Your Next Cable TV Provider Could Be Google or Apple

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GoogleSomething big is going down in Kansas City. Google (GOOG) is offering lightning-fast Internet -- and television -- at ridiculous prices.

For $120 a month, Google Fiber customers can get Internet access at speeds 100 times faster than today's average, and a TV service that includes most of the major channels. A Nexus 7 tablet doubles as a remote control and the included DVR can record eight shows at the same time. Or, for just $70 a month, they can get only the super-fast Internet.

If those prices seem high, consider that industry leader Comcast's (CMCSA) video customers are shelling out an average of $148.57 a month for a far slower -- and in many regards, inferior -- product.

For now, the cable giant and its rivals can stay calm: Google Fiber has no immediate plans to expand beyond Kansas City. However, the disruptive nature of the world's largest Internet company infringing on Comcast's turf has to be worrisome.

Remote Vitriol

Comcast has a serious problem keeping its customers happy.

That became unavoidably apparent to me last November, when my original Why Comcast Will Never Be Great Again piece attracted more than 1,100 reader comments, with most of those chiming in fed up with Comcast's poor reliability and escalating prices.

But you don't need to lean on my anecdotal evidence. The numbers show Comcast really is having trouble with customer loyalty.

Comcast closed out its latest quarter with 22.1 million video customers, 176,000 fewer families than it served just three months earlier.

This isn't a fluke. Comcast may be increasing its broadband accounts and making inroads in business services, but its video customers have been cutting the cord for years.

Comcast closed out 2011 with 460,000 fewer subscribers than it had when the year began. It also surrendered 757,000 net video accounts in 2010 after losing 623,000 customers in 2009.

Changing Channels

Where are Comcast customers going? Many are finding cheaper platforms, largely in the form of AT&T's (T) U-verse and Verizon's (VZ) FiOS. However, there are also many people getting rid of their cable bills entirely.

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Cable bills creep higher every year, and not necessarily due to greed on the part of Comcast and its smaller rivals. Networks and professional sports leagues demand higher payments, and Comcast has little choice but to pass those fees on to its dwindling base of subscribers. It doesn't seem to matter that most people couldn't care less for more than 90% of the channels in their cable packages. They still have to pay up, because there isn't a single satellite or cable television provider that will let customers cherry pick and pay for only the channels that they want to see.

Networks are the ones that call the shots. They're the ones bundling crappy channels with their popular ones. Realizing its own model's vulnerability, Comcast got into the content game by acquiring NBCUniversal two years ago.

It won't help.

Apple to the Rescue

It's really just a matter of time before Apple (AAPL) disrupts the television market the way that it has revolutionized the music industry and redefined the smartphone market. Before he died last year, Steve Jobs told his biographer that he had "finally cracked" the TV problem.

Apple is reportedly running into resistance from cable networks. Google ran into the same brick wall. However, sooner or later, logic and the consumer's freedom of choice will prevail. Comcast and its peers will never be the same once that happens.

The cord cutting trend is just starting to gain real momentum. It's not just the broader availability of streaming: Consumers have real financial decisions to make. Times are tight. Smartphone data plans aren't cheap. If you think most people would be willing to give up their phones before telling Comcast to take a hike you may be misreading how dependent this country has become on its smartphones.

Television is a $150 billion industry once you bake in monthly subscriptions and advertising, but it may not be that way for long once consumers get to mold it into the product that they want. Comcast's total revenue climbed just 6% in its latest quarter, and analysts see the company's top line growing by just 2% next year.

The trend is unmistakable.

Motley Fool contributor Rick Munarriz does not own shares in any of the stocks in this article. The Motley Fool owns shares of Google and Apple. Motley Fool newsletter services have recommended buying shares of Apple and Google. Motley Fool newsletter services have recommended creating a bull call spread position in Apple.


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