We return to the topic of “cord-cutting,” thanks to a few recent developments.

Before we start, it’s worth noting that much of the cord-cutting coverage I see online seems to begin with frustration at prices (somehow never compared to the costs of other entertainment options) or by desired flexibility in purchasing options (they just want to get the one network or the one show).

Then, the subsequent reporting or blogging is driven by a fierce conviction that the Internet and the Digital Age is changing the “cable model” – as everything must be changed under the new regime (“Resistance is futile!”) – and that it’s only a matter of time before the whole existing infrastructure comes tumbling down, to be replaced by a Bright New Tomorrow.

I must point out that the Internet offers a technical solution to delivery of content. It does not address the business models involving the production of content.

Everybody’s Dropping Cable and Its Days Are Numbered

“It’s only a matter of time,” critics will say. Pretty soon, a Hulu subscription will “kill your cable.” Or perhaps Google has the answer to “kill your cable bill.” In fact, it’s already happening now! The cord-cutters are taking over!

Just as a brief sample of cord-cutting claims, here’s Fierce IPTV from April and the L.A. Times from eight months ago.

About a month ago, I fact-checked two major cord-cutting reports from earlier in the year. Now, a new Nielsen report confirms that “cord cutting to date has been limited to very specific demographic segments.” See this finding from the report, as quoted by Connected Planet:

The survey’s key metric: 3.9% of the U.S. population had broadband Internet but no cable TV service in January 2010. That’s the same percentage reported for the same month a year earlier. In January 2008, it sat at 3.2%.

At the same time, the percentage of people with both cable TV service and broadband was 66.3% in January of this year, compared to 61.6% in January 2009 and 54.8% in January 2008.

But maybe there’s another threat to cable.

Drop Cable and Still Get Sports

About a week ago, ESPN and Microsoft accounted a deal that would bring the ESPN3 online service to Xbox 360 customers. There was much rejoicing in certain quarters, with MG Siegler writing at TechCrunch, “Xbox 360 Gets Live Sports In HD From ESPN. Canceling My Cable In 5, 4, 3…” Two days later, Karl Bode noted at DSLReports, “ESPN/Xbox 360 Deal Less Sexy Upon Closer Inspection.” He noticed that ESPN’s streaming video service has a model similar to its multichannel video business. ISPs are affiliates, much as cable operators are. And ESPN3 doesn’t offer all the same content that the television version does. (Also, see this post from the Sonic.net CEO Blog, arguing that “the Internet is ‘à la carte’, and it should remain that way.”)

So, I Should Still Cancel Cable, Right?

People like to complain. They threaten to cancel their service. But if you like to watch the programming, how else are you going to watch it?

CNET’s Rick Broida writes The Cheapskate column about saving money. He posed the question this week, “Is it time to pull the plug on cable TV?” He notes that you can use streaming services or a media center PC.

However, these options will get me only so far. If I want to watch shows like “Breaking Bad” or “Mad Men,” I’m sunk: they don’t air anywhere except on AMC. My only option would be to wait for them to come out on DVD. And even then, they won’t be high-def.

I also have kids who would probably require hospitalization without daily doses of “iCarly” and “Phineas and Ferb.” Granted, both are available through Netflix, but not the latest episodes.

And then there’s sports. I don’t watch a ton, but I do like my college basketball. The question is, do I like it enough to justify $70/month (especially when the season lasts only six months or so)? Dunno.

If You Want a Revolution, What’s the Solution?

As I’ve said before (see this post), people like to claim you can replace cable with something else, but the “something else” is often just broadcast programming streamed online.

Broadcast television has been around since the 1940′s and has a business model based on broad distribution; the free online viewing of those shows is just ancillary revenue. Cable has always offered niche content and has a dual revenue stream of advertising and affiliate fees.

Cable and other multichannel video providers are now responding to consumers’ interest in accessing cable content in new ways; that’s why we’ve seen the launch of “TV Everywhere” kinds of services, which allow subscribers to watch online the content they’re already paying for.

All those prognosticators who claimed that the cable model is doomed should try to answer the fundamental questions of how the television business is supposed to transition into this Bright New Tomorrow, while still maintaining the ability to recover production costs and generate revenue.

While the enormous growth and progress of U.S. broadband over the last decade continues to be under-appreciated by some in Washington, real consumers who use the service everyday continue to express their satisfaction with their service.

The latest data comes via a report from Leichtman Research Group, finding that, “71% of US broadband Internet subscribers are very satisfied with their current Internet service at home.”  On top of that, the report says people are even pleased with the speed of their Internet connection.

If this sounds familiar, the FCC’s own broadband study which we covered here a few weeks ago that said 91% of home broadband users report being at least somewhat satisfied with the speed of their service (with 50% saying they are very satisfied).  Also similar to the FCC’s survey, the Leichtman research notes, “77% of broadband subscribers do not know the download speed of their Internet service at home.”

This last data point raises an interesting question – If consumers are satisfied with their broadband service and it performs the functions they want, is it important to know the exact speed of your home broadband service?

The Institute for Policy Innovation recently tackled this question and raised some interesting analogies:

Can most people rattle off the horsepower of their car or their lawnmower? Can most people even tell you what “horsepower” means? (Horsepower is a measurement of work over time. Move 33,000 pounds one foot in a minute and that is one horsepower). What about their furnace? Can they opine on how many BTUs it produces? (BTU stands for British thermal unit. Heat one pound of 60 degree water by one degree at a pressure equal to one atmosphere and you have one BTU).

