Comcast Loses Just $5.50 Per Month When You Cut The Cord Thanks To Its Growing Broadband Monopoly

from the insulated-from-competitive-harm dept

We've noted several times that the cable industry is somewhat shielded from the rise of cord cutting because of its growing monopoly over broadband. You see, as AT&T and Verizon give up on unwanted DSL customers they don't want to upgrade (as part of a pivot into content and ads), there are now huge swaths of the country where users really only have one option for broadband above 25 Mbps: cable. Users fleeing neglected DSL lines sign up for cable, and because TV bundled with broadband is cheaper than broadband alone, users sign up for TV service they may not even want.

As this cable monopoly grows, these cable companies have less incentive than ever to compete on price across more than half of their footprint. And with ISPs literally writing state laws preventing public/private or community broadband, no market forces exist to prevent them from expanding the application of entirely unnecessary usage caps and overage fees. Most analyses overlook this, instead focusing on the scattered rise of Google Fiber and other gigabit deployments in highly-select areas.

One Wall Street analyst this week highlighted just how cushioned a company like Comcast really is when it comes to cord cutting. MoffettNathanson analyst Craig Moffett crunched the numbers and found that once you account for the higher costs you'll have to pay for buying broadband standalone, Comcast only really loses about $5.50 per month when a user cuts the TV cord:
"When a Comcast customer drops video, the MSO loses about $38 in contribution margin, Moffett estimates. But that customer ends up paying an extra $25 a month more for broadband when their bundling discount goes away. "Now, further suppose that half of those customers opt to upgrade to a higher speed tier at an average premium of $15 per month (implying a probability-weighted $7.50 benefit per cord-cutter)." The difference comes to $5.50.
Moffett's analysis isn't perfect and Comcast's losses are likely higher. He comes to that $5.50 number by assuming the departing customer upgrades to a faster speed, which really isn't necessary just for streaming Netflix. And it's not clear he's included the revenues Comcast makes on households paying rental fees for numerous cable boxes, or the fees Comcast hides below the line (like the broadcast TV fee). Still, the point remains that Comcast is arguably shielded from cord cutting because of the high prices it charges for broadband -- only made possible by limited broadband competition.

And Moffett doesn't even touch on the fact that Comcast can further recoup any cord cutting losses via usage caps and overage fees, something Moffett and other investors have long embraced given it lets an ISP charge significantly more money for the exact same service. Nor does Moffett highlight how Comcast further benefits by counting all competitor streaming traffic against the cap, while it's own streaming video service remains cap exempt.

All told, cable providers are now adding 99% of the quarterly net additions for new broadband subcribers each quarter, at the same time that the sector is consolidating at an incredible rate. And these companies continue to have almost comical control over state legislatures, often allowing them to literally write wish-list legislation further insulating them from competitive harm. And time and time again the industry, and the policy folks it employs en masse to pollute public discourse, intentionally conflate enabling this protectionist dysfunction as the "deregulation of free markets" (often with no penalty from an unskeptical press).

So yes, if you live in a major, relatively-affluent city or upscale broadband development your broadband options may be improving, if you're lucky. But across more than half of the country, users are actually seeing less broadband competition than ever before. And with Trump listening to telecom advisors that don't believe monopolies exist and are keen on gutting net neutrality and all regulatory oversight of said non-existing monopolies, you're potentially talking about millions of consumers looking at higher prices and worse customer service than ever before.

The solution, again, is fighting for better broadband on the local level. If you want better broadband, you need to get behind the push to eliminate protectionist state laws that restrict towns and cities from making local broadband infrastructure decisions for themselves. These laws, passed in roughly 20 states, not only prohibit towns and cities from building their own networks (even in cases where nobody else will), but they often hinder the kind of public/private partnerships that are becoming necessary to shore up competitive gaps caused by the broadband market failure the industry will tell you doesn't exist.

