Wednesday, October 4, 2017

Wall Street Predicts Your Comcast Bill Will Soon Double -

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Wall Street research firms predict that your broadband bill is about to get a lot more expensive. According to a research note sent to investors by New Street analyst Jonathan Chaplin, broadband pricing could double" from existing pricing levels, which are already among the most expensive in many developed nations. While the report doesn't explicitly say it, the elimination of consumer privacy protections and the looming death of net neutrality rules has incumbent cable providers -- and the people that profit off of them on Wall Street -- giddy as schoolchildren.

Another unmentioned reason for Wall Street's "optimism": While Google Fiber and gigabit connections are getting over hyped, in reality many areas of the country are getting less competitive than ever as incumbent telcos simply refuse to upgrade DSL users at any real scale.

With rubber stamp regulators in office busy weakening broadband definition standards to obfuscate this growing lack of competition, the end result is a stronger cable monopoly with less government oversight than ever, allowing for greater price hikes.

As a result, Chaplin insists that US broadband is currently "underpriced."

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.

While Chaplin insists that broadband pricing has "barely increased," he's notably talking about the advertised price. Comcast has used a rotating crop of sneaky fees to jack up the cost of service post sale; fees that have skyrocketed many times the rate of inflation over the last decade (the company is facing several suits for the practice). A lack of competition has also allowed Comcast to impose usage caps and overage fees, leading to Chaplin's optimism regarding the impact cord cutting will have on massive media conglomerates like Comcast NBC Universal.

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.

All of this is great news for Comcast, but won't be such great news for you.
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