With Fixed Costs And Fat Margins, Comcast's Broadband Cap Justifications Are Total Bullshit

from the pay-more-for-less dept

For a while Comcast tried to pretend that its slowly-expanding usage cap "trials" were about managing network congestion. At least until leaked Comcast documents, the company's top engineer, and the cable industry's top lobbyist all confirmed that justification was bullshit (caps don't really help manage congestion anyway). Since then, Comcast has veered away from any hard technical explanation for the glorified price hike, instead focusing on the ambiguous claim that these new "flexible" pricing models bring "fairness" to the broadband industry.

To sell this evolved line of horse excrement, Comcast CEO Brian Roberts recently proclaimed the company was simply trying to create a more "balanced relationship" with its customers. After all, Roberts told attendees of a recent conference, broadband is just like electricity and gasoline:

"We don’t want anybody to ever not want to stay connected on our network, but just as with every other thing in your life, if you drive 100,000 miles or 1,000 miles, you buy more gasoline. If you turn on the air conditioning to 60 vs. 72, you consume more electricity. The same is true for usage, so I think the same for a wireless device. The more bits you use, the more you pay."

The problem with that narrative? Broadband is absolutely nothing like gasoline or electricity, because for major ISPs' like Comcast -- the price it pays for bandwidth remains relatively fixed despite usage, so whether an individual user consumes 300 GB or 400 GB doesn't impact Comcast's bottom line in the slightest. Meanwhile, with Comcast customers paying some of the highest prices in any developed nation, any Comcast earnings report will show you that Comcast's broadband margins remain plump; more than capable of paying for necessary infrastructure upgrades several times over.

That there's no financial or technical justifications for fixed-line usage caps is a point made time and time again, and really can't be repeated often enough. As the CCG Consulting POTs and PANs blog recently noted, Comcast really faces two primary costs when it comes to providing you bandwidth: transit and raw bandwidth. And in both instances, these costs are not only immensely manageable thanks to Comcast's huge size, but by and large remain static:

At Comcast’s size they either have a direct physical presence at each major Internet POP or they have an arrangement with some carrier who does. Due to their sheer size, I have to imagine that Comcast’s cost for transport on a per-megabit basis is lower than anybody else in the industry other than maybe AT&T, who is one of the owners of the Internet structure.

Transport can be a major cost for an ISP that operates a long distance from a major POP. I have small ISP clients that spend between $10,000 and $20,000 per month on transport, which is a lot if you only have a few thousand customers. But for Comcast this cost has to be minuscule on a per customer basis. And the cost is fixed. Once you buy transport to a market it doesn’t matter how much bandwidth you shove through the pipe. So this cost doesn’t increase due to customer usage.

The analysis goes on to note that Comcast's other major cost, raw bandwidth, is probably around $2 per subscriber, and also remains largely fixed:

"An ISP’s total cost for an Internet port is based upon the average of the busiest times of the month. For instance, a small ISP might use 500 raw megabits of aggregate usage on most evenings, but if their customers have a few nights per month where they use 700 megabits, then the ISP pays for that larger amount for the whole month.

The interesting thing about this pricing structure is that the ISP pays the same every day of the month whether the customers are using the data or not. The cost to Comcast wouldn’t change if any one customer, or even all of the customers in a city, were to use more data, as long as that usage doesn’t create a new fastest day of the month.

Admittedly, Comcast's costs get more complicated given it sells transit and gets paid by companies like Netflix for direct interconnection. But the point remains that, by and large, its bandwidth costs largely remain fixed, and despite significant growth, companies of Comcast's size are paying less today for raw bandwidth than they were ten years ago. And they're pulling in more money than ever. Despite claims of an exaflood, the revenues Comcast makes on broadband far, far exceed the money Comcast needs to spend on network infrastructure.

The bottom line is there's simply no financial or technical justification for what Comcast is doing. The only reason Comcast is imposing usage caps is to impose glorified price hikes on noncompetitive broadband markets, to unfairly skew the playing field in favor of its own services, and to protect legacy TV revenues from Internet video. Every other excuse the company bandies around is utter and complete drivel, designed to pander to a public that believes bandwidth pours from a magical, elven spigot buried deep in the Earth.

Filed Under: brian roberts, broadband, broadband caps, data caps, fairness
Companies: comcast

Comcast CEO: It's Not A Broadband Cap, It's A 'Balanced Relationship'

from the semantic-manure dept

Comcast continues to play semantic patty cake as it defends the company's broadband usage cap plans. With about 12% of the company's customers now capped (and growing), Comcast insists the 300 GB monthly usage cap (with $10 per 50 GB overage fees) is simply a "trial" of a new, "balanced" relationship. You see, Comcast isn't just taking advantage of a lack of broadband competition to cash in on Internet video, it's simply experimenting with "flexible data consumption plans" that bring greater choice and freedom than ever before to customers of the least liked company in America.

