While the cable industry continues to argue that cord cutting, the term used for people canceling their cable subscriptions because they can find the content for free or for less online and via other means, isn't real, a new report is confirming the contrary. It turns out that cable lost more than 500,000 subscribers last quarter but not outright, because many customers switched to satellite and IPTV providers. Nevertheless, the pay TV sector still managed to lose subscribers overall, according to research firm SNL Kagan.

Specifically, cable operators lost 741,000 basic video customers in Q3 2010, which is the "the largest single dip for cable since the research firm began compiling data for the segment in 1980." The phone industry added 476,000 customers in the third quarter. Thus, the pay TV sector lost 119,000 subscribers overall: those remaining users most likely moved to the Internet. Cable is falling on the wayside as services like Netflix and Hulu continue to expand their offerings.

Most cable providers continue to deny the existence of cord cutting, arguing that it has yet to have any noticeable impact on subscriber numbers. Others argue that pay TV providers will be the last to admit to the phenomenon as they don't want to scare investors or lead more customers to consider ending their service. Cable companies are blaming the poor numbers on the weak economy but instead of embracing the Web, they're merely raising prices for remaining customers.

"Operators are pointing to a continuation of the forces that pushed subscriber gains into negative territory in the second quarter, including the weak economy, high unemployment and elevated churn of former over-the-air households," Ian Olgeirson, senior analyst at SNL Kagan, said in a statement. "However, it is becoming increasingly difficult to dismiss the impact of over-the-top substitution on video subscriber performance, particularly after seeing declines during the period of the year that tends to produce the largest subscriber gains due to seasonal shifts back to television viewing and subscription packages."