Cable is indeed losing subscribers, but it's happening very slowly. According to the latest data from Nielsen, the number of U.S. homes with cable subscriptions has declined 4.1% in the last year. Meanwhile, TV service provided by telephone companies like Verizon increased 21.1%.

Nielsen reports considerable growth in the sector of consumers who watch a combination of Web-based and non-cable broadcast television. This is the crowd that Boxee hopes to target with its live TV antennae dongle. They watch half as much TV and stream twice as much online video as the general population.

It's a group that has grown quickly, but still makes up only 5% of consumers. By comparison, nearly 71% of households subscribe to both broadband and cable television. Cable's penetration rate alone is more than 90%. In short, it's not going away anytime soon.

The cable industry faces real, longer-term threats from the likes of Netflix, Hulu and increasingly, Amazon Prime, as well as from set-top boxes and connected TVs. Trends in technology, coupled with the high prices of cable subscriptions, are slowly making cable less attractive to consumers Realizing this, the cable companies have put a renewed focused on innovating for a hyper-connected, multi-screened future.

TV content - wherever it may originate - still takes up an extraordinary amount of our lives. On average, Americans watch 33 hours of television per week. Television has long dominated the media diets of consumers, but what's changing is when and how they access it.

After what turned out to be a pretty good year in 2011, Hulu announced last week that they are planning to invest $500 million in new content initiatives. That will undoubtedly include more pricey agreements with traditional content providers, but today the company revealed another place it plans on spending that money: on original programming.

A week before the debut of "Battleground," Netflix will be airing its first installment of original programming as well. A mobster drama called "Lilyhammer" is expected to be the first in a series of Netflix-only shows to launch over the next two years. Next year, the canceled-yet-beloved series "Arrested Development" will be making its triumphant return to screens of all sizes, not through the Fox network on which it originally aired, but exclusively through Netflix.

Web-Only Premium Content: A Disruptive Force?

As early and unproven as this Web-first model is, it may well represent the next phase in Web TV and pose a tangible challenge to traditional content distributors. Such a challenge would come despite the predictions of people like Mark Cuban, who recently wrote a blog post outlining why the television business as we know it isn't going anywhere, despite advances made in the online streaming industry.

Cuban, himself the chairman of a cable network, touts the immediacy and timeliness of the traditional TV model, as well as its inherent value to advertisers, who he says prefer to have their messages reach viewers within a shorter timeframe.

Still, if Web-only series such as those premiering on Netflix and Hulu do particularly well and spawn more like them, that will be one less reason for many people to keep their cable subscriptions, if they ever sign up in the first place. With the arguable exception of live sports and certain popular, premium cable programming, the incentive for subscribing to cable continues to decline, especially as prices climb.

Long the go-to source for LOLcats and viral, homemade videos, YouTube is getting serious about premium content as well, with Google actively seeking more professional video content and redesigning the site to help better showcase that content. This push for premium video comes as Google TV is being revamped and added to more connected devices and television sets.

Cable may not go extinct overnight, but if what we saw come out of CES last week is any indication, the future of TV is very much connected to the Web and far more interactive than ever.

They may not like to publicly admit it, but cable company executives realize that this looming threat is real, even if it's not overwhelming just yet. That's why they've taken a series of defensive measures to ensure they they don't get left in the dust. Lately, it's the iPad and tablets in general that are serving as big cable's next battleground for the attention of consumers.

This week, Showtime joined its premium cable channel competitor in this space by launching its Showtime Anytime app for the iPad. The application offers access to the channel's library of original content but, again, you need to be signed up for Verizon FiOS or AT&T's U-Verse to access it.

Cable behemoth Comcast has wasted no time expanding its online and mobile offerings under its XFinity brand (formerly Fancast). Most recently, the company launched a pilot program for something called AnyPlay, which will let subscribers stream live TV to their iPad or Motorola Xoom tablet. This enables people to tune in from anywhere in their home, even if somebody else in the household is currently watching a different program on the bigger screen. This is something the company started testing out last year in an effort to one-up online streaming sites like Hulu and Netflix.

Offerings like this make a cable subscription much more convenient and worthwhile to certain consumers, despite its rising prices and the existence of a host of Web-only content alternatives. For now cable companies retain the upper hand, with millions of subscribers and increasingly aggressive innovation designed to help it avoid the fate of other pre-Web media industries. Whether these efforts succeed in the long run remains to be seen. If not, there's always money to be made in selling access to the Internet itself.

By 2016, the number of households that do not subscribe to a traditional pay TV service will triple from what it is today. All told, 9 million households won't have cable, Magnaglobal predicts. Of those, about 4 million are what we'd call cord cutters; people who once subscribed to cable but canceled it in favor of accessing television content via the Internet using a set top box or computer hooked up to their TV sets.