Speaking at a conference last week, Comcast CEO Brian Roberts added more insult to injury by insisting that imposing such limits on broadband makes sense, because broadband is just like gasoline and electricity:

"Just as with every other thing in your life — if you drive a hundred thousand miles or a thousand miles you buy more gasoline," Roberts said during Business Insider's Ignition conference on Tuesday. "If you turn on the air conditioning at 60 versus 72, you consume more electricity," he said. "The same is true for [data] usage, so I think the same for a wireless device — the more bits you use, the more you pay."

Except that's nonsense. Unlike gasoline and electricity, Comcast's cost to provide broadband is fixed. It costs Comcast the same to deliver 10 Mbps as it does to deliver 50 Mbps, and while the company does incur capacity costs overall, generally they're easily offset by modest network investments like the upcoming upgrade to the DOCSIS 3.1 standard. Any ISP earnings report will show you that with bandwidth costs generally dropping, flat-rate broadband profit margins are incredibly healthy, and it's the cost of service and support (which again Comcast is literally the worst in the country at) that tend to be the biggest expenses.

Roberts knows this, but his attempt to distort what the company's doing has been par for the course so far. Roberts also trotted another favorite Comcast claim -- that what the company is doing isn't a bandwidth cap:

"They're not a cap," Roberts told attendees. "We don’t want anybody to ever not want to stay connected on our network." Comcast is, the CEO claims, "just trialing ways to have a balanced relationship."

Except again, there's nothing "balanced" about what Comcast is doing. Users previously on unlimited (and already expensive) data plans not only face caps and overage fees, but they have to pay $30 to $35 if they want the same unlimited usage they enjoyed yesterday. Surely there's a planet where the populace thinks a mammoth rate hike of no benefit to the consumer can be considered "balanced," but it's certainly not this one. Remember, Comcast's own support documents have shown that these caps are in no way technically necessary. They're a rate hike to protect Comcast's TV revenues from Internet video.

It's clear Comcast brass hopes that by moving slowly, and framing the caps as a "trial" that offers "flexibility," it will keep the public and regulators slack-jawed and docile. But the company needs to tread carefully. ISPs have whined incessantly that they shouldn't be regulated like utilities despite being so eager to bill like them. And despite a lot of hand-wringing over "utility regulations" during the net neutrality fracas, so far regulators have complied, refusing to apply most of the specific utility regulations during the recent ISP reclassification to Title II.

But eventually consumers, the press and a few politicians will realize that unlike gasoline and electricity, nobody is objectively working to ensure that broadband usage meters are accurate. The result has been meters that at times have logged usage even when the modem's off or the power is out, problems that will only grow as caps expand. As such, broadband ISPs eager to cap may be inviting the kind of price controls and price caps (sorry, balanced relationships with regulators) that gives any good duopoly ISP executive nightmares.

Filed Under: brian roberts, broadband cap, data cap
Companies: comcast

Comcast CEO Admits You 'Can't Keep Raising Prices Forever,' But Seems Intent On Trying Anyway

from the self-inflicted-wound dept

As Internet video continues to slowly pick away at cable subscriber totals, most cable companies have absolutely refused to compete on price. Apparently, most of them intend to see just how long they can get suckers cable TV customers to keep paying an arm and a leg for bloated bundles of mostly awful content, only actually competing on price when the problem of cord cutting hits critical mass. Until then, cable execs spend their time either pretending that cord cutting doesn't exist, or proudly fooling themselves into thinking they still offer the best video content value in the streaming video and BitTorrent age.

Every so often a cable executive will pop up from milking the cable cash cow to pay a tiny bit of lip service to the idea of lower prices and more flexible cable bundles. The latest case in point is Comcast CEO Brian Roberts, who this week at least acknowledged that the cable TV cash cow is not immortal:

"This conversation that is happening right now only is going to accelerate (cable adaptation). I do think on the other side, however, there is a realization that you can’t keep raising prices forever and [without] either having serious margin change or people saying ‘I’m going to live without some channels.’ I think you’re seeing that tension rise. I think these things have a way of correcting or balancing out before something draconian happens. I’m hopeful that is the case."

