Predictions

by Karl Bode


Filed Under:
broadband, competition, prices, wall street

Companies:
comcast



Wall Street Predicts Apathetic Regulators And Limited Competition Will Let Comcast Double Broadband Prices

from the who-needs-competition-anyway dept

Wall Street predicts that cable giants like Comcast will soon be cashing in on the one-two punch of rubber stamp regulators and an ongoing lack of competition in the broadband space. Under the Obama administration, regulators turned a blind eye to the fact that cable giants like Comcast were taking advantage of a lack of competition to impose arbitrary and unnecessary usage caps and overage fees. Under the Trump administration that apathy has ballooned ten fold, with the looming assault on net neutrality only green lighting Comcast's ability to use those fees to raise rates and hamstring streaming competitors.

Wall Street analysts obviously adore this new paradigm of regulatory apathy to the sector's competition woes, and predict cable providers are about to enter a very lucrative period of profit taking. Said enthusiasm is usually masked by the use of rhetoric that obfuscates the real consumer and market harms such cheer leading assists. For example, a research note sent to investors this week by New Street Research analyst Jonathan Chaplin indicates that competitive "headwinds" will soon waver, allowing Comcast to double the amount it currently charges for broadband:

"We have argued that broadband is underpriced, given that pricing has barely increased over the past decade while broadband utility has exploded,” New Street said. “Our analysis suggested a ‘utility-adjusted’ ARPU target of ~$90. Comcast recently increased standalone broadband to $90 (including modem), paving the way for faster ARPU growth as the mix shifts in favor of broadband-only households. Charter will likely follow, once they are through the integration of Time Warner Cable.”

New Street added that “broadband pricing could double from current levels.”

How exciting. Of course while Chaplin tries to argue that broadband pricing has "barely increased" over the last decade, it's important to understand he's talking about the advertised price. Comcast has provided a master class in the tactic of using hidden, sneaky, and/or entirely bogus fees to covertly jack up the cost of service post sale, something both Comcast and Charter are facing numerous lawsuits for. Then there's Comcast usage caps and overage fees -- which is Comcast's charming way of abusing limited competition to raise rates -- while pretending that isn't actually happening.

That brings us to the other major portion of Chaplin's note, which goes on to predict that Comcast should be fairly well insulated from cord cutting. How? Thanks, in part, to Comcast's growing monopoly over broadband and the higher prices that allows:

"The traditional pay-TV market saw the worst loss of subs on record this quarter,” the investor note said. “We don’t expect this trend to change anytime soon; however, we think cable should be somewhat insulated because: 1) they should take share in a declining market, helped by the pull-through effect from growing share in broadband; 2) we don’t think cable makes much money in pay-TV. In fact, the [free cash flow] lost from subs dropping pay-TV is generally recovered through higher HSD pricing.”

As we've noted previously, Comcast is somewhat insulated from cord cutting because of a lack of competition in the broadband space. In countless markets nationwide, telcos have simply refused to upgrade aging DSL lines at any scale. These telcos have effectively ceded control of the residential broadband market to local cable competitors as they focus on other ventures (largely either expanding further into business broadband or clumsily slinging video ads to Millennials in a quest to be the next Facebook or Google). As a result, we're quietly and slowly seeing bigger cable broadband monopolies than ever in many markets.

As these frustrated DSL users flee to cable just to get current-generation speeds (which is happening faster than ever), they're signing up for broadband and TV bundles that are notably cheaper than TV alone. That doesn't mean these users necessarily wanted cable TV (in many instances the cable box sits dusty in a closet), but they're still paying all the same. Meanwhile, usage caps and overage fees help protect cable TV revenues by making it more expensive than ever to flock to streaming video competitors, and with the looming death of net neutrality, these companies can also exempt their own streaming services while penalizing competitors.

This is, again, something we've built thanks in large part to the bipartisan apathy toward actually doing anything to fix the broadband market. Because actually doing so would upset deep-pocketed campaign contributors, we're apparently content in paying empty lip service to things like "bridging the digital divide," while despised industry giants like Comcast cash in on our collective Congressional and regulatory dysfunction. Enjoy your higher Comcast bill, everyone.


Reader Comments

Subscribe: RSS

View by: Time | Thread


  • icon
    Ninja (profile), 5 Oct 2017 @ 6:04am

    North Korea charges $660 per month for 1mbit and unlimited data. At the very least Americans will have more speed even if they can only use it to the max for a few dozen minutes?

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

    • identicon
      Anonymous Coward, 5 Oct 2017 @ 8:43am

      Re:

      North Korea charges $660 per month for 1mbit and unlimited data. At the very least Americans will have more speed even if they can only use it to the max for a few dozen minutes?

