Cable subscribers aren’t the only ones cutting cords. Increasingly, smaller broadband providers have been getting out of the TV business altogether, the Wall Street Journal reported Tuesday, or scaling back their offerings. The latest is Suddenlink, a smaller cable provider that just dropped Viacom’s suite of channels, including MTV, VH1 and CMT.
A representative for small cable companies told the Journal that change in the cable TV market is going to “come from the bottom.” Are small broadband providers key to upending the cable business model? Here’s what you need to know:
Who are these companies?
Just about all metropolitan areas in the U.S. are claimed by just a few large broadband providers like Comcast, Cox and Time Warner, but about 14 percent of pay TV subscribers are served by a cable company with a million or fewer customers.
These companies — like USA Communications, a co-op in Shellsburg, Iowa — typically serve rural or small-town customers. Many eschew eye-catching new subscriber discounts used by larger companies in favor of straightforward price lists by community. These subscriber bases are small, sometimes only a few thousand customers.
About 915 smaller cable companies are represented by the National Cable Television Cooperative, which told the Journal that companies serving a total of 53,000 subscribers have gone out of business or dropped their TV offerings in favor of broadband. One provider in Missouri said only a fifth of its customers pay for TV anymore.
How do networks fit into this?
TV networks charge “carriage fees” to cable providers for the right to run their channels. Providers pay a fee per subscriber, often for a bundle of channels. Historically, cable companies have complained about rising fees and being made to carry channels their customers don’t want.
The fees themselves are closely guarded secrets, but some estimates put them as high as $6 per subscriber for ESPN. The rising costs and ballooning bundles can put a strain on smaller providers, like Cedar Falls Utilities, who spoke out against the carriage system earlier this year.
Between high costs and low subscriber interest, it’s easy to see why some smaller providers might be eyeing a broadband-only business model.
How are small providers making up for the lost programming?
These small companies are making up for programming by pushing à la carte streaming services. Earlier this year, Netflix inked deals with three small cable companies to put their services directly into set-top boxes, for example. One company, RTC Telephone in Georgia, promotes Roku’s set-top box as a $5 add-on to its broadband service.
More rural cable companies, like BTC Broadband in Oklahoma, are also providing high-speed fiber internet, which could push customers away from pay TV and toward reliable broadband.
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