For years I’ve thought that—while Comcast’s cable television business had a future that made polar bears wince in sympathy—its lock on the cable internet business made the company invulnerable. Sure, cord-cutting and cord-shaving are eroding cable TV. Younger people in particular, unless they are big sports fans, don’t bother to subscribe (cord-nevers). However, Comcast still owns the big pipe, internet service, through which all streaming services surge. They’ll evolve, I thought, but they’ll be fine.
That’s no longer the case. Four colliding trends are likely to accelerate the disruption and decay of Comcast’s entire business—not just cable TV. This is also true of the smaller cable companies, but given its dominance the impact is likely to be biggest on Comcast.
The trends are: 5G mobile data connections, ATSC 3.0, a new form of cable cutting, and superabundance.
5G is not just 20 percent better than 4G: it’s 1000 times better
With today’s 4G mobile data, as new Verizon CEO Hans Vestberg recently shared in the Wall Street Journal, 1,000 devices can connect per kilometer. The transition to 5G increases that number 1,000-fold to one million devices per kilometer.
This new bandwidth will enable new connected experiences that we haven’t begun to imagine, but it also means that people will be able to stream Netflix, YouTube, Hulu and the rest of the video services from their smart phones to the big screen on the living room wall—no cable connection required, no buffering expected.
But what about local TV and broadcast news?
It has been possible to put an antenna on your roof to capture broadcast signal for decades, but with a new advanced television technology called ATSC 3.0, you’ll simply buy a converter that will be as easy to install as a Roku box today.
ATSC 3.0 (say it three times, fast) increases the capacity of over-the-air broadcast by orders of magnitude. Today, for example, your local ABC affiliate can beam out one standard definition signal that looks crappy on your hi-def big screen TV, and you can’t even get it on your iPad. In the near future, with ATSC 3.0, ABC will be able to beam out multiple channels in ultra-high definition to televisions, mobile devices like phones and tablets, and even into moving cars.
If the average mid-sized city has ABC, CBS, NBC, Fox, the CW and a local PBS station, each of whom can send, say, four UHD channels, then people will have 24 channels of content free over the air, eliminating the need to subscribe to cable or satellite in order to get your local news or the latest episode of Dancing with the Stars. It’s even more if you include Spanish-language broadcast like Telemundo and Univision.
ATSC 3.0 has not yet arrived, but it started testing in Phoenix last April.
Cutting the internet cable cord is already happening
In what Fortune recently called “the third wave of cord cutting,” as many as one in five households in the U.S. are abandoning their home internet service in favor of connecting only via smartphone (this number is from our friends at Pew).
We saw it with home land lines, and now we’re seeing it with home internet service.
The implications are enormous: if people are already cutting the internet cord with comparatively unsatisfying 4G connections, then it’s likely that more of them will cut the cord when 5G bandwidth arrives. Add 24 free broadcast channels on top of that via ATS 3.0, and the reasons to pay a couple hundred bucks each month for cable television seem anemic.
There’s too much to watch anyway
Back in 2016, Nielsen reported that on average Americans with cable television had access to 206 channels but watched fewer than 10 percent. We are, in other words, creating consideration sets rather than trying to get an overview of everything available to us on television, not to mention the superabundance of programming coming to us through streaming video.
Comcast’s bundle of hundreds of channels we don’t want that come along with the twenty we do want is an analog business model in a searchable, digital world.
Any business that relies on bundling for its profits should get night sweats. We saw this first with the music industry: Napster and iTunes broke open the CD bundle where you had to buy 12 songs to get the one you wanted. Newspapers were next, where you no longer had to pay for all the articles or classified ads in order to find the ones that interested you.
The gradual decline of cable television is an old story. What’s new with this quartet of colliding trends is that, in the near future, people will have a viable alternative to the cable triple play of television, internet and phone service.
It’s not happening this year, or next year, and probably not the year after that. Ordinarily, with publicly-traded companies like Comcast, something coming in 2023 is too far away to consider since the companies have to worry about reporting to Wall Street every quarter.
The best explanation of why this is a bad idea comes from Bill Gates, who wrote in his 1996 book The Road Ahead, “We always overestimate the change that will occur in the next two years and underestimate the change that will occur in the next ten. Don’t let yourself be lulled into inaction.”
[Cross-posted on the Center site and elsewhere.]
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