TWC To Start Charging $3.95 Monthly Cable-Modem Fee For Existing Customers

10/02/2012 5:43 AM Eastern
Time Warner Cable within the next two months will begin charging most existing high-speed Internet users a $3.95 monthly cable-modem lease fee -- which could boost the MSO’s annual revenue $300 million, according to analyst estimates.
“Internet customers across our footprint will begin to see the fee over the next two months,” TWC spokesman Justin Venech said. “Customers have the choice to purchase a modem from a third-party retailer to avoid paying the $3.95 per month.”
About 1.6 million Time Warner Cable customers currently pay the $3.95 monthly fee, which the MSO began charging new customers about a year ago, according to a research note by ISI analysts Vijay Jayant, David Joyce and Vikash Harlalka.
With the change, expected to start in mid-October, an additional 6.5 million broadband subscribers will be subject to the fee, ISI estimated. The new fee will not be applied to customers with Starter Internet, Connected Learning, SignatureHome and certain IntelligentHome services.
The new charge could add about $300 million to TWC's annual revenues, resulting in an increase in net income of about $180 million. “With no additional expenses, all of it (after accounting for taxes) falls to the bottom line,” the ISI analysts wrote.
ISI now expects Time Warner Cable to generate $22.5 billion in revenue for 2013 (up from $22.3 billion previously), with earnings per share projected to be $7.36 (up from $6.91 previously). The firm raised its price target on TWC shares from $105 to $115 per share; ISI has a “buy” rating on the stock.
Charging lease fees for cable modems is a widespread practice in the cable industry. Comcast and Cox Communications, for example, currently charge as much as $7 per month to lease a modem, ISI noted.
Time Warner Cable has approved retail DOCSIS modems for use with its broadband service only from Motorola Mobility, according to its support website for New York City region. The MSO offers leased modems supplied from Arris, Cisco, Motorola, Netgear, SMC Networks, Technicolor, Ubee Interactive and ZyXel (although only models from Arris, Motorola and Ubee support DOCSIS 3.0).
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