The number of people who never signed up for cable is expected to double - to 5 million, from 2.5 million today - by 2016, according to the report. Meanwhile, growth of DVR ownership is expected to slow down, as the devices become less necessary in light of stream-anytime Web content sitting waiting in people's video queues.

The cable industry, having seen this coming, is preparing its own preemptive strikes. Comcast and Verizon are rumored to be bringing cable subcriptions to Microsoft's XBox 360, a gaming console that effectively doubles as a set-top box. Comcast has rolled out its own Web TV initiative called "TV Anywhere" that lets paying subscribers watch content from a variety of devices. They also bought a giant content company, just in case.

Photo by Windell Oskay

The Ideas and Solutions report, which is greatly skewed to the point of view of the paid television operators, puts the so-called Generation Y demographic of 70 million TV watchers into three groups - "loyalists," "leaners" and "at-risk." Not surprisingly, the "at-risk" group were early adopters of technology much more likely to gravitate towards services like Hulu and Netflix. What category do you fall in?

According to Ideas and Solutions market breakdown, I would fall in to the "at-risk" group, as would probably most employees at ReadWriteWeb.

"It's not that the sky is falling, but it certainly warrants a lot of attention, and the subscription-based pay-TV providers, along with the programmers who rely on them for distribution, should really invest the time and the resources to get to know this audience better," Glen L. Friedman, president and founder of Ideas and Solutions, said in a release.

Why Gen Y Is Leaning Away From Paid Television

The report notes that consumers loyal to paid television were sports fans who found the billing cycle convenient. It says that marketers can keep subscribers by attuning television more to "at-risk" and "leaners" preferences such as on-demand, DVR options and programming more aligned with their interests.

Cost was the major factor in cord-cutters decisions, with 69% "at-risk" and 61% of "leaners" citing it as the primary reason for cutting the cord. "Other ways I can watch entertainment content" was at 36% and 35% for the two groups respectively.

Nearly 50% of those at risk of cutting the cord are Netflix and Hulu users as opposed to 29% of "loyalists" and 42% of "leaners."

Ideas and Solutions suggests that paid television providers become "need to be cognizant of their pricing and packaging models and face the challenge that many 'Gen Ys' want the features they need at affordable price points because they are
willing, ready and able to turn to alternative options, no matter what their level of loyalty to pay-TV," the report says.

The was an "integrated qualitative and quantitative study of 500 aged 18 to 19 who were current pay-TV subscribers. Friedman has developed product strategy for DirectTV and held senior positions at Time Warner Cable and Century Cable.

The ALBA-1 cable arrived in Siboney on February 9th, linking the eastern Cuban town to the cable's start-point in the Venezuelan port city of La Guaira. The second part of the project will lead from Cuba to Ochos Rios in Jamaica.

The Venezuela-Cuba joint project has been advertised as a triumph against the United States embargo of the island nation. Venezuela's Gran Caribe and Cuba's Transbit hired a Chinese subsidiary of the French company Alcatel-Lucent to lay the cable at a cost of $70 million. It took 19 days for the specialized cable-laying ship, Île de Batz to make the journey from Venezuela.

The project is an indication of how important the Internet is, even to countries whose relationship to communications is antagonistic. Currently, virtually no private Cuban citizens can secure an Internet connection. To blog, Cuba's small blogger community must copy their posts onto a thumb-drive and sneak into a dollar-only hotel to post, or to email the post to compatriots outside the country.

Cuba's Bloggers

According to a leaked diplomatic cable, the Cuban government is more afraid of this small but powerful group of bloggers than it is of its entire old-style dissident population.

Nevertheless, according to the press release:

"Cuban officials say the country's priority will be to build more public telecentres and improve Internet access at schools, hospitals and scientific institutions."

Look for Hugo Chávez's government to provide its Cuban counterpart with extensive filtering tools, perhaps by passing on software and hardware made by American companies like Cisco and McAfee.

Siboney photo by Klaus Schaefer | Île de Batz photo from Wikimedia Commons | other sources: BBC, AP/TMC, Cuba Standard

So, we were quite excited to learn this evening of a new proposal that would give New Zealanders - including a couple RWW staff members - a better broadband experience. According to NZ website Stuff, a halndful of well-known innovators and entrepreneurs are teaming up on a $900 million dollar project that would give Kiwis (and their Aussie neighbors) "virtually unlimited" broadband access via an international cable that would run across the Pacific Ocean. Just how much of a difference would this cable make compared to current Internet access?

The plan is to construct a 5.12 Terabits per second-capacity fiber cable to connect Australia and New Zealand to the U.S. - a cable that would deliver data at five times the speed of the current network.

