As giants like Amazon, Apple, AT&T, and Comcast rush to dominate the TV market, smaller cable providers are suddenly finding themselves unable to compete. Pay TV margins have been tightening for years, and without the kind of scale enjoyed by companies like AT&T/DirecTV/Time Warner or Comcast/NBC Universal, smaller cable companies have warned for years how they would probably have to ditch the TV business and focus exclusively on broadband.
Some companies, like Kansas cable TV provider Rainbow Communications, are finally following through on those promises. The company sent a letter to its customers this week (hat tip, Cord Cutters News) informing them they’d be shuttering their cable TV operations, and suggesting impacted customers should probably go check out this whole streaming video thing:
“You’ve probably heard about streaming TV. Streaming is watching TV over your internet connection, and now with new applications, you can stream shows on television sets. While Rainbow will not be your TV provider moving forward, your new digital picture and sound can be delivered over our Rainbow internet service. When you combine our high-speed internet with HD-picture, the clarity will surprise you.”
It’s the beginning of what’s expected to be a fairly ugly shake up as the long-unsustainable pay TV sector transitions from “wink wink” competition to a new streaming video fist fight. Gone are the days where cable TV providers could neglect customer service and charge $130 a month for a bundle of 500 channels nobody actually watched. Under the new reality, margins are tight as hell, and unless you’re doing double duty as a cable provider and broadcaster, you’re not going to have the scale to be able to compete with massive giants with the leverage of scale.
But good news (for them)! Because U.S. broadband is so painfully uncompetitive, most of these smaller cable companies can shift entirely to broadband, where they can raise rates largely with impunity. They can also impose arbitrary and unnecessary usage caps and overage fees, letting them both jack up the cost of broadband service, and cash in on the streaming video services they’re now pushing captive broadband customers to. That same lack of competition will also let them ignore the abysmal customer service the cable sector is historically known for.
In other words, most of these companies can simply pivot from overcharging you for cable TV to overcharging you for cable broadband, while saving costs on program carriage fees and traditional cable infrastructure.
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