In a recent post featured in today's Policyband newsletter (subscription required), Golden West Telecommunications Cooperative explained (and apologized to its customers for) a $4 per month price increase for video services. The reason put forth: rising cable programming and retransmission consent fees. Golden West even pointed out that "[o]ther telecommunications cooperatives in South Dakota have discontinued cable TV due in part to rising costs" – an exodus part of "a broader trend" that includes WideOpenWest and Frontier Communications.
I and other Free State Foundation scholars have documented extensively the rapid and relentless ascent of streaming services and the corresponding loss of subscribers by traditional providers subject to the FCC's statutory authority. We have argued that these seismic shifts demand an aggressive deregulatory response from both Congress and the Commission. We have implicated the latter's refusal to eliminate one-sided rules – and confounding desire to impose still more one-sided rules – as an exacerbating factor in the decline of facilities-based Multichannel Video Programming Distributors (MVPDs). And we have explained how that decline harms competition and, in turn, consumers.
Not surprisingly, these marketplace trends are not slowing down. By way of example, Netflix days ago announced that it added 1.45 million subscribers in the United States and Canada during the second quarter, bringing its total to over 84 million. Traditional providers, on the other hand, experienced yet another "worst quarter ever" between January and March – an overall drop in pay television subscriptions that surpassed 12 percent – and analysts anticipate that second quarter results could be just as bleak.
Nevertheless, the FCC remains unwilling to remove its blinders and focus on the reality before it. Consequently, an increasing number of facilities-based MVPDs are adapting to the steadily more inhospitable competitive landscape by embracing an "if you can't beat them, join them" approach that deemphasizes their own legacy bundled offerings. Some, as noted above, are exiting the marketplace altogether and/or outsourcing their video operations to virtual MVPDs (vMVPDs) – WideOpenWest, for instance, has partnered with YouTube TV.
Others are striking deals with programmers and streaming platforms so that they can provide consumers the online alternatives that they prefer over traditional video packages. Examples include:
- Comcast is offering broadband customers the Xfinity StreamSaver™ bundle that includes Apple TV+, Netflix Standard with ads, and Peacock Premium with ads. As I noted in a recent post to the FSF Blog describing the available-at-retail Xumo platform, Comcast provides broadband customers with a Xumo Stream Box – which supports hundreds of third-party apps, including those of multiple vMVPDs that compete directly with its own legacy video products – at no additional cost.
- Charter gives subscribers to certain Spectrum TV® video packages access to Disney+ Basic and ESPN+. It also provides a free-for-six-months Xumo Stream Box to those that subscribe to Spectrum One Stream and add Spectrum TV.
- Altice USA last week announced the launch of Entertainment TV, a vMVPD service that offers over 80 channels for $30 per month and is available to broadband subscribers as part of its Optimum Stream product. As reported by Daniel Frankel, managing editor of Next TV, "[l]ike many cable operators, the company would prefer to leave linear video behind."
Traditional MVPDs find it increasingly challenging to win and retain customers in the vibrantly competitive battle for eyeballs that includes not just streaming alternatives, but social media platforms – particularly YouTube – and gaming. The FCC's dogged determination to saddle them with even more one-sided rules, such as unreasonable constraints on their ability to employ common billing practices, is exacerbating the situation and driving them to retrain their focus. As a result, consumer choice and overall consumer welfare are compromised.
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