Cable TV: Not Long for this World...

At the middle of last century AT&T, colloquially known as Ma Bell, controlled all phone service to homes and businesses. If you wanted phone service they were your only choice. You had no options with AT&T. You got what they decided they wanted to offer and that was that. They were regulated by the government but that didn’t seem to be doing much to improve service or lower costs.

Enter Bill McGowan. He decided it was time to undo Ma Bell’s monopoly and give them some competition. They didn’t like the idea. He started a phone company to compete with Ma Bell and then filed a lawsuit to end their monopoly. During this tumultuous time his company, Microwave Communications Inc., later known as MCI, was fondly referred to as a law firm with a microwave dish on it’s roof (it employed more lawyers than telephone people.)

Well, Ma Bell didn’t like competition. They said that they had a legal and regulated monopoly and all was fine, thank you very much. Bill said all wasn’t fine, that they were extremely slow in introducing newer technologies and that their rates were much higher than they needed to be. Ma Bell said that undoing their carefully structured monopoly would put the entire phone system at risk, that there would be tremendous problems and that people wouldn’t be able to make phone calls if Bill won.

Fortunately for all of us, Bill won. MCI began implementing newer technologies and offering services at a fraction of what AT&T had been charging. To their credit, AT&T became a much more efficient, competitive, and technologically advanced company within just a few years instead of the 10 or more many expected.

Today’s cable companies are not much different than AT&T of yesteryear. We are living in an ancient world held down by a paradigm largely developed decades before Al Gore decided he invented the Internet*.

We can only get the channels that our monopoly cable carrier or satellite service decides to offer. I’d like Universal Sports Channel, but my cable company doesn’t offer it so I’m out of luck. And even for channels they do offer we often have to purchase those we don’t want in order to get one we do, just because of the way the cable carriers decide to bundle channels.

My PC isn’t handcuffed like my antiquated cable service. I’m not prevented from viewing tripadvisor.com because Comcast hasn’t negotiated a contract with them. Can you imagine if your internet service provider told you that you could only access the websites they choose to offer?

Likewise we’re limited in options for Al’s internet service. Many people have no alternative for internet but their monopoly cable company. A few have a low-speed DSL option from their local phone company (likely a descendent of Ma Bell), but if they want higher speed, cable is it. Some have no reasonable option at all.

Well, there’s sunshine on the horizon and it won’t even require lawsuits.

Part I of sunshine is that we are beginning to see the unbundling of cable channels from carrier service. Many ‘channels’ are now streaming their programming on their websites. So, while Comcast doesn’t offer Universal Sports, I can just go to Universal Sports website and watch their stream of the Milan – San Remo bike race. I’m no longer locked in to only what Comcast chooses to offer and only at the price Comcast chooses.

In time we’ll see more and more of this and ultimately it will no longer be necessary to subscribe to any ‘channels’ through our cable or satellite company. All we’ll need is internet service and then we’ll ‘tune in’ to whatever ‘channels’ we want to watch via their websites.

One slight cloud though. Just as traditional land-line phone companies are seeing a precipitous decline in customers as more and more of us forego a traditional phone for a cell phone, cable companies will see a decline in people purchasing traditional cable service as we choose to get the channels we want directly via the internet. The cable carriers will want to raise their internet rates to make up for the lost revenue from cable TV subscriptions, but they’ll find a problem. Competition.

Part II of sunshine is 4G. Today you may get the internet at your home through your cable company, DSL from the phone company, or maybe WiFi from your municipality **. Tomorrow you may very well get the internet in your home from your cell phone company. We think of cell service as ‘mobile’, but if it can do mobile cost effectively, it can certainly do stationary even more cost effectively. 4G promises data performance comparable to what cable provides today or greater. DSL has provided little real competition to the cable companies, but 4G and similar wireless technologies will. Just replace your current cable modem with a 4G modem and you’ll be set.

Verizon is leading the charge with a faster rollout (30 cities in Q3 of 2010) and greater speed promises of 5 – 12 Mbps. Sprint is just behind though they say that they will only offer 6 mbps initially. And even our old friend AT&T is there with rollouts (12 mbps rumor) planned for 2011. The 4G spec though includes up to 1 gigabit per second (gbps) for stationary applications.

Today I pay $148/mo for cable and another $62/mo for internet so a total of $208 to Comcast. I pay another $67/mo to my cell company for voice+data. My guess is that the new 4G will come in around $99 for voice+data so for another $32 I can drop my $62/mo cable internet and soon the $148 cable altogether.

The one remaining piece of the puzzle will be for TV’s to include web browsers and media players similar to those we have on our PC’s. LCD and Plasma displays are really just computers built into very large computer displays. Today they have proprietary media players for Netflix and Youtube, tomorrow we’ll see open applications like we have on our PC’s including web browsers and good media players.


* Note: The Internet was actually invented by a guy name Vinton Cerf. I worked for Vint. At MCI.

** 4G data service from cell providers has been a known technology for some time. Despite this, several municipalities around the country have moved forward with installation of WiFi (and low power WiMax) networks, often paid for with tax dollars. It remains to be seen if these will be able to compete with 4G (which includes a higher power version of WiMax). My guess is that these, along with 'wifi hotspots', won't be long for this world either.