      In urban areas. In rural areas there may be no cable, leaving the serfs with DSL which will be less than 1mbit on 4-mile+ lines.

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

  • icon
    TheResidentSkeptic (profile), 5 Oct 2017 @ 6:23am

    Then again...

    ... if only 40% of the consumers can afford to pay double the price... I see a resurgence in AOL Dialup and WWIV.

    Of course, "broadband" will have to be re-defined as "Any Access at All", but that doesn't seem to be an issue...

    Not far from the inventors of the internet to be in last place for availability and speed and first place in price.

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

    • icon
      Ninja (profile), 5 Oct 2017 @ 7:55am

      Re: Then again...

      "Of course, "broadband" will have to be re-defined as "Any Access at All", but that doesn't seem to be an issue.."

      I've heard that there are some Indian tribes in the US using fast broadband smoke signs. And earning millions with invalid patents, sketchy copyrights and """"broken"""" slot machines.

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

  • identicon
    Anonymous Coward, 5 Oct 2017 @ 6:56am

    From where do these people think all that money is going to come from?

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

    • identicon
      Anonymous Coward, 5 Oct 2017 @ 7:16am

      Re:

      I can afford it, I'm just not going to.

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

    • identicon
      Annonymouse, 5 Oct 2017 @ 7:22am

      Response to: Anonymous Coward on Oct 5th, 2017 @ 6:56am

      Ah there is the fallacy right there.
      You assumed that they were thinking. Heck I doubt they even have that capability

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

    • identicon
      Anonymous Coward, 5 Oct 2017 @ 8:59am

      Re:

      They can just get it the honest way, using their monopoly (or duopoly) to raise the prices they charge the peons.
      - Every CEO in the world

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

      • identicon
        Anonymous Coward, 6 Oct 2017 @ 7:32am

        Re: Re:

        I was thinking of the money the customers do not have .. to purchase the overpriced service, but your comment is also applicable.

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

  • identicon
    Anonymous Coward, 5 Oct 2017 @ 7:19am

    government-dysfunction

    >>> "Congressional and regulatory dysfunction"

    ________________


    Duh !

    That above phrase should be boldly posted above every TechDirt writer's desk, as they pontificate about issues large & small ..........

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

  • identicon
    Anonymous Coward, 5 Oct 2017 @ 7:31am

    I am shocked, SHOCKED...

    ...that price-gouging will be going on in this establishment.

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

    • icon
      NeghVar (profile), 5 Oct 2017 @ 10:43am

      Re: I am shocked, SHOCKED...

      it is not price-gouging. Price gouging refers to raising the prices of protected commodities like food, water, and gasoline

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

      • icon
        JoeCool (profile), 5 Oct 2017 @ 11:27am

        Re: Re: I am shocked, SHOCKED...

        Price-gouging can occur with ANYTHING in high demand. You generally only hear about it on the news as relates to food and such before a big storm, but it will also be found on other news articles on almost anything, as long as the pricing is well above what it SHOULD be due to any special circumstances.

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

  • identicon
    Jean Diego von Hamato, 5 Oct 2017 @ 7:32am

    Has no one noticed?

    Broadband (and its related product, bandwidth) have been commoditized.

    The price shouldn't be increasing, but dropping. What Bizarro-world economics do you have to imagine to believe otherwise? And it's not like the cable ISPs are in pain, either... all their infrastructure has been amortized and long ago.

    Or maybe Wall Street now feels safe brazenly calling for rent-seeking?

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

    • identicon
      Anonymous Coward, 5 Oct 2017 @ 7:39am

      Re: Has no one noticed?

      "What Bizarro-world economics do you have to imagine to believe otherwise?"

      Anti-Free-market Regulation

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

      • identicon
        Anonymous Coward, 5 Oct 2017 @ 8:32am

        Re: Re: Has no one noticed?

        A pure free market is a terrible thing for all but the corporations and investors. A pure regulated market is terrible for... well, pretty much everybody. Some balance is required and this is a prime example of where some regulation is needed.

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

        • identicon
          Anonymous Coward, 5 Oct 2017 @ 8:46am

          Re: Re: Re: Has no one noticed?

          There is a difference between
          Pro-Free-market regulation
          and
          Anti-Free-market regulation.

          But thanks for intentionally misrepresenting my position, YET AGAIN. You always do, this is why you folks deserve this problem you are having. You directly cause just exactly what you "claim" to seek to avoid through blind trust and ignorance. What was the definition of insanity again? to continue to do what you have been doing but expecting different results?

          Keep it up folks, been working real well!

