Let’s be clear: broadband-only video homes, or "cord-cutters" as they are commonly called, are a real thing. We at Magna estimate that they account for about 4% of TV homes today, and will grow to about 11% over the next four years.
Traditional multichannel (i.e. cable) subscriptions are set to peak this year, and some of the ensuing decline will be due to over-the-top solutions. Consequently, Nielsen has broadened its definition of a TV home to reflect viewers that get their video via broadband but watch on a set.
But is it really fair to label it "cord-cutting" when more than half of the broadband connections in the country are controlled by the top cable providers?
To me, "cutting the cord" means gaining independence in some way, but even if you cancel your TV subscription, odds are you will be relying on the same provider for your broadband connection. And if said provider is going to be losing money on the television side of the business, they will naturally have to charge more for high-speed data.
That viewpoint was confirmed in a recent New York Times interview by former Time Warner Cable CEO Glenn Britt, who noted, "The reality is, if everybody watched TV over the Internet, and we were out of the TV business, then we would have to recover more money from the Internet service."
Cost savings is one of the oft-cited reasons for abandoning traditional multichannel subscriptions in favor of a streaming-only approach, but if broadband prices are going to rise to make up for the loss of TV subscribers, that becomes a moot point.
Many providers are already selling higher download speeds at a premium, and the demand for it will only increase as the quality of video signals improve—just consider the burgeoning 4K (or ultra-HD) technology, which will require much more bandwidth than today’s high definition signals.
That leaves consumers interested in a fully on-demand video experience, even if the cost is the same. There will undoubtedly be homes that go that route, and it will cost the multichannel providers some TV subscriptions. But they will still need reliable high-speed Internet. They will still need a cord.
So is it really "cord-cutting?" Or just "cord switching?"