I am guessing that people are satisfied with their service because it consistently works, it consistently zips along at a pace that accomplishes what the user is trying to do, and it consistently helps them with school, business and entertainment activities.

It is great news that most consumers are satisfied with their Internet service, but cable is continuing to invest so we can offer even faster Internet speeds and a variety of tiers for consumers to choose the service that best meets their needs.

Cable operators have invested more than $160 billion over the last decade in infrastructure upgrades, maintenance and equipment, but more is happening everyday.  And many cable operators are increasing speeds for customers, often without increasing price.

Ultra-fast Internet – or DOCSIS 3.0 as we know it – was deployed to 52 million homes and business around the country, or 43% of cable’s national footprint, by February 2010.  Offering speeds from 50 to 100Mbps, DOCSIS 3.0 is providing cutting edge services for many homes and businesses now, and well into the future.

The reason why we continue to invest in our network and increase the speeds we’re delivering is to ensure this satisfaction continues.

Yesterday, the FCC voted 3-2 to approve a Notice of Inquiry to change the legal framework of Internet access by reclassifying it under Title II of the Communications Act.

John Eggerton of Multichannel News and Broadcasting & Cable wrote an overview of the FCC meeting and the  day’s happenings.

We issued a statement from NCTA President & CEO Kyle McSlarrow:

“Over the past decade, broadband deployment in America has been an unparalleled success story. That success has been greatly aided by the farsighted judgment of prior Democratic and Republican Commissions to promote innovation and investment in new networks through the exercise of regulatory restraint. As we revisit this question with the start of today’s inquiry, we see little benefit to changing course and great danger in attempting to shoehorn modern broadband services into a Depression-era regulatory regime without serious collateral effects to investment, employment, and innovation.

“We appreciate that Chairman Genachowski is seeking comment on alternatives to a Title II approach. We also very much appreciate and agree with the Chairman’s statement of support for legislative efforts to provide much needed certainty. We believe that is the right next step, and we can preserve our ability to protect consumers, maintain an open Internet, and encourage continued investment and innovation through carefully targeted legislation.”

Comcast also issued a statement from EVP David Cohen.

Here are just a few stories following the FCC’s vote:

• New round in FCC broadband fight
• FCC Advances Internet Plan Backed by Google, Amazon
• FCC Formally Launches ‘Third Way’ Process, Asks for Comments
• FCC seeks comment on broadband reclassification

If there is any one common theme that has arisen from the years-long policy debate surrounding network neutrality, reasonable network management and preserving an open Internet experience – it’s that there is no simple solution and the entire Internet ecosystem must be engaged with a common purpose to continue providing consumers with a great Internet experience.

That is why today’s announcement of the formation of a Broadband Internet Technical Advisory Group (BITAG) is such encouraging news.  The BITAG starts off with some of the leading broadband providers, high-tech companies and Internet content providers, and will provide an inter-industry forum to allow technical and engineering experts to discuss technical issues and develop best practices related to matters that affect the consumer broadband experience.

According to today’s announcement, the BITAG’s mission is to:

Bring together engineers and other similar technical experts to develop consensus on broadband network management practices or other related technical issues that can affect users’ Internet experience, including the impact to and from applications, content and devices that utilize the Internet. Participants agreed that the TAG’s mission could also include: (1) educating policymakers on such technical issues; (2) attempting to address specific technical matters in an effort to minimize related policy disputes; and (3) serving as a sounding board for new ideas and network management practices.

An impressive list of companies that touch all points of the consumer broadband experience have signed on to the initial BITAG effort, including AT&T Inc., Cisco Systems, Inc., Comcast Corporation, DISH Network, L.L.C., EchoStar Corporation, Google Inc., Intel Corporation, Level 3 Communications, LLC, Microsoft, Time Warner Cable, and Verizon.

Importantly, the BITAG will be managed by an independent and expert facilitator, Adjunct Professor Dale Hatfield of the University of Colorado at Boulder, a former FCC Chief Technologist who is executive director of the highly-respected Silicon Flatirons Center.

Formation of BITAG was applauded by The Internet Society, one of the world’s foremost non-profit organizations which provides leadership in Internet related standards, education, and policy:

“This joint effort by industry leaders provides an exciting opportunity to address key operational challenges facing the Internet user experience,” said Leslie Daigle, Chief Internet Technical Officer of the Internet Society.  “The Internet Society believes this activity is an important contribution to the ongoing global, open technical dialog and looks forward to seeing its output appropriately integrated with the work of existing Internet standards activities.”

(Also see NCTA’s statement on our website.)

As today’s BITAG announcement indicates, this is really the beginning of a process to attract interest and participation by others and to organize the BITAG to meet the mission statement to which these companies have committed.  We look forward to learning more about the BITAG and to supporting its efforts.

If you follow the discussions on this blog, you would be well-advised to watch this excerpt of Kara Swisher’s interview with Comcast COO Steve Burke at the D8 Conference.

(You can also read coverage on the conference blog and at Barron’s Tech Trader Daily blog.)

Burke makes a good case for cable’s resilience in the face of the supposed looming threat of online video (See my post from last week). I particular enjoy the bit, during an exchange about “à la carte” offerings of service, when Burke gently chides Swisher for comparing the monthly price for Comcast’s video service to the daily price for the Wall Street Journal.