FCC might just resist such merger talk but I think their best course of action is to encourage new companies to offer broadband access.  Open up new spectrum for broadband/cellular and encourage companies to enter the fray.  The electric companies already string this country with wires; can't they be encouraged to build out a broadband business.  LightSquared unsuccessfully tried to compete; offer them spectrum that works with their model.  It seems the best course of action is to encourage competition in a landscape that requires more and faster broadband access, at a reasonable cost.  Monopolies set and control pricing; competition lets the market choose. 

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