Netflix Viewing Seen Swelling U.S. Cable Bills
Time Warner Cable Inc. (TWC) and U.S. pay- TV companies, weighing how to profit from surging Internet demand spurred by Netflix Inc. (NFLX) and Hulu, are on the verge of instituting new fees on Web-access customers who use the most.
Context & Ripple Effects
The arc here runs back to 2008, when Netflix opened up Internet viewing on set-top devices and turned a DVD-by-mail company into a bandwidth consumer at scale. By 2009 the question was already being asked out loud whether viewers would accept paying an operator like Comcast for online TV access — Comcast floated a $10-a-month online TV fee — and Time Warner Cable had spent years building its own on-demand pipeline, expanding video-on-demand offerings back in 2007.
What Bloomberg reports now is the operators' answer taking shape: with Netflix and Hulu confirmed as major drivers of swelling U.S. Internet traffic, Time Warner Cable and other pay-TV companies are reportedly weighing new fees aimed at the heaviest web-access customers. The report frames this as deliberation rather than a decision — the fee structure is not yet announced.
First-order effects
- Heavy Netflix and Hulu users on Time Warner Cable would see their broadband bills rise under the proposed structure, effectively paying twice for the same streaming habit they already fund through subscriptions.
- TWC gains a way to monetize the traffic surge even as its own video subscriptions lose viewing hours to over-the-top services.
Second-order effects
- Rival pay-TV operators facing the same traffic math would come under pressure to match usage-based pricing, turning broadband metering from an experiment into a competitive necessity.
- Netflix and Hulu's value proposition — flat-fee unlimited viewing — gets taxed at the network layer, pushing both services toward deals or optimizations that keep streams cheap for customers.
Third-order effects
- If usage-based billing spreads, the cable industry's center of gravity shifts from selling channel bundles to selling metered pipes — the bundle cannibalization problem gets answered by charging for the replacement activity itself.
- A two-sided pricing regime could emerge where streaming services eventually negotiate directly with carriers over delivery costs, entrenching the largest players and raising barriers for smaller over-the-top entrants.
The trend: Pay-TV operators are responding to over-the-top streaming not by competing on content but by converting the resulting bandwidth demand into a new usage-based revenue line.