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  • icon
    Per Dutton (profile), 2 Dec 2016 @ 9:50am

    similar numbers

    When I cut TV from my Verizon triple-play bundle and upped my speed one tier just like Moffett's assumptions, I was told I would only save $5 for the double-play bundle. Like this analysis, Verizon ignored the cost of renting the box and taxes/fees, which in the end left me saving more like $30/mo. Surprised to see how close the numbers were. It is a brutal process to talk with the reps on "what will I actually pay?" during any purchase -- they never know what fees/charges will get tacked on until they enter all kinds of details first...

    reply to this | link to this | view in chronology ]

    • icon
      Jeremy Lyman (profile), 2 Dec 2016 @ 10:12am

      Re: similar numbers

      I've always thought it should be some kind of fraud that they're completely unable or unwilling to tell you what your actual bill will cost until the first one comes in the mail.

      reply to this | link to this | view in chronology ]

  • icon
    Jeremy Lyman (profile), 2 Dec 2016 @ 10:17am

    No FCC No More

    So, with the federal regulators out of commission is there anything that can be done at the state level to extend network neutrality to consumers at a local scale? Or will the new FCC lay down the jurisdictional hammer reclassifying ISP as information service and make it untouchable by state legislature?

    Maybe the best bet is to battle those same protectionist state laws and create municipal networks to force competition?

    reply to this | link to this | view in chronology ]

    • identicon
      Anonymous Coward, 2 Dec 2016 @ 10:23am

      Re: No FCC No More

      is there anything that can be done at the state level to extend network neutrality to consumers at a local scale?

      Only if the ISP's let it happen. The FCC was about the only part of government supporting net neutrality.

      reply to this | link to this | view in chronology ]

    • identicon
      Anonymous Coward, 2 Dec 2016 @ 10:24am

      Re: No FCC No More

      It's call the FTC and other anti-trust type laws that could affect the monopolies, but you will find that...

      Just as the FCC did nothing, they will do nothing either. It's one of the things that gets me about TD and their sycophantic love for the FCC and its neutrality rules. The FCC created this mess, the new rules suck total dick and TD's neck is in a brace now!

      I told them a long time ago to "don't bother celebrating yet" and no matter how right I am, no one listens!

      Hey I could be wrong this time... you never know right?

      reply to this | link to this | view in chronology ]

      • icon
        Jeremy Lyman (profile), 2 Dec 2016 @ 11:31am

        Re: Re: No FCC No More

        The FTC is still a Federal body. I'm asking if there's a viable way to address this from within a state government more attuned to the actual needs of its constituents. I'm thinking along the lines of other utilities like water, gas, electric, sewer. Can we locally regulate ISPs under similar provinces or does the FCC's mandate preempt state control?

        reply to this | link to this | view in chronology ]

        • icon
          Vidiot (profile), 2 Dec 2016 @ 12:56pm

          Re: Re: Re: No FCC No More

          This is the question of the moment... the president-elect and his merry crew propose rabid de-federalizing of government oversight, placing, in their minds, regulatory controls from environmental to commerce in the hands of state government bodies. But no such structures exist! I'm having trouble imagining Comcast lobbyists buying off 50 separate Communications Commissions; will Samsung need to seek type acceptance for a TV receiver from 50 different authorities?

          reply to this | link to this | view in chronology ]

          • identicon
            Anonymous Coward, 3 Dec 2016 @ 1:22am

            Re: Re: Re: Re: No FCC No More

            > I'm having trouble imagining Comcast lobbyists buying off 50 separate Communications Commissions;

            Why, just look at the number of state legislatures they have successfully bough to prevent local competition.

            reply to this | link to this | view in chronology ]

      • icon
        The Wanderer (profile), 4 Dec 2016 @ 12:41pm

        Re: Re: No FCC No More

        The new rules are bad, yes.

        But the old rules were worse. The new ones, while still bad, are a considerable improvement.

        The problem we're currently facing is not how bad the current rules are, but the fact that even the current insufficient set of rules are almost certainly going to be rolled back, and we'll have no meaningful constraints at all on anticompetitive and monopolistic behavior in these areas.

        reply to this | link to this | view in chronology ]

    • icon
      Ninja (profile), 2 Dec 2016 @ 10:33am

      Re: No FCC No More

      "only made possible by limited broadband competition."

