American Cable Association president Matt Polka said that while his members still consider themselves in the cable business, that business is "failing."
Polka's comments came during an interview for an episode of C-SPAN's Communicators series that will air Saturday, June 3, at 6:30 p.m. on C-SPAN, with re-airings Monday, June 5, at 8 a.m. and 8 p.m. on CSPAN2.
Interviewer Peter Slen pointed to a Multichannel News story about ACA's annual summit that noted Cable One was no longer marketing its video services because of the high costs, focusing instead on broadband.
"The cable business isn't what it used to be because of the high costs—the increasing costs of not only cable programming and sports programming and broadcast programming through retransmission consent—and as a business it is failing," Polka said. "It is very, very difficult in some cases for an operator to break even on the cable side," which is why broadband was so important.
Tom Larsen — senior VP of government and public relations for ACA member Mediacom, who was also interviewed for the program — called cable his company's "worst product" in terms of profitability.
But while it is a challenging business, Mediacom is not ready to abandon it yet, Larsen added, saying the MSO hopes that someday its programming "business partners" will be more "sensible" on pricing.
Polka called cord-cutting the "video issue of our time," saying over-the-top (OTT) video is giving customers more choice than the bundle of linear cable programming.
But he noted that cable operators are not just watching from the sidelines as the Hulus and Amazon Primes of the world proliferate. He said they are providing consumers with more choice as well, "through on-demand, through availability of over-the-top services, as well as making sure that their broadband plant is fast enough to support a video consumer's habits."
Larsen was asked why cable did not move to a skinny bundle model in the face of the increased over-the-top choice and control. He put most of the blame on programmers.
"They would rather continue to reap the cash from that platform and grow outside of that platform with newer over-the-top providers," Larsen said.
He said if MSOs were able to do a skinny bundle, they would be able to drop channels from their expanded-basic lineups, and programmers don't want that.
Asked why not an a la carte model, Polka cited the same reason Larsen had used, saying, "It is the companies that control the content and the distribution rights."
He pointed to carriage agreements that require minimum subscriber reach or charge a rate penalty. "So it is very difficult for operators to create that choice for consumers," he added.
Larsen said another way to get more sensible about pricing is to rein in the "reckless" spending on sports rights.
On the topic of regulation, Polka said the ACA is hopeful the new Republican administration would bring more balance to communications regulation overall, so operators like Mediacom can lower the costs of regulatory compliance and raise investment in plant.
Larsen said he did not expect FCC chair Ajit Pai to address an issue of great importance — retransmission consent — the fastest growing cost of Mediacom's business.