Why Households Keep Cable TV

The results of a new survey were recently released by Telaria and Adobe Advertising Cloud that looked in detail at both cord cutters and those who still use traditional cable TV packages. The survey asked questions to groups of cord-cutters, those with traditional TV and also consumers who only watch video on demand and don’t pay for a service. A summary of the survey can be found at this link.

The survey asked why households keep traditional cable TV and got the following responses:

  • 42% said the primary reason for keeping traditional cable TV is to watch live programming such as sports or local news.
  • 55% said that the options for cord-cutting are confusing.
  • 34% said they liked having a lot of channels available.
  • 21% said they didn’t know where to look for alternative options to traditional cable TV.
  • 55% with traditional cable TV are still satisfied with the value they get for the price they pay.
  • 48% said they have considered cancelling traditional cable TV.
  • 30% said they would cut the cord if they were sure they could watch all of their favorite content

Cord-cutters were asked why they had left traditional TV:

  • 73% said it was due to the high cost of cable TV. 74% of cord-cutters say they are now happy with what they are paying for content.
  • 30% described themselves as low users of watching content and left because they didn’t use traditional TV very much.
  • 36% said they were still able to get the content they want.

There were some other interesting responses in the survey:

  • 16% of respondents say they have used somebody else’s password to watch streaming content.
  • 27% of homes now use a digital antenna to watch over-the-air TV, with sports being the primary reason for using the antenna.

These results are further validated by a survey released earlier this year by Deloitte who surveyed 2,088 households asking why they are keeping traditional cable TV:

  • The primary reason for keeping TV, cited by 71% of households is the ability to watch live broadcasts – be that sports, local news or events like the Emmys or Oscars.
  • Another primary reason is that households perceive that they are saving money due to a bundle. 56% of respondents said the bundle made them feel like they are getting a good deal.
  • The third reason cited for keeping traditional cable is that households said they’ve had the service for a long time and don’t want to change.
  • However, Deloitte found concern about price with 70% of respondents said they are paying too much for their cable subscriptions.

As somebody who cut the cord a number of years ago I echo some of the concerns voiced in these surveys. It can be confusing understanding the differences between the online programming options. I applaud anybody who can decipher the differences between packages offered by Sling TV, DirecTV Now and Playstation Vue. I’ve not yet found an online service that is easy to surf if you don’t have specific programming in mind. The proliferation of platforms with unique programming such as CBS All Access, Disney and others will likely make it even harder to find or afford all of the content you might want to watch. We are definitely not yet to a point where cord-cutting is as easy as keeping the traditional cable package.

The Terabyte Household

I was just in a meeting the other day with a bunch of ISPs were talking about household downloads. Several said that they were now seeing monthly data usage exceed a terabyte, and those with Comcast were lamenting that this is causing them a lot of money.

I wrote a lot about Comcast data caps a few years ago when the company experimented with really low data caps of 300 gigabytes per month. At that time a lot of households complained that they were exceeding those caps. Comcast was arguing at the time to end net neutrality and I think this persuaded them to back off of the low caps, which they set to 1 terabyte.

Here we are only a few years later and a lot of households are bumping up against and exceeding that data caps. Comcast absolutely know this was coming and they just pushed the ability to monetize data caps a few years into the future. As an ISP the company knows better than most that the household demand for total downloaded data has been doubling every three years or so. That kind of growth will push a huge number of households over a terabyte within a decade – with many already hitting it now.

Comcast tries to justify data caps by arguing fairness – the same argument they made a few years ago. They say that those that use the Internet the most ought to pay the most. Even if you can buy that argument the penalty for exceeding the data caps are excessive. Comcast doesn’t charge a household for the first two months they exceed a terabyte. After that they have two plans. They will automatically bill $10 for every extra 50 Gigabytes over the data cap – with total excess charges capped at $200 per month. Customers who expect to exceed the data cap can also agree to pay $50 extra every month to get unlimited usage.

