Is cable dead? The problems with providers, competition, and access seem familiar.

Is cable dead? Respected technology writer Doc Searls thinks so. In his blogpost today he talks about the recent example of Al Jazeera restricting its online Al Jazeera English stream in the US when it began broadcasting its cable channel, Al Jazeera America, on August 20. Searls’ take is that Al Jazeera’s move to cable is a backwards one; he sees it as sacrificing the future for the past.

Cable may not be dead – yet. I think that Al Jazeera’s sacrificing a bit in the short term and playing the long game in order to have access to the American market. But what is interesting is Al Jazeera’s explanation for the move: “Due to copyright and distribution restrictions, not all viewers will be able to access all of our streaming video services.” It highlights the distinction between cable channel (content) and cable provider (access), and the power that providers currently have over what viewers can see.

Time Warner Cable, which owns CNN, immediately dropped Al Jazeera America from its lineup. (In other news, they have also blacked out CBS in several major markets during their fee negotiations but will undoubtedly reach an agreement before football season starts.) AT&T’s U-verse pay-TV service said it wouldn’t carry Al Jazeera America because of a contract dispute.

The customers served by these providers have no choice in the matter. They can’t see Al Jazeera America – yet.

In almost all US markets there is a monopoly on the provision of cable services. Susan Crawford, a communications policy expert and a professor at the Cardozo School of Law, warns in her recent book “Captive Audience: The Telecom Industry and Monopoly Power in the New Gilded Age” that a handful of cable companies have become monopolies that stifle competition and innovation. Crawford compares the cable company structure to that of the 19th century railroad and steel monopolies, which faced minimal competition due to an extremely high cost of entry into the market.

Technically, there could be competition in a market. Another cable provider could negotiate with local government and utilities to get “rights of way” and “pole attachment” contracts so they can lay their cable infrastructure and then compete with an existing provider. But in reality the time it would take navigate regulations and begin to get returns on investment, coupled with the fact that it would be immediately competitive (unlike being the first to offer service in an area), creates an incentive to look for new markets instead, and so the cable providers have slowly become a de facto oligopoly, with local monopolies on service.

What could help break these monopolies on the delivery of content? New technology. Google’s Chromecast allows streaming of content to your TV, as does Apple’s AppleTV. Microsoft recently unveiled its next-gen Xbox, the Xbox One, a device which some believe may be capable of replacing your cable box. In theory you could have access to any programming available on the internet without being restricted by what a cable provider offers – and without being forced to pay for unwanted channels bundled into a package. One internet veteran speculates:

If individual TV channels were to charge a membership fee similar to that offered by Netflix ($8), they could increase their overall revenue while leaving cable TV providers behind. Infrastructure costs have been rapidly dropping and companies can now purchase such turnkey infrastructures from third party companies like Brightcove or MLBAM, the digital arm of the MLB, for relatively small per-user prices.

But streaming depends upon high internet speeds, and the current monopolistic structure of cable and internet service providers hasn’t provided the market pressure to quickly upgrade infrastructure. (Google is slowly rolling out its ultra-high-speed Google Fiber, which is spurring competitive response in those markets.) Even if the infrastructure were state-of-the-art, though, there is a paradox in the business model: the cable giants provide programming through bundled cable subscriptions, but they also offer broadband internet service to consumers, which can be used to access content from competing providers like Hulu or Netflix. Last June the Department of Justice opened a “wide-ranging” investigation into whether cable, satellite and telecom providers are using their role as providers to throttle bandwidth and/or use other tactics to stifle fast-growing internet video services.

The state of the cable industry today seems very reminiscent of the last days of Ma Bell. In the 1960s, MCI petitioned the FCC to grant it license to set up private phone lines connecting St. Louis and Chicago via a private microwave system, a technology different than AT&T’s copper wires. However, MCI couldn’t offer its services without the cooperation of AT&T: the origin and end points had to be AT&T local lines. AT&T resisted, restricted, and tried to prevent MCI access, and in March of 1974 MCI filed a far-reaching lawsuit against AT&T, citing antitrust violations. In November of that year the Justice Department, whose antitrust division had been investigating AT&T’s business practices, also filed an antitrust lawsuit. (An interesting summary of how MCI successfully took on AT&T can be found here.) The result, in 1984, was the breakup of AT&T into separate local and long-distance providers, and the rise of a new industry of long-distance telephone service and equipment companies.

Cable isn’t dead yet, but it seems very close to being forced into disruptive change similar to what happened to the telephone industry. When that happens, there will be nothing standing in the way of Al Jazeera English coming back online.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s