The Industry

Taking Aim at Junk Fees

Senator Richard Blumenthal of Connecticut introduced Senate Bill S.916, which takes aim at eliminating junk fees, which are fees that are not advertised for a product but that get added on after a customer buys a product or service. These fees were attacked this year by President Biden in the State of the Union Address.

The bill language is clear: “A covered entity shall clearly and conspicuously display, in each advertisement and when a price is first shown to a consumer, the total price of the good or service provided by the covered entity, including any mandatory fees a consumer would incur during the transaction, which shall not change during the purchase process.” The legislation goes on to give authority to regulate junk fees to the Federal Trade Commission.

Telecom companies, particularly cable companies, are among the worst in having hidden junk fees that are not included in advertising but are added to a customer’s first bill. But telecom companies aren’t the only industry, and the bill is aimed at airlines, online ticket companies, and other industries that routinely advertise prices that are lower than what a consumer is ultimately charged.

It’s clear why companies use junk fees since the practice gives them the ability to advertise super-low rates to attract customers. Consider the junk fees charged by Comcast. Comcast is not unusual, and the hidden fees of other large cable companies are similar.

Comcast routinely advertises low rates to attract new cable TV customers. A customer who buys at an advertised special rate will get a first bill with a lot of hidden junk fees that are not included in the advertised price – or else hidden deep in small print footnotes.

  • Comcast has a broadcast fee of $28.70 per month. This is a fee where Comcast has accumulated annual increases in programming costs into this side fee instead of raising the basic price of cable.
  • Most markets have a regional sports fee. This fee is specific per market and can range from $4 to $8. This fee is the accumulated increases in sports programming costs that have not been added to the basic rate.
  • Comcast also charges $9.00 extra for each settop box – a fee that is not included in the advertised price.

A first-time Comcast customer buying cable at an advertised $30 special rate could get a first bill for almost $75 – a startling difference.

Comcast also has hidden fees for broadband. The company charges $15 per month for a WiFi modem. The biggest surprise for many new customers is the Comcast data cap on broadband. The company charges $10 for each 50 GB of data over the data cap limit.

Consumers hate hidden fees. Anybody who has signed with one of the giant cable companies got a big surprise when they opened their first bill. But by then, most people are locked into a contract that came along with getting the low advertised rates.

There have been almost no repercussions for the practice. Occasionally, the states will pursue a company for deceptive advertising. For example, in early 2020, Comcast settled a dispute with the Minnesota Attorney General’s Office over false advertising related to sports fees. Comcast refunded $1.4 million to customers and paid a fine of $160,000 – which is a small penalty for a Company that had 16.1 million cable customers at the end of last year – all paying similar fees.

Deceptively low special rates make it unfairly hard to compete against a cable company. A competitor could have prices that are lower than the cable company, but hidden fees let the cable company advertise an untruthfully lower price. My clients with fiber networks tell me that customers routinely compliment them for not having hidden fees. People have gotten used to signing up for a low rate but paying a lot more – they become instantly loyal to a company that doesn’t play the games. This legislation would hopefully make the big ISPs become more truthful – but I’ll believe it when I see it.

The Industry

Converged Networks

I’ve been reading and thinking about converged networks – networks that are enabled to tackle multiple market segments. The best example of this is the largest cable companies that are using their residential last-mile broadband networks to support the cellular business.

The cellular business is a perfect fit for a cable company. They already have fiber deep into every neighborhood, which makes it easy to strategically locate small cell sites without building additional fiber. The big cable companies have put a lot of effort into WiFi which can save money by capturing a lot of cellular backhaul traffic from customer phones.

Having the ability to leverage the existing network also gives cable companies a lot of flexibility. They can continue to buy wholesale cellular minutes in areas where the cell traffic volume is light and use their own cellular network where customer usage is high. This is a cost advantage over the cellular companies that must provide their networks everywhere.

It’s an interesting dynamic. I think the cable companies got into the cellular business as a way to increase customer stickiness – meaning making it harder for customers to leave them. The cable companies will only sell cellular to customers who buy their broadband, meaning that a customer that wants a new ISP must also change to a new cellular provider. But now that cable companies are gathering a mass of customers, I have to think they are now looking at cellular as a big profit opportunity.

To a lesser degree, large cellular companies are building a converged network when they are using excess capacity on the cellular network to provide FWA home broadband. This has obviously been a winning strategy in the last year when Verizon and T-Mobile were the only two ISPs with big growth.