Comcast goes on to explain away the terabyte cap by describing what it takes to exceed the cap, as follows:

  • Stream between 600 and 700 hours of HD video
  • Play online games for more than 12,000 hours
  • Stream more than 15,000 hours of music
  • Upload or download more than 60,000 hi-res photos

This explanation is simplistic for a number of reasons. First, full Netflix HD broadcast at 1080p streams at over 7 Mbps and uses roughly 2.5 GB per hour, meaning a terabyte will cover about 400 hours of full HD video. If you have a good broadband connection the chances are that you are watching a lot of 4K video today – it’s something that Netflix and Amazon Prime offer automatically. It only takes only about 180 hours of 4K video in a month to hit the terabyte data cap – a number that is not hard to imagine in a cord-cutting home. The chart also misses obvious large uses like downloading games – with download sizes over 40 GB for one game becoming common.

The Comcast charts also fail to recognize the hidden ways that we all burn through bandwidth today. It’s not untypical for the average household to have a 30% to 40% overhead on Internet usage. That comes from the network having to transmit data multiple times to complete a download request. This overhead is caused for a number of reasons. First are inefficiencies inherent in the open Internet. There are always packets lost on transit that much be sent multiple times. There are also delays caused by the ISP network, particularly networks that are undersized in neighborhoods and that hit capacity during the busy hours. The biggest cause of delays for most of us is in-home WiFi networks that creates a lot of collisions from competing signals.

There are also a lot of background use of the Internet today that surprises people. We now routinely use web storage to back up files. All of the software on our machines upgrade automatically. Many now use applications like video cameras and home alarms that connect in the cloud and that ping back and forth all day. All sorts of other things go on in the background that are a mystery – I’ve noticed my house has significant broadband usage even when we aren’t home. I’ve estimated that this background communication probably eats about 150 gigabytes per month at my house.

When I consider those issues the Comcast terabyte data caps are stingy. A household with a lot of network noise and with a lot of background traffic might hit the data caps using only half of a terabyte of downloaded video or other services like those listed by Comcast. A home today might hit the cap with 200 hours of full HD streaming or 90 hours of 4K streaming.

The other amazing aspect of the terabyte data caps is the charge for using more than a terabyte in a month. As mentioned above, Comcast charges $10 for every extra 50 GB. I’ve done the math for dozens of ISPs and most of my clients spend between $2 and $4 per month on average for the bandwidth per broadband customer. That number includes not only residential users, but for most ISPs also includes some huge commercial broadband customers. The average price varies the most according to how far an ISP is away from the Internet, and that component of the cost is fixed and doesn’t increase due to higher data volumes by the ISP. After backing out this fixed transport cost, my math says that an extra 50 GB of broadband costs an ISP only a few pennies. For a large ISP like Comcast that cost is significantly lower since they peer with the big broadband users like Netflix, Google and Amazon – and for those arrangements they have nearly zero incremental cost of extra bandwidth.

Finally, the Comcast website claims that less than 1% of their users exceed the terabyte data caps. Only they know the numbers, but I find that hard to believe. When you look at the amount of usage needed to hit that cap there has to be a lot of cord-cutter households already exceeding a terabyte.

The bottom line is that Comcast is extorting homes when they force them to spend $50 per month for unlimited data usage. That extra bandwidth costs them almost nothing. Unfortunately, there isn’t a damned thing any of us can do about this any since Comcast and the other big ISPs got their wish and broadband is no longer regulated by the FCC.

Deregulating Text Messaging

“This is one of the oddest dockets I’ve ever seen”. That’s roughly quoting myself several times over the last year as I read some of the things that the current FCC is up to. I find myself saying that again as I read the FCC’s recent docket that proposes to classify SMS text messaging as a Title I information service. Their stated reason for the reclassification is that it will make it easier to fight text message spam, and that stated reason is where the FCC loses me.

Text message spam is a real thing and I’ve gotten some annoying text spam over the last year and I’d sure hate to see my texting inbox get polluted with crap like my email inbox. However, I doubt that you’ll find any technologist in the industry that will tell you that the way to fight spam of any kind is by waving a magic wand and changing the way that something is regulated. The way you fight spam is to put barriers in place to detect and block it – and that is something that only the carriers that control the flow inside of a communications path can do. It’s the solution that the FCC themselves just pushed recently to try to stop robocalling – by demanding that the telephone industry find a solution.

