So you think you’re going to save money by canceling your cable TV service and watching your favorite shows through online streaming options? Sure, that may work at first but cable companies will still figure out how to get their pound of flesh from you unless they face real competition in the home broadband market. The New York Post points out that even though cable companies are losing pay TV subscribers, they’re making up for this lost revenue by jacking up prices on home broadband services.
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Comcast, for example, reported in its most recent earnings figures that its revenue from broadband services rose by 9.6% in the most recent quarter, which is higher than the growth rate of broadband subscribers it reported over the same period. Similarly, Cablevision this week reported that revenue from its broadband services grew 6% on the quarter despite the fact that it actually lost customers over the same period.
Simple arithmetic tells us that if revenue growth for a service is outpacing customer growth for that same service, then the cost of the services must be increasing. And if cable companies can increase costs this much without fear of customers fleeing in droves, then it probably means they don’t face any real competition for home broadband services in many of their markets.
And this shows us the real limitations of cord cutting: While it may kill off the bundled pay TV model that consumers have grown to hate over the years, it might not lead to lower prices unless cable companies get real competition for home broadband services. Until that happens, cable companies will just make up for losing pay TV money by raising your Internet bills — in other words, they win either way because no one else is challenging them.