But as I look at the long-term outlook for FWA, this doesn’t seem like as strong of a converged strategy as what the cable companies are doing. To me, the difference is in the capability of the two networks. A cable company’s last-mile network can absorb cellular backhaul from customers with barely a blip in network performance. But the same can’t be said for cell sites. It’s far easier for cell sites to reach capacity, and cellular companies have made it clear that they will prioritize cellular data over FWA broadband performance. Maybe cellular carriers can solve this problem by eventually fully implementing the 5G specifications. But for now, cable company networks can handle convergence much more easily than cellular networks.

I have been wondering why fiber providers have not made the same push for convergence. The one exception might be Verizon, which has said in recent years that it now considers all arms of its business when building fiber assets. In the past, the company treated its fiber Fios business, the cellular business, and the CLEC business as arms-length businesses. From what I can tell, Verizon is still not as converged into what the cable companies are heading for – but there might be a lot more of that going on behind the scenes that we don’t know about.

I’m surprised that nobody has tried to integrate the cellular business for small fiber providers. There is a pretty decent list of fiber providers today that have between 100,000 and 1 million customers – and most of them are growing rapidly. It would be a major challenge for a single ISP with a few hundred thousand customers to launch the same kind of MVNO cellular operation that has been done by Comcast and Charter. But it seems like there ought to be a business plan for fiber ISPs to collectively tackle the cellular business. A last-mile fiber company can bring all of the same benefits to an integrated cellular business as the cable companies and are only lacking economy of scale.

I can think of a few reasons nobody has made this work. Taking time to consider cellular is a major distraction for a fiber ISP that is building fiber passings as quickly as possible. There is also getting the many mid-sized fiber providers to trust each other enough to be partners. But at some point in the future, it’s hard to think that somebody won’t figure this out.

If fiber ISPs enter the cellular business, broadband becomes a truly converged market where cable companies, cellular companies, and independent fiber providers compete with the same suite of products. I know that’s what the public wants because it breaks some of the monopolies and increases choice. My crystal ball says we will get there – I’m just fuzzy about how long it will take.

The Industry

A Repeat Performance for Cable 4Q 2022

The traditional cable companies lost over 6.25 million cable subscribers in 2022, up from 5.6 million in 2021. That means that almost one in every twenty homes in the country dropped traditional cable TV during the last year.

These numbers come from Leichtman Research Group, which compiles most of these numbers from the statistics provided to stockholders, except for Cox, which is privately held and estimated. Leichtman says this group of companies represents 96% of all traditional U.S. cable customers.

% 4Q Annual
4Q 2022 4Q Change Change Change
Comcast 16,142,000 (440,000) -2.7% (2,034,000)
Charter 15,147,000 (144,000) -0.9% (686,000)
DirecTV 13,100,000 (400,000) -3.0% (1,500,000)
Dish TV 7,416,000 (191,000) -2.5% (805,000)
Verizon 3,301,000 (82,000) -2.4% (343,000)
Cox 3,050,000 (90,000) -2.9% (340,000)
Altice 2,439,000 (52,800) -2.1% (293,300)
Mediacom 510,000 (15,000) -2.9% (62,000)
Breezeline 309,627 (13,411) -4.2% (37,102)
Frontier 306,000 (16,000) -5.0% (74,000)
Cable ONE 181,500 (20,500) -10.1% (79,500)
Total 61,902,127 (1,464,711) -2.3% (6,253,902)
Hulu Live 4,500,000 100,000 2.3% 200,000
Sling TV 2,334,000 (77,000) -3.2% (152,000)
FuboTV 1,445,000 214,000 17.4% 323,000
Total Cable 37,779,127 (775,711) -2.0% (3,531,902)
Total Other 24,123,000 (689,000) -2.8% (2,722,000)
Total vMvPD 8,279,000 237,000 2.9% 371,000

The losses are fairly even across the industry, with most cable providers seeing around a 10% drop in cable customers during the year. The exceptions were Charter, which lost only 4.3%, Frontier that lost almost 20%, and Cable One (Sparklight) that lost over 30% of customers. If these trends continue for another year, Charter will pass Comcast and become the largest traditional cable provider.

The magnitude of the losses are staggering, with Comcast losing over 2 million cable customers during the year and DirecTV losing 1.5 million.

To put the loss of cable customers into context, these same large companies had over 85 million cable customers at the end of 2018 and are now down to under 62 million customers.

