How Comcast wants to meter the Internet
NEW YORK – This year marked a turning point for Comcast (CMCSA), the cable giant: It now has more Internet than TV customers. And it’s trying out how to charge you for the amount of data you use, much the way Verizon and AT&T do for wireless customers.
Why risk doing something that upsets customers? Most large cable companies — AT&T and some smaller providers are the main exceptions — offer unlimited data plans.
The reason is simple. Comcast currently takes in more revenue from video customers than from Internet customers, but that’s not likely to be true forever. A small but growing number of consumers are skipping cable subscriptions as hours spent watching video shifts online. So finding a way to charge for heavier Internet use could bolster Comcast’s revenue as the ranks of its cable customers shrink.
For instance, the company lost 48,000 cable customers in its just-reported third quarter while adding 320,000 Internet customers. (Even so, Comcast says the loss in the cable customers was the smallest for the third quarter in nine years, a good sign for the company.) Revenue rose 8.3 percent to $18.7 billion in the July-September period, while net income dropped 23 percent to $2 billion because of a tax gain from last year.
Comcast actually used to impose a monthly 250 gigabyte data cap on its customers, but ended it in May 2012 to experiment with alternative ways of managing bandwidth. That August, it capped monthly data use for Nashville, Tennessee, customers at 300 GB; going over the limit cost $10 for every 50 GB. The company launched a similar plan in Tucson, Arizona, that October — you got 300 GB for a base plan, 600 GB if you signed up for a faster and more expensive connection.
By December 2013, Comcast had rolled out the Nashville system to Atlanta and a handful of smaller markets, many in the South. It also offered a slow Internet plan of 3 megabits per second that gave you a $5 credit if you used 5GB or less each month, and charged you $1 for each gigabyte of data over 5 GB.
This month, Comcast added a tweak as it expanded the cap into Florida: Customers can now pay an additional $30 a month for unlimited data. (In Atlanta, it’s $35 a month.) At this point, roughly 12 percent of Comcast territory is subject to “usage-based pricing,” MoffettNathanson analyst Craig Moffett estimates.
The average household watches 240 hours of TV a month, Moffett says; using current streaming technology, it would likely exceed the Comcast cap by watching the same amount of online video. (Comcast says the 300 GB cap would let you stream 230 to 575 hours of video a month, depending on if you watch it in standard definition or HD, or on your phone, computer or tablet versus a TV.)
About 8 percent of all Comcast customers go over 300 GB, the company says. Data caps really amount to a mechanism “that would introduce some more fairness into this,” says Comcast spokesman Charlie Douglas. Yet Neil Smit, president and CEO of Comcast’s cable division, said in July that there are no plans to extend the caps “on a widespread basis anytime soon.”
Data caps are under scrutiny by regulators who worry that they could hurt online video competitors. In April, the feds quashed Comcast’s $45 billion bid for Time Warner Cable (TWC), partly out of concern that the merged company might undermine online video rivals like Netflix. Comcast rival Charter subsequently made its own bid for Time Warner Cable, and has promised no data caps for at least three years if regulators approve the deal.
Matthew Pulsipher, 23, lives in the Atlanta metropolitan area and decided to pay Comcast’s extra fee for unlimited data to support his family’s streaming of shows from Netflix and Amazon Prime Video. But he’s not happy about it.
“I think the idea of limiting your usage is absolutely insane,” Pulsipher said. “It would make sense if the cap was 2 terabytes, but 300 is just low enough to punish streaming.”
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