BMT, many of the networks are actually raising the prices they charge cable companies because their revenues are down. It is having he opposite affect of your prediction, and many basic cable plans are becoming more expensive. The competition between the major providers is the only thing currently keeping pricing in check. We still have our cable for the time being, but I wouldn’t be opposed to dropping cable at some point – we rarely watch much TV. Unfortunately, the channels we watch most often are cable only channels! 🙂
Yes, Amazon Prime requires an internet connection to stream video. I recommend getting cable internet vs. dial up or DSL. DSL may be fast enough, but dial up will not be. A basic cable internet package should be enough for streaming video. Try the minimum plan, but if it isn’t fast enough, then bump up the service one level, try that, and repeat if necessary. But you should be fine with the basic package. Also be sure to check how much data streaming you have to be sure you don’t go over the plan limits, as that may be expensive, depending on your internet provider (many plans offer unlimited downloads, but it’s still a good idea to check).
The question of "when does it make sense?" can easily be rephrased as "how much money can I save?" and one of the biggest factors will be the price difference between combined internet and TV service or just internet. These are also the options that vary the most widely based on where you live, and the availability of promotions or contracts that can keep prices down for a short time.