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

          • identicon
            Anonymous Coward, 5 Oct 2017 @ 10:53am

            Re: Re: Re: Re: Has no one noticed?

            Well you keep trying to address the wrong problem. Regulations are not the problem, but rather corrupted regulators who are easily corrupted because they could need a new job after five years in office.

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

          • identicon
            Anonymous Coward, 6 Oct 2017 @ 7:34am

            Re: Re: Re: Re: Has no one noticed?

            Yeah - wtf guys!

            Why do you guys always do that?
            Every time!
            Always
            Whaaaaa

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

    • identicon
      JEDIDIAH, 5 Oct 2017 @ 8:27am

      Re: Has no one noticed?

      > What Bizarro-world economics do you have to imagine to believe otherwise?

      The economics of natural physical monopolies.

      If you are lucky you get to choose between the local land line monopoly and the local cable monopoly. Neither one believes they have any competitors (even if they do).

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

      • identicon
        Anonymous Coward, 5 Oct 2017 @ 9:00am

        Re: Re: Has no one noticed?

        this is what regulations should be focused like a laser against.

        we actually did and do have these laws, but those regulations are not enforced for political purposes.

        The problem begins with corrupt politicians, but it ends with the apathetic citizens doing nothing about their dirty ass reps.

        If you want a change, then we need to start voting in anything other than these two parties, both are big business and take loads of donations from these folks. Only a fool believes the words coming from their mouths enough to vote for them!

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

        • identicon
          Anonymous Coward, 5 Oct 2017 @ 9:37am

          Re: Re: Re: Has no one noticed?

          > we actually did and do have these laws

          Do we? What are they?

          We used to have regulations requiring DSL providers to allow third-party access. It works reasonably well in the UK and Canada but the FCC dropped those regulations long ago. They still have to allow colocation in the central office for CLECs, but the central office is too far away from customers to allow fast "broadband" DSL access; that's why other countries have been building remote DSLAMs everywhere. (It would be nice to see the occasional third-party DSL cabinet in dense areas like Manhattan, even if we can't expect a cross-country rollout from every ISP.)

          Has the US ever required cable ISPs to share their lines? Elsewhere that's normal too.

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

  • This comment has been flagged by the community. Click here to show it
    identicon
    Anonymous Coward, 5 Oct 2017 @ 7:37am

    snicker

    you are doing my work for me TD!

    but you all still hate me! whooo hooooo!

    I hate being right, but it looks like you all hate it even worse!


    Oh... and I would not call it apathy...

    I call it COMEUPPANCE!

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

    • identicon
      Anonymous Coward, 5 Oct 2017 @ 8:33am

      Re: snicker

      What the actual fuck are you talking about?

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

      • identicon
        Anonymous Coward, 5 Oct 2017 @ 8:47am

        Re: Re: snicker

        Nothing substantial, constructive or useful. That's his entire point.

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

        • This comment has been flagged by the community. Click here to show it
          identicon
          Anonymous Coward, 5 Oct 2017 @ 8:54am

          Re: Re: Re: snicker

          The point is that I warned you that this was going to happen and that you all helped make it happen.

          I am sorry that you are not able to understand how you keep shooting yourselves in the foot. It is clear as fucking day for me, but apparently you folks lack the mental capacity to understanding anything other than... which political issue did my party tell me to support or resist?

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

          • identicon
            Anonymous Coward, 5 Oct 2017 @ 12:19pm

            Re: Re: Re: Re: snicker

            Citation needed.

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

          • identicon
            Anonymous Coward, 5 Oct 2017 @ 5:03pm

            Re: Re: Re: Re: snicker

            Right... the other readers from other countries with no political or monetary clout against the US helped make this happen. If you did something, you made it happen. If you didn't do anything, you made it happen. Everyone but you made it happen. Everyone you support or didn't support made it happen. We get it; repeating yourself doesn't make you look intelligent, you're just a fucking broken record.

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

  • icon
    limbodog (profile), 5 Oct 2017 @ 7:41am

    Wall Street Predicts Apathetic Regulators

    You misspelled 'complicit'

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

    • identicon
      JEDIDIAH, 5 Oct 2017 @ 8:29am

      Re: Wall Street Predicts Apathetic Regulators

      You already have local monopolies here. The regulators don't have to be "complicit" at all. All they have to do is allow the market to do what it wants.

      These companies are not treated like public utilities. So there is no relevant regulation stopping them.

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

      • icon
        ShadowNinja (profile), 5 Oct 2017 @ 8:47am

        Re: Re: Wall Street Predicts Apathetic Regulators

        Treating them as public utilities is what we should have done 2 decades ago.