Yet here sits a docket that blindly declares that reclassifying texting as an information service will somehow dissuade bad actors from sending spam text messages. I’m pretty sure that those bad actors don’t really care about the differences between Title I and Title II regulation.

One of the interesting things about this filing is that past FCCs have never definitively said how texting is regulated. Over the years the industry has come to assume that it’s regulated under Title II just like a telephone call – because functionally that’s all a text message is, a telephone call made using texted words rather than a voice call.

To some extent this docket is the first time the FCC has every officially addressed the regulatory nature of text messaging. In the past they made rulings about texting that implies a regulatory scheme, but they never have officially put texting into the Title II category. Now they want to remove it from Title II authority – the first time we’ve ever been told definitively that text is already a Title II service. Here are some of the past FCC treatment of the regulatory nature of text messages:

  • In 1994 the FCC ruled that systems that store and forward telecommunications messages, like SMS texting are ‘interconnected’ services, which at that time were clearly regulated by Title II. But there was no specific statement at the time that texting was a Title II service.
  • In the Telecommunications Act of 1996 the FCC defined a telecommunications service for the first time – which was defined as a service that uses telephones and the PSTN to communicate. The 1996 Act didn’t mention texting, but it clearly fits that definition.
  • In 2003 the FCC declared that text messages were ‘calls’ when the agency implemented the Telephone Consumer Protection Act, which was the same treatment given to other Title II telephone services.
  • In 2007 the FCC included texting as one of the Title II services for which cellular carriers must allow roaming.
  • In 2011 USAC began enforcing the inclusion of text revenues as a Title II interstate revenues that used to assess monies owed to the Universal Service Fund.

All of these regulatory actions implied that texting is a Title II service, although that was never explicitly stated until now, when the FCC wants to reclassify it to be an information service. Reclassification doesn’t pass the ‘quack like a duck test’ because telephone calls and anything like them fit squarely as Title II services. Texting is clearly a type of telephone call and any person on the street will tell you that a text message from a cellphone is just like a phone call using text rather than voice.

Unfortunately, the only conclusion I can draw from this docket is that the FCC has an ulterior motive since their stated reasons for wanting to reclassify texting are pure bosh. There seem to be no obvious reasons for the reclassification. There are no parties in the industry, including the cellular carriers, that have been clamoring for this change. Further, the change will have the negative impact of further shrinking the Universal Service Fund – and expanding rural broadband is supposedly the number one goal of this FCC.

This is disturbing for somebody who has followed regulation for forty years. By definition, regulatory agencies are not supposed to push for changes without first opening an industry-wide discussion about the pros and cons of any suggested changes. Regulators are not supposed to hide the motives for their ideas behind false premises.

The only justification for the FCC’s proposed ruling that I can imagine is that the FCC wants to kill all Title II regulation. It seems they are on a mission to eliminate Title II as a regulatory category to make it hard for future FCC’s to reregulate broadband or to bring back network neutrality.

If that’s their real agenda, then we ought to have an open discussion and ask if we ought to eliminate Title II regulation – that’s how it’s supposed to work. The rules establishing the FCC call for a process where the agency floats new ideas to the world so that all interested parties can weigh in. The FCC is not ready to face the backlash from openly trying to kill Title II regulation, so instead of an open debate we are seeing a series of ridiculous attempts to chip quietly away at Title II regulation without overtly saying that’s their agenda.

In my opinion the time when we ought to stop regulating telephone services is getting closer as technology changes the way that we communicate. But that time is not here and there is still room for monopoly abuse of text messaging. There are a number of examples over the last decade where carriers have blocked text messages – sometimes when they disagreed with the content.

I’m disappointed to have an FCC that is using regulatory trickery to achieve their agenda rather than having a bold FCC that is willing to have the public debate that such a decision deserves. Telephone and related services like text messaging were regulated for many reasons and we ought to examine all of the pros and cons before deregulating them.

I’m guessing that this FCC wants to kill Title II regulation without ever having to tell the public that’s their agenda. I think they want to deregulate text messaging and then point to that deregulation as the precedent to justify deregulating all Title II services without having to suffer to criticism that is sure to come when the public realizes this closes the door on net neutrality.

Femtocells Instead of Small Cells?

