Cord-Cutters Will Be Stuck With Rising Internet Prices

by Adam Benjamin | August 28, 2013 10:46 am

We’ve talked about the future of streaming video[1] and the increasing demand for a la carte content pricing[2]. But is the video revolution really that beneficial for consumers?

A recent Bloomberg Businessweek article[3] suggests perhaps not — that cord-cutters might start eating the cost of video elsewhere.

Earlier this month, the numbers on paid TV subscribers forced Moffett Research to finally admit that, yes, cord-cutting is actually happening[4], as year-over-year subscriber growth has dropped for eight consecutive quarters. And, hey, if you can drop a $70 cable bill in favor of a $10 Netflix (NFLX[5]) subscription, why wouldn’t you? (Aside from access to sports, which is what sports bars are for.)

Well, according to that Businessweek article, as people stream more HD content, the cost of that video is going to sneak up on them in an unlikely place: their Internet bills.

Internet access has been moving toward a pay-by-usage model for a while. Just as mobile providers like Verizon (VZ[6]) and AT&T (T[7]) started charging for data usage once everyone was streaming YouTube videos over their iPhones, Internet providers will start charging people for how much bandwidth they use per month, not just for access and speed.

That’s decidedly bad news for people like me, who spend a few hours per week streaming video and playing video games online. However, it could be good news for people who only jump on the Internet a couple times per day to check their Outlook email.

But the news is most beneficial for — you guessed it — those Internet providers. Time Warner Cable (TWC[8]) and Comcast (CMCSA[9]) stand to make significant profits on by-usage Internet prices — especially as more HD content becomes available. (And let’s not even mention 4K content, which would inflate data usage to absurd numbers if it manages to take off.)

So while cord-cutting is a great way to save money on TV content for now, remember that Comcast has a whole playbook full of ways to sap you of your money.

Adam Benjamin is an Assistant Editor of InvestorPlace. As of this writing, he did not hold a position in any of the aforementioned securities.

Endnotes:
  1. future of streaming video: http://investorplace.com/2013/08/whats-next-for-streaming-video-content/
  2. increasing demand for a la carte content pricing: http://investorplace.com/2013/08/the-time-has-come-for-a-la-carte-pricing/
  3. Bloomberg Businessweek article: http://www.businessweek.com/articles/2013-08-22/even-cord-cutters-will-have-to-pay-the-cable-bill
  4. cord-cutting is actually happening: http://www.theatlanticwire.com/technology/2013/08/cord-cutting-officially-real-thing/68032/
  5. NFLX: http://studio-5.financialcontent.com/investplace/quote?Symbol=NFLX
  6. VZ: http://studio-5.financialcontent.com/investplace/quote?Symbol=VZ
  7. T: http://studio-5.financialcontent.com/investplace/quote?Symbol=T
  8. TWC: http://studio-5.financialcontent.com/investplace/quote?Symbol=TWC
  9. CMCSA: http://studio-5.financialcontent.com/investplace/quote?Symbol=CMCSA

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