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.

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.

It probably comes as no news to you that the availability and consumption of broadband video has risen dramatically this year. I enjoy using Net-viewing to timeshift or catch up on old episodes of particular shows, as well as watching video that’s exclusive to the Web (I love ill Doctrine, a hip-hop video blog hosted by Jay Smooth).

But there’s been a particular notion that risen as well that fascinates me: the proposition that online video can completely replace regular television. Twice, we’ve addressed the notion that online “a la carte” consumption of content can be a cost-savings measure (here & here).

In recent months, the “cord-cutting” meme has shifted a little bit. Instead of simply focusing on the benefits of online video’s a la carte nature, there have been a series of stories about people canceling cable or other subscriptions in favor of getting all their video from other sources.  There’s even a website dedicated to the idea of No More TV.

For example, here’s an L.A. Times piece on Kevin Rose – co-founder of such start-ups as Revision3, Pownce & Digg – explaining why he canceled his Comcast cable and TiVo subscriptions in favor of getting video from the Internet and his Netflix-Roku box. Note that he says he only watches “a handful of shows and about 10 to 12 hours of programming a week.” As we’ve noted before, Nielsen says the average is 127 hours, 15 minutes per month, or just shy of 32 weekly hours.

Mutichannel News has also examined this idea of dumping cable for the Internet. Note that the first customer interviewed says, “I don’t watch a lot of TV myself.” Here’s an important piece of this movement to cutting cable:

Online fare is skewed toward broadcast content. Full episodes of about 90% of broadcast networks’ primetime shows are available on the Internet, compared with about 20% of cable shows, according to Forrester Research.

So, while some cable programming is available online, much is not. Multichannel talks to another customers who says “the bigger adjustment for him was the lack of cable news programming.” TV Week‘s Daisy Whitney is in the midst of an experiment to see if she can get all her television shows online; this week, she wrote about the difficulty of finding kid-friendly content. Will Richmond discusses the lack of cable programming in more detail.

Now, I know that there are readers who will come to the conclusion that I make these remarks for anti-competitive reasons. Purportedly, cable operators are scared of the competition from online video, which also supposedly explains (NOT) many of our network management policies. But some cable operators are also in the online content business, such as Comcast’s Fancast service. And many of these articles and blog posts on getting video from online sources don’t mention that you still have to have a broadband connection to do so – a service also offered by cable.

I think the growth in video is a terrific thing, but I’m a little skeptical about how fast the “cord-cutter” trend is growing. If this was a real movement, wouldn’t we see multichannel subs going down as broadband video consumption went up?  Instead, the subscription numbers have stayed pretty stable.

This week, Contentinople‘s Eve Bergazyn also noted another trend:

According to The Nielsen Company ’s TV/Internet Convergence Panel, the heaviest users aren’t medium loyal: “the top fifth of Internet users spend more than 250 minutes per day watching television, compared to 220 minutes of television viewing by people who do not use the Internet at all,” the company announced in a press release. The opposite is true too, with lower Internet-usage correlating with less time spent in front of the television.

So, perhaps the roles of television and the Internet are more complementary than it might seem at first glance.

In the last few months, a number of blogs have written about “a la carte” consumption of content as a cost-savings measure. In these tough economic times, managing your entertainment and information budget is certainly a good idea. But much of the discussion I’ve seen fails to note that this approach isn’t going to work for everyone.

For example, in early June the I Will Teach You To Be Rich blog argued in favor of cutting down on unneeded subscriptions: “Instead of paying for a ton of channels you never watch on cable, buy only the episodes you watch for $1.99 each off iTunes.” (Also see the discussion of this tactic on Lifehacker.) You also often see people talking about how little cable television they watch.

• The Short Bus: “After all, I only watch about 5 or 6 channels – none of them are a major network.”
• jetdawgg at Leatherneck.com forum: “Frankly, the only Time-Warner channel I REALLY want is Turner Classic Movies. Maybe a couple others.”

I’ve also seen people argue that they only watch a couple of cable series. And if you’re a low-level consumer of such content, perhaps this makes sense. More and more television programming is available online, either as free streaming video or available for purchase on an a la carte basis via services such as iTunes or Unbox. Some have asked if Apple TV could be a replacement. As the supply of broadband video grows, the theory goes, consumers can turn to an online supply of a la carte video to satisfy their needs, saving money at the same time.

So, let’s run some numbers. According to estimates from SNL Kagan, the Average Monthly Price for Expanded Basic Programming Packages (2007 estimate) was $42.76. You can buy some television programs on iTunes for $1.99. Once you’ve purchased 21 or so shows at two bucks a pop, you’ve now matched the price of expanded basic cable service. At that rate, you could watch one show each weekday night, but you’ll have to take the weekends off. But if you want to watch more than that, then subscribing to cable makes more sense.

Another measurement is to take the average basic cable rates from SNL Kagan and divide it by average basic cable network viewing time from the Cabletelevision Advertising Bureau to obtain the Average Price Per Viewing Hour, which was 24.5 cents in 2006 (see an explanation of PPVH here). Since a typical hour drama can be purchased on iTunes for $1.99 – which makes their Price Per Viewing Hour about 8 times more. Keep in mind that a half-hour show also costs $1.99, making the PPVH for fare like Family Guy and South Park even higher.

Naturally, there are a couple of built-in assumptions to the a la carte argument: how little TV you will watch and how much cable programming you can get online. A recent Nielsen report on TV, Internet and Mobile usage found that the average American is watching 127 hours, 15 minutes per month. To watch that amount of video at $1.99 per hour would cost more than $250 per month. And if half of those shows were half-hour sitcoms (also at $1.99) the monthly bill would come in at $380. The people above who are quoted as watching so little television fall well below the average.

What’s interesting about the discussion of this topic is that there’s an assumption of how much video is watched online by consumers. Sure, there are certain groups who watch a ton of video online and watch little, if any, cable TV. But that Nielsen study found that Americans are not only using the Internet more, but are watching even more television. You might think this doesn’t apply to young people, but the Nielsen study says that 18-24 year olds are watching over 103 hours a month, and a recent study from Alloy Media + Marketing found that 38% of college students aren’t watching online video at all.

This is not to say that there’s not growth in broadband video. For example, 37 million episodes were watched on ABC.com’s video player during the month of May, or a total of 815 million minutes of full-length content.. There’s a good deal of broadcast programming online. But your local news isn’t available online. And while some cable programming is available, much of it is not. Will Richmond explored this issue and explained the importance of cable programmer’s dual revenue model.

Finally, the study of economics demonstrates that people’s mental states can affect their perception of this equation. You may think a subscription makes more sense because you pay once and get a lot. If you consume less than you think, a subscription approach might not be right for you. But when it comes to consuming television, consider your cell phone.

Remember a few years ago when cell phones were new? You got one and selected a simple plan, because you were only going to use the phone for emergencies. And then you got in the habit of using the device, because it’s so convenient, and then your bill went through the roof. Today, it’s smart to get a plan with a lot of hours or unlimited texting or some other pricing system that’s economical. Similarly, if you truly only watch a very small amount of cable TV, and if your favorite program is available in some other form, then it might make sense to purchase your video programming by episode. But if you watch an average amount of television, which is more than 4 hours a day according to Nielsen, then one of cable’s various packages (basic, expanded basic, digital, etc.) definitely makes more sense.

UPDATE:  I just noticed that this January post during CES touches on many of these same issues.