The world looks very different now than it did just a few months ago. COVID-19 has spread across the globe, causing tragedy on a massive scale and triggering huge shifts in lifestyles and business practices. Much of the world's population now lives under stay-at-home and social isolation guidelines of varying degrees of severity and legal weight. Meanwhile, businesses are operating (if they can) in a world in which human contact and free movement are heavily restricted.
Though it is by no means the most important aspect of the crisis, the current conditions create unique challenges for legacy pay-TV companies like AT&T (NYSE:T), Comcast (NASDAQ:CMCSA), Cox Communications, Charter Communications (NASDAQ:CHTR), and Verizon (NYSE:VZ). A stay-at-home population means more TV viewing and more internet use (the latter is of concern to many legacy pay-TV companies as well, since many are also internet service providers (ISPs)). Cable (and satellite) are more popular than ever among those who were already paying customers, but new customers are hard to acquire when installation technicians can't visit people's homes. Here's how the COVID-19 crisis is impacting cable TV companies.
Staying home and watching TV
First, the good news: With hundreds of millions of people largely staying home, a lot of folks are watching more TV. This home entertainment boom has lifted streaming services, and it's boosting cable and satellite TV viewership, too. Nielsen predicted a rise in TV watching under quarantine circumstances of up to 60%, and while the numbers don't seem to be quite at that level (yet), they have certainly risen. Television news programs are (as Nielsen and others predicted) doing particularly well -- a good thing for cable TV providers. While services like Alphabet's YouTube are becoming increasingly important mediums through which people can access the news, cable still has the edge when it comes to providing live video news broadcasts. (If there's a real tech industry threat to cable news, it's Facebook -- through which roughly half of all adults say they get news -- rather than any strictly streaming TV news alternative).
To your door -- and no further
But there are also problems with having a customer base full of self-isolating TV addicts. When things go wrong with cable connections, providers typically send technicians into customers' homes to fix the issues (often for a fee, of course). But with the pandemic still spreading, such activities are -- to varying degrees depending on where in the U.S. one lives -- unsafe, illegal, or both. That has forced cable companies to make tough decisions. Cox, for example, has decided that its technicians will stay outside of homes during service calls; so has Verizon. There are still things those workers can do to help a customer without going inside their home, but the inability to walk through the front door is a clear limitation.
That isn't just an issue for repairs. It's also a problem for securing new customers. There are very likely some cord-cutters out there who wish they still had cable right now, at least for the duration of their isolation. But, in many cases, it's far too late to get new service set up. Cable and satellite operators typically offer in-home installation, but such services are virtually impossible to offer safely in the midst of this pandemic.
At least one pay-TV company has an attractive alternative right now: AT&T recently debuted a pay-TV service called AT&T TV. Though it's technically a streaming service, AT&T TV has all the features of a legacy pay-TV service: It features huge bundles of channels, long-term contracts, plenty of fees, and even a de facto cable box. (AT&T TV's Android TV-powered streaming box is the only non-mobile device that the service works with, and customers who want AT&T TV on more than one TV need to have multiple boxes -- one per TV, just as with a cable box.) But AT&T TV wasn't designed to be a streaming service -- AT&T already has one of those in the form of the rather similarly named AT&T TV Now. Instead, AT&T TV is supposed to play a role similar to that of DirecTV (the satellite TV service that AT&T acquired in 2015 for $49 billion), but with lower costs for AT&T. The big cost-saving measure: it doesn't require professional installation. Right now, that's a trait that looks like much more than just a way to save on overhead.
Internet traffic challenges
The newly homebound population of the United States is not just watching a lot of TV. They're also, in many cases, hard at work. Many professionals are now working from home, which is putting added strains on communications networks, often in residential areas that would never see such traffic under normal circumstances.
This has caused big problems in Europe, where broadband networks have been overloaded by crisis-related traffic -- including uses directly related to the pandemic (such as healthcare-related traffic and emergency communications), traffic from the working world (including new work-from-home connections and the bandwidth-hogging VPNs that many companies use for security purposes), and even traffic from a bored population killing time with Netflix, online video games, and other web-connected diversions. To help out in countries where the networks are overloaded, companies like Netflix and Google have agreed to limit streaming quality on their video-streaming services.
Netflix isn't dialing back its streaming quality in the United States -- not yet, anyway. But for the many cable companies that are also ISPs, the ISP side of the business is demanding attention. The good news for internet users and ISPs alike is that the United States has a strong broadband infrastructure. Cox and Comcast, among other companies, have stated that they are ready to meet the surging need for internet bandwidth. But it's too early to say if the effects of the COVID-19 pandemic will cause serious problems with U.S. broadband networks, especially given that the virus is furthest from reaching its peak in the same rural and semi-rural areas that are home the country's weakest broadband infrastructure. As of this writing, the areas hit hardest by COVID-19 are primarily well-connected cities like Seattle and New York City. Speaking to The New York Times, former FCC Chairman Tom Wheeler expressed uncertainty about America's broadband infrastructure: Asked how it will fare under this strain, Wheeler replied, "We just don't know."
For now, though, the ISP business remains a bright spot for companies like Comcast at a time when their other ventures (such as Comcast's movie and TV production business) are struggling. As for what the future holds, only time will tell.