Television programming costs associated with the “triple
play” (TV, Internet, voice) offering of legacy telcos and cable companies are the
primary business risk facing the subscription-based, closed access, “own the
customer” infrastructure business model employed by the legacy telephone and
cable companies as well as Google Fiber.
Those costs are steep and threaten the viability of commercial
fiber to the premise deployments that depend on future cash flows from service
offerings – which include TV – to cover CAPex and provide ROI to investors.
So
dear are TV programming costs that Google Fiber’s Milo Medin described them
“the single biggest piece of our cost structure” and “the single biggest
impediment" to further expansion. The
Wall Street Journal reports
costly TV content has prompted some small cablecos to scrap the triple play
offering and reposition themselves purely as Internet and VOIP (Voice Over
Internet Protocol) providers. Over
the top (OTT) TV offerings by Sony and Dish Network are also similarly struggling
with the high costs of TV programming.
Susan P. Crawford’s book Captive
Audience: The Telecom Industry and Monopoly Power in the New Gilded Age
describes the self-reinforcing TV programming market dynamics that cement the
dominance of the big subscription-based incumbent telcos and cablecos – and Comcast
in particular for live sporting events. These large players can afford the high TV programming costs. But
large scale notwithstanding, it’s not TV for all since the big legacy telcos and cablecos cherry pick their service areas,
leaving lots of consumers redlined and without Internet TV since they opt not to build the infrastructure to deliver it.
One possible way around this negative circumstance would be for the OTT Internet TV content players to organize consumers into large regional purchasing pools and cater to smaller providers as well as open access community fiber networks operated by local governments and utility cooperatives. That would shift market power to the purchasing side while at the same time bolstering these home grown Internet infrastructure players.
One possible way around this negative circumstance would be for the OTT Internet TV content players to organize consumers into large regional purchasing pools and cater to smaller providers as well as open access community fiber networks operated by local governments and utility cooperatives. That would shift market power to the purchasing side while at the same time bolstering these home grown Internet infrastructure players.