Except the Internet video revolution isn't going to magically "correct" itself or "balance out." It's going to swallow the cable industry piece by piece until it finally listens to consumers and starts offering better value and better customer service. And while cable TV customer defections are happening at a slow trickle right now (Comcast lost 69,000 subscribers last quarter), it's only going to accelerate as the options improve. These losses will also start hitting Comcast's voice subscriber totals as wireless service improves, digital voice becomes irrelevant, and Comcast customers look for ways to trim their bloated bills.

As Roberts was busy stating the obvious, many were quick to point out that Comcast's busy imposing all manner of new TV and broadband price increases as is the cable industry's proud fall tradition. Cable TV prices are rising, broadband prices are increasing, DVR, set top and cable modem prices are rising -- and there's always a new, obnoxious, below-the-line fee around the corner. And whether it's set top boxes, net neutrality or last mile competition, Comcast works tirelessly to ensure this skyward price hike status quo remains firmly intact, all while offering the worst customer service in any industry.

So go ahead, cut your cable TV line; Comcast will just take its pound of flesh from your broadband bill via rate hikes, sneaky fees, usage caps and overage charges (or a new $30 fee if you want to avoid usage caps entirely). And because many of Comcast's territories are actually becoming less competitive than ever as telcos exit unwanted DSL markets, there's not much customers can do about it short of building their own community ISP.

Filed Under: brian roberts, cable tv, prices
Companies: comcast

Comcast CEO Still Pretending His Company's Horrible Satisfaction Ratings Are Just A Normal Part Of Being So Huge

from the King-Kong-was-simply-misunderstood dept

As we've noted before, Comcast has not only the worst customer satisfaction ratings in the telecom industry, but among the worst customer satisfaction ratings across all industries. The reasons for this are not complicated: the company grew like wildfire through acquisitions, then made a habit of skimping when it came to customer support and subcontracted installation technicians. The result is a never ending parade of ridiculous stories involving poorly trained or under-funded Comcast employees doing something aggressive, pathetic, or downright abusive.

Every six months or so like clockwork Comcast CEO Brian Roberts will come forward with his hat in hand and a puppy-dog look on his face, promising that the company has heard the public's concerns and is doing everything possible to fix things. While the press has fixated on Comcast lately because of the Time Warner Cable merger, this has been going on for most of the last decade.

During one of these episodes about a year ago, Comcast CEO Brian Roberts came forward to insist the company was working really hard on improving customer service, but that the problem was really a matter of scale. To hear Roberts tell it, the company only really sees such a heavy volume of complaints because Comcast itself is just so huge:

"What unfortunately happens is we have about … 350 million interactions with consumers a year, between phone calls and truck calls. It may be over 400 million and that doesn't count any online interactions which I think is over a billion. You get one-tenth of one-percent bad experience, that's a lot of people..."

Fast-forward nearly a year to just last week, and Roberts was once again back in the public eye, professing to be "embarrassed" (he really, really means it this time) about the company's 2014 iteration of its annual customer service scandal:

"At an event in San Francisco, Roberts said that he was “embarrassed” and “disappointed” when he heard the recording. “It was a teachable moment for employees and it was a teachable moment for all of us,” he said...Still, the Comcast CEO maintained that such customer service nightmares are not the norm. “We get 250 million phone calls a year,” he said. “The nature of our business is that we’re going to have these things."

Except again, awful customer service at Comcast is absolutely the norm. These aren't just anecdotal squeaky wheels. Every single customer satisfaction survey, whether its J.D. Power & Associates, Consumer Reports, the American Customer Satisfaction Index, the YouGov Brand Index or the less scientific Consumerist Worst Company in America Awards have made this abundantly clear: Comcast is among the very worst companies in America at customer service. Period. This hasn't changed because Comcast has no meaningful competitive incentive to change, and therefore simply refuses to spend the money necessary to fix the problem.

Continuing to pretend that the problem is a matter of scale simply doesn't cut it as an excuse. Worse, if "these problems happen when you're big" is really the explanation the CEO wants to keep falling back on, what happens when the company's $45 billion acquisition of Time Warner Cable gets approved?

Filed Under: brian roberts, customer satisfaction, customer service, scale
Companies: comcast, time warner cable

If Comcast CEO Brian Roberts Really Believes Netflix Gets Bandwidth For Free, Will He Pay Netflix's Bandwidth Bill?

from the just-saying... dept

So there was some buzz earlier this week when Comcast CEO Brian Roberts, speaking at the Code Conference, more or less admitted that he was seeking to shake down the entire internet:

In a series of analogies, Roberts likened his company’s role to that of a postmaster, pointing out that Netflix pays hundreds of millions of dollars to mail DVDs to its customers but now expects to be able to deliver the same content over the internet for free.