I have just seen the future of broadband and it does not consist of building millions of small 5G cell sites on poles. CableLabs has developed a femtocell technology that might already have made the outdoor 5G small cell site technology obsolete. Femtocells have been around for many years and have been deployed in rural areas to provide a connection to the cellular network through a landline broadband connection. That need has largely evaporated due the ability to use cellphones apps to directly make WiFi calls.

The concept of a femtocell is simple – it’s a small box that uses cellular frequencies to communicate with cellular devices that then hands-off calls to a landline data connection. Functionally a femtocell is a tiny cell site that can handle a relatively small volume of cellular calls simultaneously.

According to CableLabs, deploying a femtocell inside a household is far more efficient that trying to communicate with the household from a nearby pole-mounted transmitter. Femtocells eliminate one of the biggest weaknesses of outdoor small cell sites – much of the power of 5G is lost in passing through the external walls of a home. Deploying the cellular signal from within the house means a much stronger 5G signal throughout a home, allowing for more robust 5G applications.

This creates what I think is the ultimate broadband network – one that combines the advantages of a powerful landline data pipe combined with both 5G and WiFi wireless delivery within a home. This is the vision I’ve had for over a decade as the ultimate network – big landline data pipe last mile and powerful wireless networks for connecting to devices.

It’s fairly obvious that a hybrid femtocell / WiFi network has a huge cost advantage over the deployment of outdoor small cell sites on poles. It would eliminate the need for the expensive pole-mounted transmitters – and that would eliminate the battles we’re having about the proliferation of wireless devices. It’s also more efficient to deploy a femtocell network – you would deploy only to those homes that want to the 5G features – meaning you don’t waste an expensive outdoor network to get to one or two customers. It’s not hard to picture an integrated box that has both a WiFi modem and a cellular femtocell, meaning the cost to get 5G into the home would be a relatively cheap upgrade to WiFi routers rather than deploying a whole new separate 5G network.

There are significant benefits for a home to operate both 5G and WiFi. Each standard has advantages in certain situations within the home. As much as we love WiFi, it has big inherent weaknesses.  WiFi networks bogs down, by definition, when there too many devices calling for a connection. Shuttling some devices in the home to 5G would reduce WiFi collisions and makes WiFi better.

5G also has inherent advantages. An in-home 5G network could use frequency slicing to deliver exactly the right amount of bandwidth to devices. It’s not hard to picture a network where 5G is used to communicate with cellphones and small sensors of various types while WiFi is reserved for communicating with large bandwidth devices like TVs and computers.

One huge advantage of a femtocell network is that it could be deployed anywhere. The cellular companies are likely to cherry pick the outdoor 5G network deployments only to neighborhoods where the cost of backhaul is affordable – meaning that many neighborhoods will never get 5G just like many neighborhoods in the northeast never got Verizon FiOS. You could deploy a hybrid femtocell to one customer on a block and still be profitable. Femtocells also eliminate the problems of homes that won’t have line-of-sight to a pole-mounted network.

This technology obviously favors those who have built fast broadband – that’s cable companies that have upgraded to DOCSIS 3.1 and fiber overbuilders. For those businesses this is an exciting new product and another new revenue stream to help replace shrinking cable TV and telephone networks.

One issue that would need to be solved is spectrum, since most of it is licensed to cellular companies. The big cable companies now own some spectrum, but smaller cable companies and fiber overbuilders own none. There is no particular reason why 5G inside a home couldn’t coexist with WiFi, with both using unlicensed spectrum, with some channels dedicated to each wireless technology. That would become even easier if the FCC goes through with plans to release 6 GHz spectrum as the next unlicensed band. The femtocell network could also utilize unlicensed millimeter wave frequency.

We’ll obviously continue to need outdoor cellular networks to accommodate roaming voice and data roaming, but these are already in place today. Rather than spend tens of billions to upgrade those networks for 5G data to homes, far less expensive upgrades can be made to augment those networks only where needed rather than putting multiple small cells on every city block.

It’s been my experience over forty years of watching the industry that in the long run the most efficient technology usually wins. If CableLabs develops the right home boxes for this technology, then the cable companies will be able blitz the market with 5G much faster, and for a far lower cost than Verizon or AT&T.

