Owning the New Highway System Key to Future Profits

So what’s going on?  Seems like every cable, telephone, and satellite company is either being bought or taken over by a larger company.  AT&T wants to buy DirecTV; Time Warner is being swallowed up by Comcast.  This reshuffling of assets and the customer base has more to do with what these companies don’t know than some well–thought-out strategy.  They are all playing defense in the face of the unknown.

Who is to blame for this uncertainty?  You are.  The TV entertainment industry is changing at a dizzying pace, but audiences are giving entertainment providers mixed messages.  There is a marked increase in the number of people who are opting to receive TV Programs by non-traditional methods. 

The NetFlix streaming service adds thousands of subscribers each month.  Many of these people are opting to cut the cable cord.  There is a significant and growing number of individuals who now use free over–the-air broadcast stations exclusively to get breaking news and sports programming, and subscribe to an internet-based streaming service, like NetFlix or HuluPlus, for other non-time-sensitive programming.  In almost every case this saves money.

At the same time, the cable and satellite companies still are making billions of dollars on millions of subscribers who continue to use their traditional TV services.  The big question is how long it will be before this latter group opts out of the high monthly bills and moves to the less expensive internet a la carte option.

As a defensive move, the mega media companies like Comcast are shifting gears away from offering the actual programming to a new business of providing the “pipe” into your house (and the “virtual pipe” for your mobile devices).  Look for these companies to move away from the “WHAT” you see, and toward “HOW” what you see gets to you.  One thing is certain: no matter which way the industry goes, there will be a need for some kind of connection into every house and to every iPhone, iPad, or the myriad other mobile devices.  For the home, this may be coaxial cable, fiber optics, or some not-yet-announced technology.  For the mobile environment, faster and more robust wireless networks will be the cash cow.  The companies that have those connections will be kings of their respective mountains. 

As this shift happens, look for the government to pay more attention to these services and decide if they are becoming so-called Common Carriers.  If deemed to be Common Carriers, these companies will have a whole new set of regulations to deal with in setting rates and providing access.  Of the two giants, AT&T will have the experience over Comcast navigating these regulatory waters because of their long history of providing other types of “pipes”—remember that the second “T” in its name stands for “telegraph.”