Streaming Netflix Movies Could Increase Your Cable Bill

November 30, 2011

The huge Internet data demand resulting from increased customer usage of movie streaming services from online providers such as Netflix and Hulu is not going unnoticed by cable TV providers. Reason is that most cable TV providers are also the providers for Internet broadband data.

In fact, there is a major shift going on in the cable TV provider industry as operators are providing more higher profit margin Internet broadband services than the lower profit margin TV content.

A recent Bloomberg article “Netflix Viewing Seen Swelling U.S. Cable Bills”, by Alex Sherman, gives an excellent analysis of the current condition of the cable and broadband provider industry.

““We’re basically a broadband provider,” Peter Stern, chief strategy officer for New York-based Time Warner Cable, said Nov. 17 at the Future of Television conference in New York. “As a convenience for our customers, we package and distribute television and provide service around that.””

The end result of customers choosing more online TV content is that broadband providers are seeing higher demands. Their solution to this is simple, set caps on usage and charge more for higher usages. As Sherman correctly points out, Cable operators can’t get away with these excess charges for ever. At some point, government regulators will get involved.

““It’s the reason why Apple or Google would inevitably be reticent about committing a significant amount of capital to an online video model,” Moffett said. “You can’t simply assume just because you can buy the content more cheaply, you can offer a product that’s cheaper to the end user.””

What we think at NextGen Digital Home:

This article is an excellent analysis of what’s happening in the TV and Internet broadband industry. Contrary to what many people think, there is not an unlimited supply of internet available to them – no matter what their download speed may be.

Wireless may help in some cases, but there is not an unlimited supply of the low frequency wireless space available either. Major wireless providers are paying dearly for this space and have already removed most all of their unlimited plans and replaced with different usage tiers.

It kind of makes you wonder why Netflix is so eager to get out of their physical media side of the business and replace with online streaming. Industry trends would suggest broadband Internet is going to become more expense.