It would be ironic if the best 5G solution also happens to need the fastest pipe into the home. The decisions by big telcos to not deploy fiber over the last few decades might start looking like a huge tactical blunder. It looks to me like CableLabs and the cable companies might have found the winning 5G solution for residential service.

eSim

One of the big goals for 5G is to be able to use the technology to communicate with numerous devices other than cellphones and tablets. In order for that to happen the cellular industry is going to have to adopt eSim technology, which means creating virtual sim cards inside of devices rather than requiring the physical sim card that is used today in cellphones.

Traditional sim cards don’t play well in the IoT world. Many IoT devices will be tiny sensors that will be low power and that will be too small to hold a sim card. But probably more importantly, for IoT to grow as envisioned by the cellular carriers, customers are going to need an easy way to change wireless carrier without having to change a physical sim.

Picture the future smart home that has numerous smart devices that tie into a cellular network to get to the cloud. It’s likely that most devices you buy will come with a pre-paid subscription to some specific carrier, but that eventually that carrier will want homeowners to pay a monthly fee to continue the monitoring. I picture the nightmare where I might have devices that are monitored by each of the major cellular carriers, and each is going to want me to pay a monitoring fee to keep my devices connected to the cloud.

The only way most homes are going to agree to this vision of the world will be if they can migrate all of their devices to the same cellular network. And that means a homeowner (or farmer or factory owner) is going to want the option of homing all of their devices to the carrier of their choice. That’s where eSim comes in – it’s a virtual sim card that can be redirected at will by the customer without having to deal with physical sim cards. I envision sim manager software that will register and track all of my sim devices and that could move them en masse to a new carrier at my command.

Today’s sim card technology is a dinosaur and I liken it to the analog settop boxes that cable companies forced customers to rent from them. Cellular carriers have been extremely slow in accepting sim card technology because they know that having to physically change a sim card is a barrier that will stop some customers from changing service to another carrier. The big cellular companies say they have been working on eSim technology, but it’s been dragging slowly forward for years.

There are already products using eSim. For example, the Samsung Gear S2 smartwatch was the first commercial device to include eSim in 2016. Samsung used the eSim technology because there wasn’t room for a sim card. However, this is not an eSim card like I described above. A customer can’t change the carrier on smart watch that comes preset by Samsung. However, early eSim devices show that the technology works.

There are carriers in the country that are pushing for eSim. For example, smaller and regional cellular carriers like C-Spire and Ting are pushing for the technology. Some of the big cable companies are pushing for the technology.

What’s needed to make eSim work is a set of universal standards that would allow a customer to aim the eSim at the carrier of their choice. And that is going to take the cooperation of the big cellular companies. There is enough pressure on them that this change is likely to start happening over the next few years. Hopefully the eSim technology will just become part of the expected background technology that makes devices work on cellular networks, and that customers in the future will be able to easily decide their cellular carrier without the hassle of dealing with every cellular device in their home. My guess is that teenagers a decade from now will never have ever heard of a sim card and it will be just another obsolete technology.

The High Cost of US Cellular Broadband

The Finland-based company Rewheel has been tracking cellular prices since 2014. Their latest report looks specifically at the cost of cellular broadband and shows that US prices are among the highest in the developed world. Rewheel specifically focuses on countries in the European Union and countries that are members of OECD (the Organization for Economic Cooperation and Development), which brings in countries in North America and South America and countries like South Korea, Australia and New Zealand.

The US, Canada and a few other countries are the outliers with the highest broadband prices. The study shows that the average price charged for of a gigabit of downloaded cellular data in the US is just over $6. Nearly half of the countries studied have gigabit prices for less than $1. To put our cellular broadband prices into perspective, US cellular broadband rates are 16 times higher than the average rate in the European Union. What is striking is that the cost per gigabit in the US dropped 11% since 2017 due to carriers increasing the size of data allowances.

The study also correlated broadband prices to the number of cellular competition in a country. In general counties with multiple cellular competitors have lower broadband rates – for instance, countries with three cellular competitors have higher rates than countries with 4 or more competitors. Again, the US with four primary cellular spectrum owners is an outlier compared to other countries with that many cellular companies.

