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.
Thank you for reading this Techdirt post. With so many things competing for everyone’s attention these days, we really appreciate you giving us your time. We work hard every day to put quality content out there for our community.
Techdirt is one of the few remaining truly independent media outlets. We do not have a giant corporation behind us, and we rely heavily on our community to support us, in an age when advertisers are increasingly uninterested in sponsoring small, independent sites — especially a site like ours that is unwilling to pull punches in its reporting and analysis.
While other websites have resorted to paywalls, registration requirements, and increasingly annoying/intrusive advertising, we have always kept Techdirt open and available to anyone. But in order to continue doing so, we need your support. We offer a variety of ways for our readers to support us, from direct donations to special subscriptions and cool merchandise — and every little bit helps. Thank you.
–The Techdirt Team
Filed Under: broadband, competition, prices, wall street
Companies: comcast
Reader Comments
Subscribe: RSS
View by: Time | Thread
[ link to this | view in chronology ]
Re:
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.
[ link to this | view in chronology ]
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...
Not far from the inventors of the internet to be in last place for availability and speed and first place in price.
[ link to this | view in chronology ]
Re: Then again...
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.
[ link to this | view in chronology ]
Re: Re: Then again...
Ping times may be a bit higher though
[ link to this | view in chronology ]
[ link to this | view in chronology ]
Re:
[ link to this | view in chronology ]
Response to: Anonymous Coward on Oct 5th, 2017 @ 6:56am
You assumed that they were thinking. Heck I doubt they even have that capability
[ link to this | view in chronology ]
Re:
- Every CEO in the world
[ link to this | view in chronology ]
Re: Re:
[ link to this | view in chronology ]
government-dysfunction
________________
Duh !
That above phrase should be boldly posted above every TechDirt writer's desk, as they pontificate about issues large & small ..........
[ link to this | view in chronology ]
I am shocked, SHOCKED...
[ link to this | view in chronology ]
Re: I am shocked, SHOCKED...
[ link to this | view in chronology ]
Re: Re: I am shocked, SHOCKED...
[ link to this | view in chronology ]
Has no one noticed?
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?
[ link to this | view in chronology ]
Re: Has no one noticed?
Anti-Free-market Regulation
[ link to this | view in chronology ]
Re: Re: Has no one noticed?
[ link to this | view in chronology ]
Re: Re: Re: Has no one noticed?
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!
[ link to this | view in chronology ]
Re: Re: Re: Re: Has no one noticed?
[ link to this | view in chronology ]
Re: Re: Re: Re: Has no one noticed?
Why do you guys always do that?
Every time!
Always
Whaaaaa
[ link to this | view in chronology ]
Re: Has no one noticed?
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).
[ link to this | view in chronology ]
Re: Re: Has no one noticed?
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!
[ link to this | view in chronology ]
Re: Re: Re: Has no one noticed?
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.
[ link to this | view in chronology ]
snicker
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!
[ link to this | view in chronology ]
Re: snicker
[ link to this | view in chronology ]
Re: Re: snicker
[ link to this | view in chronology ]
Re: Re: Re: snicker
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?
[ link to this | view in chronology ]
Re: Re: Re: Re: snicker
[ link to this | view in chronology ]
Re: Re: Re: Re: snicker
[ link to this | view in chronology ]
Wall Street Predicts Apathetic Regulators
[ link to this | view in chronology ]
Re: Wall Street Predicts Apathetic Regulators
These companies are not treated like public utilities. So there is no relevant regulation stopping them.
[ link to this | view in chronology ]
Re: Re: Wall Street Predicts Apathetic Regulators
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.
[ link to this | view in chronology ]
Re: Re: Re: Wall Street Predicts Apathetic Regulators
[ link to this | view in chronology ]
Re: Re: Wall Street Predicts Apathetic Regulators
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.
[ link to this | view in chronology ]
oh no!
If only they had a Martin Luther King of the Internet to lead them in some kinda peaceful protest/boycott of the evil ISPs!
[ link to this | view in chronology ]
Re: oh no!
[ link to this | view in chronology ]
Re: oh no!
The only people that hurts is the people doing the boycotting because they are left without internet access.
[ link to this | view in chronology ]
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.
[ link to this | view in chronology ]
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.
[ link to this | view in chronology ]
Re: Don't expect from others what you can't/won't do yourself
Or, better yet...
[ link to this | view in chronology ]
[ link to this | view in chronology ]
Narrative
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!
[ link to this | view in chronology ]
Re: Narrative
[ link to this | view in chronology ]
Re: Re: Narrative
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.
[ link to this | view in chronology ]
Re: Re: Re: Narrative
Please reply again, the more you talk the more face-palm.
[ link to this | view in chronology ]
Re: Re: Re: Re: Narrative
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.
[ link to this | view in chronology ]
Re: Re: Re: Re: Re: Narrative
[ link to this | view in chronology ]
Re: Narrative
I did not get that impression, but it is not completely without merit.
[ link to this | view in chronology ]
Re: Re: Narrative
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.
[ link to this | view in chronology ]
Re: Re: Re: Narrative
Gee, wonder why that sounds familiar?
[ link to this | view in chronology ]
UK broadband
[ link to this | view in chronology ]