        The worst part about this whole mess, and how Wall Street loves it, is how we're under-mining our own economy and economic growth with this madness.

        Slower Internet speeds hurt businesses and economic growth. It makes a lot of areas less attractive to move to and start businesses in. And that trickle down effect makes almost everyone poorer in the long run, including most Wall Street investors who are too short sighted realized that non-Comcast and non-Verizon stocks get hurt by their monopolies and lack of competition.

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

        • identicon
          Anonymous Coward, 5 Oct 2017 @ 10:22am

          Re: Re: Re: Wall Street Predicts Apathetic Regulators

          10 million now or 10 billion in 15 years... decisions,decisions.

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

      • identicon
        Anonymous Coward, 5 Oct 2017 @ 9:44am

        Re: Re: Wall Street Predicts Apathetic Regulators

        You already have local monopolies here. The regulators don't have to be "complicit" at all.

        It's still not apathy, which describes a lack of interest/concern. Were the regulators and lawmakers actually apathetic, the monopolies would not be "donating" money to them constantly.

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

  • identicon
    Anonymous Coward, 5 Oct 2017 @ 10:07am

    oh no!

    What can the poor, helpless, "VICTIM"-tshirt-wearing, impotent, spineless consumers do?

    If only they had a Martin Luther King of the Internet to lead them in some kinda peaceful protest/boycott of the evil ISPs!

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

    • identicon
      Anonymous Coward, 5 Oct 2017 @ 10:55am

      Re: oh no!

      An Internet leader who cuts off his means of leading by boycotting the Internet, along with his followers. You have not thought that idea through.

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

    • identicon
      Anonymous Coward, 5 Oct 2017 @ 12:21pm

      Re: oh no!

      Why do people keep suggesting we boycott ISP's?

      The only people that hurts is the people doing the boycotting because they are left without internet access.

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

      • icon
        That One Guy (profile), 5 Oct 2017 @ 3:36pm

        Re: Re: oh no!

        Because they have this hilariously flawed misconception that the internet is some optional luxury for a majority of people, and that they can simply 'do without' for a month or two without issue, and since they don't, clearly they don't care enough to do something about the problem.

        Blaming the victim and attacking strawmen basically.

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

    • icon
      That One Guy (profile), 5 Oct 2017 @ 3:32pm

      Don't expect from others what you can't/won't do yourself

      As I always say when some putz comes forth with idea of 'They had it coming, if they really cared they'd boycott the companies': you first. Go without for at least a month solid, entirely, and then come back and tell us how it went.

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

  • identicon
    Anonymous Coward, 5 Oct 2017 @ 1:55pm

    When you have monopolies doing this and then soon after putting usage caps and overage fees we'll all be getting loans to have broadband before long. Still pisses me off Cox put a 1TB cap on their already expensive internet. https://www.techdirt.com/articles/20150921/08095232312/cox-sues-tempe-arizona-nefarious-plan-to-brin g-google-fiber-to-town.shtml

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

  • icon
    MyNameHere (profile), 5 Oct 2017 @ 6:23pm

    Narrative

    I can understand that you are trying to support a "all ISPs are criminals" narrative, but the WSJ report doesn't seem to hit any of the points you are suggesting.

    They got to their conclusion based on the OTHER argument you keep pounding on, the "cord cutters". Cord cutters never really cut the cord, they just buy MORE other cords and in other manners. The basis of their cord cutting is buying MORE internet, more speed, more bandwidth, more...

    For an ISP, when people buy more, they make more. When demand is high, prices generally go up. The time required for competition to arrive is such that supply and demand aren't kept in equilibreium at the low price point you wish, and instead the ISPs are able to offer higher speed / higher bandwidth packages are a higher price - and people are taking them.

    This is doubly so with cord cutters. As they cut the cord and "save" on cable, they then have extra money by which to buy a better internet connection (and they need it, streaming isn't low speed work!). So in the end, as people cut the cord, they buy more and better (read more expensive) internet service and there is the result the WSJ is reporting.

    The funny part is for the cable companies, it's not such a bad thing either. Even as you shriek on about cord cutting, they continue to add new internet subscribers and charge more for them - and it costs them less to do. A huge percentage of the money received for cable goes to paying for programming. Internet? Not so much, the cost of connectivity (especially in higher ratio systems) isn't as signficant. So bottom line, the cable companies are actually keeping more income to themselves.

    So yeah, the WSJ is looking at all of this and seeing longer term profits. This is especially true because the costs and time required for competition to roll out is such that it's unlikely that any of these companies will see meaningful competition in the short to medium term, which is where investors generally work these days.

    Basically, you missed a good story, too busy trying to build a narrative and not long enough actually thinking it through!