The study doesn’t look at specific reasons for the rates in various countries, or the ramifications for higher or lower prices. However, a lot of the reasons for high prices in the US are well understood:

  • In the US one of the larger costs or providing cellular service is the cost of transport to get data to and from cell sites. The prices charged to cellular providers here is far higher than fiber transport costs in many other companies. The price for fiber transport in the US grew out of the extremely high prices of transport that were billed for decades by AT&T and the other big monopoly telcos, and those prices are still high today.
  • Cellular networks are already overloaded. The cellular companies really don’t want customers to use a lot more mobile data on the cellular networks and hope that most usage gets handed off to WiFi networks. Lower cellular data prices would increase cellular network usage, and the cellular carriers in this country have not invested in the underlying cellular networks to handle greater traffic volumes.
  • The nature of competition here is different than in many other countries. The big carriers in the US have adopted an oligopoly pricing mindset where they compete on things other than price. This is not true just for cellular broadband, but also for landline broadband, cable TV service and most of our telecom markets.

There are a lot of ramifications for having higher cellular broadband prices:

  • Number one is the overall cost of cellular service in the US. The Rewheel study shows there are 14 countries in 2018 where customers can buy a smartphone plan for $34 per month (30 euros) that includes truly unlimited broadband plus at least 1,000 minutes of phone calling. It’s hard for a customer in the US to find a similar plan for under $70. Since practically everybody in the US has a cellphone, the cost of cellular phone bills is a burden on many US families.
  • Several studies over the last year have shown that US cellular customers have grown accustomed to self-limiting their cellular usage. Even customers who buy the so-called unlimited data plans that are capped at 20 GB in monthly download don’t use even half of that data on average. Cellular data caps have taught us to not use cell phone data – a concept that would be foreign in Europe.
  • Because of the high price of landline and cellular broadband, many homes have elected to use their cellphones for broadband since they can’t afford both connections. Such homes are paying far more per GB of data than the rest of us and are further penalized for going over monthly cellular data caps.
  • There are many homes in the rural US where cellular data is the only broadband option (other than satellite which most have tried and rejected). I hear stories all of the time in my travels in rural America where households with schoolkids are spending $500 or more per month on cellular data. The big cellular companies are gladly taking their money and haved no incentive to find an affordable option in rural America,

The High Cost of Sports Programming

The web news site Axios reports that sports channels were the top ten most expensive channels in terms of what is charged to cable operators. Not only are sports channels the most expensive programming, but their prices are increasing faster than most other channels, helping to continue to drive up the cost of a cable subscription. They only other channels that are increasing prices at a faster clip are local network affiliates of the big over-the-air networks like ABC, CBS, FOX and NBC.

Axios reports that they received the cost of networks from industry analysts Kagan. The five most monthly cost to cable companies include:  ESPN $7.54; YES $6.05 (Yankees and Nets); SportsNet LA $4.64; Fox Sports AZ $4.63; and Fox Sports Detroit $4.51.

I’ve seen estimates that the average cable subscriber pays about $20 per month to cover sports programming – a huge percentage of a total cable bill. That figure obviously varies by market and by specific cable package, but most expanded basic cable packages include numerous sports channels like ESPN, FS1, the NFL Channel, the NBA Channel, etc.

Sports channels are expensive due to the high costs of obtaining the broadcast rights to various sports teams and leagues. For example, a major percentage of the revenues earned by college football and basketball programs comes from revenue agreements with networks like ESPN.

Another reason that the monthly fees charged for sports networks keep rising is due to cord cutting and the overall loss of cable customers in the industry. It’s been reported that ESPN has already lost over 2 million customers for the year – a number that is line with estimates of cord-cutting. ESPN has lost almost 12 million customers since their peak at the end of 2013.

Subscription fees to cable companies account for more than 60% of ESPN’s revenues (with most of the rest coming from advertising sold during sporting events). It’s also been reported that ESPN accounts for almost 30% of the value of Disney stock, so it has to be alarming to the Disney parent company to continue to watch customers leave the service. ESPN has made up for some of these losses by selling over a million monthly subscriptions at $5 for ESPN+, an online network that offers sports programming not shown on the basic ESPN channels.

