Yes, you wouldn't need cable in addition to the apple tv.
The advantage that this model would offer is that the networks are still able to make money because people aren't purchasing only 4-5 channels for $.99 or so. And the apple tv is more affordable because the pricing is subsidized based on the subscription fees.
i've run the numbers. once you factor in $50 for internet and $15 a month for Hulu and netflix itunes only makes sense for a few episodes here and there.
the $.99 per episode price is way too much. Roku with Amazon seems like a better deal apple tv as well. i only plan to buy a few cheap cartoons. anything more than that is going on blu ray. i refuse to buy $30 movies that are compressed and DRM locked to devices, services and ecosystems.