Digital Cord Cutting

Why Google, Intel and Apple May Not Disrupt the TV Business After All

As speculation centers on the ways that Google, Apple and Intel could disrupt the cable TV business, there’s also a fair degree of pessimism that the new players will lead to something consumers crave: Lower monthly bills.

On Friday, FCC commissioners praised the results of a report showing increasing competition for cable, as online services like Netflix, telcos like AT&T’s U-verse, and satellite providers like DirecTV expand their footprint.

Mignon Clyburn, acting chairwoman of the FCC, said that the increased competition is “leading to more choices in terms of programming packages and prices, and that’s great for consumers.” Commissioner Jessica Rosenworcel noted the Emmy nominations for web series as a sign of progress. Commissioner Ajit Pai suggested a new Golden Age of Television, noting that there “is no time like the present for those who savor quality content.”

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But there’s concern, to put it mildly, among public interest groups that even with the new playing field, what will remain is a landscape of pricey tiers, particularly with the costs of sports channels rising, and the prospect that cable giants will still control the online video marketplace if it imposes data caps, or pricing based on usage.

John Bergmayer, senior staff attorney for Public Knowledge, said that the latest FCC report “shows that the industry itself has not changed much, and it’s not evolving fast enough to meet consumers’ evolving demands. Coupled with the FCC’s reports on cable industry prices, a pattern emerges of consumers paying more each year for more of the same.”

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In May, Sen. John McCain (R-Arizona) created some waves when he introduced legislation that would force cable providers to begin offering channels on an ala caret basis. But his bill is given little chance of getting very far, and some in the cable industry argue that even if ala carte programming were available, consumers still would face the prospect of high prices, or even higher prices, for the most desirable channels, like ESPN.

Matt Wood, policy director for the public interest group Free Press,  questions whether much will change at all. In a statement, he suggested that “it’s a sure sign of a broken market when the best that giants like Google and Apple can promise is a better cable box.” To be sure, neither company has officially unveiled their plans, albeit reports have surfaced of their efforts at getting into the multichannel marketplace.

“It’s not an actual alternative if customers are still tied to the cable model,” Wood wrote. “Until we break apart the forced channel bundles and get rid of unnecessary online data caps, we’ll never see more than baby-step innovations and skyrocketing prices.”

The FCC’s report shows that cable’s share of the marketplace has fallen, from 59.3% at the end of 2010 to 55.7% in June, 2012, even as the overall number of multichannel subscribers increased to 101 million. The gains came from satellite, which grew from 33.1% market share to 33.6%, and telephone subscribers, like those coming from AT&T’s U-verse and Verizon’s FIOS, which increased from 6.9% in 2010 to 8.4% in 2011.

The number of households with Internet connected TVs was increasing, the FCC said, with 41.6 million in 2012, or 35.4% of all households, according to an SNL Kagan study. But the majority of those still retain their cable, satellite or telco subscriptions.

In other words, while online video is competing for viewers’ eyeballs, what remains to be seen is whether it can be comparable competition that replaces a cable provider, offering ESPN, TNT and all the rest.

Bergmayer said that the “barrier is the deals,” in that video providers have enough buying power to prevent content from going online. Even then, if demands can be made that cable, satellite and telcos bundle channels, why not the new entrants?

“The media marketplace is so concentrated, on both the production and distribution side, that just one or two companies can veto new entrants,” he wrote in a recent blog post.

Clyburn did note that online entrants could help subscribers save money by eliminating the need to rent set-top boxes. Apple’s plans reportedly involve improving apps on its Apple TV to make that possible.

That, however, may not shave much off the overall cost of a bill. Satellite and telcos entered the multichannel market as competition to cable, and consumers’ bills haven’t exactly plunged. So when it comes to online entrants being the next great disruptors, there’s ample reason for skepticism, or to only believe it when you see it.

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