Where I See the Cable Operators Taking Broadband

While Stacey Higginbotham @ Gigaom is busily keeping a very careful eye on what the cable operators are going to do with metered bandwidth, I've been given thought to what they will do to really make money.

The answer resides in how the MSO's have always made money.

Charging the newly minted content providers as well as the service providers who will cross their networks. How? Just like they do with the cable networks that come along now, versus the established players.

Here's I see it working:

Cable Exec: Hello Mr. Skype. We'd love to have you available in our 10 million homes passed.

Mr. Skype: that's great. We already are going to many of your homes.

Cable Exec: Yes. You have been. But you see, we need to upgrade our network as all the video and the file sharing you're users are doing is really a burden to us. It cuts in to the bandwidth we need for our new IP based DVR traffic.

Mr. Skype: Well upgrading your network will certainly be good for everyone.

Cable Exec: We're glad you see it that way. We have decided a nickel a month per home passed is a fair price. So effective next month you'll send us a check for $500,000 a month for each home we pass. Oh and we're adding new systems every quarter so plan accordingly.

With over one hundred million homes passed a year by the cable MSO's Skype alone would contribute to the cable operators top line $60,000,000 just to get access under this scenario. Unfortunately, out of the 10 million homes of the one cable system, it's a good bet Skype is only being paid by less than five percent of the subscribers.

Of course the cable operators won't stop there.

Cable Exec: Mr. Jobs. You know we're both in the Pay Per View movie business now. You sell via downloads, we sell based on OnDemand. Our customers are the same, and both receive the content that travels over our last mile. We've decided your $14.99 model for ownership and $3.99 for rentals is hurting us. It's also hurting our big advertisers, the local movie rental stores.

Mr. Jobs: Well you know we have disrupted the music business.

Cable Exec: Yes, we saw that and we also have seen a drop off in viewership of some tv shows too. It seems people like to pay you for iTunes TV to watch HD, rather than pay us for our HD video channels. Really hurts our subscriber values.

Mr. Jobs: Well, Apple has always found a way to keep our price points up, and we keep selling more. Maybe we can help you with your marketing, especially to consumers.

Cable Exec: I'm so glad to hear that. What we'd like to do is have Apple pay us a nickel for every home passed that could have Internet access......

So while I'm sure the net neutrality advocates will yell and scream, the outcome is inevitable. We're heading to a sending party pays model. But to allow it to happen a few things will have to co-exist.

End user targeted Non-commercial content (i.e content that is not paid for will be allowed to pass) just like public tv. The same will go for local content that is commercial. Think of the Must Carry rule applying to digital content. This is really spur the growth of HyperLocal media, and make up for the sudden lack of "local news" organizations.

Let's face it. You're really only paying for the last mile, not the Internet. Because the Internet is free...Right?

Comments

[Andy Abramson]

If those of us in the USA had many options for ISPs you'd be right. But most have two options.

Cable or Telco.

My prediction is that if one breaks ranks and goes Pay for Play so will others.

[dean.collins]

When Time Warner blocks my use of Skype, I'll be blocking my wallet from paying them and moving to another ISP.

Your prediction is stupid and flawed.

You aren't taking into account that customers can survive without Time Warner.....Time Warner cant survive without customers.

Sure like any market place there will be customers who dont care because they dont use skype, or dont find it a big enough issue to move.

But once enough pissed off and "now looking for a new isp" customers leave then Time Warner will be in a situation that my monthly payments "will" be noticed.

But hey, if you are too rich that it doesn't both you then thats great for you.

Cheers,
Dean