When one accesses HBO via cable
television and other multichannel video programming distributors (MVPDs”), the
subscription price covers both content and conduit. With HBO’s announcement that it will offer
standalone access, without proof of an MVPD subscription, consumers now will
see a price point for only the content. Curiously
this unbundled price may exceed the current rate of about $15 a month offered
by MVPDs that includes carriage.
How can
this be? Are MVPDs underpricing, or
ignoring carriage costs? Does a $15+ standalone price ignore the cost
savings when consumers and not HBO bear the cost of carriage? Is broadband carriage of an additional
bitstream so insignificant in cost that it’s not worth metering or charging?
These
questions do not have easy answers, in part because outsiders, including researchers
like me, have no access to cost information.
We know that bandwidth intensive applications, such as streaming video, can
have a significant cost, particularly at busy hours when a carrier might have
to invest in more bandwidth and switching facilities to accommodate
demand. However, we also know that
unless and until Internet Service Providers (“ISPs”) reduce their unlimited or
250+ GigaByte monthly allowances, subscribers incur zero cost when they have to
bear the cost of carriage for delivery of HBO.
So the cost
of broadband carriage will have no significant impact on consumer decision
making about bundled or unbundled HBO access unless and until using an Over The
Top (“OTT”) application for unbundled access to content only triggers additional
charges. Put another way, if consumers
can “binge watch” HBO, Netflix and other content sources without exceeding
their monthly data allowance, then having to bear the cost of carriage is insignificant.
Who bears
the cost of carriage has become a significant matter in recent weeks for
content providers, like Netflix, content distributors, like Level3, last mile
ISPs like Comcast and consumers. Most wireless
consumers on metered data plans, have no more than a few GigaBytes available
per month. Device shifting HBO from the television set, or even the PC with wired
broadband access, to mobile tablets and smartphone would likely trigger a
higher data charges, or migration to an “unlimited” data access tier.
The
possibility exists that MVPDs like Comcast can punish HBO and its standalone
subscribers by reducing wireline data allowance. Rather than meddle with HBO traffic, by throttling
or degrading service, all Comcast has to do is raise subscribers’ incremental cost
of video streaming and other OTT applications from zero.
