The Coming Revolution in Cable and Why We Won’t Cut the Cord
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- 5 min
In my New Technologies class, one of the recurring topics we’ve covered is that of disruptive innovations. I did not use the Clayton Christensen text as the basis of this discussion, primarily because Christensen seems a bit too optimistic about the role that disruptive innovations can have in creating new markets and new players. Instead, I felt that Tim Wu’s The Master Switch was a more complete discussion of potential disruptions such as telephone, radio, and the Internet because it not chronicled how these and other technologies disrupted existing markets but also how they were consolidated anew.
Cable TV: From Community to Commerce
Once a grassroots technology, cable television is an example of a technology on the cusp of a disruption. The cable industry emerged as a community-oriented project in the 1940s, known as Community Antenna Television, that gave television set owners in remote locations access to broadcast signals necessary to make television a worthwhile product. Hardware is essentially useless unless you have enough software. By the 1960s, the broadcasters saw cable as a threat to their livelihood and convinced the FCC to block it in all but the smallest markets. Meanwhile, policy wonks were enamored with cable television because it offered an alternative to broadcast television. Television viewers could be liberated from the dependence of watching television via scarce and tightly controlled radio waves. They could access more specialized, relevant than anything that the broadcast networks could ever offer.
By the 1970s, cable television was hardly a disruptive medium. Ted Turner had pioneered a way to distribute his Atlanta-based UHF station to a nationwide audience, via satellite. While this was a truly innovative strategy for starting a superstation that could rival broadcast networks, its programming strategy was actually less ambitious than that of the broadcasters. The superstation WTBS aired off-network syndicated programming, such as older sitcoms and movies, and live coverage of Atlanta Braves and Hawks games.
The Threat of Internet and Cord Cutters
As cable television has evolved to “multichannel television” as it has included direct broadcast satellite for the better part of twenty years, new Internet-connected television sets and over-the-top devices appear as disruptive innovations for multichannel television, possibly encouraging “cord cutters” to sever the ties with cable and satellite suppliers and their high bills once and for all. Derek Thompson has challenged that idea because he sees the technology titans, namely Apple, Google, and Microsoft, not as agents of change because they simply don’t care for unbundling specific content from the lucrative packages that net multichannel video providers their fortunes. As Thompson writes, “Apple has realized that it doesn’t have to beat Comcast and Verizon to own your living room. It only has to join them.” The tech giants are more likely than not partner with multichannel television providers than to challenge them.
The Smartphone Sustains the Wireless Carriers
Any television device that Apple could market will likely fall short of disrupting the multichannel television industry and will likely resemble what we’ve seen with smartphones. While the smartphone has clearly been a wonderful innovation, it is, to use Christensen’s terminology, a “revolutionary” one because it introduced an unexpected innovation but one that ultimately sustains the existing market. That’s what we saw with the iPhone and with its chief rival Android. Charles Arthur explains that Android actually strengthens the wireless carrier industry. He writes, “Google wants as many carriers as possible to sell Android phones – that’s how you get market share, and because the phones are ad-supported the more the better; it defrays the cost of software development faster. The business model for the carriers is exactly as it was before Android: sell a variety of phones from a variety of handset makers at a variety of prices. No disruption there.” Despite its significant marketshare, Android has not disrupted the smartphone industry, much less the wireless telephone industry.
The wireless carriers have benefitted greatly from the innovation of the smartphone. It has allowed them to sell new services, such as lucrative data plans and unlimited text messaging plans while retaining the legacy voice services that make up a significant portion of a consumer’s monthly bill. In the case of the iPhone, Apple might control the hardware and the software at the expense of the carriers’ tight control, but the wireless carriers are also benefitting from expanding revenues.
“No Disruption There”
As the smartphone has strengthened the finances of the wireless carriers, I expect that any new television product Apple introduces will actually strengthen the position of the multichannel television providers. In the case of the multichannel television providers, they might lose control over the hardware necessary to deliver video to the television set, but they will still be the beneficiaries of such any innovation that the tech companies develop. I wouldn’t be surprised to see any new Apple TV device to first work with Verizon FiOS and AT&T’s U-Verse, since there’s already a partnership between Apple and those companies in the wireless space, and then to the others, such as TimeWarner Cable, Cox, and Comcast. I don’t know what that device is, all I know is that it will be revolutionary, but, Charles Arthur would say, “no disruption there.”
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