By now you’ve probably read the comments from Time Warner Cable (TWC) CTO Irene Esteves explaining that her company doesn’t plan to build out fiber to the home because there’s no evidence that American consumers actually want super-fast networks. While a lot of people expressed surprise in response to this attitude, it’s actually been a common refrain from the cable industry and its defenders for quite some time now — let’s recall that National Cable & Telecommunications Association CEO Michael Powell recently described achieving gigabit speeds as an “irrelevant exercise in bragging rights.” That this attitude isn’t just consigned to one company but is apparently held by the entire industry indicates that the market for home broadband in the United States is horrendously uncompetitive and is in desperate need of a shakeup.
Before going any further let’s contemplate how ridiculous Esteves and Powell’s statements would sound if they were top executives in just about any other industry. Can you imagine Tim Cook, for instance, saying that he hasn’t found that people want completely accurate mapping information and that the data provided by the original iOS Maps is good enough? Or if after Siri had been released, Google (GOOG) CEO Larry Page had said that there’s no evidence that consumers want voice-enabled personal assistants and that his company wouldn’t devote any resources into creating a competitive offering of its own? Or if the CEO of Samsung (005930) declared that his company wouldn’t be spending additional resources to improve display technology because consumers right now seem pretty happy with how the Galaxy S III looks?
The reason such statements would be widely ridiculed is because all of these companies are in intensely competitive markets and they always want to be seen as striving for the best. They know that if consumers think that they’re falling behind the times and aren’t doing everything in their power to deliver the best devices and services, they will lose business very quickly. Just look at what happened to BlackBerry (BBRY) after the company decided that having a wide selection of mobile apps wasn’t that important just a couple of years ago: Consumers fled to iOS and Android and left the company in the desperate position that it’s in today.
It goes without saying that the cable industry doesn’t fear such backlash because it knows consumers have nowhere else to go.
In my neighborhood, I have Comcast (CMCSA), Verizon (VZ) DSL and… well, that’s it. If I want a reasonably fast home broadband connection, then I’m pretty much stuck with Comcast. And from everything I’ve read, most Time Warner Cable customers out there are similarly stuck with Time Warner because the cable companies have created regional fiefdoms where they don’t compete with one another and can get away with telling the world that they don’t plan to invest in fiber anytime soon.
The end result is a cable industry that can pile up cash from its Internet services despite ranking among the lowest-rated industries in customer satisfaction every year.
The fact that any Internet service provider is held in the same level of esteem by American consumers as an insurance company that required a massive taxpayer bailout and an oil company that dumped a bunch of petroleum into the Gulf of Mexico is stunning. It indicates that not only are Americans dissatisfied with their current choice of broadband providers, but that they’re positively itching for an alternative that will let them tear up their monthly cable bills for good.
Or put another way, cable companies had better enjoy their regional monopolies while they can. Because if any competitor comes along that delivers a faster service at a reasonable price in the near future, then the consumer exodus from cable will be swift and permanent.[bgr-post-bug]
