Data behind recent headlines is suspect
Wednesday’s Wall Street Journal had one of those double-take-inducing headlines: “Cord cutters lop off internet service more than TV.” Huh? Wha?
As the newspaper reports, “last year around 1 per cent of U.S. households stopped paying for home internet subscriptions and relied on wireless access instead, according to consumer surveys by Leichtman Research Group Inc. Just 0.4 per cent of households in the last year canceled their pay-television subscriptions in favour of getting video entertainment over the internet via services such as Hulu or Netflix.”
The study cited rising Internet prices in the face of continuing economic difficulties as the reason for the cord cutting. The average price of home Internet service has been rising steadily, from around $28 a month in 2005 to $46.78 last year.
There’s no argument on the Internet prices, but some of the other issues premised by the story don’t add up. For one, the article mentions that “hundreds of thousands” of Americans cancelled their Internet service in favour of using wireless and hotspots. Yet 1% of the 115 million or so U.S. households adds up to more than a million households, meaning that the total number of Americans who should have cancelled would actually be in the millions. So which is it: hundreds of thousands or millions?
Moreover, millions sounds rather high, doesn’t it? If that was truly happening, surely someone else would have reported it. Even the WSJ article seems to contradict the assertion, stating that “Despite such cord cutting, the cable industry continues to add internet subscribers.” If hundreds of thousands—or millions—of people are cancelling, how is the industry still growing?
It seems like the study is trying to throw cold water on the hotly debated notion of traditional cord cutters, or those people who are cancelling their TV service. Techno evangelists are arguing that the age of traditional television is nearing its end, while cable providers maintain that everything is fine.
The reality is TV cord cutting is happening in much greater volume than home Internet cancellations, at least for now. About five million U.S. households—or 4% of the total—are “zero TV,” up from two million or about 1% of the total in 2007. Those five million households represent approximately 13 million people. Internet cancellation may be happening at a faster pace than TV, as the Leichtman study suggests, but it’s certainly too early to say right now—and definitely too early to proclaim in headlines such as the Journal‘s.
That doubt is amplified by the seeming illogicality of it all. The story doesn’t mention how many of those internet cord cutters are also TV cord cutters, but it’s probably reasonable to assume that most of them are. With its cost skyrocketing incredibly, TV is rightly seen as a luxury that can mostly be replicated via internet, which is conversely viewed by many users, businesses and even courts and governments as essential.
Those people who have cancelled their home Internet probably haven’t thought things through, as evidenced by one such individual quoted in the WSJ story:
He says he worries about keeping up with The Daily Show and The Colbert Report since he doesn’t have a DVR. ‘I’ll probably have to watch them at work, but that could get me into trouble.’
Does it even need to be said? Well, maybe it does: “Good luck with that.”
It’s that necessity-versus-luxury that is actually the alarming thing about all of this. Internet prices are heading upwards simply because providers know users can’t do without the service—it certainly isn’t based on technology prices. Globally, the cost of bandwidth has been plummeting for years. In the United States, meanwhile, competition between cable and telephone providers has petered out, with telcos such as Verizon giving up on investing more in newer infrastructure.
It’s obvious that Internet users are being increasingly milked, but it’s not at all clear—despite one report to the contrary—that more of them are willing to cut the service rather than television.
(Stacey Higginbotham over at GigaOm also critiques the WSJ article, arguing that if it’s really happening, we’re all in trouble.)
This story originally appeared in Canadian Business.
