Cutting the final cord

Five years ago when I was still on staff at Telephony, I was asked by a cable operator whether or not consumers would be willing to cut off their wireline data service in favor of a mobile-only option. At the time it seemed absurd. Wireless options, while offering mobility, were slower, unreliable and astronomically expensive compared to DSL and cable.

Fast forward and suddenly it’s not such a silly question. With hundreds of devices -- smartphones, tablets, netbooks and notebooks -- coming off the shelf with built-in connectivity and service providers increasingly heading toward unlimited data plans, the assumption that consumers will always have a wireline data service is looking outdated.

At Yankee Group, I along with my colleague Dmitriy Molchanov published a report that asks the same question regarding the video environment but with a slightly different twist. Not taking any particular access into account we asked consumers in a survey conducted throughout if they’d consider cutting off pay TV services in favor Internet-based options. In effect, would they be willing to cut the final cord of the traditional triple-play service. Sounds like a silly question? Perhaps, but it’s worth asking that if consumers will go with alternatives for voice and data why not video?

The results were interesting in that there not only is a small group of consumers that have already cancelled pay TV, but there’s a sizeable portion that would definitely consider it as an option. In total, we believe somewhere between 10% and 15% of consumers will make some kind of move to eliminate a portion of their pay TV in the next 12 months.

So does this mean the pay TV world, be it cable operators, satellite providers or IPTV operators, is about to implode? Hardly. In most cases, we don’t anticipate most of that 10%-15% to take the most radical step and completely cut off service. Instead, we envision more consumers dropping premium channels, limiting the number of movies they purchase via video on demand or pay per view and dropping to the most basic levels of service.

In place of those premiums and VOD/PPV movies, consumers will use the plethora of new devices, including Google TV, Roku boxes, connected Blu-Ray players and, most importantly, gaming consoles to find content via Hulu, YouTube and the dozens of sites dedicated to niche or not so niche content. Indeed, the number of consumers with gaming consoles outnumbers even the largest MSO subscriber counts, and those consoles have far more processing power than even the most advanced set-tops.

So while pay TV operators may not be quaking just yet, we certainly appear to be on the verge of a significant shift in video consumption.