In most of the U.S., cable operators have the fastest Internet pipe in town — easily topping telcos’ digital-subscriber-line services — and now they’re growing more inclined to exert their pricing power.
Cablevision Systems will increase the cost of its broadband service by $5 per month starting in January 2013, which will result in an average increase of 3.2% for Optimum Online customers who are not currently on a promotional rate, according to the company.
Meanwhile, Time Warner Cable in mid- October began charging a $3.95 cable-modem “rental” fee for an estimated 6.5 million customers across the country who previously didn’t pay that additional charge.
For TWC, the new charge could add about $300 million to annual revenues, resulting in an increase in net income of about $180 million, according to an analysis by ISI Group. “With no additional expenses, all of it (after accounting for taxes) falls to the bottom line,” the Wall Street analysts wrote in a report.
TWC also is expanding its usage-based billing plan for lighter Internet users nationwide by the end of 2012, with the exception of Hawaii, chairman CEO Glenn Britt said at an investor conference last week. Under the Essentials plan, customers who use less than 5 Gigabytes of data per month get a $5 discount on their bill. Usage over that limit is billed at $1 per Gb, with a maximum of $25 in surcharges.
Britt, speaking at the UBS Global Media & Communications Conference in New York, said TWC will “always offer unlimited service.” While he acknowledged not many customers have opted for the Essentials tier, he said the company sees an opportunity to cater to customers who don’t use as much broadband.
Cablevision said the price bump is the first increase on its broadband service in a decade, and added it will make no changes to the price of its cable TV or phone products for 2013.
The change comes after Verizon Communications — a key competitor in Cablevision’s New York-area footprint — this summer raised the price of FiOS Internet for bundle customers by $10 to $15 per month, while also boosting connectivity speeds.
In announcing the change, Cablevision said it has made “significant” investments in its broadband product, including a recent $140 million DOCSIS network-augmentation project.
Cablevision initiated the latest broadband upgrade after it scored poorly on a 2011 test commissioned by the Federal Communications Commission, which found the operator delivered 54% of advertised speeds during peak periods (7 to 11 p.m., Monday to Friday). On the FCC’s report based on data from April 2012, Cablevision was found to have delivered 120% of advertised download speeds and more than 100% of upload speeds.
The Bethpage, N.Y.-based MSO also touted its deployment of more than 50,000 Wi-Fi hotspots, which offer Optimum Online customers Internet access with speeds of up to 15 Mbps for no additional charge.