Should You Have a Cord Cutter Package?

rabbit earsIf you are in the cable business is it time to consider a ‘cord-cutter’ product? Obviously Cablevision thinks it’s a good idea as they became the first cable TV company to offer a standalone version of HBO Now to its line-up.

Cablevision has also adding two specific cord-cutter products as well. For $34.90 per month they will provide a 5 Mbps download cable modem, a Mohu Leaf 50 digital antenna to watch network television without a cable subscription, and their Freewheel unlimited text and voice WiFi phone service (more on this below).

For a promotional price of $44.90 per month they will provide a 50 Mbps down/25 Mbps up cable modem and the same free digital antenna. There is no description of what the price will rise to at the end of the promotional period. Both products have an option to add HBO Now for $15 per month.

The Cablevision Freewheel WiFi phone is an interesting product also. It provides unlimited voice and text as long as the customer is on WiFi and inside of the Cablevision service footprint. As long as you buy another Cablevision product it’s priced at $9.95 per month and you have to buy a Motorola Moto G phone for $99.95. The phone does not work on traditional cellular, so it’s only going to be attractive to those who are always around WiFi.

Cablevision says these packages are meant to go after cord cutters or cord nevers and are to provide an alternative for those who don’t want to pay for a traditional cable programming package. This begs the question: should other providers consider the same sort of cord cutter packages? A few weeks ago, the FCC officially announced that cord cutting is real (a little late to the game) since I don’t know that I have any clients that are not losing cable customers in a given footprint.

The Cablevision options are somewhat odd, though. While Freewheel WiFi phones will be attractive to those who stay around WiFi all day, it’s a product that doesn’t work in moving vehicles and which doesn’t revert to traditional cellular when you are out of reach of WiFi. For around $15 per month you can buy a better version of this product from several cellular resellers that partner with traditional cellphone service so that the phone will work anywhere in the US. And the more expensive cord cutter package is basically a naked cable modem with a free digital antenna thrown in.

There are two questions to ask if you want to consider a cord cutting product. What do cord cutters really want? Can you put together such a package?

Cablevision seems to think that people want a naked standalone data product, but most of my clients have offered that for years. They have come to the conclusion that they should never turn away anybody willing to pay for their highest margin data product, especially since most small companies are losing money on cable TV anyway. You can often get standalone cable from the larger cable companies if you fight hard enough for it, but they will spend a lot of effort getting you to buy a bundle of some sort instead.

Companies like Sling TV seem to think that cord cutters want smaller packages of programming, and I am sure some of them do. But recent surveys show that customers are extremely loyal to the few networks they most want, and so a smaller package is only going to be attractive to that tiny sliver of your customers who only want exactly what is in the smaller package you offer. I think what people really want is a la carte programming and the ability to buy only what they want and nothing more. But that is not going to be on the table soon, if ever.

If Verizon is able to wade through the lawsuits and offer their smaller packages, I think they are going to get limited response as well, because their proposed pricing for smaller packages is not much cheaper than normal cable packages. And this highlights the second thing cord cutters want – they want to save money. Unfortunately, as many have warned, when you pull channels out of the bigger line-ups and sell them in smaller piles, the programmers are going to charge a lot more for you to carry them. They still want to be paid as if you are taking their larger line-ups.

I would be shocked if Cablevision sells very many of their smaller package – it’s just too quirky in forcing both a WiFi phone and a slow cable modem together. The number of households who are going to think that is the perfect product can’t be very large. But Cablevision might address this over time by offering a wide array of different cord cutter options. But then they will have violated something that cable companies have learned the hard way – which is to keep the options simple.

I’m not sure that there is any real cord cutter package that will be a killer product to keep your cord cutter customers happy. But perhaps there is a suite of different products that will be attractive to different segments of cord cutters and which will each get a little piece of the market.

2 thoughts on “Should You Have a Cord Cutter Package?

  1. Millennials and economists will buy the cord cutter package en mass.
    Re Freewheel and VoWiFi – In 2004, I published a book entitled “Voice over 802.11”. It was way ahead of the times. Freewheel as a standalone issue does not upend the telecom world as we know it. Google’s Project Fi does the same thing. As an aggregate, VoWiFi will take considerable market share from Verizon and AT&T’s premium cellular services. Two weeks ago I published a white paper on this predicting a 20% market share loss for VZ and AT&T within 20 months of Project Fi’s launch. The description outlines the facts and figures:

    Given their existing infrastructure, MSOs are well-positioned to offer substitutes for cellular that makes them “poor man’s MNO” following classic lines for “disruptive technology” and “creative destruction”. By offering low cost substitutes for premium cellular services MSOs can achieve total market domination of residential telecom buying, i.e. true quadruple play attaining 100% of residential telecom services purchases.

  2. I would agree that WiFi calling can really disrupt the large cellular carriers. But I am still not ready to think that the WiFi guys will take a 20% market share. Companies like FreedomPop, Republic Wireless and Scratch Wireless have already been doing this and have not gotten much traction. Perhaps a big name like Google will do better.

    But I think the big impediment right now is handsets. Cablevision, the existing competitors listed above and Google are all mandating that you use a specific handset for WiFi phones, and that is their big weakness. I think people are developing a very strong loyalty to specific brands of smartphone and the savings of WiFi calling are not going to lure people off their iPhone or Samsung Galaxy. But if these companies can develop this into an app that could be put on any phone then they can probably do as well as you are suggesting. But until that happens I think this is a fringe business even if it’s Google selling it. I know you couldn’t get my wife off her iPhone even if you paid her to take your service.

    Google has it right in that their phone will use cellular when WiFi is not available. I think the true WiFi-only phones like Cablevision have are a true niche phone. There can’t be that big of a percentage of the population that doesn’t want to be able to take their smartphone to the store or to make a call when their car breaks down. The Cablevision phone looks like a product I would hand a 12-year old so that they didn’t kill me on a cellular data plan.

    The other thing to remember is that only two cellular companies control the market for cellular minutes. The whole WiFi phone market could crash and burn overnight if for some reason Sprint and or TMobile decided not to sell cellular minutes to the WiFi phone market. In my career I have seen cellular wholesale opportunities in the past literally disappear overnight when the underlying carriers changed their mind. TMobile will not care if WiFi phones kill AT&T and Verizon, but if they start to kill TMobile’s retail business too badly then they might change the wholesale relationship, and that is the big cloud that hangs over WiFi phones as a long-term business plan. Sprint and TMobile could kill this business at any time, and it’s not inconceivable that a set of circumstances could lead them to do so.

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