Over the summer the cable industry
paid a lot of lip service to lowering cable TV prices, insisting that they were very conscious of the fact that the recession and housing implosion left many users struggling. However, despite the bi-annual rate hikes many families continue to pay for cable, resulting in companies like Time Warner Cable offering paltry discount TV tiers that are
so packed with restrictions as to have little to no value. Cable simply refuses to seriously compete on price.
Even the cable industry's biggest cheerleader and stock fluffer, Sanford Bernstein telecom analyst Craig Moffett, has noted that
these rate hikes simply aren't sustainable and something has to give.
Moffett was back this week arguing in
a research note to investors that something has to give in this equation. Families on the lower end of the income graph are struggling to meet major bills, and ultimately cable is going to be among the first things cut -- especially as lower-priced Internet alternatives continue to evolve:
quote:
After the necessities of food, shelter, transportation and healthcare each month, the bottom 40% of U.S. households have already exhausted all of their disposable income. There is nothing left for clothing… for debt service… for cable… or for phone. The inability to pay for necessities — much less home entertainment — threatens to upend an industry that has already more or less reached its saturation point. According to Moffett, approximately 86 percent of U.S. households currently pay for TV services. “Relatively few other sectors have this kind of economic exposure to the bottom half,” he wrote.
Of course out of the other corner of his mouth Moffett has been
slamming cord cutters as losers in their mom's basement wolfing down dog food, while relentlessly pushing for
higher per-byte broadband pricing that would sock these struggling families in their already hurting wallets. In short, as an investor Moffett knows that cable is ultimately (gasp) going to have to compete in the television sector on price, and they'll need to recoup those losses elsewhere if his company and client's stocks are to remain afloat. That elsewhere will be metered broadband, an effort to constrict the pipe and drive up costs for a fixed-or-declining cost product.
