Competing Against Big Cable Companies

I’m asked at least twenty times a year how a small ISP can compete against the big cable companies. The question comes from several sources – a newly-formed ISP that is nervous about competing against a giant company, a rural ISP that is entering a larger market to compete, or investors thinking of funding a new ISP. These folks are rightfully nervous about competing against the big cable companies. Comcast and Charter together have roughly 55% of all broadband customers in the country, so the assumption is that they are formidable competitors.

It’s more realistic to say that they are decent competitors. They have slick marketing materials to try to lure customers. They have persuasive online marketing campaigns to snag the attention of new customers. They have good win-back programs to try to keep customers from leaving them.

But the two big cable companies have one obvious weakness – their prices are significantly higher than everybody else in their markets. Every marketing push by these companies involves giving temporary low special prices to lure customers – but those prices eventually revert to much higher list prices.

There is a great example of this in the market today. Both Verizon and T-Mobile have been adding large numbers of broadband customers to their fixed wireless FWA products that deliver home broadband using cellular spectrum. The two cellular companies have been highly successful in the marketplace, adding over 2.6 million new broadband customers through the first three quarters of 2022, while Comcast and Charter added about half a million customers during that same time period – mostly at the start of the year.

The FWA wireless product is clearly competing on price. The FWA broadband is not as fast or robust as cable company broadband, but the prices are attractive to a lot of consumers. For example, T-Mobile offers 100 Mbps broadband for a $50 monthly fee for customers willing to use autopay – a price T-Mobile says will never increase. This is far below the prices of the cable companies, which are in the range of $90 per month for standalone broadband.

I thought I’d take a look at how Comcast is competing against the lower-price FWA products. Comcast has two special offers in January 2023 for standalone broadband.

  • In a special offer that ends February 1, Comcast will provide 400 Mbps broadband for $30 per month, which requires autopay. The special price is under a contract for one year, but the special price extends for two years (meaning that if a customer terminates during the first year they have to pay for the remaining months of the contract). The special price for this product was higher in the past and likely has been lowered to compete against FWA.
  • The other offer is ongoing and doesn’t end on February 1. Comcast will provide 800 Mbps download speeds for $60 per month, which requires autopay. This is also a two-year term, with the first year under a contract.

Comcast then adds hidden fees to the special price. Unless a customer brings their own modem, Comcast charges $15 per month for a WiFi modem, a price that was increase by $1 this month. In many markets, Comcast also has data caps, and customers that exceed 1.2 terabytes of usage per month are charged $10 for each additional 50 gigabytes of data used in a month.

For the 400 Mbps product, a customer who brings a modem and who doesn’t exceed the data caps will pay $30 per month if using a bank debit and $35 per month with a credit card debit. Using the Comcast WiFi modem (which most customers do), raises the monthly price to $45 or $50 – right in line with the T-Mobile FWA product. But the kicker comes at the end of the term when the price, before a cable modem, jumps to $92 per month, and $107 with the modem. The result at the end of the 800 Mbps special is similar, with the price rising to $97 per month before a WiFi modem. Anybody buying the special today must also worry about whatever rate increases Comcast adds to the base broadband price by 2025.

The special prices offered by the big cable companies are alluring – customers can get a significant discount for a year or two. But inevitably, the prices will skyrocket – and in the case of the 400 Mbps special will more than double at the end of the discounted special.

ISPs that compete against the big cable companies have learned that all they have to do to compete is to offer fair prices and wait out the specials. Over time, customers who get tired of the pricing yoyo will come around. ISPs with fiber tell me that customers that come to them from a cable company almost never go back to cable. Customers appreciate fair pricing with no games and a reliable broadband product that delivers the promised speeds – that’s how you compete against the big ISPs.

4 thoughts on “Competing Against Big Cable Companies

  1. Is that 100mbps or “up to 100mbps”? Or, how much does that vary depending on how many people in my neighborhood are enjoying the same service?

    And, is there a fair witness speed test I could use to see what my effective speed to a friendly site might be? (Maybe, not the one provided by my ISP which is always reporting speeds that are mysteriously faster than some of the other speed tests.)

    And, the usual question that’s much, much harder to answer is, “how much faster is it for me to use my favorite suite of Internet activities. Because, of course, there are all sorts of intermediate routers and pipes that need to be adjusted if you’re going to get to those sites faster from your house (competing with the other fast moving folks in your neighborhood). And then those sites, then have to be beefy enough to serve up faster performance for its customers who have newly zippy connections.

    Offering high speed for the last 100′ has potential to be the biggest effective fraud around (undoubtedly, why it’s so popular, especially in media that have QoS). It’s necessary for high speed use, sure, but certainly not sufficient. As, Comcast and T-Mobile and all other ISPs fully know.

    (Full disclosure, my 5g connection to the tower a couple of blocks away is *blazing*. And, damn if I can detect any difference in my my effective performance from my plain old 4g connection…)

  2. @Matt the PFL concept has real risk for an ISP, because if and when there is financial pressure, an ISP can raise rates. Giving up that capability really could paint one into a corner.

  3. As usual Doug, you hit the nail on the head. People are sick of the poor customer service and yoyo pricing from the traditional cable companies but now we are really seeing a change.

    My particular area is served by Charter and there are several companies (Frontier, MetroNet & Hiawatha Broadband) expanding (or will be starting once the ground thaws) their all fiber networks. From what we’ve heard Charter is losing customers in droves when a competitors fiber becomes available. Symmetrical & faster speeds at a lower cost, sign me up. Add in fixed wireless options and the tradition cable companies will continue their struggle to add more subscribers.

    And I’m not going to get sucked into my cell phones getting service from a cable company. And 12 month highly discounted promotions are a long term joke and a reason people complain about increases in prices. What did you think was going to happen? Creates a customer service and perception nightmare for the company. Short term gain, long term pain. My PFL $100/month (total cost) for four lines with unlimited data from Metro (T-Mobile) has been working great for several years.

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