      You see, I think broadband competition is needed alright but plenty of these woes we are seeing in the US (and elsewhere mind you) is driven by the fact that a single company can own the pipe AND the services that go through it. Of course this alone would not allow a monopolistic ISP from imposing caps and charging for overages and exemptions from their customers but at the very least they wouldn't be able to leverage their position even more through cap exemptions. It's a whole fucked up setup right from the beginning.

      reply to this | link to this | view in chronology ]

      • icon
        Jeremy Lyman (profile), 2 Dec 2016 @ 11:37am

        Re: Re: No FCC No More

        I agree local loop unbundling is a better solution than running duplicate infrastructure to everyone's home. I'm not really sure how we get there from where we are now, aside from letting all the companies merge and trust-busting them in 50 years.

        reply to this | link to this | view in chronology ]

  • icon
    Ninja (profile), 2 Dec 2016 @ 10:26am

    But if Clinton had won you leftist media shills would not be bashing her. But since it's His Holiness Donald "The Immaculate" Trump then it's all attack. /derp


    I thought I should throw Clinton and Trump somewhere here because why not? :-D

    reply to this | link to this | view in chronology ]

    • identicon
      Anonymous Coward, 2 Dec 2016 @ 10:38am

      Re:

      I don't normally take you for a troll but... perhaps that explains a few things.

      It looks to me that Hillary is getting far more acolyte levels of attention from her posse compared to Trump. Of course there has been a lot of ass kissing going on over at Trump Tower lately so maybe he can catch up and even pass Hillary, now that she seems to be washing out of politics finally. I guess that is at least ONE good thing I can say for sure that came out of a Trump Presidency. Bye Bye Hillary!

      Though I am sure she will be resurrected somehow. Cockroaches can be hard to kill off!

      reply to this | link to this | view in chronology ]

      • identicon
        Wendy Cockcroft, 6 Dec 2016 @ 2:23am

        Re: Re:

        It looks to you...? Have you not seen the rabid attacks we've had from people bashing us for daring to criticise St. Donald of Trump?

        If that's not "acolyte levels of attention," what is it?

        Protip: don't build a cult of personality around your Glorious Leader; it makes [rhetorical] you look ridiculous.

        It's true, though; the Dems are all over their fallen idol like flies on... that stuff... whingeing about the Russkies stealing the election and handing it to Trump. She's a neocon warmonger and we're better off without her.

        Trump is a jerk.

        There you go, fair and balanced.

        reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 2 Dec 2016 @ 10:34am

    Can't wait for that Elon Musk global satellite internet. I predict cable prices will plummet fairly rapidly after a period of sky-is-falling temper tantrum rhetoric.

    reply to this | link to this | view in chronology ]

    • identicon
      Anonymous Coward, 2 Dec 2016 @ 10:45am

      Re:

      Pointless... satellite internet will only be partially viable because of all the delays. We may have worked a lot of magic by now but at that distance the latency counts when playing most online games because physics alone guarantee you at least 550ms worth of latency. Light does travel fast, but not that fast!

      Sat internet will be better than nothing however but are a lot of logistics to work out compared to a simple wifi or cellFi blasting a wave a few feet or miles compared to 23,000 miles way way up through clouds and weather phenomenon!

      reply to this | link to this | view in chronology ]

      • identicon
        Anonymous Coward, 2 Dec 2016 @ 11:17am

        Re: Re:

        From what I've been told it's supposed to be low orbit with sub 100ms latency.

        reply to this | link to this | view in chronology ]

      • icon
        Frozen Njal (profile), 13 Dec 2016 @ 6:01am

        Re: Re:

        Regardless, for many people who aren't heavy (internet) gamers, this could really help, and would force a lot more competition hopefully. A good way to get around the last mile issue!

        reply to this | link to this | view in chronology ]

    • identicon
      Anonymous Coward, 2 Dec 2016 @ 8:15pm

      Re:

      Have no fear, there will be laws against that new technology being used to bypass the dinosaurs.

      reply to this | link to this | view in chronology ]

    • identicon
      Anonymous Coward, 5 Dec 2016 @ 8:01am

      Re:

      No it won't! Satellite has limited bandwidth, and huge LAG, worse then a dial up modem. Might be OK for streaming, or downloading a large file, but sucks at normal web browsing and gaming.

      reply to this | link to this | view in chronology ]

  • icon
    Ehud Gavron (profile), 2 Dec 2016 @ 11:36am

    -$198/mo to Comcast

    I cut the cord in November 2015. My Comcast bill went from $198/mo to $0/mo. They lost a little bit more than $5.50 on me.

    Now we should also add the costs... after all, surely they saved something in NOT providing me service. Well, it was my backup Internet connection so $0 on bandwidth, and it costs them $0 after the initial hookup to "also" provide me the same channels my neighbor gets.

