Bernie Arnason

There is an ongoing debate about the true impact of video cord cutting. One side of the argument says consumers are actively cutting the cord to save money or because they consume video differently than the traditional ‘smorgasbord’ channel line-up model.

The counter argument points to the data and says cord cutting is simply not a major concern. The debate is not stopping service providers from experimenting though, with AT&T’s latest broadband and HBO bundle as an example.

AT&T is offering a bundle of 18 Mbps broadband, a very limited local channel line-up, and a HBO subscription, which almost looks like an HBO a la carte option. The bundle is priced at $40 per month and includes Wi-Fi service (in and out of the home) as well as U-verse DVR service. AT&T is also highlighting the TV Everywhere aspect of the offer, which allows subscribers to watch the HBO GO app on the go.

Subscribers can opt for a faster 45 Mbps broadband tier and add HD capacity for additional monthly fees. With this option, AT&T hopes to attract broadband subscribers who are not interested in full blown channel line-ups, but do want HBO and a DVR. Subscribers can then augment their content choices with over-the-top (OTT) options from Netflix, Hulu, Amazon, and others. AT&T gets to place a set-top box (STB) in the home and entice these subscribers to use their VOD and other revenue generating services, perhaps as an alternative to Netflix.

The promotion expires July 5, 2014.

[Commentary] The latest research from Leichtman Research Group reveals that the pay-TV industry lost a whopping 0.1% of subscribers to video cord cutting in 2013. That equates to 105K subscribers from a total multichannel pay-TV universe of 94.6 million subscribers.

Hardly the crisis of video cord cutting that gets much of the headlines these days, at least according to LRG’s analysis. The news is somewhat sobering for the traditional cable MSO industry according to LRG. Collectively, the largest cable MSOs lost 1.7 million video subscribers in 2013. But telecommunications television gains of 1.46 million and DBS net adds of 170K offset the cord cutting trend.

The real impact probably won’t come for some time though. From my vantage point, the issue to be concerned about is not cord cutting, it’s ‘cord nevering.’ That is, younger people who are now in their teens and twenties who lost interest in pay-TV a while ago, and are unlikely to subscribe to a pay-TV service as they move into head-of-household status. At least not subscribe to a multichannel video package as we define it today. For them, a hefty broadband pipe into the home and on the go may fuel their video appetite through a broadband TV type package, the business and revenue details of which are still being worked out.

[Commentary] Over the top (OTT) video delivers video content over the open and unmanaged Internet directly to a consumer’s home. With broadband TV, service providers are delivering video over their closed and managed broadband network to that same home.

Many content owners continue to demand a closed facilities based broadband network to distribute their content. In some regards, broadband TV is the new IPTV, albeit with some very distinct differences, namely it requires a dramatically less expensive video headend. But traditional IPTV still delivers robust channel line-ups with access to all the content that most consumers still demand -- a channel line-up that broadband TV does not. Then again, that’s exactly the point.

For now, broadband TV is setting itself up as an alternative to cable and IPTV for consumers who do not want or need a traditional channel line-up. That may change over time. The broadband TV momentum is also shaped by a very interesting announcement from DISH. The traditional DBS provider has been spreading its wings for some time now, including stocking up on considerable wireless spectrum assets, and recently announced a distribution deal with Disney that they claim gives them Internet distribution rights for Disney owned content, including ABC and ESPN. DISH may be on a path to offer some form of a virtual cable MSO type offering, where they can offer a channel line-up delivered via the Internet to any broadband home. I would characterize this as a broadband TV/OTT hybrid. In my opinion, this type of offer still needs local broadcast to be compelling enough.