Cable cord cutting debate rages on

There’s a great debate raging on blogs and other sites, over whether Internet video is prompting a lot of folks to cancel their pay TV service — cable, satellite or IPTV. If you’ve got a few minutes, there’s an excellent synopsis of both sides of the argumentin this exchange between HDNet’s Mark Cuban and Boxee’s Avner Ronen. Boxee is company that offers freeware to enable consumers to view, share and recommend many different types of Internet content, but is currently only available for Mac users.

The essence of the debate is simply this: Given the way Hulu, YouTube and other sites are making so much content available on the Internet for free, people are no longer willing to pay for TV services that package content and deliver it to the TV. Consumers want to be able to choose what they watch and when they watch it, and the Internet allows them to do that, especially now that services such as Boxee or AppleTV or others allow that viewing to take place on TV sets and not just on computer screens.

On the surface, this is a ‘duh.’ Of course consumers want choice and control and an Internet delivery model makes that infinitely easier. Heck, even old farts like me watch TV online when they are North Carolina grads (Go Heels!) living in the upper Midwest and suffering through a TV diet of Bit Ten and Notre Dame games.

But the proof thata grand shift is happening remains anecdotal - either you are someone or you know people who have cut the cable cord in favor of AppleTV or something similar. To date, there are simply no numbers to back this up. everyone that has taken a close look at the 2008 numbers agrees there is no evidence that any appreciable number of people is abandoning paid TV service for Internet-based video.

That doesn’t mean a whole generation of tweens, teens and twenty-somethings aren’t watching the majority of their TV online - their parents may still be paying for cable or satellite service, which keeps the subscription numbers where they are. Or, as the transition to digital broadcast occurs, a certain number of folks who’ve gotten their TV over the air may have decided to finally pay for it, balancing out those who are leaving.

My personal opinion is that the video market is in great flux on many fronts and this is only one of them. There’s tremendous pressure on advertising revenues when so many of us use DVRs to skip the ads. Online ad sales are a tiny fraction of what’s spent on traditional TV and cable ads, so there’s a business model at risk.

Then there are the bandwidth issues, which Cuban raises. U.S. homes will need substantially more bandwidth than many get now to support multiple HD video streams into every home, and every home is going to need more internal bandwidth as well. Since the companies providing that bandwidth are the companies also selling paid TV services, another business model issue looms large.

It seems to me a hybrid approach is likely to dominate in the near future, until some of these business issues are resolved. The digital transition may make a combination of broadcast and Internet TV palatable for many households, services such as boxee or ZillionTV will certainly give us all more choices, but many of us will find old habits hard to abandon entirely. And as cablecos and telcos work to bring more interactivity and video on demand to their services, they might compete more effectively with the Internet models.

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