In the fourth quarter, the three online cable alternatives that LRG tracks gained 371,000 new customers for the year, A few major online alternatives, like YouTube TV aren’t on the list since they don’t announce customer counts.

The Industry

Is the Broadband Market Mature?

Craig Moffett, of MoffettNathanson, was recently quoted in FierceTelecom asking if the broadband industry is reaching maturity. Other than in rural areas, where a lot of homes are still hungry for better broadband, the broadband penetration rate in cities is approaching 90%. It’s a fair question to ask if there is room for much more growth in the industry.

This is a question that has bounced around for the last five years. But there was still significant growth in broadband over the last few years. In 2019, national broadband subscribers grew by 2.6%. That leaped to 4.5% in the 2020 pandemic year. In 2021, broadband growth slowed to 2.8% but rebounded to 3.3% in 2022.

The 2022 growth rate is likely inflated by rural broadband growth, as practically all the overall industry growth for the year came from cellular FWA broadband provided by T-Mobile and Verizon. We can’t know for sure since those companies haven’t reported on the mix of rural and urban FWA customers.

What would a mature broadband market look like? It would first mean that annual subscriber growth would likely not be greater than the growth of total households. In recent years that has been in the 1% annual range and would mean perhaps 1.2 million new broadband subscribers each year nationally. This is a drastic change for the broadband industry. Consider Comcast and Charter, the two largest ISPs. These two companies represent almost 55% of all broadband subscribers. In 2019 the two companies grew by over 5%. In 2020 that leaped to over 7%. Growth for the two fell to 4% in 2021, but in 2022 was only around 1%. The stock price for these companies for the last decade has been based upon an ever-growing customer base – and annual rate increases.

We already have an idea of what a mature telecom market looks like by looking at the big cellular companies. Practically everybody has a cellphone, and the industry now expends huge marketing dollars in trying to pry market share from competitors.

There is one way that broadband differs from cellular in that cell service in much of the country is a commodity, meaning there is not much real difference between products or performance of the cellular carriers. This isn’t true everywhere, and in some places, one of the cellular companies has a superior network. But in most urban markets where most folks live, there isn’t a lot of difference between cell companies.

The broadband market is different because, in many markets, there is only one fast ISP – usually the cable company. Such markets are effectively broadband monopolies, and the monopoly provider doesn’t have to worry about a competitor taking market penetration. That means that if overall growth permanently slows that all of the wrestling for market share is going to happen in the markets that have both a cable company and a fiber competitor.

But there is another possibility. In markets where Verizon FiOS has competed against a cable company for many years, the two sides have reached a duopoly equilibrium – meaning that neither Verizon nor the cable company won the competition battle. We saw Verizon and the cable companies dukeing it out heavily in the early years of FiOS, but the marketing in these markets today has none of the desperation or vehemence of cellular competition. In a duopoly market, the two big players are happy to maintain a relatively steady market share – and the equilibrium is fine with both competitors as long as it doesn’t get too badly skewed.

If overall broadband growth slows, we’ll see different responses depending on the market. Markets without a major fiber provider will continue to be cable monopolies. This is where prices will go up every year. Markets that settle into a steady duopoly will compete with low-key advertised specials to lure folks back and forth between the two ISPs. The biggest marketing battles and the real competition will come from markets where a cable company is competing against an independent fiber provider other than the big telcos. When broadband growth inevitably slows, the industry will naturally change. But I don’t expect to see a clear-cut national response. A mature broadband market will differ according to the local mix of competitors.

The Industry

Broadband Prices and Digital Discrimination

I recently wrote a blog that talked about digital discrimination. The article identified two primary types of discrimination. The first is infrastructure discrimination, where lower-income neighborhoods tend not to have the same quality of technology as more affluent neighborhoods. The second was price discrimination, where cable companies have started to price broadband differently by neighborhood based on demographics.

But there is a more basic element of price discrimination that also needs to be recognized. The big cable companies have raised the price of broadband at a much faster rate than inflation, which is putting the cost of a broadband subscription out of reach of a lot of households.

It’s not easy on the web to find the pricing history of broadband because the primary source of pricing has always been on ISP web pages which are constantly updated. If you do a web search on older broadband prices, the first couple pages of Google search are full of fraudulent articles from USTelecom and big ISP lapdogs like BroadbandNow that tell you that the cost of broadband has dropped over time. The many articles making this claim fail to mention that the statistic that has dropped over time is the price per megabit of broadband speed. That just means that cable companies have increased broadband speeds at a faster pace than prices. But the out-of-pocket cost of broadband has increased at a significantly faster pace than general inflation as measured by the Consumer Price Index. These articles must be confusing to the average consumer who knows they are paying more for broadband every year.

