Cord cutting started picking up steam in 2016 when 1.9 million pay-TV customers abandoned the service, according to an estimate from SNL Kagan. But that's just the tip of the iceberg. The research group expects 10.8 million more customers to cut the cord over the next five years, with total subscribers falling to 82.3 million.

That's bad news for pay-TV giants like Comcast (NASDAQ:CMCSA) and AT&T (NYSE:T). But it could be a major opportunity for virtual providers like DISH Network's (NASDAQ:DISH) Sling TV to take share of the pay-TV market. Kagan estimates virtual service subscribers will climb to 11 million by 2021.

Scissors about to cut a coaxial cable.

Image source: Getty Images.

Cord cutters can't live without TV

Even though some consumers ditch their traditional pay-TV plans, they still have a habit of sitting in front of the television. That leads them to spend more time watching over-the-top video services compared to cord-never households, according to data from Comscore.

Virtual pay-TV providers often offer cord cutters a lower-priced option compared to traditional cable, which may attract some to simply switch service providers. Considering the switching costs for virtual providers is extremely low for customers (and often includes free trials), many cord-cutters may opt to sample various services to see if any fit their lifestyle at a price they can accept.

There are currently just over 3 million virtual pay-TV subscribers in the U.S. Sling TV is the market leader with over 2 million subscribers.

The number of virtual options continues to grow with Hulu and YouTube recently offering live TV services. AT&T launched DIRECTV Now last fall. Verizon (NYSE:VZ) is expected to launch its own over-the-top service as well. The space is much more wide open for competitors compared to traditional television content delivery, which required significant upfront capital investments.

As more and more companies enter the market, it could help accelerate the cord cutting trend at traditional providers. Some companies like DISH, AT&T, and Verizon will be cannibalizing their own services, although management likes to say it's expanding the addressable market.

If you can't beat 'em, join 'em

The problem cable stalwarts like Comcast now face is the potential erosion of their video subscriber base as more competition enters the market. Comcast currently benefits from offering a premium product compared to traditional and virtual distributors. Its X-1 platform for on-demand and streaming content has helped improve subscriber retention. Additionally, streaming services are much more prone to technical glitches and outages, making the viewing experience sub-par at times.

But as more competitors enter the over-the-top market and technology improves, Comcast's advantages may disappear. If that's the case, it will see an uptick in subscribers abandoning its video service and find itself forced to do what AT&T and DISH Network did and launch its own OTT service.

That could result in lower profit margins for its video business, as these services generally carry significantly lower service prices while programming expenses take up a larger share of revenue. While it beats the prospects of losing a customer entirely, Comcast will want to delay an over-the-top service as long as it can.

There is a potential upside for traditional pay-TV providers, though. Many are tied to certain territories due to the limitations of the physical infrastructure required for distribution. Virtual providers can easily operate nationwide, opening up new markets to companies like Comcast and Verizon. (AT&T and DISH notably already have nationwide coverage through satellite.) Verizon's territory is relatively small compared to Comcast, so it makes sense that it's planning to launch in the near future while Comcast delays a virtual service outside of its territory.

The next wave of cord cutting is just starting to build to a crest and the influx of virtual providers is helping it gather momentum. The good news is that many cord-cutters will be looking for a replacement instead of an alternative, which, as Kagan's estimates show, ought to result in most customers paying for TV one way or another.

Adam Levy owns shares of Verizon Communications. The Motley Fool owns shares of and recommends Verizon Communications. The Motley Fool has a disclosure policy.