American TV subscribers are ditching their cable companies at an ever faster rate in the past few months, and many of them aren't signing up with a satellite or phone competitor instead.

Consumers are switching more than channels. More and more they're switching from cable to internet television. (iStock)

Their willingness to simply go without pay television could be a sign that internet TV services such as Netflix and Hulu are finally starting to entice people to cancel cable, though company executives say the weak economy and housing market are to blame.

Third-quarter results reported this week by major U.S. cable and satellite TV companies show major losses, but don't settle the question of what's causing them.

If "cord-cutting" in favour of internet video is finally taking hold, that has wide-ranging implications. Consumers who use the internet to get their movies and TV shows bypass not just the cable companies, but the cable networks that produce the content. The move could have the same disruptive effect on the TV and movie industries as digital downloads have already had on music.

Canadians turn to telecoms for television

In Canada, major telecom providers Bell and Telus increased overall TV subscribers in their third quarters while Rogers boosted its digital subscriber base in its recent quarterly results.

Canadians are spending more time on the internet than watching television. (istock)

Canadians have been spending more time online than in front of their television sets recently, marking the first time internet usage has jumped ahead of TV watching, a survey from Ipsos Reid released last spring suggested.

Cable companies have been both embracing the shift by encouraging their subscribers to stream online content, while also discouraging too much of a shift by offering a growing selection of on-demand services.

A few weeks ago, the CEO of phone company Verizon Communications Inc. likened cord-cutting to what started happening to the local-phone companies five or six years ago, when people started giving up their landlines in favour of relying solely on their cellphones.

"The first thing when that happens is you deny it," Ivan Seidenberg said. "I know the drill. I have been there."

Cable compensates by selling more expensive packages

Cable companies have been losing video subscribers for some time, but they have been compensating by upgrading basic subscribers to more expensive digital tiers, as well as adding broadband and phone subscribers.

Reed Hastings, CEO of Netflix, announces Netflix's expansion to Canada in Toronto, on Sept. 22. (Adrien Veczan/Canadian Press)

Meanwhile, Netflix Inc.'s streaming service has become so popular that it is now the largest source of U.S. internet traffic during peak evening hours, according to Sandvine Inc., a Canadian company that supplies traffic-management equipment to internet service providers. Netflix announced its entry into the Canadian market in September.

A variety of gadgets can send Netflix's streams to the living-room TV, including game consoles and the $99 Apple TV box. Many high-end TVs now come with the built-in ability to play internet content.

Thomas Clancy Jr., 35, in Long Beach, N.Y., cancelled the family's Cablevision subscription this spring. He said he has been happy with Netflix and other internet video services since then, even though there isn't a lot of live sports to be had online.

'The amount of sports that I watched certainly didn't justify a hundred-dollar-a-month expense for all this stuff.'—Thomas Clancy Jr., former cable subscriber

"The amount of sports that I watched certainly didn't justify a hundred-dollar-a-month expense for all this stuff. I mean, that's $1,200 a year," Clancy said. "Twelve hundred dollars is ... near a vacation."

But Clancy is also an example of the hurdles cord-cutters face. He uses an internet-connected Blu-ray player to get Netflix movies to the TV. And he pulls a cable from his computer to the TV for internet content Netflix doesn't have. Clancy owns a computer consulting firm and is tech-savvy enough to do all that. Most people wouldn't know how.

Most people who have the technological skills to take advantage of internet video find that the selection of movies and shows isn't broad enough to make the jump worth it, Sanford Bernstein analyst Craig Moffett said.

Low-income homes drop cable due to cost

On the other hand, poor people have an excellent motive to cut cable and simply replace it with an antenna or nothing at all, he said.

'The price of cable TV has risen to the point where it's simply not affordable to lots of lower-income homes.'—Craig Moffett, industry analyst

"The price of cable TV has risen to the point where it's simply not affordable to lots of lower-income homes. And right now there are an awful lot of lower-income homes," Moffett said. "The evidence suggests that what we're seeing is a poverty problem rather than a technology phenomenon."

In addition, high unemployment in the United States means fewer new households, as children delay moving out of their parents' houses, or people move in with roommates. That can reduce the number of households that pay for TV.

Cable companies would like to get low-income customers back with cheaper cable packages, but their hands are tied. Content providers such as the Walt Disney Co. and News Corp. won't license their channels one by one, so subscribers have to take big, expensive channel packages, or very basic ones, which offer little beyond what's available with an antenna.

Content providers now get billions of dollars in fees from cable service providers, and they want to make sure that whatever new industry model comes along, they'll get paid. It's not obvious yet that internet video will let them sustain their profit levels.

Six companies create the content that consumes 85 per cent of U.S. viewing hours, Moffett said. "Until they get on board, the train's not leaving the station."