I’m going to use Comcast for the following discussion, but you could change this discussion to any of the other big cable companies – a few which have raised rates even faster than Comcast. I found a copy of a portion of Comcast’s annual statement for 2005 in the SEC archives. 2005 was an interesting year for broadband because it marked the beginning of the time when broadband speeds on cable companies broke away and greatly surpassed the DSL competition. In the 2005 annual report, Comcast said that its average customer was getting broadband speeds between 6 and 8 Mbps. The company reported that the average broadband charge to customers that year was $42. My recollection of 2005 is that the cable companies (and the telcos) only offered a single broadband product and didn’t have price tiers – a customer paid $42 and got the fastest speed available.

If you trend the Consumer Price Index from December 2005 until December 2022, something that cost $42 in 2005 would be expected to cost $63.34 today to keep up with inflation. Interestingly, the telcos that are still selling DSL in cities today have prices that are at or below the price predicted by inflation.

With the price increase at the end of 2022, the two basic Comcast broadband products were labeled as Fast and Superfast (the product name vary by market). These are the products that Comcast offers to new customers. The fast product at the end of 2022 was $83, with an additional charge of $15 for the modem, which most customers buy. That’s a total price of $98. The Superfast product base price was raised to $93, and with the modem now costs $108. In 2005 there was no separate charge for the modem.

The Consumer Price Index would predict that something that cost $42 in 2005 would now cost $63.34, an increase over 17 years of 51%. The cost of the Comcast Fast product is 133% higher than what Comcast customers paid in 2005. The price of the Superfast product increased by 157% since 2005.

These super-high rate increases are perhaps the ultimate price discrimination – the big cable companies are pricing millions of homes out of the market. The cable companies will tell you that they have low-income products, but only certain homes qualify for them and folks need to know to ask for them. The low-income products also don’t offer the same speeds as the normal consumer broadband products.

Comcast and the other big cable companies have raised rates between 2.5 and 3 times faster than inflation since the end of 2005. Comcast just implemented a $3 increase in December 2022 even as it was seeing customer growth stagnate, while seeing increased pressure from FWA competition. Raising prices at a time that the company’s sales are stagnating might be the ultimate proof that in most neighborhoods that Comcast is a monopoly that can raise prices with impunity.

The Industry

Final 2022 Statistics from Ookla

As a numbers guy, I’m always intrigued by the Ookla Speedtest Global Index since it provides an interesting look at broadband speeds in the U.S. and around the world. This report shows the median and mean upload speeds, download speeds, and latency for both mobile and fixed broadband by country.

The median download speeds for fixed broadband in the U.S. at the end of 2022 was 193.7 Mbps download, 22.6 Mbps upload, and 14 milliseconds of latency. As a reminder of statistics, the median means that half of all speed tests showed faster results and half slower results than those numbers. Ookla thinks that median speeds are the best way to track the overall market and the difference between carriers.

The fastest median download speeds for landline ISPs at the end of 2022 comes from Comcast at 226.1 Mbps. Charter was at 225.3 Mbps, Cox at 212.3 Mbps, Altice at 190.8 Mbps, AT&T Internet at 187.1 Mbps, and Verizon at 183.2 Mbps. Median upload speeds were obviously faster for ISPs using fiber, with the fourth quarter median upload speeds showing AT&T Internet at 142.8 Mbps, Verizon at 104.9 Mbps, Altice at 29.8 Mbps, Comcast at 20.4 Mbps, Charter at 11.8 Mbps, and Cox at 10.7 Mbps. Missing from these numbers are smaller fiber-only ISPs that have much faster median speeds than all of these large companies.

Those are interesting upload speeds for some of the cable companies during a year of upcoming giant BEAD grants since a large percentage of customers of the cable companies are clearly not achieving the 20 Mbps upload speeds that is being used by the grants to define an underserved customer. We’ve already seen some state broadband grants awarded in cable company service areas – will folks apply for BEAD grants to compete with underperforming cable companies?

