Tuesday, 21 March 2017 | MYT 7:30 AM
Cord-cutting millennials may break America’s Internet
Good news! There's something else we might be able to blame on those darn millennials besides killing breakfast cereal and shunning the Olympics. They might also crush our disappointingly fragile digital highways.
The US (and the world) is in the midst of a sea change in how we spend our leisure time. Young people are less inclined to indulge in America's favourite pastime: zoning out in front of the TV. On average, people ages 18 to 24 spend half as much time watching live and recorded television as 35- to 49-year-old Americans, according to Nielsen.
Young people are definitely watching video, but it's more likely something from YouTube or a friend's Snapchat story on their phone than the episode of Grey's Anatomy their parents are watching on the living room TV.
The trend is only going to accelerate. Internet hangouts like Facebook and Twitter are delving more into TV-like web video. And the TV-and-movie smorgasbords from Netflix, Amazon and Hulu are increasingly being joined by packages of internet-delivered TV channels from the likes of DirecTV, YouTube, and soon Hulu and perhaps Amazon.
Those online TV alternatives such as Dish Network's Sling TV picked up 888,000 customers last year, according to research firm MoffettNathanson. Over the same period, cable, satellite and telecom TV services lost a cumulative 1.7 million TV customers, which MoffettNathanson estimates was the industry's fastest rate of decline on record.
That's not (yet) the tidal wave of “cord cutting” feared by TV industry pessimists. But it's clear the future of home entertainment lies over the internet and smartphone networks.
As TV changes accelerate, though, not enough people in the technology and entertainment industries are talking about a crucial issue: Can America’s expensive and inferior home and mobile Internet networks handle it as more people shift from watching TV to having their entertainment delivered over the Web?
Even now, many home Internet networks can't manage. Media and tech consulting firm Activate estimated only 12% of US households have fast enough Internet speed to support multiple people watching TV online via services such as Sling TV. About 34 million Americans – 10% of the population, and 39% in rural parts of the country – have no access to fast home Internet, according to an analysis by the Federal Communications Commissions.
It’s true that tech companies such as Netflix and Google's YouTube have devoted their considerable resources to ensuring their videos can stream even at pokey speeds. But few companies have the smarts and financial firepower of those giants. And broadcast TV is particularly tricky because it hogs more bandwidth and is a bigger technical challenge than streaming an older episode of Game of Thrones.
Think about how often there are problems when popular events are streamed online. Almost every year people have hiccups when they try to watch the March Madness college basketball tournament on their computers and phones, and so far the volume of people watching TV online is pretty tame. A National Football League executive said at most 3 million people tuned in to watch Yahoo's live stream of a 2015 game. On TV, NFL games average tens of millions of viewers at once.
Watching video via cellular networks is also a problem. Rich Greenfield, an analyst with BTIG Research, this week published an analysis that found streaming just 30 minutes a day of (non-high definition) video on AT&T's mobile network would add up to 10.5 gigabytes of data each month. That is beyond the monthly allotments for many people.
Even for smartphone users who have an increasingly prevalent “unlimited” data plan, video is slowed to a crawl – if it's available at all – after 20 to 30 gigabytes of monthly data usage.
I have a habit of asking executives involved in web video whether they're concerned about the Internet's ability to keep pace with an explosion in demand for more and more Internet TV, movies and other video. Almost none of them admit to such concerns, and when they do they tend to believe US cable and telecom companies will continue to invest in new technologies to bulk up broadband and mobile networks.
I'm not so sanguine. Traditionally, the cable and telecom companies that are responsible for Internet networks don’t have a great track record of making infrastructure investments, which often don't result in decent financial returns. Hopes that new mobile technology will patch holes or replace creaky broadband aren't realistic for all but a handful of circumstances.
The best hope for our Internet infrastructure is that online video watching by those darn millennials will increase slowly and steadily rather than surge in coming years. Because if it does surge, the Internet might have a meltdown. — Bloomberg