This proposal puts Warehouse founder Stephen Tindall, TradeMe creator Sam Morgan, entrepreneur Rod Drury, and techies Mark Rushworth, John Humphrey and Lance Wiggs in competition head-to-head with Southern Cross Cable, a large network partially owned by Telecom New Zealand. The team, called Pacific Fibre, hopes to complete the project by 2013.

Of course, the next step is figuring out the exact cost of the proposed cable - the group thinks $900M might be a highball figure - and find investors. However, as Tindall eloquently noted, you have to spend money to make money - something anyone with an interest in NZ's economic future and global competitiveness must consider.

"The New Zealand Institute identified billions of dollars in economic potential by unleashing the Internet," he said, "and it is beyond time to address the issue. This is necessary and basic infrastructure - we must decrease the distance between New Zealand and the international markets.

"Doing so will be incredibly valuable for New Zealand and Australian businesses and consumers. If we are able to deliver on this cable this it could be as valuable to our NZ economy as the quantum leap refrigerated ships were to our export trade many years ago."

How feasible do you think this project will be? Is 2013 a realistic time table? And where do you think Pacific Fibre's investors will be found? Let us know your opinions in the comments.

If you think regular bloggers get trolled in their comments sections, the discussion on Blogband is likely to get heated. Comments will be moderated before being posted and any off-topic rants will appear on the Off Topic Comments page. While the page is currently empty, depending on the decisions made about fiber, ISPs and infrastructure, it's likely to light up like a Christmas tree and read like The Best of Craigslist.

Authentication

Now, Comcast and Time Warner are about to start a trial with about 5,000 cable customers that would give these households access to TV programs on the web. Of course, the real test here is not whether the cable companies can deliver online TV over their networks, but whether they can figure out a good way to 'authenticate' households that have a cable subscription.

Spin: More Choice for Customers

As Om Malik points out, this also opens up the door for possible anti-trust proceedings against the large media companies that are involved here. For now, it looks like Comcast and Time Warner will be working together on this project (Time Warner uses the name TV Everywhere, Comcast calls its system "OnDemand Online"). In this limited first test, Comcast will carry some programming from Time Warner's TNT and TBS networks.

As expected, the cable companies are spinning this as an innovative agreement that will bring "customers exponentially more free content, more choice and more HD programming online as well as on TV." In reality, of course, this project is simply a way for the cable companies and networks to protect their revenue streams.

There is, however, also some truth to the cable companies' claims. A lot of cable networks do not put any of their content on the Internet, as the networks don't want to jeopardize the lucrative income stream they currently receive from the cable companies.

Hulu, the Elephant in the Room also Wants to Play

As of now, free TV programming online isn't going to go away anytime soon, but as PaidContent reports, Hulu, the most visible online TV site, is also looking into subscription models and the executives there might not be averse to joining the cable companies' authentication schemes. At some point in the future then, your cable subscription might determine which shows you can watch on Hulu and similar online TV sites.

• Laziness: "It's hard to beat the one-stop shop of cable. It's all right there at literally the touch of a button."
• HD: "TV shows on Hulu are great and convenient but are not in HD. I could stream HD content on ABC, but I'd have to watch it on my Mac ... iTunes doesn't offer HD versions of its TV shows."
• Discovery: "There is a Zen-like satisfaction to flipping through channels and finding a cable oddity that I didn't know existed."

Despite my own hate-hate relationship with my cable TV provider, I too can't seem to walk away. Here are some of my own additional reasons:

• Live sports: What can I say? I'm a sports junkie. Yes, you can get a lot of sports streamed live online these days, but not as much as over cable (especially in local markets), and if you add up all the costs you're talking about a significant investment just for sports.
• Convenience: No downloading, no buffering, no waiting in line, no waiting for someone to seed last night's big season finale. Cable is always there for me, working just as promised. And if you have a DVR, you even get to watch it on your own time.
• Impatience: Before BitTorrent, or iTunes, or Joost gets a television show, it is broadcast over cable or network TV. There are some shows I don't want to wait for: 60 Minutes, NOW with David Brancaccio, and Bill Moyers Journal come to mind. (You know, as long as there isn't a game on... ahem.)

But for everything there is to like about cable, there is an equal or greater number of reasons to cut the cord. The headaches I've gone through over the past few months dealing with my cable provider (Cox -- one of the few companies on the planet that can almost make Comcast start to sound good to me), from not showing up for scheduled service appoints to slipping things I didn't order onto my bill, should have been enough to make me cancel my contract, if not for television's addictive hold on me.

We've looked at the numerous Internet TV options on ReadWriteWeb in the past (see in depth reviews here and here), and on my computer right now I have Joost, Babelgum, Livestation, and Veoh installed. But none seem compelling or complete enough to grab my full attention away from cable.

Do you still watch cable television? If not, what made you give it up? Do you watch TV online? Let us know in the comments below, and vote in our poll. In the meantime, I'm going to check what's on.