The median download speeds for cellular broadband in the U.S. at the end of 2022 was 78.9 Mbps download, 9.3 Mbps upload, and 31 milliseconds of latency. For the fourth quarter of 2022, Ookla says that T-Mobile has the fastest download speeds – on the modern chipsets – of 151.4 Mbps, up significantly higher than the third quarter 2022 median speed of 116.1 Mbps. Ookla not only measures mobile speed tests, but records the type of device being used. Old flip phones still using 3G will have lower speeds based on the capacity of the device. At least for now, the median download speeds for T-Mobile are far faster than Verizon (69.0 Mbps) and AT&T (65.6 Mbps). This likely means to some extent that the Verizon and AT&T are still supporting a greater number of older and slower devices. Median upload speeds were closer with T-Mobile at 12.5 Mbps, Verizon at 9.3 Mbps, and AT&T at 8.0 Mbps.

Ookla shows mobile latencies are about the same between the carriers, with T-Mobile at 56 ms, Verizon at 58 ms, and AT&T at 60 ms. Ookla calculates what it calls a multi-server latency, which represents the latency that should be expected by the average user at times when the local network is not under heavy load.

I looked back at an old blog I wrote in 2017, and the differences in mobile broadband speeds between then and now are astonishing. For example, in a 2017 report, Ookla showed median cellular download speeds nationwide at 22.7 Mbps, which was up 19% over 2016. I took a speed test on AT&T when I wrote the 2017 blog and got a download speed test of 13 Mbps. I took a test this morning on my AT&T cell phone and got a download speed of 141 Mbps. That’s more than a tenfold increase in speed in just five years.

Back in that same time frame, I was writing about how the cellular data networks were getting badly clogged and overloaded. It didn’t strike me until I wrote this blog that one of the ways that cellular companies have stretched their network capacity is by increasing speeds. A tenfold increase in speed means that the time required to handle the data requirement for a given customer is reduced by that same magnitude. Upgrading to a faster network means increasing the capacity to serve a lot more customers without a major network upgrade.

The Industry


I recently noticed in the T-Mobile pricing for FWA cellular broadband that the company is claiming that the price is locked-in and will never be raised. In the pricing world, that kind of offer is referred to as a price-for-life, although T-Mobile didn’t use that term.

I’ve had clients ask me about this over the years, and I hopefully talked most of them out of the idea. This is the kind of idea that comes from marketing folks because it’s a gimmick that makes it easier to sell. But there are some long-term consequences of offering a guaranteed price forever.

There are some ugly stories of when price-for-life went sour. Back in 2016, Comcast door-to-door salespeople offered residents some price-for-life packages in Salt Lake City that were rolled out in anticipation of Google Fiber coming to the market. For example, residents were offered a triple play bundle at $120 per month that included broadband, cable TV, and a telephone line. The Comcast doorknockers promised customers a lifetime price, backed up in writing that their price would be good for as long as the customer kept the plan. Customers were assured at each step of the sales process that they were buying a lifeline plan and that rates would never be increased. For example, Comcast customer service reps on the phone repeated the assurance that the prices would be good forever.

It got ugly when the Comcast corporate folks raised rates in 2018. There was a class action lawsuit that alleged that as many as 20% of the 200,000 upgrades sold during the sales campaign were sold as lifetime plans. To nobody’s surprise, Comcast customer service denied any knowledge of selling a lifetime plan it had marketed just two years earlier. Comcast enforced the rate increase, which was substantial for some customers.

Most ISPs who market a lifetime rate would not be dumb enough to raise the rates only two years later. But there is a risk for T-Mobile to repeat the Comcast gaffe. It’s not hard to imagine five years from now that somebody at T-Mobile headquarters will be searching around for extra margin and notice this pile of underpriced customers.

It’s even more likely that T-Mobile can offer this product for life since it already knows the product won’t be around five years from now. As the company introduces future 5G features, at some point it could declare the current product to be technically obsolete and discontinue it.

That tactic would be impossible for a fiber provider, but the average customer doesn’t understand cellular networks well enough to dispute that kind of maneuver. But for my clients who have a fiber network, I can picture some households keeping a product-for-life for twenty or thirty years. I think a lot of people would sign up for a price-for-life for gigabit service.

But there are other reasons why price-for-life is a bad idea. The number one issue is inflation. We just went through a period where we saw steep inflation that would quickly eat away at the margin on a lifetime product. This is particularly true when offering a price-for-life for a product that has already been priced at introductory rates. Even if we return to a long-term inflation rate of 3% annually, the margins on a price-for-life product will drop steadily each year.