Live sports are still one of the major draws for consumers. Numerous surveys have shown that local sports are one of the primary reasons why many customers keep their traditional cable subscriptions. So far, sports programing has not been offered on the Internet except through expensive monthly plans like Sling TV or PlayStation Vue that look a lot like a cable subscription.

There might be a coming shake-up in the sports programming world. Currently Disney is selling 22 regional Fox sports networks, which was one of the government’s requirements for the merger of Disney and 21st Century Fox. One of the bidders for these networks is Amazon, and the speculation is that they might offer much of the content on a streaming basis. That would be a major shake-up of the industry that thrives due to sales only to cable companies. The Fox sports networks own over half of the rights to Major League Baseball, the NBA and the National Hockey League, so it’s a powerful pile of programming rights.

A few things are certain. The model of raising subscriber cable prices by $2 every year to cover increases in sports programming is a model that can’t be sustained forever. Saving money is the number one reason given by cord-cutters for leaving traditional TV. It’s also likely that Amazon or somebody else is going to change the market paradigm and will sell sports content a la carte by the game.

I subscribe to PlayStation Vue mostly to get the sports. I could cut that annual bill in half if I could pay $5 per event to watch those events I really want to watch. A Gallup poll last year showed that 37% of households say they are not sports fans. Rising cable prices are going to drive a lot of these households to find cheaper alternatives, and as dropping ESPN subscribers show they will opt out of paying for sports they don’t watch. Charging each cable household $20 per month to watch sports is not sustainable.

The Slow Growth of Telemedicine

One of the most hoped-for benefits of rural broadband has been the use of telemedicine to conduct routine doctor visits via a broadband connection rather than requiring rural patients to drive to cities for a doctor’s visit. However, the use of telemedicine hasn’t grown as fast as once predicted.

A recent study was published in JAMA, the Journal of the American Medical Association that looked at telemedicine use from 2005 through 2017. The study gathered records of telemedicine claims that were reimbursed through insurance. In 2005 there were only 206 telemedicine claims. By 2017 that had grown to 202,000 – but that is still only a tiny fraction of total medical visits. When looked at statistically it’s an annual growth rate of over 50% annually, but the overall number of visits are still a tiny blip in the industry.

The analysis showed that 53% of telemedicine visits were for mental health treatment, followed by 39% of telemedicine visits with a primary care physician. The average age of a telemedicine patient was 38. As expected, 83% live n rural areas, although telemedicine is also valuable for patients in cities with limited mobility.

The use of telemedicine has been bolstered by having 32 states pass laws that require insurance companies to treat telemedicine visits on parity with in-person visits. This provides the ability for Health Delivery Organizations (HDOs) like hospitals and clinics to treat patients remotely if the choose to do so.

I don’t want to sound negative because there is also good news in the study statistics. Most of the growth in telemedicine visits have occurred in just the last few years. A recent study was done by Vidyo, a company that provides the telemedicine equipment for hospitals and clinics. Vidyo surveyed 300 HDO organizations and asked about their telemedicine plans. Vidyo reported the following:

  • 75% of HDOs are now using or planning to soon use telemedicine.
  • Of the HDOs already using telemedicine, 47% report a savings for the medical practice; 51% report improved efficiency for the HDO; 58% report that doctors are satisfied with the results from telemedicine; 67% say that telemedicine is easy for staff to use, and 67% say that patients are receptive to telemedicine.
  • HBOs report the primary benefits of telemedicine as: patients get to ask questions which stops little problems into becoming big ones; telemedicine lets patients build a bond with a doctor; cellular video provides the ability for patients to get access to healthcare from anywhere; and video connections allows for collaboration among multiple doctors for complex health issues.
  • One of the holdups of telemedicine deployment has been the need for HDOs to invest in new technology. There are a number of practices waiting to see more proof of the benefits of telemedicine before implementing.

I’m sure that one of the hold-ups for more deployment of telemedicine is that that a lot of rural places don’t yet have the broadband to support it. Telemedicine requires a 2-way video conference, like Skype. It also often requires a good broadband connection for ongoing 24/7 monitoring of devices for outpatients from surgery or other procedures. Homes without a good broadband connection cannot participate in telemedicine. There are rural health clinics that initiate telemedicine visits from their site to specialists in nearby cities – but this still requires the patient to travel.