“They would like it all to be free. I would like to not have to pay for cable boxes,” he said.

Except, of course, Netflix already pays for its bandwidth. And Comcast's customers already pay for their bandwidth. What Roberts really wants to do is to get Netflix to pay a second time for Comcast's customers' bandwidth, even though they're already paying for it.

As for this argument that Netflix is trying to get anything "for free," we went through this ridiculous argument nearly a decade ago, when the lobbyists for the telcos made the same claim (though, at that time it was about Google instead of Netflix). Mike McCurry, working as an AT&T lobbyist at the time, argued that Google "will never have to pay a dime no matter how much bandwidth they use." Basically the same argument that Roberts is making about Netflix wanting "it all to be free."

So as we did with McCurry, we'd like to make a small request of Roberts: if he's so sure that Netflix pays nothing for these things, why not agree to pay Netflix's bandwidth bill? After all, he's arguing that it's free, so he shouldn't have to pay anything. Of course he knows that Netflix pays a ton for bandwidth. And he knows that his customers pay a ton for bandwidth. He's just hoping to get them both to pay more.

Filed Under: brian roberts, double paying, fud, mike mccurry, net neutrality, open internet
Companies: comcast, netflix

Comcast's CEO: As Long As I Keep Saying Aereo Is Illegal, Sooner Or Later Someone Will Believe Me, Right?

from the right? dept

Aereo, makers of a system to let people stream network TV to their computer by setting up individual antennas for each customer (a process that is technologically insane, but legally required to stay legal), has come out on the winning side of both court rulings to date, including the one at the appelate level. While the various cases are still ongoing, you'd think that the TV networks would at least acknowledge this fact. But, of course, they don't.

In an interview, Comcast (owner of NBC Universal) is still adamant that it's plain as day that Aereo must be illegal.

Comcast CEO Brian Roberts told PBS in an interview this week that broadband live TV streaming company Aereo is breaking the law by refusing to pay retransmission-consent fees. "Here comes a company that says, 'I don't want to pay that fee.' Well, I understand that, but I don't think that's the law of the land," Roberts told PBS NewsHour in a segment about the future of television.

It's funny, of course, because while he doesn't think that's the law of the land, it appears that both the district and appelate courts in the 2nd circuit actually do think it's the law of the land, and they're the ones that count. Of course, the problem is that Roberts is pretending this is about refusing to pay retransmission-consent fees. It's not. It's a question of whether or not the copyright situation changes based on the length of your cable. Everything that Aereo does for a consumer is perfectly legal if they were to setup the same basic contraption in their home (get an antenna, receive over-the-air network TV, connect a Slingbox or similar device to the feed, then access the feed via the internet). The only difference is that Aereo is setting this stuff up itself on its own property. That means, the real difference is the length of the cord between the antenna and the TV. If you set it up at home, it's short. If Aereo sets it up, it's long. The networks want you to believe that this longer cable suddenly means that retransmission fees need to be paid. Most people seem to recognize that this is ridiculous.

But not Roberts. To him, it's obviously illegal, despite the fact that two courts have already ruled otherwise.

Filed Under: brian roberts, copyright, retransmission
Companies: aereo, comcast, nbc universal

Comcast CEO Argues Rules Will Protect Customers In Merger, While Comcast Lawyers Argue Rules Are Unconstitutional

from the how-it-works dept

Earlier, we had a story about NBC Universal boss Jeff Zucker being caught lying in his Congressional testimony on the Comcast/NBC merger. And a bunch of folks have now been sending in the news of Al Franken blatantly calling Comcast boss Brian Roberts for also being less than honest, specifically about the FCC rules to protect consumers:

"In other words, looking to get approval for this merger, you sat there in my office and told me to my face that these rules would protect consumers but your lawyers had just finished arguing in front of the Commission that it would be unconstitutional to apply these rules."

You can see the video here: Of course, this is nothing new for Comcast. It has been playing the same doubletalk game for a while now -- always insisting that it shouldn't be subject to more regulation because the FCC's rules keep it in line... while at the same time fighting the FCC in court and saying that those rules are unconstitutional.

All that said, I have to say that I'm not particularly concerned about Comcast and NBC merging. I'm all for it. If two companies that poorly run are getting together, it's pretty much guaranteed to be a disaster. We've seen this game before, and it was called AOL-Time Warner. While it's difficult to think that anyone could screw up that badly again, if anyone can, it's the folks at NBC Universal.

Filed Under: al franken, brian roberts
Companies: comcast, nbc universal