The main problem I have with the price-for-life concept is that it provides an easy path for the marketing department to make sales and earn sales bonuses today while pushing lower margins into somebody else’s lap in future years. Sales departments never heard of a sales gimmick they don’t like, and this is clearly a gimmick. A more sensible approach would be to offer a fixed price for some reasonable term, like three to five years. That’s enough to be a sales hook without killing the bottom line in future years.

My main objection to price-for-life is that it conveys a message to consumers that runs against the philosophy of most small ISPs. Most small ISPs pride themselves on offering fair rates all of the time, which makes it easy to favorably contrast themselves with the big ISPs that constantly run special pricing promotions. Once a small ISP runs a price-for-life promotion it loses that message and marketing advantage because it has created a pile of customers that year-over-year have lower rates than their neighbors – and those neighbors will notice.

As odd as it sounds, a price-for-life also creates an administrative burden on an ISP. Having a pile of customers that are different than everybody else is something that will have to be explained to every new customer service rep for decades to come. Getting everybody at an ISP to remember the nuances of the products and prices sold in the past is one more complication that makes it harder on future staff. This was one of the major issues when Charter purchased Time Warner Cable. Time Warner had hundreds of different old grandfathered price plans that confused Charter employees. Charter resolved this by killing off the old rate plans – effectively voiding old price-for-life promises.

There is one counterargument to be made in favor of price-for-life. There is value in a customer that never churns. Even if a customer delivers less margin every year by hanging on to a price-for-life product, that customer is delivering a huge accumulated return by paying for a product for a decade or two. But this argument just sounds like a justification, because an ISP likely would have made more profits over time by not locking in rates, even after considering future churn. In my opinion, the long-term downsides and complications of price-for-life outweigh this economic argument.

The Industry

Who’s On First?

I saw a short article in Business Wire that said that Comcast Business had landed a project to provide a private wireless network for the guests of The Sound Hotel Seattle Belltown. This is an example of the continuing convergence in the industry where the big cable companies, ISPs, and wireless carriers are freely competing on each other’s turf. For decades we’ve neatly categorized companies as telcos, cable companies, or wireless carriers, but this convenient categorization is starting to fray around the edges, and its getting a lot harder to distinguish between the big industry players.

If we look back ten or fifteen years, the distinctions between these companies were clearly defined. The big telcos served residences and small businesses using DSL. The big telcos were clearly structured in silos. There was practically no interface between the wireless companies at Verizon and AT&T and the broadband business. Verizon went so far as to set up Verizon FiOS, its fiber business, separately in every aspect from the copper and DSL business.

The cable companies had faster broadband than DSL after the upgrades were made to DOCSIS 3.0. Speeds up to 300-400 Mbps blew away the capabilities of DSL. Once those upgrades were completed, the cable companies took market share in cities from the telcos year after year until the cable companies had a near-monopoly in many markets.

The market with more balanced competition has been the large business market. This is the market where fiber quickly became king. At one point the telcos controlled most of this market, with their fiercest competition coming from a handful of big CLECs. Verizon responded to this competition by buying MCI, XO, and others in the northeast. CenturyLink become one of the nationwide market leaders through the acquisition of Qwest and then Level 3. The big cable companies cautiously launched fiber ventures for this market twenty years ago and have picked up a decent market share.

But those simple explanations of the business plans of the big ISPs is now history. As the Business Wire announcement showed, the big companies are crossing technology barriers in new ways. Comcast

Providing a private wireless network for a large hotel is emblematic of a new trend in competition. In doing this, Comcast is crossing technical lines that it would never have considered years ago. From a business perspective, Comcast is going after the full suite of services for businesses like this hotel, not just the wireless network. The newest word in the competitive market is stickiness, and Comcast is likely tying down this hotel as a customer for a long time, assuming it does a great job.

These crossovers are even more evident in the residential and small business markets. Comcast, Charter, and other cable companies are bundling cellular service with broadband and the triple play, something that the telcos have never managed to pull off. Telcos have decided to reclaim urban market share by building huge amounts of fiber. And the cable companies are reacting to that threat by rushing some early versions of DOCSIS 4.0 to the market in order to fix the upload bandwidth issues. The big wireless companies have joined the fray with the FWA cellular wireless broadband products. While these products can’t compete with the bandwidth on fiber or cable networks, the product is still adequate for many homes and hits the market at a much lower price.