It looks like telemedicine is poised for rapid growth. This has taken longer to get going than what I would have guessed when looking at the discussion of telemedicine a decade ago. But like many industries it’s taken a while for the technology to get perfected and for doctors to trust using it. Now that many HDOs are starting to  use telemedicine it looks like we are finally poised for gigantic growth of the practice.

Quantifying the Benefits of Broadband

Economic development staff in almost every community I’ve ever worked with want to be able to quantify the benefits of broadband. It’s not hard to list the many benefits such as providing the ability for rural students to do homework, or the ability to start a home-based business after getting broadband. However, there has never been any way to put a dollar value to the community for these benefits.

Three economists from Purdue University have tackled the problem and took a stab at quantifying the benefits of bringing broadband to all of the areas served by Rural Electric Member Cooperatives (REMCs) in the state of Indiana. The work was done by looking in detail at the public benefits that would be generated at the Tipmont Cooperative and then extrapolating those results to the six other REMCs in the state.

The results are eye-catching and the study calculates a net present value of $24,293 to every cooperative household. I think most people’s first reaction is that amount seem too large, but when you look at the assumptions behind each component of that number, each assumption seems to be conservative.

Here are a few of the benefits measured by the study:

Medical. The study relied on recent studies that quantified the benefits of telemedicine. Several studies have shown that there is a significant decrease in Medicare costs once a region begins using telemedicine. The biggest savings comes from significantly reduced hospital stays and emergency room costs that come as a result of using telemedicine for preventive medicine – by checking up on patients regularly, resulting in small problems not escalating to severe ones.

Education. Numerous recent studies have shown that students without access to broadband don’t perform as well as students with broadband. Adults also benefit from online education through the ability to pursue college degrees online or to get training for new careers. It’s challenging to quantify the benefit of more education at the macro level, but it’s really easy to understand at the microlevel. We know that those who complete high school degree earn more over a lifetime than those who don’t. There have been numerous studies that quantify the increased lifetime earnings from various levels of post-high school education.

Economic Development. Recent studies have shown that there is a direct positive correlation between broadband adoption and economic development. The old economic model of communities thriving by attracting large employers is crumbling as the US continues to lose factories and factory jobs. But broadband helps existing businesses do better and can help keep an existing business to flee a market due to lack of broadband.

At the local level, better home broadband allows people to work at home, many of them finding higher-paying jobs than are available in the local economy. Good broadband also let’s some households bolster full-time earnings by engaging in ecommerce such as opening Etsy web stores. Numerous studies over the years have shown that anything that increases local wages benefits the local community with a multiplier effect as those extra earnings are spent on local goods and services.

Shopping. If you read my blog from last Monday, I discussed surveys we’ve done at CCG that listed the ability to shop online as one of the things most wanted in areas that have no broadband.

A recent Price Waterhouse Cooper study in England calculated the advantages of online shopping at US $754 per household annually – a combination of being able to buy goods at lower prices and the savings from not having to drive to buy things. That number has to be conservative when compared to rural areas in the US where households have longer drive times to reach retail shopping.

Farming Benefits. Much of the area covered by the study are agricultural and several studies have shown that good broadband can bolster farm incomes by as much as 6% annually – a number that is bound to increase as the benefits or smart-farming and outdoor IoT sensors improve crops and herd management.

Why the Study is Conservative. There are some obvious economic benefits that aren’t even included in the study. For example, there are several studies that show that lack of broadband depresses housing value. Anecdotally, I’ve been told in the last few years by rural real estate agents that they are starting to have trouble selling houses with no broadband – and it’s hard to put a value on the inability to sell a house.

The study pulls together studies done by others paint an overall picture of broadband benefits. looking at specific benefits of broadband – anybody that wants to understand this more should read the links to other studies. They step that made this study relevant to me was layering these impacts onto the specific area served by the Tipton Cooperative. One only has to travel to rural America these days to be able to see the differences between areas with and without broadband. Areas without broadband are unable to take part in things the rest of us take for granted like online shopping, easy access to do homework or pursue advanced degrees and the ability work from home and start new businesses. This is the first study I’ve seen that has tried to quantify all of these benefits for rural America, and the results are startling.