While stories of the cable companies running in fear from the impending flood of online content and restricting bandwidth in response have been common on slashdot for a while it's disappointing that something like the Economist has picked up this fable.
The reality is that most of the content that offered on cable today won't make its way to the web for free under the current revenue models of content providers (not cable cos). Currently half of the revenue that channels like TLC get is from cable subscriptions. The other half is from advertising. These channels aren't interested in cutting their revenues in half on the hopes that on-line advertising somehow doubles in profitability. This is especially the case when it's currently only about 10% of what the same ads get you on TV.
Hulu is an experiment by major networks (FOX/NBC) (who already provide their content for free and get most of their revenues from advertising) to see if they can make the online advertising model work and capture more eyes than they are currently getting. While the site is successful in terms of traffic, the advertising dollars aren't there yet. As long as it doesn't undermine the real money of TV advertising, it's a useful experiment. (There is some cable network content on Hulu from Viacom ala Comedy Central/Sci Fi but its the content that is so mainstream that the advertising experiment may pay-off).
While the Economist was missing the boat they decided to also throw in the al-a-carte pricing myth as well. That model doesn't work either since not everyone wants the same 15 channels. If you move to that model then today's 100 channels would be tomorrows 20. Hope you like Home Shopping Network more than BBC America.
As to why DOCSIS 3 is so slow to make its way out? First cable cos are large companies that have basically been monopolies for long enough that their culture reflects that. They are slow to do anything. Second, they are waiting for the end of analog signals so they can reclaim some bandwidth. Third it's expensive. When you have 30 million customers, $100 a pop is real money. Under these conditions, there is little incentive to rush to market. That said, cable cos are starting to roll out this service and increasing the bandwidth of existing customers.
So what will happen? I think content providers will partner with cable cos to provide their content online. It will be on a different part of the pipe, just like phone service is so you get good quality of service for HD even when your neighbor has his torrents at full throttle. You'll see reasonable network caps like comcast's 250GB a month but your video viewing (on that separate pipe) won't count towards that so you mostly won't care providing you have a job or something else to do other than watch torrent content all day. Will you suddenly get all the good content you want for free? Unlikely. Will your most affordable (and legal) option for getting content still be from a cable co/tele co? Probably. Hopefully as more options become available: Cable, Fiber, Netfix, iTunes, the pressure will be on cable/tele cos to provider a better experience.
