For some time, I’ve been noting on my Twitter account the rising tide of people who have decided to cut the cord that ties them to servicing their television needs through cable, satellite or other wired means, instead turning to the Internet to be informed and entertained.  The topic is blowing up now, with Washington Post tech columnist Mike Musgrove now examining the issue in his column this past weekend (“TV Breaks Out of the Box“).

And I don’t even really need to respond, because Adam Thierer has given it the one-two punch at Tech Liberation Front.

• Cutting the (Video) Cord, Part 2
• We Don’t Need to Mandate “a la Carte”… It Already Exists

But if you want my take on the cost-savings of broadband video, refer to these earlier posts:

• The Roles of TV and the Internet
• Does A La Carte Always Make Sense?
• More Media Inaccuracies About A La Carte

On a related note, TV Week‘s Daisy Whitney writes about using the Boxee service to watch Internet video on her television, as part of a cable-free experiment she’s conducting.

The Golden Swamp blog comments on Musgrove’s column by noting that more people watched Tina Fey’s portrayal of Sarah Palin online than on television, and suggests than one could then unbundle one chunk of content (such as a Palin skit) from an entire television episode (a 90-minute SNL). Judy Breck is using this approach to propose unbundling educational resources; others have applauded the ability of iTunes to allow you to buy just the songs you want instead of the whole album (David Lazarus called it the “iPod factor.”).

But as I have written on this blog in regards to “a la carte,” the economics may not pay off. If you unbundle one cable network from others, the economics change. Unbundle one show from a network, they change again. Unbundle a segment from the show, again.  That’s not to say that cable networks don’t or shouldn’t repurpose content. Comedy Central puts entire episodes of The Daily Show online for free. Some cable networks make content available to mobile subscribers or put clips on their websites. I’m simply offering a reminder that there are different approaches and different business models; not everything you want may be available on the platform you want and in the manner you want.

But things change and nothing is permenant. Stay tuned.

Less than a month ago, I wrote about Comcast’s deployment of DOCSIS 3.0 in New England and areas of Philadelphia and New Jersey, following up on the Minneapolis/St. Paul market. I mentioned that they expected to reach more than 10 major markets in the coming months.

Here we go: Comcast launches DOCSIS 3.0 in Oregon and Southwest Washington, including such communities as Aberdeen, Spokane, Beaverton, and Eugene. The Extreme 50 tier offers download speeds of up to 50 Mbps. Comcast will also double speeds for the majority of existing high-speed Internet customers at no additional cost.

The company has a web page which allows you to check if wideband is available in your area or to sign up for e-mail updates when it is rolled out to you.

UPDATE: Media coverage.

• Comcast Rolls Wideband in the Pacific Northwest
• Comcast’s 50 Mbps service comes to OR, WA next month

There was a column in the L.A. Times yesterday from David Lazarus entitled: “Let’s pay only for the TV we watch.” So, once again, back we go to the topic of “a la carte” cable service.

I get it. It feels like much of the content world is going to a pay-only-for-what-you-want model. Certainly, it feels right emotionally to only pay for the stuff you’re going to use. But this argument is almost always predicated on one premise: If I could pick and choose, my bill would go down.

Lazarus writes:

The average U.S. home now receives a record 118.6 TV channels, according to a recent report from Nielsen Co. But the dirty little secret of the cable industry is that the average subscriber watches only about 17 channels regularly.

That’s more than 100 channels that most cable subscribers are paying for but seldom if ever watching.

Because of the number of cable systems nationwide, it’s hard to get a fix on the average monthly bill. But many estimates place this figure at $60 to $70.

This means, if all channels cost the same, the typical cable subscriber is spending about $9 a month for the 17 channels he wants to watch and about $55 for the 101 channels he never sees.

There are big problems with the figures here, so let’s break it down.

If you’re getting 118.6 channels, that means you’re getting digital cable service, because analog can’t deliver that many. SNL Kagan estimates that the current average monthly price for digital service is $59.23 (expanded basic is $44.28), which not only provides a wide range of programming but also opens up the door to high-definition and Video on Demand.

The first important point that Lazarus overlooks is that the average cable subscriber has elected to switch from a cheaper level of service with fewer channels, in order to take a more expensive level of service with more options. Perhaps people like the greater choice that comes with digital?

For example, Cablevision recently reported that more than 90% of its video customers subscribe to digital service, which means that 9 out of 10 of its customers want more channels, not fewer. If you look at the largest cable operator, Comcast, you find that 69% of its video customers elect to subscribe to digital service. Industry-wide, approximately 62% of cable’s video customers have made the decision to receive more channels via digital service.

Lazarus continues:

But all channels don’t cost the same amount. By most accounts, the sports channel ESPN is one of the most expensive carried by cable systems, costing by some estimates more than $3 a month per subscriber. Many other channels are said to cost as little as 25 cents monthly.