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

    • identicon
      Anonymous Coward, 5 Oct 2017 @ 8:10pm

      Re: Narrative

      Funny thing though as your ISP keeps slowing you down and charging you more to get back what you had before you feel evermore that you are being ripped off. That doesn't work well as a long-term strategy because the ISP won't maintain a monopoly forever and once there is an alternative the entire customer base will flee.

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

      • icon
        MyNameHere (profile), 5 Oct 2017 @ 10:34pm

        Re: Re: Narrative

        Perhaps.

        However, Wall Street works mostly on the short and medium term, and not very often on the long term. So they are looking at the mid-near term (say the next 5 to 10 years) and they see the incumbent players probably doing pretty well.

        Google Fiber has already had almost a decade to try to get over the hump, and they have essentially given up. Unless there are major technology advancements that roll out very quickly, the mid-near term is good for existing players and not for anyone else.

        Long term, those players could also be looking at the alternatives, such as longer distance wi-fi or other alternatives, especially related to the last mile.

        In wireless, 5G is coming, but not much before 2020 or 2021, and "full" roll out might not come for 5 years or more after that. Limitation in available bandwidth means that in many cases it won't replace wire line internet.

        As I said, the conclusion is that short to mid term, existing players are fine and likely to get a boost. Long term is less certain, but Wall Street will be onto the "Uber for Prostitution" or whatever by then.

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

        • identicon
          Anonymous Coward, 6 Oct 2017 @ 6:10am

          Re: Re: Re: Narrative

          You expect communications technology to only be a continuation of the old. Can't you imagine an advanced technology being created that makes all minor advances in the old obsolete.

          Please reply again, the more you talk the more face-palm.

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

          • icon
            MyNameHere (profile), 6 Oct 2017 @ 1:30pm

            Re: Re: Re: Re: Narrative

            "You expect communications technology to only be a continuation of the old."

            I do not. As I said "Long term, those players could also be looking at the alternatives, such as longer distance wi-fi or other alternatives, especially related to the last mile. ". The game changer for the ISPs will be anything that changes the last mile.

            "Can't you imagine an advanced technology being created that makes all minor advances in the old obsolete."

            I can easily imagine it. I can also imagine that it's not going to magically roll out next week and be widely adopted the week after. So for the purposes of Wall Street short and medium term business, it looks like ISPs are going to go up at least in that time frame.

            No facepalms. Just reality.

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

            • identicon
              Anonymous Coward, 6 Oct 2017 @ 3:15pm

              Re: Re: Re: Re: Re: Narrative

              Necessity is the mother of all invention. You sure adoption of a better technology would be slow for customers after years of being screwed.

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

    • identicon
      Anonymous Coward, 6 Oct 2017 @ 7:41am

      Re: Narrative

      "you are trying to support a "all ISPs are criminals" narrative"

      I did not get that impression, but it is not completely without merit.

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

      • icon
        MyNameHere (profile), 7 Oct 2017 @ 1:25pm

        Re: Re: Narrative

        You don't think? Let's put together what Karl linked to in the first paragraph to see:

        rubber stamp regulators lack of competition arbitrary and unnecessary usage caps and overage fees hamstrung streaming competitors.

        When you filter out everything else, it's clear Karl has an agenda and he's pushing it without mercy. Every story he writes has a similar grouping of terms, trying to SEO his comments to be the only ones you see if you search Google for certain phrases.

        Everything he writes is to support this basic concept. Cutting out everything except the quotes in each case proves it.

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

        • identicon
          Anonymous Coward, 8 Oct 2017 @ 10:59pm

          Re: Re: Re: Narrative

          You are worrying too much about another person and basing your reply on the reputation you built up in your head.

          Gee, wonder why that sounds familiar?

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

  • identicon
    Furriner, 6 Oct 2017 @ 10:09am

    UK broadband

    £30/month for 70 Mbit fibre in the UK, where the ISPs have competition.

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


Add Your Comment

Have a Techdirt Account? Sign in now. Want one? Register here
Get Techdirt’s Daily Email
Use markdown for basic formatting. HTML is no longer supported.
  Save me a cookie
Follow Techdirt
Techdirt Gear
Shop Now: Techdirt Logo Gear
Advertisement
Report this ad  |  Hide Techdirt ads
Essential Reading
Techdirt Deals
Report this ad  |  Hide Techdirt ads
Techdirt Insider Chat
Advertisement
Report this ad  |  Hide Techdirt ads
Recent Stories
Advertisement
Report this ad  |  Hide Techdirt ads

Close

Email This

This feature is only available to registered users. Register or sign in to use it.