    So they went from a cost of $0 to a cost of $0 and a net of $198 to a net of $0.

    I enjoy their weekly mailings offering me Xfinity or Comcast or whatever else... just not anything I'd ACTUALLY want like uncapped high-speed service with a static IP. Fortunately I have that from another provider.

    E

    reply to this | link to this | view in chronology ]

    • icon
      The Wanderer (profile), 4 Dec 2016 @ 12:47pm

      Re: -$198/mo to Comcast

      just not anything I'd ACTUALLY want like uncapped high-speed service with a static IP.

      We have that, actually.

      My household - in what is considered a "semi-rural" area - has Comcast Business Class service: high speeds, no caps that I'm aware of, static IP address (though I believe that last comes at an extra fee).

      Not sure what the monthly total comes to, but I would be surprised if it was higher than the $198, and it may well be lower.

      Now, they certainly don't advertise that service to residential customers, but they will sell it to you if you ask them the right way. To the best of my awareness, they don't even demand any proof that you really are a business of any kind.

      (They still send us fliers advertising Xfinity service, probably because - thanks to my father's minor cable-news addiction - we do have Comcast TV service. You'd think the different parts of the company would talk to one another...)

      reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 2 Dec 2016 @ 12:10pm

    No kidding? Did anyone really think that as long as the cable company is providing your Internet service, you could actually see a difference if you dropped phone and broadcast? All the screaming about "cord cutters" here was all just a smoke screen for the industry (or for ignorant people who didn't know any better.)

    And the FTC or the FCC can't help. Companies have infected local (state) regulators that pass laws that benefit the provider and hurts their own citizens. Want to bring in Muni Broadband? Guess what, your own state government probably has made that illegal.

    reply to this | link to this | view in chronology ]

    • identicon
      grayputer, 6 Dec 2016 @ 8:44am

      Re:

      Well, my bill went from about $220/mo to $80/mo, so I'd say my bill dropped. My original bill included internet. It included several tiers of "channels" (who gets just the base package). On top of that I had Netflix and Amazon prime (another ~$18/mo). Killed TV, kept the internet link via Comcast (yup, up $30/mo), kept Netflix and Amazon. Added Hulu Plus ($10/mo) and a Roku (one-time $99). Added free Roku channels for several other "cable tier" channels (AMC, Scifi, CNN, FOX, ABC, USA, CW, NBC, PBS, History, A&E, ...), added "replacement channels" for others I no longer had (TED Talks, Crackle, Pluto, Smithsonian, ...). Added several channels with old B-grage SciFi movies (my weakness).

      Old price, all in (cable, Netflix, Amazon, Internet, ...), was just under $240/mo. New price with 100 channels and internet is just under $100/mo. Save about $140/mo, comcast bill down from $220/mo to $70/mo.

      reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 2 Dec 2016 @ 12:30pm

    no duh

    I cut the cord, but I still pay the same company for internet access==I didn't cut the cord at all

    just like water generally seeks the lowest surface, companies will generally seek to maximize, or at least maintain, profits

    only competition will end monopolies

    boycott or bend over

    reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 2 Dec 2016 @ 12:43pm

    I do see the cost difference as being low, but not 5.50 low. Comcast is able to raise the price of internet service while at the same time reduce the cost of the double play packages that it almost makes sense to get internet and cable tv because of the "value". With the 1 TB cap and the fees for overages/unlimited date, they can recoup it back on the heavy users (Netflix.DirectTVnow, Hulu users).

    reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 2 Dec 2016 @ 1:32pm

    The government is their enabler.

    If it weren't for various arms of the government protecting them from open competition they could never get away with their crap.

    reply to this | link to this | view in chronology ]

  • icon
    Web_Rat (profile), 2 Dec 2016 @ 8:41pm

    Comcast Loses Just $5.50 Per Month When You Cut The Cord...

    Since Comcast is on the bleeding edge of below the line billing, coming soon to your Comcast bill:

    Disconnected Customer Profit Recovery Fee.........$5.50

    reply to this | link to this | view in chronology ]

  • identicon
    Jim, 3 Dec 2016 @ 5:27am

    But:

    Oh, I loved the Disconnected profit fee, you have to leave out the customer, with that you could charge everyone in the country. Send a bill to every address, and make them disprove it. Wow. Expect to see one soon.

    reply to this | link to this | view in chronology ]


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