DirecTV Now

Thanks to mysteriously escalating prices, channels you don't want, and a lack of competitive options, cable TV and Internet companies are widely hated in the US.

OpinionsCord cutting is supposed to save us from at least some of that. But AT&T's new DirecTV Now plan just transplants the cable model into the cord-cutter world. It's full of traps and pitfalls for consumers, the biggest of which may not become obvious for another year or so.

DirecTV Now is basically a cable bundle delivered through your Internet connection. You'll see a lot about a $35 promotional rate for 100 channels, but that rate will reset soon enough to $60. That's what Spectrum Cable here in New York charges for a traditional bundle of 125 channels plus DVR service, which DirecTV Now doesn't offer.

AT&T's smallest bundle, which will in fact cost $35, includes 60 channels. That will be a savings over cable. However, you can't get fewer than 60 channels, and in the great cable tradition, they'll probably include a lot of channels you don't want.

(Before you start asking exactly which channels are in the bundles, AT&T apparently isn't releasing a full list until Thursday.)

The company also reserves the right to spontaneously hike prices on that bundle whenever it wants. Because the channel bundles are so big and a little weird (you need the 100-channel bundle for BBC News?) you'll be dragged along into cost negotiations for channels you don't care about.

This isn't entirely on the cable companies. Fox wants to make sure you can't get (popular) Fox News without (less popular) FX and (what is it even?) FXX. Cable companies' negotiations over the mess of channels owned by Disney/ABC/ESPN are an annual horror show. (ESPN alone usually costs an average of $7 per month out of your cable bill.)

The whole struggle over content carriage fees is a big part of why the cable TV pricing world is such a mess, and why you can't get recent network television on Netflix, which works really hard to contain its costs. Cable companies build these big bundles, make them opaque, and then pack profit on top. What you actually pay for the content you watch ends up hidden. Breaking the bundles would be more market efficient and more transparent to consumers. But cable companies don't want that (as they need the opacity to hide their profit margin) and content providers don't want that (as they want to force channels most people don't watch into the bundle.)

So expect DirecTV Now rates to hike regularly, just like cable rates do. And remember, if you're getting DirecTV Now over an ISP with a data cap, as we're seeing more and more often, your TV watching will count towards the data cap. That's another hidden cost. Hooray for cable and its business models!

It gets worse, though. For America.

The First Real Net Neutrality Test

I know, net neutrality is boring. What if I just call it crony corruption? Let's call net neutrality regulations "anti-corruption rules."

DirecTV Now is a real test of our anti-corruption firewalls, in a way that T-Mobile's Binge On and other carriers' competing products are not. That's because it's free for any video channel or site to participate in Binge On. Yes, there are some technical requirements that make it easier for bigger sites to comply than smaller sites. But DirecTV Now launches corruption into a new order of magnitude.

For AT&T wireless subscribers, using DirecTV Now won't impact their data caps. (And remember, AT&T subscribers who don't have DirecTV satellite service can't get unlimited data.) Any other video provider that wants to do this has to pay up, big time. DirecTV Now gets to do this for free. Sling TV would need to write a big check to AT&T.

AT&T claims DirecTV is "paying AT&T" for this privilege. That is transparently ridiculous. That is like if I move a $50 bill from my pants pocket to my jacket pocket and claim that I'm paying myself. The money is going from AT&T to AT&T. Any other description is some silly Penn and Teller slight-of-hand nonsense.

Now we get to what I think of as the frog-in-the-pot factor in this kind of corruption. Offering DirecTV Now for free doesn't immediately stall or block any competitors. It looks like a good thing, where nobody else's things are damaged.

The danger is that we're now frogs in slowly warming pots. Free DirecTV Now will entice a certain number of people away from other services, which will damage those other services and reduce consumer choice. It tilts the playing field. Other services may need to align with other carriers, and then you'll have a situation where if you want DirecTV Now, you sign up with AT&T, but if you want PlayStation Vue, you sign up with Verizon.

Then there will be one choice on each carrier, and, hey, remember your cable bill? Yeah, it's going to look like that. Welcome to the pot, frogs. Hope you enjoy the water.