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Dish’s new Sling TV is a huge deal. Here’s why.

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You may have heard that Dish Network is unveiling a new online service called Sling TV. This is no ordinary set-top box alternative: Now, for the first time, you'll be able to get live sports, online, without paying for a cable bundle. That's a huge deal, and potentially a sign of things to come. Here's everything we know about Sling TV and why it matters.

What is Sling TV?

Sling TV is a service by Dish Network, one of the country's largest satellite TV providers. When it officially goes online in a few weeks, it will cost $20 a month. For that you'll get access to about 30 channels — including TNT, Cartoon Network and CNN. These channels will be streamable over the Internet — or "over the top," in industry parlance. But the real kicker is that Dish is throwing in ESPN (more on that in a second).

Why is Dish launching something like this?

Dish wants to go after cord-cutters — a growing segment of TV watchers who don't subscribe to pay-TV and instead watch only free, over-the-air television, on-demand services like Netflix, or a mix of both. The drawback to being a cord-cutter is that you sometimes sacrifice channel choices. You don't get to watch HBO, for example, if you're a cord-cutter. But many people, particularly young viewers, don't seem to mind — and that's a problem for traditional pay-TV companies.

So, why now?

Well, HBO recently announced it will offer its own standalone Internet streaming service, making it possible for you to watch its premium shows even if you don't have a cable subscription. In fact, this has been a characteristic of the whole industry lately: CBS is going "over the top," too. There are rumors that Verizon may want to partner with AOL, a move that would put the telecom giant in a good position to distribute video content over its Internet pipes. Federal regulators recently took steps to nurture online video services. In short, everyone is preparing for a future where at least some TV is streamed over the Web, and by exclusively offering ESPN on its service, Dish stands to get a head start on its rivals.

What's the big deal about ESPN?

Live sports is pretty much the foundation for all paid television. It's the thing that holds the cable bundle together; without it, you'd wind up with a collection of mostly middling channels that few people would be inclined to pay for. This is reflected in each channel's monthly price:

As you can see, sports channels command a premium. But now that non-cable subscribers will be able to get live sports through Sling TV, it's an open question whether people will continue to pay for those pricey pay-TV packages.

Are we witnessing the end of the cable bundle?

Not quite. Sling TV is only a first step, and it comes with some limitations. For instance, Monday Night Football won't be viewable on mobile phones due to provisions in ESPN's own contract with the NFL. And it's still unclear what Sling TV means for live, local sports games.

Meanwhile, some analysts say cable unbundling could easily backfire. Here's how the Wall Street Journal explains it:

Laura Martin, an analyst at Needham & Co., estimates that unbundling would drain half of the revenue, or $70 billion, out of the television industry. Moreover, today’s hundreds of channels would shrink down to about 20, she wrote. That is because advertising would decrease substantially on channels with reduced audience reach, forcing consumers to pay the entire cost of running the channels, instead of splitting that cost with advertisers, as is done in basic cable.

Should I get Sling TV?

At the moment, it's certainly looking like an attractive deal. Suppose you pay $20 a month for Sling, $8 a month for Netflix and $8 a month for Hulu. Maybe you pay $6 a month for CBS's streaming app and $15 a month for HBO's standalone app. That adds up to $57 a month, which is still way less than many pay-TV packages.

But you still have to pay for Internet!

True. Internet access still represents a substantial monthly charge even if you've decided to abandon the traditional TV lineup. This raises an interesting empirical question: Is it cheaper to get an Internet-only plan from your broadband provider, then supplement that with Sling TV and other streaming services? Or is it still more cost-effective to get cable TV and Internet together?

The answer depends on where you live. I went back and looked at New America Foundation's annual Cost of Connectivity report — a yearly study of how much Internet access costs in various places around the world. Focusing solely on Internet plans in the United States, we wind up with this chart:

On the left there, you'll see prices in blue for plans starting at speeds of 4 megabits per second — the baseline download speeds required for streaming HD video. The most expensive plans top out at around $70 — which, combined with the $57 package we cobbled together above, adds up to a hefty $127. A more modestly priced plan for similar or better speeds in the $30-$40 range, which New America says is available in cities like Washington, D.C., Los Angeles and New York, bring that figure down to a more manageable $90 to $100.

Update: A few sharp-eyed readers are offering the reminder that CBS All Access won't include NFL games, either. Very good point.