This has to be confusing to the average residential consumer. Consumers who abandoned DSL years ago are being lured back by to the telcos by fiber. Folks who have been paying far too much for cellular service are moving to the more affordable cable company wireless service. And people who can’t afford the high price of cable broadband are seemingly flocking to the more affordable FWA wireless. I have to imagine that the customer service desks at the various ISPs are being flooded by customers canceling service to try something different.

Markets always eventually reach an equilibrium. But for now, both the residential and business markets in many cities are seeing a fresh new marketing efforts. A decade from now, it’s likely that we’ll reach a predicable mix of the various technologies. We know this from having watched the markets where Verizon FiOS battled with the cable companies for several decades. But much of the country is just now entering the era of refreshed competition.

Unfortunately, this new competition isn’t everywhere. There is already evidence that new investments are not being made at the same pace in lower-income neighborhoods. Some cities are seeing widespread fiber construction while others are seeing almost none. There will still be a lot of work to do to make sure that everybody gets a shot at the best broadband – but the obvious convergence in the industry shows that we’re headed in the right direction.

Improving Your Business

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.

The Industry

The Outlook for Cable Company Broadband

A majority of my clients compete against one of the big cable companies, so they are always watching anything that affects the prices, technology, or performance of these companies. After a decade of unending success, 2022 has been a rough year for cable companies.

The statistic that probably matters the most to these companies is that stock prices are way down for the year. As I write this blog, Comcast has dropped 39%, Charter 46%, Altice 72%, and Cable One 61%. Stock prices are down for a lot of companies this year, but these large drops show that Wall Street has lost faith in the cable company earnings model, where the companies gained customers quarter after quarter and raised rates a healthy amount each year. For many years it wasn’t hard to predict that the cable companies were going to have a good year.

The cable companies have been losing cable customers at a rapid pace in recent years and collectively lost 2.7 million cable customers in 2021. But losses of cable subscribers were more than offset by the growth of higher-margin broadband customers. In 2021, the big cable companies collectively gained 2.8 million broadband customers as they continued to take customers away from DSL while benefitting from the surge in home broadband subscriptions during the pandemic.

But the growth in broadband customers was slowing, and in the fourth quarter of 2021, the cable companies collectively added 445,000 customers and another 482,000 in the first quarter of this year. But then the wheels came off, and the big cable companies collectively lost 60,000 customers in the second quarter of this year. While that’s a mere blip for companies that collectively have 75.6 million broadband customers, it feels like a watershed event in the broadband industry. It looks like cable is no longer the automatic king of broadband in attracting and keeping customers.

It’s not all bad news for cable companies since the biggest ones are aggressively pursuing cellular customers. It seems like this is being done to make customers stickier and less likely to churn. But at some point, the cellular business ought to add to the bottom line for the cable companies as they shift from pure cellular resale to carrying more of the cellular traffic on their own spectrum.

All of this obviously has the big cable companies examining their future. We’ve all been wondering how the cable companies would react to this accumulated bad news. We got at least one inkling of their strategy when Charter recently raised the price of standard broadband by $5 per month. It first seemed gutsy to raise prices when subscribers have stopped growing until you realize that the cable companies are not losing customers but have just stopped growing for now. A $5 increase in broadband price means over $1.8 billion in new revenue for Charter. The company would have to start bleeding customers to put a dent in that much new bottom line. I think this tells us that price increases are still on the table – the stock prices will tumble even further without the new bottom line from a price increase.

Interestingly, Charter also announced a new discount program called SpectrumOne, where the company is bundling broadband, a modem, and one line of unlimited mobile for one year. The price is $49.99 per month (for 12 months) with 300 Mbps broadband and $69.99 per month with 500 Mbps broadband. I saw a few articles pointing this out as Charter’s reaction to its lack of growth, but I see this differently. This is a one-year special only, and prices will return to normal at the end of the year. Charter has always had special promotions, and this promotion is not aimed at adding broadband customers – instead, the company is giving away cellular for a year to hook new wireless customers who have been reluctant to trust the cable company for cellular service.

There are several takeaways for ISPs competing against Charter. First, broadband prices will probably continue to rise, giving hope to competitors who follow suit with higher prices. Charter’s real push for a competitive edge is to hook a lot more folks on its cellular service, making it inconvenient for customers to break the bundle. We’ll still have to wait to see if Comcast and the other big cable companies adopt a similar tactic – but it’s one that makes a lot of sense for the bottom line.

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