I never watch ESPN. When I watch TV, it’s usually CNN, CNBC or a movie channel. On an a la carte basis, I could probably get the handful of channels I like for pocket change.

That, of course, is not what the cable industry wants.

Lazarus leaves out all of the relevant content here. Those figures he cites are carriage fees that cable operators pay programmers in order to carry those services and offer them to their customers (The real rates are found in private contracts; actual figures will vary by company and circumstances). It’s not what those networks “cost” and it’s not a reflection of what you would be charged in an a la carte world.

He also writes:

According to the FCC, average cable rates nationwide more than doubled over the last 10 years.

In fact, the FCC has not released any reports containing this information. There have been statements in the media to this effect, but the Commission has not released any reports to back up this assertion. It is irrelevant to compare today’s rates to the rates from more than ten years ago, since the nature and value of that service has changed over that same time-frame, but it is worth noting that over the last several years, the increases in cable rates have actually lagged behind inflation rates.

Read this post for the financial details, but the short version is that if each network lost the carriage they have now and then had to market and sell the channel to individual consumers, revenue goes down, operating costs go up and programming quality probably also goes down.  And the price you think you’ll pay for individual channels on an a la carte basis? You’re probably grossly underestimating it. The reason why you should pay for more than you watch is that it beats paying more to have fewer options.

Lazarus writes that cable needs to be brought “in line with the wholesale shift in how consumers now approach entertainment.” But different distribution outlets have different pricing models. If you saw Iron Man in the theaters, you probably paid ten bucks. The DVD is probably $20. Buy it on iTunes for $15 or watch it on VOD for $5. As I’ve written previously, different businesses operate on different models and it’s a mistake to assume they should all be the same.

Lazarus makes a comment early on about knowing “as a newspaperman” a little something about “outdated business model[s].” The print edition of his newspaper, the Los Angeles Times, is not sold on an a la carte basis, with the option of buying just the sports section or the business section. They did experiment a few years ago with putting their online entertainment section behind a wall and then charging a subscription fee for access. They later ended the experiment. The New York Times did something similar with its TimesSelect service. In these instances, the free market determined their actions, not regulation. Business models change over time and the models of the cable industry will undoubtedly do so as well.

If you look at the comments of this column, you’ll find some other reasons given why mandatory a la carte would probably be problematic. You could also check out some of Mike Masnick’s posts at Techdirt, such as here, here or here.

There are adults today who have never known a world without cell phones, color television or ATMs. These are people who have had cable television all of their lives (not to mention Internet access, DVRs, DVDs, and so on for a shorter period of time). This actually presents significant challenges to the cable industry.

To people who have always had cable, there is no difference between an over-the-air (OTA) broadcast channel and cable offerings. However, in both the business and regulatory environments, the difference between OTA television and cable matters. The business models are different, the ad revenue streams are different, the content regulation is different. Whether you run a local TV station or a cable system, a broadcast network or a cable net, you live with these differences everyday.

To viewers, those differences are invisible. They cruise around the channel lineup, probably not paying any attention when they’re tuned to a cable channel and when they’re looking at a broadcast station. They may be vaguely aware the rules for swearing vary between basic cable and networks like NBC, CBS, ABC, Fox, or the CW – although, as broadcast standards have changed over the years, the differences aren’t as stark as they used to be. Even if they see that distinction, they may not know this is because broadcasters use the public airwaves, while cable programmers do not.

Another example: If a cable programmer – Animal Planet, Comedy Central, Turner Classic Movies – wants to be carried by a cable operator, then that network has to make its pitch. It has to demonstrate the value it will deliver and then an agreement is negotiated. An OTA broadcaster can choose between Must Carry or Retransmission Consent status in order to gain carriage. As NCTA President & CEO Kyle McSlarrow pointed out in testimony earlier this year, “it’s not a free market negotiation.” For example, if negotiations between a cable operator and a broadcaster go badly, that operator can’t turn to an out-of-market broadcaster that carried the same programming.

You can argue that the average viewer doesn’t need to know the difference. They watch what they want to watch and they don’t care whether the programming is cable or broadcast. But you cannot ignore the impact of these differences. They can be seen all the time.

I’ve mentioned the issue of must carry/retrans, which I blogged about earlier when clashes between Time Warner Cable and broadcaster LIN TV were in the news. I’ve written multiple times about the distinction between the broadcasters’ Digital TV Transition and the cable industry’s migration to digital; just recently, my colleague Michael Turk responded to a Consumers Union letter that seemed to combine the two. I’ve written about the so-called “cord-cutters,” who aim to get all their TV via the Internet; I mentioned how little cable programming is available online as compared to broadcast television – an issue which is a direct result of their differing business models. (Will Richmond writes about this issue in more detail today.)

