Comcast Still Makes A Killing, Even When You Cut The Cord

from the damned-if-you-do dept

While the rate of cord cutting is expected to double for Comcast this year, the phenomenon isn't having as dire an impact on the company's bottom line as you might expect. That's thanks to Comcast's growing monopoly over broadband in countless markets where the nation's phone companies are simply refusing to upgrade their networks at any real scale. That lack of competition lets the company not only jack up the standalone price of broadband (starting at $75 in many markets), but it allows the company to implement punitive and unnecessary usage caps and overage fees to drive up your bill should you embrace streaming alternatives.

Speaking at a telecom conference in New York this week, Comcast cable CEO Dave Watson very quietly acknowledged the fact that when a customer cuts the cord, the fact that Comcast doesn't have to pay content licensing costs for that user -- combined with the fact that they simply drive up the cost of broadband for that user -- means that the company comes out ahead anyway:

"Watson added that while Comcast tries to keep customers through a variety of programming and broadband packages, but added that when a customer leaves as a result of price, the impact is actually favorable to the company. "We segment the marketplace,” Watson said, adding that when a low-end customer drops video service over price, but keeps their broadband service – at a higher monthly charge – the company makes out better.

"It’s actually accretive when that happens,” Watson said. “It’s a manageable transition."

Of course that wouldn't be the case if Comcast actually had to compete on the broadband front, a problem we don't seem particularly intent on solving anytime soon. Wall Street of course knows this and is very excited about the prospect, with many analysts cheering Comcast toward boosting the cost of standalone broadband from $75 (after a recent hike) upwards of $90 per month or higher:

"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 this firm 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 Comcast can also slowly but surely squeeze with zero organic market or (for now) regulatory repercussions.

Of course Comcast still values the cash cow that is traditional television, and in an added wrinkle has started only doling out the latest speed upgrades to users that bundle television. But thanks to our refusal to actually address limited competition in the broadband space, Comcast will manage to grab its pound of flesh -- one way or another. That's why a growing number of towns and cities see building their own broadband networks as the only path forward out of this cycle of monopoly dysfunction.

Filed Under: competition, cord cutting, fees, price hikes, usage caps
Companies: comcast


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