When discussing television, and the impact of various policy proposals, it is useful to be aware that the telecommunications and television industries are still rooted in historical traditions, no matter how much it seems like all the old rules are gone. While public policy may eventually catch up with the rapid changes of the last decade, we’re not quite there yet. We must remain cognizant of that in applying a one-size-fits-all model to services that vary greatly – whether you can see the differences or not.

On Thursday, NCTA responded to the Senate Commerce Committee in regards to a Consumers Union complaint about cable’s migration to a digital platform. The CU has questioned the impact of our migration on the simultaneously occurring digital transition for broadcast signals. In the letter, we sought to specifically address the Consumers Union allegations that our migration is an attempt to surreptitiously game the broadcast transition to fleece our customers.

My co-author Paul has written repeatedly on the distinction between cable’s migration to a digital platform and the broadcasters’ transition to digital broadcast. While the two share one common element – the movement from increasingly obsolete technologies to delivery methods that greatly increase consumer value – they are two completely different events.

You can refresh your understanding of the differences between the two by reviewing any of the following posts.

• Clearing up the DTV Transition
• The two digital transitions
• Separating the two transitions
• Once more – there are two transitions…
• More DTV Confusion

Without dwelling on the point, cable’s migration away from an analog platform to digital began years ago, in the mid 1990’s. Since 1996, cable has spent $130 billion dollars to create a robust platform not only for digital delivery of video, but to also provide valuable services like high-speed Internet and telephone service. We have been upfront about our plans to migrate our delivery to digital and the fact that 60 percent of cable customers now have digital is a pretty good indication that consumers also like it.

Cable operators could have simply set a date, contacted their customers and said, “On this date, you’ll need a box. If you don’t have one, you won’t get cable.”  Instead, we took a gradual, phased approach to the upgrade in an effort to cause minimal disturbance to our customers.  We recognize that no matter how carefully we manage the switch to digital some customers will be inconvenienced. Even a gradual shift to this new technology will cause some disruption.  However, the industry has done all it can to be upfront about the process, and to ensure that the unfortunate overlap of our ongoing migration and the rapid shift in broadcast technologies do not harm our customers.

Many of the complaints about our move from analog to digital center around the fact that customers will be required to obtain a set-top box, while they do not currently need one. This is true.  Note that all of cable’s competitors – satellite video services, Verizon, etc. – run on all-digital platforms and require every subscriber to obtain a set-top box.  By contrast, many cable companies plan on retaining at least some analog services.  No box will be needed to receive those services.

In contrast to cable’s digital migration, the DTV switch will occur on a flash-cut basis on set date, February 18, 2009.  The DTV transition was handled that way out of necessity – needing to free spectrum for emergency services and others – there has been a fair amount of confusion and fear of possible disruption. We have worked tirelessly to minimize the effects of that rapid change on consumers. We joined with the National Association of Broadcasters, the Consumer Electronics Association and a host of other organizations to educate consumers. We have aired public service announcements valued at hundreds of millions of dollars, and used many other tactics to help ensure that the American people are not inconvenienced by the cut over from analog to digital broadcasts.

The fact that a hard date was set for the DTV transition just as cable’s migration began accelerating does not mean that the two events are related.

Like the DTV shift, however, ours is also being done out of necessity. Our companies have millions of customers who are looking for faster Internet, less expensive phone service, increased hi-def viewing options, and more video-on-demand content. To meet that demand, it is critical for cable operators to free up the space consumed by analog channels.

Technologies like DOCSIS 3.0 – cable’s wideband Internet service – make use of the freed analog space. For example, for every four analog channels, DOCSIS 3.0 channel bonding can deliver 160 mbps – typically 10-50 times faster than current cable Internet service. In video terms, for every channel delivered in analog, cable operators can deliver 6 digital channels.

Analog channels, viewed through that lens, end up costing cable operators more in terms of lost opportunities for other services. They become more expensive to maintain, and that expense increases rapidly.

Think about it this way. Horse-drawn carriages were once a popular method of getting around. As people adapted to the new technology of automobiles, things began to change. Different types of road construction may have increased wear on parts. Parts for the old buggies may have been harder to obtain, or more expensive. The technology simply outpaced many consumers who were loyal to what they knew.

This migration is no different.

Today’s telecommunications platform requires hardware to connect. The cable industry (through CableLabs) has worked with the consumer electronics industry to develop technology to allow you to connect to digital service without a STB – first with the one-way Digital Cable Ready sets and now the interactive tru2way televisions. The first sets with this technology are already for sale in Denver and Chicago.  We are confident that consumers will find tremendous value in the digital services you will be able to get using these devices.

While there will, as mentioned, be some customers who are inconvenienced during our migration, cable has done all it can to keep the number impacted, and the disruption they experience, to an absolute minimum. Cable continues to feel the pressure of competition from both satellite and the phone companies. Our customers have choices, and we do not take that for granted. We work every day to provide great products with great value, and strive to keep every customer happy.